Dunelm vs Halfords: Financial Analysis

This assignment involves a comprehensive financial analysis of Dunelm Group Plc and Halfords Group Plc. It compares the two companies' profitability, liquidity, solvency, and efficiency ratios, using data from their financial statements. The analysis aims to evaluate the financial health and performance of both companies and suggest strategic improvements for Dunelm.

Financial Statement
Analysis

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
Analyzing financial performance of Dunelmand Halfords Group Plcwith the help of internal
and external factors......................................................................................................................1
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Financial statement analysis is a process undertaken by business unit and its stakeholders
with the motive to evaluate business position as well as performance. Such analysis is highly
significant which in turn provides high level of assistance to the management team of business
unit in developing strategic and competent framework. Along with this, generation of high return
is the main objective of investors behind making investments. Thus, by making evaluation of
final accounts,investors can decide whether they should invest money in the securities of
concerned unit or not. The present report is based on Dunelm and Halfords Group Plc which is
one the leading companies that comes under the category of UK retail sector. Dunelm Group Plc
is a leading British home furnishing retailer that has approximately 250 stores in the UK. In this
report, the extent to which financial position of Dunelm is sound over Halfords Group Plc
through the means of ratio analysis will be analysed.
TASK
Analyzing financial performance of Dunelm and Halfords Group Plc with the help of internal
and external factors
In order to evaluate the financial aspects and position of Dunelm Group Plc, SWOT
analysis has been conducted to assess both internal as well as external factors. Main reasons
behind these internal and external factors closely affect the customer base as well as profitability
of firm.
Internal and external analysis
SWOT analysis ofDunelm Group Plc
Internal analysis
Strengths
 Strong brand equity and attractive
location
 Offering a wide range of home
furnishing products or services
 Largest home ware retailer: One stop
Weaknesses
 Prices charged by Dunelm is higher as
compared to supermarket
 Poor merchandising standards
 Lack of enough space

shop
 Gives high value for money
External analysis
Opportunities
 Focusing on increasing target group
through providing innovative products
 Expanding network, selecting product
selection and reaching via establishing
flagship stores
 Opportunities pertaining to
personalized furnishing in line with
Presto
Threats
 High competition
 Lack of large scale development due to
competition law (Dunelm Group SWOT
Analysis, USP & Competitors,2017)
SWOT analysis of Halfords Group Plc
Strengths
 Customer centric policies and high
quality offerings
 Free customerdelivery system and
online sales service
 Offering high discounts
 Free car checks in stores (Halfords
SWOT Analysis, USP & Competitors,
2017)
Weaknesses
 Fails to expand business outside UK
and Ireland
 Distribution system is limited to UK
Opportunities
 Maximization of sales through
improving post sales customer service
system
Threats
 Decline in customer’s demand for
bicycles

 Creation of efficient distribution system
 Explore business operations in
developing countries
 Intense competition
 Decreasing purchasing power of
customers due to financial crisis
Financial statement analysis
Methodology: To analyze and interpret financial statements,ratio analysis tool has been
selected as well as applied. Such tool assists in summarizing and evaluating the position of firm
from various perspectives such as profitability, liquidity, solvency, efficiency and investment. By
making assessment of all such aspects, one can easily determine whether financial condition of
the concerned organization is good or not (Fabregat-Sanjuan, Ferrando and De la Flor,
2015).Further, by using the tool of ratio analysis,firm can measure performance over the years
and in against to the rival firms. However, on the critical note, it can be presented thatdifferent
business units undertake various rules while preparing final accounts (Fraser, Bhaumik and
Wright, 2015). This is one of the main aspects which in turn closely influences the significance
of such methods and creates issue in comparing the performance of different firms.
Ratio analysis of Dunelm and Halfords Group Plc is as follows:
Profitability ratios
Dunelm Group
Plc
Halfords
Group Plc
Particulars Formul
a
2016 2017 2016 2017
Gross profit 439 467 543 559
Net profit 102 73 64 56
Sales
revenue
881
(Financial
statements
of
Dunelm
Group
PLC,
2017)
956 1022 1095

