Contents

• About Thorntons plc
• Ratio analysis
• Thorntons plc Value analysis
• RISKS AND MEASURES TO MITIGATE THEM
• Conclusion and Recommendations
• References
• Appendix

Description

Thorntons plc is a company with great potential, this can be seen through the sales growth rate value driver, and moreover the credit control management is commendable. It has grown overall its stores over the five years. However there is a lot of inconsistent with its franchise growth. The profitability is there but it is not consistent over the years.
The shareholder’s value has continually diminished over the years. It is of utmost importance for the management to realize that its’ key objective is to maximize the wealth of the shareholder. This can only be achieved through ascertaining that the operations of the company are run efficiently, sales revenues are amplified, and internal controls are effective and so on.
The shortcomings of Thorntons plc is that it has an inept inventory management which is dawdling the liquidity position of the company since the working capital is being over utilized and so tying up funds which would have been used elsewhere.
The controls put in place to check on operating costs are ineffective resulting to a decline in operating profits and also the net profit margins which are not consistent over the five years.
The capital structure has consistently changed over the years by a fall in net assets and other assets as well as in increase in net borrowings and debt. This is depicted by growing gearing ratio and a fall in the dividend per share. The share price along with earnings per share has not grown consistently but has been fluctuating over time.
My recommendations is that Thorntons plc should work on its inventory management policies in order reduce the amounts of finished goods it has in the warehouses by sales promotions so as to trim down the stocks. The operating controls should be revised so as minimize this costs and bring in efficiency. This will enhance its liquidity.
In addition the net debt and borrowings should be reduced so as not to affect the returns of the investors by turning debt capital into equity. Cash management should be enhanced by having budgetary controls and extension periods of the payments to suppliers ought to be lessened. This will improve its solvency.