The analysis of Consolidated Cash Flow Statement of Bunzl indicates that the company’s overall net cash position has increased by £31.9mn in 2010 as compared to a decline of £14.5mn in 2009. This has resulted in a cash and cash equivalent figures for 2010 and 2009 as £74.9mn and £43mn respectively (Bunzl).
These figures are further evaluated based on the changes in the cash position in relation to three set of business activities carried out by the company including operating, investing, and financing activities.
Operating Activities
The company’s net cash inflow from operating activities has declined by £25.5mn in 2010. This is mainly due to the negative changes in the working capital. Further investigation of components of working capital suggests that the company’s accounts receivables and inventory have risen sharply in 2010 by £52.7mn and £12.9mn respectively. This could suggest that the company has its cash stuck in larger inventory holding and receivables to be realized.
The company’s net profit for the year 2010 is up by £9.2mn from £216mn in 2009 which has a positive impact on the company’s cash flow from operating activities. Another element that needs to be discussed is the high levels of finance cost that the company is incurring.
Although it has decreased from £54.7mn in 2009 to £50.8mn in 2010 but still it remains at quite high levels. Examination of note 5 accompanying the financial statements clearly reflects reduction in the company’s loans and overdraft obligations but at the same time the company has incurred major loss in foreign exchange.
Further, the company has generated a financial gain on foreign exchange intercompany transactions which may need further understanding of the related party transactions comprising on loans and deposits between related companies (Bunzl).
Investing Activities:
The company’s net cash outflow from investing activities has increased by almost 387% in the year 2010. Currently, it is negative value £124.5mn in 2010 as compared to £25.7mn in 2009. This major change has been the outcome of the company’s capital investment.
The company has purchased nine other companies in the year 2010. These companies are producing hygiene, cleaning, and packaging products which are compatible with the company’s own product lines. These acquisitions are accounted for by the company in its financial statements using purchase method of accounting. Out of the total investment £34.5mn is paid for by the company for goodwill which these businesses are expected to bring with them (Bunzl).
Financing Activities
The company’s net cash outflows from financing activities are £67.7mn in 2010 as compared to £234.6mn in 2009. A major contributor to this position is the interest paid by the company for its debt obligations on both short and long term borrowing.
The company has also paid healthy total dividend of 23.35p per share in 2010 as compared to 21.55p in 2009 resulting in an outflow of £66.1mn in 2010 and £62.3mn in 2009.Further analysis indicates that the company has taken a fresh set of loans from financial institutions.
This has resulted in a positive inflow of £15.1mn in the company’s cash position despite of payback of borrowed amount by the company that resulted in a negative outflow of £131.5mn in 2009 (Bunzl).
Others
The company has also made a exchange gain of £1.8mn in 2010 as compared to a loss of £2.0mn in 2009.
Work Cited
Bunzl. Annual Report 2010. Financial. London: Bunzl Plc., 2010.