GP ratio GP /
sales
revenue
* 100
49.8% 48.8% 53.1% 51.1%
NP ratio NP /
sales
revenue
* 100
11.6% 7.6% 6.3% 5.1%
2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Profitability ratios
GP ratio NP ratio
Interpretation: By analyzing the income statement, declining trend was identified in GP
margin both the firms. In the year2017, it has been found that GP margin of Dunelm and
Halfords Group Plc accounts for 48.8% &51.1% respectively. Along with this, NP margin of
Dunelm has also declined from 11.6% to 7.6% at the endof 2017. On the other side, in 2016 &
2017, NP margin of Halfords Group Plc implied for 6.3% and 5.1% respectively. The main
reason behind such decreasing margin is that both the companies failed to exert effective control
on both direct and indirect expenses (Orlitzky, Schmidt and Rynes, 2003). Due to high expenses,
both the organizations failed to generate enough or high margin irrespective of increasing trends
that were seen in sales revenue. Along with this, outcomes of profitability analysis can be
supported with SWOT analysis which shows that poor merchandising standard closely affects
the profitability of Dunelm Plc. Along with this, Halfords group offers high level of discounts to
the customers which in turn enhances customer base but it caused to decreasing margin. On

comparing both the firms, it can be saidt hat profitability aspect of Dunelm Plc was good in 2016
and 2017 as compared to Halfords.
Liquidity ratios
Dunelm
Group Plc
Halfords
GroupPlc
Particulars Formula 2016 2017 2016 2017
Current
assets
158 210 235 271
Stock 117 165 158 191
Prepaid
expenses
16 22 34 30
Current
liabilities
108 141 223 247
(Financial
statements
of
Halfords
Group
PLC,2017)
Current
ratio
Current
assets /
current
liabilitie
s
1.46 1.49 1.05 1.10
Quick
ratio
Quick
assets /
current
liabilitie
s
0.23 0.16 0.19 0.20

2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
1.46 1.49
1.05 1.1
0.23 0.16 0.19 0.2
Liquidity ratios
Current ratio Quick ratio
Current ratio
Interpretation: The above depicted table shows that current ratio of Dunelm Plc was 1.46
&1.49:1 in the year of 2016 & 2017 respectively. Further, increasing trend from 1.05 to
1.10:1was identified in the current ratio Halfords group Plc. Graphical presentation clearly shows
that as compared to prior year’scurrent ratio of both the firms were slightly increased. However,
in comparison to ideal ratio i.e. 2:1, both the firms failed to maintain enough current assets for
meeting obligations (Shul'ga, 2014). Due to increase in inventory, current assets of both the firms
inclined to some extent. However, in against to Halfords Group, current ratio of Dunelm is near
to ideal ratio. Referring the same, it can be depicted that liquidity position of Dunelm is good
over the rival firms.
Quick ratio
Interpretation:From the evaluation of statement of financial position, it has been found
that quick ratio of Dunelm declined from .23 to .16:1 due to incline in the level of stock.On the
other side, quick ratio of Halfords Group increased from .19 to .20:1 respectively. In accordance
with the ideal ratio, business unit must have 1 current asset other than inventory and prepaid
expenses for meeting quickobligations. Thus, by keeping in mind the ideal ratio,it can be said
that both the firms were not highly financial capable in relation to meeting their
obligations.Thus, for making improvement in the liquidity position and performance, Dunelm
and Halfords Group Plcfocus on maintaining enough assets as per liabilities.

Solvency ratio analysis
Dunelm Group Plc Halfords Group Plc
Particulars Formula 2016 2017 2016 2017
Long term debt 94 140 25 72
Shareholders’ equity 100 110 405 408
Debt-equity ratio Long term debt /
shareholders’
equity
0.94:1 1.27:1 0.06:1 0.18:1
2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Debt-equity ratio
Debt-equity ratio
Interpretation: Tabular presentation given above shows that debt-equity position of both
the business units namely Dunelm and Halfords Group Plc was not sound. Moreover,it has been
found that in the year 2016&2017, debt-equity ratio of Dunelm Plc accounts for .94 &1.27:1. In
contrast to this,solvency ratio of Halfords Group Plc was .06 &.18:1 in the year 2016 and
2017.In the accounting year 2017, debt position of Dunelm and Halfords Group Plc increased
significantly over 2016. However, according to ideal ratio, financial structure of company can
said to be optimal only when it is equal to .5:1 (Zeitoun and Mdawar, 2016). On the basis of such
aspect, firm should issue 2 equities in against to 1 debtfor managing finance and structure.

