Evaluation of Financial Performance of Restaurant Group Plc and Britvic Plc with Comparison to A.G. Barr

ACCOUNTING AND
FINANCE AAF0446 CASE
STUDY

Table of Contents
(i) Introduction.............................................................................................................................3
(ii) Evaluation of financial performance of Britvic Plc over the past three years.......................4
(iii) Discussion of Britvic Plc’s performance in comparison with its key competitor (A.G.
Barr).............................................................................................................................................7
(iv) Conclusion..........................................................................................................................10
REFERENCES..............................................................................................................................12
Books and Journals....................................................................................................................12
Online........................................................................................................................................13

(i) Introduction
Short introduction of the Restaurant Group Plc & its key features
Restaurant group Plc is a well-known restaurant group having pub restaurants &
restaurant across United Kingdom. It is a British chain of public houses & restaurants and is
publicly traded over London Stock exchange. It was founded in 1987 as a City Centre
Restaurants Plc with the aim of managing & owning the Garfunkel’s Restaurant Chain. It is
operating in restaurant group in London, England. In January 2004, the name of the company
changed to the Restaurant Group Plc. Throughout the UK, this restaurant chain is operating
through 450 restaurants & pub restaurants. Its principle brands include Chiquito, Frankie &
Benny’s, Joe’s Kitchen, Coast to Coast, Brunning & Price and Home Counties pub restaurants.
Current financial position of Restaurant Group Plc
For the evaluation of an enterprise’s financial position, the key metrics referred to are
profitability, liquidity and efficiency of the business. These matrices are used to track, measure
as well as analyze the financial health of the business. The following ratios have been obtained
through the annual reports of Restaurant Group plc to indicate its current financial position.
Ratio 2020 2021
Gross profit margin 10.57% 10.52%
Net Profit margin -27% -6.03
Current ratio 0.33x 0.83x
Total assets turnover ratio 0.34x 0.47x
These ratios show that the profitability of Restaurant group plc has reduced in terms of
gross profit margins indicating inability of the management in generating sales revenue
efficiently. Also, the net profit margins are negative but the losses in previous year are more as
compared to the current year which indicates improvement in the financial performance of the
company (Annual reports of The Restaurant Group Plc 2021). The current ratio is below 1
indicating inability of the enterprise in meeting its short term obligations. However, this ratio has
increased in the current year indicating reduction in the liquidity risks for the company. At last,
to determine the efficiency of the restaurant group plc, the total asset turnover ratio has been

calculated which is also very low in both the years indicating inefficiency of the total assets of
the business in generating sales for the company.
Key Resources
Key resources of the Restaurant Group plc include well performing employees who are
supporting in eliminating the costs associated with poor performance like losing customers to
competitors. Also, the restaurant is having good opportunities of using equity financing for
fulfilling its financial needs which is determined through the shift from debt to equity sources of
finance. At last, the copyright protected logo of the restaurant group is helpful for in protecting
the menu & recipes of its various foods & beverages.
Challenges faced by the Restaurant Group Plc in meeting its objectives in the market
 The restaurant group is facing the pressure of labor market because of labor shortages in
UK has resulted in high wage rates.
 General inflation associated with food & drink items derived by commodity market &
supply chain pressures have result in cost inflation leading to reduced profit margins of
the group.
 Raising capital & debt refinancing are other financial challenges that the group is facing
which has resulted in financial crisis within the group (Литвиненко, 2020).
 At last, there are several operational challenges the group is facing which involves
uncertainty due to the pandemic threat in the market and cut throat competition prevailing
in the restaurant industry of UK. Meanwhile, the company is also unable to manage its
overheads efficiently which has resulted in poor profit margins.
(ii) Evaluation of financial performance of Britvic Plc over the past three years
With the help of financial statements of the company, the following financial information has
been obtained in terms of key matrices or ratios indicating profitability, liquidity, efficiency &
solvency of Britvic Plc.
Ratio 2019 2020 2021
Gross profit margin 41.87% 39.71% 41.49%
Return on capital 12.70% 11.59% 13.61%