Sri Lanka Telecom PLC
(‘SLT’ or the ‘Company’) is Sri Lanka’s national Information and Communications
Technology (ICT) provider. Also considered as the leading broadband and
backbone infrastructure services provider in the country. Throughout the
decades of operations, SLT has been delivering cutting edge and sophisticated
solutions to customers.
Ratio Analysis
|
Liquidity & Efficiency (all amounts in Sri Lanka Rupees
million)
|
||||||
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Current assets
|
22,320
|
22,907
|
17,039
|
20,492
|
14,768
|
18,473
|
|
Current liabilities
|
14,074
|
18,418
|
15,809
|
19,643
|
22,265
|
34,259
|
|
Current ratio
|
1.585903
|
1.243729
|
1.077804
|
1.043222
|
0.663283
|
0.539216
|
|
|
1.59:1
|
1.24:1
|
1.08:1
|
1.04:1
|
0.66:1
|
0.54:1
|
According to above ratios over
2011-2016 represents the company’s ability to payback its liabilities with its
assets. In a nutshell, current ratio reflects the company’s financial health.
It considers about current assets to current liabilities. If current assets are
greater than current liabilities, it’s a favorable condition. In 2011 assets
are greater than liabilities. 2012, 2013 & 2014 has that favorable
condition but decreases the asset amount per 1Rs. liability. But in 2015 &
2016 current assets are less than current liabilities which means, the
company’s ability to pay its obligations are unfavorable. It reveals SLTs
decrement of financial health over time.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Current assets
|
22,320
|
22,907
|
17,039
|
20,492
|
14,768
|
18,473
|
|
Inventory
|
1,465
|
2,396
|
1,918
|
282
|
561
|
1,146
|
|
Quick assets
|
20,855
|
20,511
|
15,121
|
20,210
|
14,207
|
17,327
|
|
Acid test ratio
|
1.48181
|
1.113639
|
0.95648
|
1.028865
|
0.638087
|
0.505765
|
|
|
1.48:1
|
1.11:1
|
0.96:1
|
1.03:1
|
0.64:1
|
0.51:1
|
Acid-test ratio is a strong
indicator of weather a firm has sufficient short term assets to cover its
immediate liabilities. According to above calculations 2011 & 2012 has
short term liabilities more than 1 per 1Rs. of liability but decreases over
time. In 2013 short term assets are less than current liabilities but in 2014
short term assets are greater than current liabilities. And also 2015 &
2016 has the same unfavorable condition when paying immediate obligations.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Revenue
|
32,291
|
34,719
|
36,781
|
38,950
|
40,565
|
43,131
|
|
Trade receivable
|
9,985
|
12,189
|
10,870
|
12,728
|
13,091
|
16,162
|
|
Average trade receivable
|
|
11087
|
11529.5
|
11799
|
12909.5
|
14626.5
|
|
Accounts receivable turnover
|
|
3.131505
|
3.190164
|
3.301127
|
3.14226
|
2.948826
|
This ratio measures the company’s
ability to covert its receivable in to cash every year. And also measure how
efficiently a firm uses its assets. Comparing above years, 2014 has the highest
accounts receivable turnover & lowest turnover at 2016. Seems SLT has a
poor collection process, a bad credit policy or none at all.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Cost of sales
|
22,294
|
25,433
|
26,821
|
29,559
|
30,421
|
33,228
|
|
Inventory
|
1,465
|
2,396
|
1,918
|
282
|
561
|
1,146
|
|
Average inventory
|
|
1930.5
|
2157
|
1100
|
421.5
|
853.5
|
|
Merchandise turnover
|
|
13.17431
|
12.4344
|
26.87182
|
72.17319
|
38.93146
|
Merchandise turnover shows how
many times a company’s inventory is sold and replaced over time. High turnover
means nothing unless the company is making a profit on each sale. According to
above calculations, merchandise turnover fluctuates, in 2012 high turnover, in
2013 decreases again 2014 rapid increase again 2015 more increase but in 2016
drastic decrease.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Net revenue
|
32,291
|
34,719
|
36,781
|
38,950
|
40,565
|
43,131
|
|
Accounts receivable
|
9,985
|
12,189
|
10,870
|
12,728
|
13,091
|
16,162
|
|
Days' sales uncollected
|
112.865
|
128.1427
|
107.8696
|
119.2739
|
117.7916
|
136.7724
|
Above ratio measure the approximate time period required to
collect the receivable. Unusually high figures imply the inadequate collection
process within the company. According to above calculations over time, 2016 has
an unusually high figure to collect receivables which means an unfavorable
condition.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Ending inventory
|
1,465
|
2,396
|
1,918
|
282
|
561
|
1,146
|
|
Cost of sales
|
22,294
|
25,433
|
26,821
|
29,559
|
30,421
|
33,228
|
|
Days' sales in inventory
|
23.98515
|
34.38603
|
26.10156
|
3.482188
|
6.731041
|
12.58848
|
Days’ sales in inventory reflects
how long will it take a firm to convert its inventory in to sales. According to above calculations, SLT shows
fluctuations where year 2014 shows the best DSI and 2012 shows the worst DSI.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Revenue
|
32,291
|
34,719
|
36,781
|
38,950
|
40,565
|
43,131
|
|
Total assets
|
73,666
|
83,383
|
83,090
|
99,017
|
103,061
|
118,117
|
|
Average total assets
|
|
78524.5
|
83236.5
|
91053.5
|
101039
|
110589
|
|
Total asset turnover
|
|
0.442142
|
0.441885
|
0.42777
|
0.401479
|
0.390012
|
Total asset turnover measures the
firm’s sales or revenues generated relative to the value of its assets. According
to above calculations year 2012 has the highest total asset turnover rate. For
every 1Rs generates 0.44 Rs of sales. Even though SLT has asset turnover rates
less than 1, which is typical for firms in the telecommunication industry.
