+ 44 20 8144 3706Executive Summary:
Roast Ltd is coffee chain in the UK and in present research study deep analysis of the UK coffee market is done. In the past few years, coffee market increased at a rapid pace in the UK. Coffee chains are consistently increasing their outlets in the UK. Poor weather conditions and shortage of labor as well as higher labor cost and elevation in oil prices are some factors that negatively affect Roast Ltd profit. Roast Ltd is earning very less profit in its business. OCC also increased in the business. There are merit and demerit of each project evaluation method and due to this reason each project evaluation method should be utilized to measure the viability of available alternative. Various sources of finance are available to the company firms and each of them has merit and demerit. Considering financial condition and future business plans firm must raise fund through equity. Starbucks should not go for acquiring Roast Ltd because of its poor financial conditions and also management of company is also very poor.
Part 1: Industry review
UK Coffee house industry:
In 2008 UK consume 70 million cups daily and a decade later in 2017 or 2018 demand increase to 90 million cups daily. Key players in the UK coffee house industry are Costa coffee, Starbucks and Cafe Nero etc (Annual turnover of selected coffee shop chains in the United Kingdom (UK) as of financial years ending 2018., 2018). At the end of the year in 2018 annual turnover of Costa coffee is 1131 million GBP. Starbucks has a total annual turnover of 387 million GBP. Caffe Nero has a total annual turnover of 334 million GBP.
It is clear that these are one of the largest retail chains in the UK and these are growing at a fast pace. Apart from these, there are many small and medium size coffee shops in the market. These UK coffee chains observe total sales of ₤4.3 billion in the year 2018 collectively.
The growth rate of coffee shops decreases in the UK from 7% to 4.2% in the year 2019. In the year 2019 coffee market in the UK grew by only 1.6%. Branded coffee shop segment increased just by 0.9% to total 8,222 outlets. In the year 2019 store number only increase by 70.
Part 2: Business performance analysis
2.1 Statement of profit or loss:
• Operating profit ratio: Operating profit ratio is the one of the main ratio because it indicates the extent to which firm has control of operating expenses in the business. Firms need to maintain high operating profit ratio in their business because by doing so strongly control can be done on expenses (Rakićević and et.al., 2016). It can be seen from the table given in appendix operating profit percentage is 5% in the year 2018 and its value was 3% in the year 2017. It is clear that operating profit is low in the business because there is low control on expense in the company. It is clear that Roast Ltd have less control on expenses in the business. So as to maximize operating profit in the business Roast Ltd need to generate economies of scale. By doing so cost can be controlled in the business. If the cost will remain in control, then in that case profit will remain high in the business. Thus, it can be said that it is the one of the main metric that assists manager in accessing company performance.
References:
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