Introduction Who we are Purpose of this workshop Introduction Who - - PowerPoint PPT Presentation
Introduction Who we are Purpose of this workshop Introduction Who we are Purpose of this workshop Aims for this workshop Do not fall asleep! Learn something Take fear / complexity away from finance jargon
Do not fall asleep! Learn something Take fear / complexity away from finance jargon Audience participation, have fun and win something!
– Exploring the method behind the mystery – Why and who are they important to
– The accountancy cycle
and Resulting Actions
Open new stores and funeral branches Sell products and services Pay Overheads = Trading Profit Community Investment CAPEX Investment Share of the Profits Increase Sales & Profit
TSC Money Merry Go Round
Share Capital Investment
Gross Margin Depreciation & Amortisation Overheads
What is it? An analysis of our performance (usually sales) one year to the next. Comparing stores/branches open throughout both years. Usually expressed as a %. Why is it important? Shows us whether our core business is growing or shrinking year on year
Previous Year Current Year Store has performed consistently Store has had a reduction in sales Store has had growth in sales Stores have opened this year so do not contribute towards LFL position Store closed so does not contribute towards LFL position
Gross Margin
What is it? Measures initial profitability. Calculated as sales less the cost of products sold, then divided by sales Why is it important? Indicates whether our business is buying and selling at the best price. Sufficient margin needs to be made to cover overheads.
What we sell the product for What the product costs us Gross Profit £10 £7
£3
30%
Gross Margin
Gross Margin Overheads
What is it? Collective term to describe the cost of running a business.
maintenance and legal and professional costs Why is it important? Overheads need to be controlled in order to ensure overall profitability
Gross Margin Overheads
What is it? Measures the trading/operational profitability of our business and is calculated: Sales less all costs/ overheads (except interest, tax & distributions) Why is it important? We need sufficient trading profit to:
£100,000 £70,000 £30,000 £21,000 £9,000 Sales Cost of Sales Gross Margin Overheads Trading Profit
Gross Margin Overheads
CAPEX
CAPital EXpenditure
What is it? Term to describe the purchase of “big ticket” items. These are not normal trading expenses and will drive benefit for future years. Why is it important? It is fundamental for future growth and development for the business
Gross Margin Depreciation & Amortisation Overheads
Depreciation & Amortisation
What is it? The yearly accounting (non cash) cost of big purchases (property, store fit outs, RVS project) Calculated as the cost of the purchase divided by the estimated useful life of the purchase. Depreciation is a cost on tangible purchases and amortisation on intangible purchases. Why is it important? Depreciation smooths out the impact of large purchases in our profit and loss performance. Matches the cost of large purchases with the benefit received from asset bought.
Buy a Car Life (years) Depreciation cost for next 5 years
Trading Profit Time
Y1 Y2 Y3 Y4
No CAPEX Refit Purchase
Gross Margin Depreciation & Amortisation Overheads
What is it? An additional profitability measure. Trading profit adding back costs of depreciation and amortisation Why is it important? A good indication of cash profit driven from trading activities. Excludes the annual accounting cost of CAPEX items
£100,000 £70,000 £30,000 £21,000 £9,000
Sales Cost of Sales Gross Margin Overheads EBITDA
£10,000 £19,000
Trading Profit Depn & Amort
Earnings Before Interest, Tax, Depreciation and Amortisation
What is success and how do we measure it? -Comparisons
Achieving or beating the budget? Beating the competition? Outperforming last year?
What are budgets and forecasts?
In simple terms:
Why:
3YP
The Accountancy Cycle
AGM
Budget
Periods 1-3 Results Q1 Forecast Periods 4-6 Q2 Forecast Periods 7-9 Q3 Forecast Periods 10-12
TSC Money Merry Go- Round ; From Customer and Beyond!
Cost of Sales £257 M (69%) People Costs £ 51 M (14%) Property Costs £ 22M (6%) Other Overheads £18M (5%) Depreciation £14M ( 4%) 69% 14% 6% 5% 4% 1 1 1
TSC 2015-2016 – Where did all the money go?
Cost of Sales People Costs Property Costs Other Overheads Depreciation Trading Profit Net Finance Costs Distributions
Cash Profit £ - 18.8M – Turns into: (-) CapEx - £13.5 M (-) Loan Repayments- £3.2M (-) Distributions- £2.6M (-) Interest and Tax -£ 0.4M (+) Add cash from Funeral Plans - £2.3 M = Equals £1.4M Net increase to TSC Cash holding.
CAPEX £13.5m
25 new stores 135 funeral homes 3 new crematoriums ½ of Wayne Rooney!
4.00 6.00 8.00 10.00 12.00 14.00 2000 JAN 2001 JAN 2002 JAN 2003 JAN 2004 JAN 2005 JAN 2006 JAN 2007 JAN 2008 JAN 2009 JAN 2010 JAN 2011 JAN 2012 JAN 2013 JAN 2014 JAN 2015 JAN 2016 JAN
Inflation (%)
Food and Drink CPI
0.70% 0.70% 0.20% 0.10% 0.00% 0.00%
Aldi Lidl Other Coop Sainsbury Waitrose Iceland Tesco Morrisons Asda
Tesco 28.10% Sainsbury 16.40% Asda 16.20% Morrisons 10.50% Coop 6.10% Aldi 6.00% Waitrose 5.10% Lidl4.40% Iceland 2.00% Other 5.20%
Morrisons pulled out of the convenience market in 2015 removing 140 stores from its estate, largely due to market pressure.
Change in consumer shopping trends Increased competition Race for space
Lidl Aldi Asda
Price deflation
Tesco Sainsbury’s
National Living Wage
Investigate new
thoroughly ensuring best return on investment Increase customer satisfaction & member engagement ensuring they want to return Investing in new technologies Build the basket - Build loyalty - Attract new customers Drive LFL growth “Control the Controllables”
5% improvement = £500k or 1 new store Price Investment
1. What does the “D” in EBITDA relate to debt or depreciation? 2. Complete the equation , Gross Margin is measured as Sales less what? 3. If we bought an asset with a useful life of 10 years, costing £500k, what is the annual depreciation charge? 4. In the presentation were TSC Property Costs £26m or £22m? 5. Was the total Capex in 2015-16 more or less than £15m? 6. Is amortisation the cost of tangible or intangible assets? 7. Is Trading profit measured before or after tax? Tie Breaker: To the nearest £100k, what was the total amount of cash receipts from funeral plan sales in 2015-16? ( e.g £5.5m )