WIMPY Past Financial Performance in 2010 -2011
OVERVIEW
Famous Brands’ annual report (2011) indicated the overall decline in International franchising division’s (which comprises of Wimpy United Kingdom) financial performance, unlike the rest of its’ strategic business units.
Major reasons behind this were:
1. Subdued customer confidence due to ‘high unemployment’ and ‘severe social spending cuts’ (Famous Brands’ annual report, 2011, p18). ‘Limited disposable income was further restrained by an increase in VAT to 20%’ (Famous Brands annual report’, 2011, p18).
2. ‘Termination of the Roadchef agreement which resulted in reduced turnover levels in a short term’ (Famous Brands’ annual report, 2011, p18).
-
Figure 1 illustrates a significant decline in revenue and operating profit, by £29m and £2m, respectively (Famous Brands’ annual report, 2011). One of the main reasons for Operating profit’ decrease is a significant drop of Turnover, which was the result of the overall Sales decrease.
- The decline in operating profit clearly demonstrated that Wimpy UK is at risk of losing profit from its core business operations, sales of fast food. As soon as Wimpy UK is an International Franchising Division, it doesn’t make any investments. That means, that the core business operations is the only source of revenue and profit for Wimpy UK. So, implementation of a new Integrated Marketing Plan could be the best possibility to improve its financial performance.
- As it could be clearly seen from Figure 2, there is an increase of Operating Profit Margin from 2010 to 2011, from 10.1% to 11.3%. It means that the decrease in Revenue was influenced to a greater extent by ‘Other Operating Expenses’ (its Day-To-Day Operations (costs)), then by decrease of the company’s Operating Profit.
- So, another possible advice for Wimpy UK could be to analyse the structure of its current costs and to redirect them to potentially more profitable activities, e.g. Advertisement Campaign or Staff Training and Control of services provided by the staff.
- Other important financial metrics in favour of the new Integrated Marketing Plan for Wimpy UK are ‘Trademark’ & ‘Goodwill’. Figure 3 makes it clear that Carrying amount for both metrics decreased. So there is an opportunity for Wimpy UK that raising brand awareness will help to generate higher levels of profit for the company.
Conclusion
Provided the above analysis, from financial point of view there is a clear need for future improvement in Wimpy UK’s Strategy and Integrated Marketing Plan. For implementing this plan we will invest $50 m, plus there is a possibility to redirect some spending for these activities from the less profitable ones.