Since these companies have large asset bases, it is expected that they would
slowly turnover their assets through sales. We could justify that throughout
the calculation period, total asset turnover rate does not show any major
fluctuations.
|
Solvency (all amounts in Sri Lanka Rupees million)
|
Above ratio measures the portion
of a company’s assets are contributed by creditors. According to above
calculations year 2016 has the highest debt ratio. But the overall debt ratio
is in favorable range.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Total shareholders' equity
|
51,850
|
53,617
|
57,103
|
58,577
|
58,702
|
59,000
|
|
Total assets
|
73,666
|
83,383
|
83,090
|
99,017
|
103,061
|
118,117
|
|
Equity ratio
|
70.38525
|
64.30208
|
68.72427
|
59.15853
|
56.9585
|
49.95047
|
Equity ratio measures what
portion of a company’s assets are contributed by the owners. According to above
calculations year 2011 has the highest equity ratio. From 2011 to 2016 we can
see overall decrement with certain fluctuations which means investors seems
reluctant to invest within the company. From 2011 to 2016 imply an unfavorable
condition for the investment within the company.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Profit before tax
|
4,488
|
4,682
|
5,014
|
4,859
|
2,795
|
2,643
|
|
Finance cost
|
58
|
534
|
371
|
49
|
30
|
25
|
|
Profit before tax+ Finance cost
|
4,546
|
5,216
|
5,385
|
4,908
|
2,825
|
2,668
|
|
Times interest earned
|
78.37931
|
9.76779
|
14.51482
|
100.1633
|
94.16667
|
106.72
|
Times interest earned ratio
measures the ability of an organization to pay its debt obligations. According
to above calculations year 2016 has the highest times interest earned ratio.
From 2011 to 2016 SLT has a favorable times interest earned which is greater
than 1. That implies the ability to service debt is not a problem for a
borrower.
|
Profitability(all amounts in Sri Lanka Rupees million)
|
Above ratio measures the
company’s ability to earn a net income from sales. According to above
calculations year 2011 has the highest profit margin. From 2011 to 2016 profit
margin has a decrement which is an unfavorable condition.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Revenue
|
32,291
|
34,719
|
36,781
|
38,950
|
40,565
|
43,131
|
|
Cost of sales
|
22,294
|
25,433
|
26,821
|
29,559
|
30,421
|
33,228
|
|
Gross profit
|
9,997
|
9,286
|
9,960
|
9,391
|
10,144
|
9,903
|
|
Gross margin
|
30.95909
|
26.74616
|
27.0792
|
24.1104
|
25.00678
|
22.96028
|
This ratio measures how
profitable a company sells its inventory or merchandise. In year 2011 has the
highest gross margin and the year 2016 has the lowest gross margin. According
to above calculations SLT has an unfavorable gross margin from 2011 to 2016.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Profit for the year
|
3,340
|
3,361
|
3,635
|
3,324
|
1,728
|
1,725
|
|
Total assets
|
73,666
|
83,383
|
83,090
|
99,017
|
103,061
|
118,117
|
|
Average total assets
|
|
78524.5
|
83236.5
|
91053.5
|
101039
|
110589
|
|
Return on total assets
|
|
4.280193
|
4.367075
|
3.650601
|
1.710231
|
1.55983
|
Above ratio measures the overall
profitability of the company. In 2013 SLT has the highest return on total
assets ratio. In 2016 has the lowest return on total assets ratio. From 2012 to
2016 return on total assets ratio has been decreased. Above figures imply that
overall profitability of the company has been decreased over time.
