BPI Annual Report: KCQs

Firstly, I would like to apologise for being so distant lately, particularly to those of you who were kind enough to select my blog in your top 3’s. I am going to begin with my key concepts. These concepts were not directly related to the financial statements themselves, but rather areas of the annual report which highlighted BPI's scope, consideration for their future, consideration for innovation and also their consideration for the community and environment within which the operate. I suppose for myself, due to my non accounting background, these were the areas that stood out to me, more so than the technicalities of the financial statements. 

KC. Much of BPI’s success can come down to their strength and resilience as a result of their wide geographical coverage, while supplying to diverse end user markets. When reviewing BPI’s turnover by sector, it is notable that no more than 33% turnover is obtained from one single end user market, with the retail food chain market leading on 33% turnover, the agriculture and horticulture industry following closely behind on 32%, and the other 35% turnover being split between industrial, construction, healthcare and waste services, and non-food retail industries. Alternatively, when looking at turnover by destination it can be seen that BPI supplies to over 50 countries worldwide, with the UK leading on 54%.

KC. BPI have recognised that through the manufacturing and supply of polythene, they maintain the responsibility to operate with concern for the environment and also the communities within which they function. In consideration for the environment, BPI promote the re-use and recycling of their materials, process new products from recycled materials, provide environmental information for employees, customers and the community, and also support initiatives which benefit the environment. Below you will find two examples of BPI’s support to environmental and community initiatives, and also a diagram explaining their recycling process. 

BPI and its employees participated in the Great Scottish Run and presented a cheque of their money raised to Down's Syndrome Scotland. >>>

<<< BPI employees together with children from Ysol Primary School planting 150 trees at the school's Eco project. 

KC. A key concept which I wanted to highlight was that of the price volatility of raw materials within the polythene industries. You will find that I have already discussed this in a previous post entitled "The polythene industry, it's risky business". If you haven't already engaged in this post, I recommend you check it out as it does highlight an ongoing barrier for BPI and how they are hoping to overcome these volatile prices and maintain their profit margins. 

KC.  BPI have been focusing investments on the innovation of thinner and stronger polythene films. When reviewing the graph to the right, it can be seen that while in 2013 the Sales Volume per square metres had increased, the Sales Volume per tonne had alternatively decreased. This innovation is allowing for the reduction of weight in packaging, ultimately increasing cost benefits and advances in packaging and extrusion technology. 

KC. BPI project that they will be able to maintain operations comfortably and expect that they have adequate resources to operate in existence for the foreseeable future. Under these grounds, BPI continue to adopt the going concern basis in preparing the financial statements. 

Q. I noted that in the income statement it showed profit from operations before restructuring costs to be 24£'m, with the restructuring costs being 1£'m. I was unsure of the exact implications and reasons for restructuring so I did some digging. In the beginning of 2013, BPI were advised that a major contract for supplying bread bags would not be renewed. As a result of this, there were 90 redundancies at the end of the year and 1£'m worth of structural changes were implemented, which they project will enhance performance for 2014. 

To be honest with you, I found these KCQs to be a nightmare, with so much information in the annual report, how do you narrow down what is truly important. Which brings me to my final query...

Q. For myself, having absolutely no accounting background, I have found the annual report very difficult to read, particularly in areas which use heavy accounting terminology. Also, much of the annual report appears to be made up of the same information, just displayed in different ways and contributed by different people. So if you were looking to buy shares in a company, how do you narrow down this bulk of information? What is the key financial data that gives an honest view of a company's stability and position in the market?