Tweedie plc operates a chain of mid-priced hotels sited near golf courses catering for both business and holiday visitors. The company had been trading successfully but has been badly affected by the recession. As a response to increased competition and falling margins, the directors decided to restructure the business by selling its two profitable overseas hotels in order to concentrate solely on operations in the UK. In January 2009 they spent £250,000 on a major marketing campaign and invested £200,000 on staff training. The sale of the overseas hotels was completed in March 2010.
The sales director is pleased that they almost managed to achieve their sales targets for the year ended 31 March 2010, although they did have to offer some customers special discounts and extended credit terms as inducements.
Tweedie's policy is not to revalue its properties. Their current share price is 175.5p.
Tweedie plc
Statement of Comprehensive Income for the year ended
31 Mar 2010
31 Mar 2009
£'000
£'000
Revenue - UK hotels
10,500
10,800
Overseas hotels
1,400
1,200
11,900
12,000
Cost of sales
(10,768)
(10,903)
Gross profit
1,132
1,097
Selling and distribution costs
(180)
(150)
Administrative expenses
(212)
(182)
740
765
Exceptional items (advertising and training)
-
(450)
Profit on sale of overseas hotels
1,022
-
Profit from operations
1,762
315
Finance cost
(52)
(45)
Profit before tax
1,710
270
Taxation
(460)
(70)
Profit for the year
1,250
200
Tweedie plc
Statement of Changes in equity for the year ended 31 March 2010
Share capital
Share premium
Retained earnings
Total
£'000
£'000
£'000
£'000
Balance at 1 April 2009
6,000
2,500
2,805
11,305
Profit for the year
1,250
1,250
Share issue
400
450
850
Balance at 31 March 2010
6,400
2,950
4,055
13,405
Statement of Financial Position as at
31 Mar 2010
31 Mar 2009
£'000
£'000
Assets
Non-current assets
11,425
12,302
Current assets
Inventory
517
290
Trade receivables
820
578
Bank
2,600
30
3,937
898
Total assets
15,362
13,200
Equity and Liabilities
Equity
Ordinary shares of £1 each
6,400
6,000
Share premium account
2,950
2,500
Retained earnings
4,055
2,805
13,405
11,305
Non-current liabilities
5% Loan notes - repayable May 2011
900
900
Current liabilites
Payables
1,057
995
Total Equity and Liabilities
15,362
13,200Tweedie plc
Statement of cash flows for the year ended 31 March
2010
2009
£'000
£'000
£'000
£'000
Cash flows from operating activities
Profit before tax
1,710
270
Adjustments for:
Depreciation
140
160
Profit on sale of overseas hotels
(1,022)
Interest expense
52
45
Op. profit before
working capital changes
880
475
Increase in inventories
(227)
(65)
Increase in receivables
(242)
(36)
Increase in payables
62
12
Cash inflow from operations
473
386
Interest paid
(52)
(45)
Income taxes paid
(460)
(70)
Net cash flow from operating activities
(39)
271
Cash flows from investing activities
Purchase of property, plant and equip.
(419)
(360)
Proceeds from sale of overseas hotels
2,178
Net cash flow from investing activities
1,759
(360)
Cash flows from financing activities
Proceeds of share issue 1 April 2009
850
--
Dividends paid
--
(200)
Net cash flow from financing activities
850
(200)
Net inc/(dec) in cash and cash equivalents
2,570
(289)
Cash and cash equivalents at 1 April
30
319
Cash and cash equivalents at 31 March
2,600
30
Tweedie plc
Key figures
Tweedie plc
Bilton plc
2008
2007
2006
2010
2009
£'000
£'000
£'000
£'000
£'000
Revenue
13,900
13,360
13,030
11,200
10,700
Operating profit
833
855
821
800
780
Non-current assets
at valuation
10,700
9,900
Current assets
760
730
Current liabilities
1,085
1,220
Non-current liabilities
1,000
926
Capital employed
11,900
11,400
10,800
18,500
17,800
Key ratios
Tweedie plc
Bilton plc
2008
2007
2006
2010
2009
ROCE
7%
7.5%
7.6%
4.3%
4.4%
Op. profit margin
6.0%
6.4%
6.3%
7.1%
7.3%
Gross profit margin
10%
11%
12%
15%
13%
Non-current asset turnover
1.30 times
1.23 times
1.27 times
1.05 times
1.08 times
Inventory days
10 days
9 days
9 days
10 days
9 days
Trade receivables days
15 days
16 days
14 days
14 days
13 days
Current ratio
1.0:1
1.1:1
0.8:1
0.7:1
0.6:1
Acid test ratio
0.8:1
0.9:1
0.7:1
0.5:1
0.6:1
Gearing
7.6%
7.9%
8.3%
5.4%
5.2%
Cash generated from operations per share
0.17p
0.18p
0.19p
0.23p
0.21p
A typical price/earnings ratio for this sector would be 12.
