Comfort Remote Site Services Ltd Case Study Solution
Aramark Corporation
Aramark Corporation is one of the biggest corporation in the remote site food service industry founded in 1959 based in Philadelphia, United States. It is engaged in offering its food and support services to sports, business, healthcare, education and correlational industries in around 21 countries. Since, Aramark Corporation is the market leader in providing the professional services to its customers, there is a likelihood that the company would go towards exploiting the expansion resources and opportunities, hence creating medium level threat for Comfort Remote Site Service Ltd.
Compass Group PLC
The Compass Group PLC is a multinational conglomerate founded in the year 1941 based in Chertsey, England. One of the subsidiary of Compass Group PLC namely Eurest dinning services which has gotten the positive response from the Listeria Monocytogenes in Ontario prisons, this popularity would allow the company to capture the Ontario market in upcoming years, hence creating high level threat for Comfort Remote Site Service Ltd.
Ratio Analysis for Comfort Remote Site Ltd.
The ratio analysis has performed in order to assess the financial health and state of the company. The exhibit shows that the company’s overall sales growth has been reducing over the period of time. This is because of the downfall of the industry and the declining trends towards the company.
In addition to this, it can be seen that the operating profit margin of the company is reducing from 21 percent to 17 percent due to the major decline in the sales of the company. Also, the net profit margin of the company has been increasing from 11 percent to 21 percent which stipulates that the company has efficiently cut the non-operating cost in the downfall of the industry.
Differential Analysis
The differential analysis is performed showing the cost and revenues related to each of the business unit and an operating profit from each unit. The calculations are based on two years and each annual revenue and cost is multiplied by 2 in order to get the total cost and revenues for two years contract. A differential analysis for all three business units are provided in exhibit.
It can be seen that the operating profit generated from the housekeeping units is negative. The reasons for the negative operating profit is the low amount that is charger per day per person for the housekeeping service i.e. $75, therefore the overall project’s operating profit is $1720942.
Return on Investment and Payback Period
The payback period and the return on investment for Gregory Mine opportunity has been calculated. The investment for the project involves cleaning equipment, uniform purchased and linens. The operating cash flows of the project are calculated based on the tax rate for year 2015. It can be seen that the return on investment for the project is 457 percent and the payback period for the project is 0.21 years. The calculations are provided in exhibit.
Recommendation
On the basis of the analysis being conducted, it is recommended to the CEO of the company to go with the bid. Since, the project would most likely allow the company to capture the new customers in the highly competitive market arena with the declining growth in the industry. Not only this, the company would be able to maximize the market share even in the reducing industry’s growth as a whole. More of it, it would provide the exploration of the new remote region in Canada. The project would provide the 475 percent rate of return over the investment of the company and the investment would be recovered within 0.21 years only. With such high rate of return and low payback period, it is to demonstrate that the project would be feasible and would generate returns. So, the company should go with the bidding process in order to gain valuable benefits and maximize the market share.
Conclusion
To sum up, it is to conclude that the chief executive officer (CEO) and the chairman of the company has contemplated to prepare the bid for the housekeeping, catering and the janitorial services of the iron ore mine namely Gregory Mine. The key stakeholders of the Comfort Remote Site Incorporation is the chairman and CEO namely Thomas young. The growth of the Remote Site Food Service Industry is estimated to be reduced by 7% in the forthcoming years. Comfort Remote Site Service Ltd has more than 20 years of relevant expertise and experience in the food industry. It has a strong and positive business relationship with the customer as well as clients which the company has developed by using its resources. It can be seen that the return on investment for the project is 457 percent and the payback period for the project is 0.21 years. It is recommended to the CEO of the company to go with the bid. Since, the project would most likely allow the company to capture the new customers in the highly competitive market arena with the declining growth in the industry. Not only this, the company would be able to maximize the market share even in the reducing industry’s growth as a whole.
Exhibit A – Ratio Analysis
| Ratio | Formula | Result | |
| 2014 | 2015 | ||
| Operating Profit Margin | Operating Profit/Sales | 21% | 17% |
| Net Profit Margin | Net Profit/Sales | 11% | 15% |
| Sales Growth | (Sales 2015-Sales 2014)/Sales 2014 | n/a | -8% |
| Profit Growth | (Net Profit 2015-Net Profit 2014)/Net Profit 2014 | n/a | 21% |
Exhibit B – Differential Analysis
| Differential Analysis | |||
| Housekeeping | Catering | Janitorial | |
| Revenues | 2190000 | 9490000 | 3650000 |
| Costs | |||
| Camp Manager Salary | 66667 | 66667 | 66667 |
| Food Costs | 5378640 | ||
| Head Chef’s Salary | 320000 | ||
| Cross-shift Baker’s Salary | 302000 | ||
| First Cook’s Salary | 302000 | ||
| Second Cook’s Salary | 496000 | ||
| Third Cook’s Salary | 467200 | ||
| Salary to Housekeeping Employees | 1632000 | ||
| Salary to Janitorial Employees | 2000000 | ||
| Cleaning Supplies Expense | 92000 | 138000 | 230000 |
| Employees Benefits | 254800 | 293080 | 310000 |
| Transportation Costs (All employees) | 1500 | 1500 | 1500 |
| Cost of Round Trip (Supervisor) | 5833 | 5833 | 5833 |
| Cost of Round Trips Camp Manager | 13333 | 13333 | 13333 |
| Cost of Round Trips Head Chefs | 26667 | 26667 | 26667 |
| Cost of Round Trips First Cooks | 26667 | 26667 | 26667 |
| Cost of Shipping Supplies | 36500 | 657000 | 36500 |
| Administrative Expenses | 10100 | 10100 | 10100 |
| Contingency Expense | 43321 | 62521 | 49945 |
| Depreciation Expense (Uniform) | 15.4 | 19.2 | 15.4 |
| Depreciation Expense (Linens) | 40000 | ||
| Depreciation Expense (Small wares and Cleaning Equipment) | 5067 | 5067 | 5067 |
| Operating Profit | -64470 | 917707 | 867706 |
| Total Operating Profit of the Opportunity | 1720942 | ||
Exhibit C – Strengths and Weaknesses
| Strengths | Weaknesses |
| More than 20 years of relevant expertise and experience in the food industry
Strong and positive business relationship with the customer as well as clients Successfully entered into mergers and joint ventures initiative Main customer is mining companies which contributed to the revenues around 90% |
No backup plan so to uncover the steady reduction in the future growth
Unwillingness of chairman and CEO to find the solutions for company’s reduced growth. Compass Group PLC captures the Remote Site Food Industry market Aramark Corporation expands in Canadian’s Remote Site Food Industry market Fierce and strong competition from the Sodexo SA |
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