Outcomesof analysis shows that monetary structure of Dunelm Plc was not good in 2016
&2017. Result like.94 & 1.27:1clearly shows that Dunelm has met more of its financial needs
through the means of debt rather than equities. This in turn imposes fixed burden on Dunelm in
the form of interest and thereby affects profitability aspects. Apart from this, debt equity position
of Halfords Group Plc is improved in the positive or upward manner. Thus, while raising
funds,both the firms need to keep in mind ideal ratio which in turn assists in creating effective
monetary structure.Hence, considering the overall assessment, it can be entailed that solvency
position of Halfords Group is good over Dunelm.
Efficiency ratios
Dunelm Group Plc Halfords GroupPlc
Particulars Formula 2016 2017 2016 2017
Total assets 346 433 705 776
Revenue 881 956 1022 1095
Creditors 53 79 99 111
COGS 442 489 478 536
Stock 117 165 158 191
Fixed assets 189 223 470 505
(Financial
statements
of
Halfords
Group
PLC,
2017)
Fixed assets
turnover ratio
Revenue /
Fixed assets
4.66 times 4.29 times 2.17 times 2.17 times
Total assets
turnover ratio
Revenue /
Total assets
2.55 times 2.21 times 1.45 times 1.41 times
Inventory
turnover ratio
COGS /
inventory
3.78 times 2.96 times 3.03 times 2.81 times
Payment period Accounts
payable * 365 /
43.77 days 58.97 days 75.60 days 75.59 days

COGS or
purchase
Fixed assets turnover ratio
2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Fixed assets turnover ratio
Fixed assets turnover ratio
Interpretation: By applying the tool of ratio analysis on financial data set, it has been
identified that fixed assets turnover ratio of Dunelm Plc decreased from 4.66 to 4.29 times. On
the other hand, fixed assets turnover ratio of Halfords Group Plc was constant i.e.2.17 times
(Financial statements of Dunlem Group PLC, 2017). As per evaluation, in 2017, both the
business units failed to generate enough returns through using fixed assets. Due to lack of having
competent staff, Halfords failed to make optimum use of assets and thereby, generated sales.
Further, lack of fixed assets maintenance is another main cause behind decreasing ratio. Hence,
as compared to Halfords, Dunelm Plc has used fixed assets in the business operations effectually.
Besides this, to improve this ratio, Dunelm Plc is required to undertake the latest equipment and
focus on up-gradation of same. Through this, firm would become able to get the desired level of
outcomes or success.
Totalassets turnover ratio

2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
0
0.5
1
1.5
2
2.5
3
Total assets turnover ratio
Total assets turnover ratio
Interpretation:In the year 2017, total assets (fixed and current) turnover ratio of both
business units declined with small rate. From evaluation, it has been asserted that in 2017, total
assets turnover ratio imply for 2.21 &1.41 times. Such trend clearly exhibits that Dunelm has
made an effective use of assets in comparison to Halfords. Still, improvement takes place in total
assets turnover ratio is not highly significant. Thus, Dunelm and Halfords Group Plc is required
to undertake budgeting technique as well as conduct training sessions for personnel.By this, firm
would become able to make an effectual use of its both fixed as well as current assets.
Inventory or stock turnover ratio
2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
0
0.5
1
1.5
2
2.5
3
3.5
4
Inventory turnover ratio
Inventory turnover ratio