|
|
2011
|
2012
|
r2013
|
2014
|
2015
|
2016
|
|
Profit for the year
|
3,340
|
3,361
|
3,635
|
3,324
|
1,728
|
1,725
|
|
Total equity
|
51,850
|
53,617
|
57,103
|
58,577
|
58,702
|
59,000
|
|
Average total equity
|
|
52733.5
|
55360
|
57840
|
58639.5
|
58851
|
|
Return on common shareholders' equity
|
|
6.373558
|
6.566113
|
5.746888
|
2.946819
|
2.931131
|
Above measure indicates how well
the company employed the owners’ investment to earn income. From 2012 to 2016
return on common shareholders’ equity has been decreased which means the way
that the company has been employed the owners’ investment seems unfavorable.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Total equity
|
51,850
|
53,617
|
57,103
|
58,577
|
58,702
|
59,000
|
|
Number of shares
|
1,805
|
1,805
|
1,805
|
1,805
|
1,805
|
1,805
|
|
Book value per common share
|
28.72576
|
29.70471
|
31.63601
|
32.45263
|
32.52188
|
32.68698
|
|
|
28.73:1
|
29.70:1
|
31.64:1
|
32.45:1
|
32.52:1
|
32.69:1
|
Above ratio measures liquidation
at reported amounts. Year 2016 has the highest book value per common share.
Which is a favorable for liquidation at reported amount.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Profit for the year
|
3,340
|
3,361
|
3,635
|
3,324
|
1,728
|
1,725
|
|
Number of shares
|
1,805
|
1,805
|
1,805
|
1,805
|
1,805
|
1,805
|
|
Basic earnings per share
|
1.850416
|
1.86205
|
2.01385
|
1.841551
|
0.957341
|
0.955679
|
Above measure indicates how much
income was earned for each share of common stock outstanding. Year 2013 has the highest basic earnings per
share and year 2016 has the lowest basic earnings per share.
|
Market(all amounts in Sri Lanka Rupees million)
|
According to above calculations,
year 2015 & 2016 has the highest price earnings ratio which means the
company has the opportunity to growth compared with previous years.
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Dividend per share
|
0.85
|
0.85
|
0.85
|
0.89
|
0.89
|
0.89
|
|
Market price per share
|
28
|
28
|
28
|
28
|
28
|
28
|
|
Dividend yield
|
3.035714
|
3.035714
|
3.035714
|
3.178571
|
3.178571
|
3.178571
|
According to above calculations
year 2014, 2015 & 2016 has the highest dividend yield and seems to be have
a favorable condition.
Vertical Analysis
|
|
Common-size percent %
|
|||||
|
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
Assets
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
Property, plant and equipment
|
47.47238
|
50.94324
|
57.2259
|
60.81885
|
67.99953
|
69.0197
|
|
Intangible assets
|
0.638015
|
1.590252
|
1.941269
|
1.339164
|
1.051804
|
0.744177
|
|
Financial Prepayments
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Investments in subsidiaries
|
18.23229
|
17.02026
|
17.03695
|
14.32986
|
13.79765
|
12.03891
|
|
Other investments
|
0.137105
|
0
|
0
|
0
|
0
|
0
|
|
Deferred tax assets
|
0.077376
|
0
|
0
|
0
|
0
|
0
|
|
Other receivables
|
3.14392
|
2.974227
|
3.289204
|
2.816688
|
2.82163
|
2.557634
|
|
Total Non-current assets
|
69.70108
|
72.52797
|
79.49332
|
79.30456
|
85.67062
|
84.36042
|
|
Current assets
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Inventories
|
1.988706
|
2.873487
|
2.30834
|
0.2848
|
0.544338
|
0.970224
|
|
Trade and other receivables
|
13.55442
|
14.61809
|
13.0822
|
12.85436
|
12.70219
|
13.68304
|
|
Current tax receivable
|
0.215839
|
0.461725
|
0.270791
|
0.083824
|
0
|
0.123606
|
|
Other investments
|
12.52545
|
8.471751
|
3.854856
|
6.460507
|
0.621962
|
0.596866
|
|
Assets classified as held for sale
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Cash and cash equivalents
|
2.014498
|
1.046976
|
0.990492
|
1.011947
|
0.460892
|
0.265838
|
|
Total Current assets
|
30.29892
|
27.47203
|
20.50668
|
20.69544
|
14.32938
|
15.63958
|
|
Total assets
|
100
|
100
|
100
|
100
|
100
|
100
|
Conclusion
After analyzing 5 years of annual
reports from Sri Lanka Telecom PLC, revenue has been raised in past 5 years.
But from 2011 to 2016 SLT shows unfavorable financial conditions when analyzing
current ratios. After analyzing accounts
receivable turnover, the conclusion would be, SLT has a poor collection
process, a bad credit policy or none at all. After analyzing equity ratio, derivable
conclusion would be, investors are reluctant to invest within the company. From
2011 to 2016 imply an unfavorable condition for the investment within the
company. Even though equity ratio reflects unfavorable conditions, times
interest earned ratio has been derived some favorable conditions. From 2011 to
2016 SLT has a favorable times interest earned which is greater than 1. That
implies the ability to service debt is not a problem for a borrower. Ultimate
conclusion would be, SLT does not maintain a stable position within the
telecommunication industry & need to consider about their existing credit
policy also.
