Filios Products plc brews beers, owns and manages pubs and hotels, manufactures and supplies alcoholic and soft drinks, and is a supplier and operator of amusement machines and other leisure facilities.

The accounts for 1997 contain the following information:

Review of financial ratio analysis • 699 Balance Sheet of Filios Products

£m Non-current assets at book value 1,663 Cur rent assets Inventories and receivables 381 Bank balance 128 509 Less: Creditors falling due within one year 193 Net current assets 316 Total assets less current liabilities 1,979 Less: 10% debentures 140 1,839 Capital and reser ves Share capital 800 Retained earnings 1,039 1,839 Profit and Loss Account of Filios Products

£m £m Turnover 1,028 Less: Cost of sales 684 Administration expenses 110 Distribution costs 101 Interest charged 14 909 Net profit 119 The following breakdown is provided of the company’s results into three divisions and head office:

Beer and Hotel Other Head pub operations business drinks & office leisure

£m £m £m £m Turnover 508 152 368 —

Cost of sales 316 81 287 —

Administration expenses 43 14 38 15 Distribution costs 64 12 25 —
Interest charged 10 — — 4 Non-current assets at book value 890 332 364 77 Inventories and receivables 230 84 67 —
Bank balance 73 15 28 12 Payables 66 40 56 31 10% debentures 100 — — 40 The following information is obtained for competitor companies: Dean, which brews beer and manages pubs; and Clarke, which is in the hotel business:
Dean Clarke £m £m Turnover 600 150 Operating profit 80 60 Net assets 1,300 300 Required:

(a) Outline the nature of segmental reports and explain the reason for presenting such information in the published accounts.

(b) Prepare a segmental statement for Filios Products plc for 1997 complying, so far as the information permits, with the provisions of SSAP 25 Segmental Reporting, so as to show for each segment and the business as a whole:
– turnover;
– profit;
– net assets.

(c) (i) Examine the relative performance of the operating divisions of Filios Products; and (ii) Compare the performance of the operating divisions of Filios Products, where appropriate, with that of the competitor companies.
The examination and comparison should be based on the following accounting ratios:
– operating profit percentage;
– net asset turnover;
– return on net assets.
(The Char tered Institute of Bankers)