Fresh It Plc: Health Food Segment Business Report Analysis

This business report assesses Fresh It Plc's strategic move into the health food segment. The report begins with an executive summary highlighting the company's current status, steady growth, and the rationale behind exploring the health food market. It includes a detailed business analysis, presenting the company's current financial standing and growth rate. The research methodology utilizes investment appraisal techniques, cost sheets, and cash flow analysis to forecast the viability of the new project. The report provides comprehensive cost sheets spanning five years, detailing opening and closing stock, prime costs, supervisor salaries, office expenses, depreciation, and other relevant costs. Financial projections include internal rate of return, payback period, and cash flow analysis, offering insights into the project's profitability and financial health. The conclusion summarizes key assumptions, projected outcomes, and the overall financial viability of the venture, supported by references to relevant financial and investment literature. The report's findings suggest that the new venture is promising, with a positive net present value and a satisfactory payback period, making it a worthwhile investment for the company.

BUSINESS REPORT
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Executive Summary
Fresh It Plc, food manufacturer has been going steady in the business for past 15 years with a
modest growth rate of 4%, which speaks volume of its attained stability and market share in
the corporate world.
Having independent retailers across the country, the company has good command in its
respective segment, but acknowledges the growing trend towards more nutrias way of living
and is looking forward to bifurcate into this segment of the industry.
Venturing into a new segment will pose its’ won difficulties for the company, but the
goodwill achieved over the span of 15 years and having precise knowledge of the changing
economic conditions, the company should fare well into the new venturing.

Table of Contents
Executive Summary...................................................................................................................1
Aims of the report......................................................................................................................3
Business Analysis.......................................................................................................................3
Current Status.........................................................................................................................3
Research Methodology...........................................................................................................3
Cost sheet...................................................................................................................................4
Internal rate of return.................................................................................................................5
Pay back period..........................................................................................................................5
Cash flow analysis......................................................................................................................6
Conclusion..................................................................................................................................7
Assumption.............................................................................................................................7
Outcome.................................................................................................................................7
References..................................................................................................................................8

Aims of the report
 The laid down report showcase the projections towards the health food segment that
the company is interested in venturing.
 Report shows projections with assumed details with regard to the profitability of the
new segment for the company.
 The report tries and formulates decision based on the collected data as to whether the
project deemed to be undertaken by the company.
 The report tries to convene ways and methods by which true and fair financial
position of the company can be obtained.
Business Analysis
Current Status
The company at present enjoys a steady moderate growth rate of 4%, over the year and its
return on capital employees i.e. 25% is greater than cost of capital at 12% indicating that the
company has the capacity to earn more profits and is utilizing the capital employed efficiently
(VanOosting, 1983).
The above status is the basis for venturing into the new segment as the company will have
back up from the main segment and raising debt will be impacted by the same. The profit
increasing indicators will motivate the stakeholders of the company to continue their interest
with company, which will have the organization to slide easily into the new segment (Pike et
al, 2012).
Research Methodology
The current report has utilized the tools of Investment appraisal technique, Cost Sheet and
Cash Flow analysis to showcase and forecast the route and viability of the new project to be
undertaken (Pike et al, 2012). Cost Sheet and Cash Flow analysis are based on certain
assumptions and investment appraisal technique consists of Net present value, internal rate of
return and payback period. All the calculations are made in pounds.

Cost sheet
PARTICULARS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Opening stock of raw
materials 42500 45500 48073 50413 27727
(-) closing stock 19125.045 20475 21632.85 22685.85 12477.2175
PRIME COST 23375 25025 26440 27727 15250
Supervisor salary 30000 30300 31209 32145.27 33109.6281
WORKS COST 53375 55325 57649 59872 48360
office expenses 30000 30300 30906 31524.12 32154.6024
25000 25250 25755 26270.1 26795.502
depreciation 12000 8400 5880 4116 2881.2
COST OF GOODS SOLD 120375 119275 120190 121783 110191
Cost of branding 8000 8040 8361.6 8696.064 9043.90656
cost of packaging 14166.7 14237.5335 14522.28417 14812.72985 15108.98445
marketing cot 10000 5000 3000 1000 1000
distribution cost 8000 8040 8200.8 8364.816 8532.11232
sales tax 34000 37000 40000 39000 36000
COST OF SALES 194542 191593 194275 193656 179876
PROFIT -24542 -6593 5725 1344 124

SALES 170000 185000 200000 195000 180000
Internal rate of return
PARTICULARS YEARS CASHFLOW
0 (293542)
1 170000
2 185000
3 200000
4 195000
5 180000
INTERNAL RATE OF RETURN 55%
Pay back period
PARTICULARS YEAR CASH FLOW CUMULATIVE
CASH FLOW
1 170000 170000
2 185000 355000
3 200000 555000
4 195000 750000
5 180000 930000
PAY BACK PERIOD 2YEARS
7MONTHS

Cash flow analysis
PARTICULARS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
operating income 228542 228593 234275 232656 215876
(+) depriciation expenses 12000 8400 5880 4116 2881.2
(-)increase in stock 42500 3000 2573 2340
(+) decrease in stock 22686
CASH FLOW FROM
OPERATING ACTIVITIES 198042 233993 237582 234432 241443
CASH FLOW FROM
INVESTING ACTIVITIES
(-) purchase of equipment 50000
CASH FLOW FROM
INVESTING ACTIVITIES 148042 233993 237582 234432 241443
CASH FLOW FROM
FINANCING ACTIVITIES
(-) interest paid 4500 4590 4681.8 4775.436 4870.945
(-)taxes paid 34000 37000 40000 39000 36000
CASH FLOW FROM
FINANCING ACTIVITIES 177542 270993 277582 273432 277443
CASH AT BEGNING 15000 192542 463534 741116 1014548
CASH AT END 192542 463534 741116 1014548 1291991

Conclusion
Assumption
 Closing stock is maintained at 45% of the opening stock inclusive of the purchase of
raw materials.
 Supervisor salary is increased by 1% over the period of years.
 Office expenses are increased by 1% over the period of years.
 Depreciation rate for the machinery is 30% and the method used is written down
value method.
 Cost of branding, packaging and distribution are subjected to an increase of 0.5% over
the period of 5 years.
 Initial investment for internal rate of return, payback period and net present value
included cost of sales, sales tax, investment in machinery and working capital.
 Interests paid for cash flow analysis are assumed at 4500 subjected to an increase of
2% over the years.
Outcome
 The projected cost sheet depicts that the company will enforce minimal loss in the
first and second year which is understandable as the product will be entering into a
new market by the company and initial cost will recovered through consecutive years,
earning the highest in 3 year which will be its peak season.
 The company based on the forecast obtains a healthy internal rate of return, showing
the profit making ability of the company in the future and significant utilization of
capital employed (“Selected Further Applications of Investment Appraisal methods”,
n.d.).
 The company has payback period of 2 years and 7 months which is very satisfactory,
considering that it’s a new venture undertaken by the company.
 Company earns a positive Net present value over the projections which aides to the
fact that the new avenue is very viable and profitable for the company.

References
Investopedia - Sharper Insight. Smarter Investing. (n.d.). Retrieved March 8, 2017
Pike, R., Neale, B., & Linsley, P. (2012). Corporate finance and investment: decisions and
strategies. New York: Pearson Financial Times / Prentice Hall.
Selected Further Applications of Investment Appraisal Methods. (n.d.). Investment
Appraisal, 111-166.
VanOosting, J. (1983). The business report: writer, reader, and text. Englewood Cliffs, NJ:
Prentice-Hal