Financial and Management Accounting: Redrow v Bellway Case Analysis

RUNNING HEAD: FINANCIAL AND MANAGEMENT ACCOUNTING
Financial accounting

Financial and management accounting 2
Case A: Redrow v Bellway
Executive summary
The report provides insights about the overall finanicla position of two companies operating in
the house building sector of United Kingdom. The report attempts the assessment of yearly
report of Redrow Plc for the year 2018 and Bellway Plc for the year 2017. It has applied a CORE
approach which covers the entire examination of both the organizations.
It starts with a concise introduction and later on clarifies the context of the case. The segment
incorporates the outline of both the organizations including their SWOT examination separately.
After that an overview of the case has been given which covers the issues saw amid the
examination. A ratio analysis has been led based on yearly reports gathered for both the
organizations and it has been assessed that Bellway Plc has performed well than Redrow Plc
amid the year 2017. Hence, it is recommended to Persimmon Plc that it should go with the
acquisition of Bellway over Redrow.

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Contents
Section A.....................................................................................................................................................4
Introduction.................................................................................................................................................4
Context........................................................................................................................................................4
Redrow Plc..............................................................................................................................................4
Bellway Plc.............................................................................................................................................6
Overview.....................................................................................................................................................8
Ratios..........................................................................................................................................................9
Liquidity ratios........................................................................................................................................9
Profitability ratios..................................................................................................................................10
Solvency ratios......................................................................................................................................12
Efficiency ratios....................................................................................................................................13
Market value ratios................................................................................................................................15
Evaluation.................................................................................................................................................16
Section B...................................................................................................................................................17
Case B1.....................................................................................................................................................17
Introduction...........................................................................................................................................17
Capital budgeting techniques.................................................................................................................18
Payback period..................................................................................................................................18
Net present value...............................................................................................................................19
Internal rate of return.........................................................................................................................20
Recommendation and Conclusion.........................................................................................................20
References.................................................................................................................................................22

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Section A
Introduction
Financial performance analysis is a strategy of assessing and measuring the perdormance and
position of the organization from each financial angle. It determines the strengths and
weaknesses of the firm by estimating the every last thing of income statement and balance sheet.
Monetary investigation can be performed by utilizing numerous methods, for example, ratio
analysis, horizontal and vertical analysis, trend analysis and others. The fundamental target of
leading the investigation is to assess the money related circumstances of the firm in order to
know about its solvency, profitability, liquidity and. The information is gathered from the
distributed yearly reports of the organization on its official site and is legitimately assessed for
taking suitable decisions (Gibson, 2011).
The report manages the monetary investigation of Redrow Plc and Bellway Plc for the year 2017
and 2018. It has embraced a CORE approach which gives context, overview, ratios and
evaluation of both the organizations' execution amid the years. The report features the issues
emerged which influenced the position and performance of the organizations in general. CORE
methodology gives the general blueprint of the analysis and is most appropriate for upgrading the
understanding of the reader.

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Context
Redrow Plc
It is the United Kingdom based organization occupied with the residential housing development.
The firm is one of the biggest British house manufacturers having 15 operational divisions across
the country. The core exercises of the organization include development of private houses all
through England and Wales. The product range is centred on the idea of conventional family
lodging in its local business. The properties possessed by Redrow include Heritage Collection,
Regent Collection, Abode Collection and Bespoke Collection. The organization is listed on
London Stock Exchange and is exchanged with a ticker RDW: LSE. The SWOT examination of
Redrow Plc is as per the following (FT.com. 2018).
Strengths
 Redrow Plc has a wide system of distribution which ensures that its items are effectively
open and accessible to its clients in auspicious way.
 The organization has constructed a solid dealer network by setting up a connection
between the dealer and distributer.
 Redrow has strong free cash flow position which empowers it to grow its business in new
markets.
Weaknesses
 The organization fizzled at confronting the difficulties given by new contestants in the
segment and should centre on enhancing the criticism component internally from the
sales team to counter the difficulties.

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 Despite making tremendous interest in Research and Development, Redrow can't contend
with the main players in the business on the part of advancement.
 The organization isn't great at foreseeing the demand for its products as contrast with its
rivals.
Opportunities
 Increase in purchaser spending and moderate growth rate gives a chance to Redrow to
expand its client base and piece of the pie.
 The advancement of market will lessen the contender's leeway and empower the
organization to enhance its intensity.
Threats
 One of the dangers to the organization is expanded rivalry in the market which can affect
the development of its benefits.
 New participants in the market are picking up pieces of the pie and are a risk to Redrow
as it can lose its clients to the new players.
Bellway Plc
It is a residential property designer in Uk which depends on Newcastle upon Tyne. The
organization deals in constructing and selling the homes having a range from one bed room lofts
to five rooms’ family homes. Likewise, it additionally gives social lodging to-lodging
affiliations. It works through 19 exchanging divisions including England, Manchester, Kent,
North London and numerous others. Different business contributions of the firm incorporate
electrical, kitchens, gardens, washrooms, flooring, fire encompass and fire, fired tiling and