Interpretation: Results of ratio analysis exhibits that inventory turnover ratio of Dunelm
Plc decreased from 3.78 to 2.96 times. In addition to this, stock turnover of Halfords Group Plc
also shows declining trend from 3.03 to 2.81 times.Such trend presents that business over 2016,
in FY 2017, both the retail organizations failed to sell and replace more frequently. SWOT
analysis presents that poor merchandising arrangement and lack of space is one of the main
weaknesses of Dunelm Group Plc which in turn resulted into low stock turnover ratio. On the
other side, due to limited reach and decline in use of bicycles as well as less purchasing power of
customers,Halfordsgroup faced difficulty in enhancing such ratio.Now, inventory turnover ratio
of Dunelm Plc is good but it needs to make focus on the adoption ofstock management tools
which in turn assists in controlling cost significantly (Asquith and Weiss, 2016).
Creditor’s payment period
2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
0
10
20
30
40
50
60
70
80
Payment period
in days
Interpretation:Creditor’s payment period, in case ofDunelmPlc, was 44 and 59 days in
2016 &2017 respectively. In contrast to this, timeperiod which was given by creditors to
Halfords Plc implies for 76 days. Such trend exhibits that Halfords Plc has provided more time
period in relation to make payment. This in turn put a positive impact on the working capital
aspect or position of firm. Thus, Dunelm Plc should also focus on the suppliers who offer raw
and finished material with extended credit limit.
Investment ratio
Dunelm Group Halfords

Plc GroupPlc
Particulars Formula 2016 2017 2016 2017
EPS Net income
– preferred
dividend /
shares
outstanding
.50 .36 .32 .28
DPS Net profit
available to
shareholders
/ Number of
shares
outstanding
.21 .26 .17 .17
Payout
ratio
DPS / EPS
* 100
42.1% 59.6% 50.6% 58%
2016 2017 2016 2017
Dunlem Group Plc Halfords Group Plc
0.5
0.36 0.32 0.28
0.21 0.26
0.17 0.17
42.10%
59.60%
50.60%
58.00%
Investment ratios
EPS DPS Payout ratio
Earnings per share
Interpretation: Results of ratio analysis show that earnings associated with per share
offered by Dunelm to its shareholders decreased from .50 to .36 GBP. In addition to this, EPS of
Halfords Group Plc also declined from .32 to .28.Thus, due to the generation of lower earnings

or net income in 2017,EPS is showing a decreasing pattern. Hence, in both the years such as
2016 and 2017, Dunelm has provided shareholders with high earnings.
Dividend per share:
Interpretation:Dividend is one of the main sources that offer returns to shareholders and
so, investors prefer to invest in company which offers high DPS.In 2017, DPS offered by
Dunelm to investors increased from .21 to .26 GBP. In contrast to this, DPS offered byHalfords
Group Plc was constant such as .17 GBP per share in both the concerned years. Thus, on
considering the trends of earnings or generation of profit margin,it can be entailed that suitable
and high returns are offered by Dunelm to the equity investors.
Payout ratio:
Interpretation: This measure is highly effective which in turn provides high level of
assistance in evaluating proportion of earnings that is paid by company to equity investors in the
form of dividend. Above depicted graph shows that in the year 2017, payout ratio of Dunelm is
higher in against to Halfords Group Plc.
Movement of share prices and returns
Date
Adj
Close
Adj
Close
11/1/2012 null null
12/1/2012
610.40
3
267.89
6
1/1/2013
665.09
9
280.99
2
2/1/2013
656.34
8
259.95
5
3/1/2013
731.17
1
266.22
5
3/31/2013
743.58
8
284.45
7
4/30/2013
788.90
8
271.42
3
5/31/2013
833.34
7 261.77
6/30/2013
866.78
6
304.17
5
7/31/2013
830.70
7
307.47
7
8/31/2013 813.10 334.31

7 7
9/30/2013
778.78
8
359.71
4
11/1/2013
791.98
8
414.83
9
12/1/2013
802.41
4
378.82
5
1/1/2014
822.47
5
394.05
5
2/1/2014
886.22
2
404.88
4
3/1/2014
842.98
1
396.89
1
3/31/2014
839.37
2
380.47
6
4/30/2014
820.10
2
418.46
3
5/31/2014
748.39
9
406.34
5
6/30/2014
745.26
2
412.53
3
7/31/2014
788.73
2
417.80
4
8/31/2014
739.43
6
415.61
4
9/30/2014
756.01
8
434.18
3
11/1/2014 757.81 418.68
12/1/2014
849.82
5
411.32
2
1/1/2015
801.95
4
393.57
1
2/1/2015
837.05
9
394.45
8
3/1/2015
765.93
6
408.46
3
3/31/2015
826.96
3
403.14
5
4/30/2015
865.51
2
426.90
1
5/31/2015
831.09
3
468.03
1
6/30/2015
821.45
6
482.21
4
7/31/2015 854.95 461.82

7 6
8/31/2015
826.04
5
417.55
2
9/30/2015
869.18
3
393.22
9
11/1/2015
914.53
8
337.07
9
12/1/2015
880.45
8
303.26
3
1/1/2016
817.90
2
348.61
9
2/1/2016 929.01
366.27
5
3/1/2016
852.91
5
364.25
2
3/31/2016
829.79
5
388.16
1
4/30/2016
896.47
9
403.33
5
5/31/2016 740.57 295.65
6/30/2016
798.33
2
324.15
7
7/31/2016
843.41
4
319.74
3
8/31/2016 800.21
333.07
2
9/30/2016
710.51
5
322.24
2
11/1/2016
694.07
9
325.28
2
12/1/2016
774.66
5
347.22
7
1/1/2017
654.78
2
349.59
7
2/1/2017
622.04
3
328.06
1
3/1/2017
613.85
8
342.54
7
3/31/2017
590.02
8
360.99
3
4/30/2017
608.99
9
350.85
3
5/31/2017
585.16
4
330.28
2
6/30/2017 585.65 321.78

4
7/31/2017
568.62
6
311.83
7
8/31/2017
688.28
5 350.5
9/30/2017 712.12 330.5
11/1/2017
680.50
2 332.7
CONCLUSION
From the above report, it has been concluded that profitability and liquidity position of
Dunelm was good in the concerned period as compared to Halfords Group Plc. Besides this, it
can be inferred that solvency position of Dunelm was not good as per the ideal ratio or
standard.Thus, for enhancing debt-equity position, Dunelm needs to issue more equity shares
which in turn help in developing suitable structure.Further, it has been articulated that Dunelm
Plc needs to take strategic action or measure for improving the efficiency ratio. Along with this,
it can be summarized from the report that Dunelm has offered high returns to the shareholders.
Thus, from the investment and growth perspective, it can be stated that financial position as well
as performance ofDunelm Group Plc is good over others.

REFERENCES
Books and Journals
Asquith, P. and Weiss, L. A., 2016. Determining a Firm's Financial Health (PIPES‐A). Lessons
in Corporate Finance: A Case Studies Approach to Financial Tools, Financial Policies,
and Valuation. pp.7-25.
Fabregat-Sanjuan, A., Ferrando, F. and De la Flor, S., 2015. NiTiCu Transverse to Axial Strain
Ratio Analysis During Tension/Compression Tests. Materials Today: Proceedings. 2.pp.
S759-S762.
Fraser, S., Bhaumik, S.K. and Wright, M., 2015. What do we know about entrepreneurial finance
and its relationship with growth?.International Small Business Journal. 33(1). pp.70-88.
Orlitzky, M., Schmidt, F.L. and Rynes, S.L., 2003. Corporate social and financial performance:
A meta-analysis. Organization studies. 24(3). pp.403-441.
Shul'ga, S. V., 2014. Information disclosure in financial statements: evolution of national
systems and integration determinants. Journal International accounting. 38.pp. 332.
Zeitoun, M. А. and Mdawar, B. W., 2016. Role of financial analysis in improving performance
in banking industry. An empirical study on Commercial Bank of Syria. Экономика и
предпринимательство. (3-1).pp.693-699.
Online
Dunelm Group SWOT Analysis, USP & Competitors. 2017. [Online]. Available through:
<https://www.mbaskool.com/brandguide/lifestyle-and-retail/9224-dunelm-group.html>.
Financial statements of Halfords Group PLC. 2017. [Online]. Available through:
<http://financials.morningstar.com/balance-sheet/bs.html?
t=HFD&region=gbr&culture=en-US>.
Financial statements of Dunelm Group PLC. 2017. [Online]. Available through:
<http://financials.morningstar.com/balance-sheet/bs.html?
t=DNLMY&region=usa&culture=en-US >.
Halfords SWOT Analysis, USP & Competitors. 2017. [Online]. Available through:
<https://www.mbaskool.com/brandguide/lifestyle-and-retail/10176-halfords.html>.