Blue Diamonds Jewellery Worldwide PLC-part 1

Financial Statement Analysis

Blue Diamonds Jewellery Worldwide PLC

Introduction

This comprehensive analysis of financial statements for “Blue Diamonds Jewellery Worldwide PLC” that specifically looks at the statement of financial position and the income statement from 2013 to 2017 . Trend analysis, Vertical analysis, Horizontal analysis and a ratio analysis has conducted from 2013 to 2017 by highlighting the specific standalone elements and specific behavioral trends within the five years period.

In the end of the analysis it gives an insight about how the organization manages its liquidity and efficiency, solvency, profitability and market behavior along with important behavioral patterns and trends which provides key details regarding organizations assets, equity, liabilities and profits or losses.

About “Blue Diamonds Jewellery Worldwide PLC

“Blue Diamonds Jewellery Worldwide PLC, is an internationally reputed company that manufactures specialized ‘floating diamonds’ jewellery. As an internationally renowned company amongst the Gem & Jewellery exporters in Sri Lanka, Blue Diamonds Jewellery Worldwide has won several accolades such as the Presidential Export Awards in 2006 & 2007” (Blue Diamonds Jewellery Worldwide PLC, 2016/2017)

“Being established in 1991, Blue Diamonds Jewellery Worldwide is a pioneer in the industry, and to date the only public quoted diamond jewellery company listed in the Colombo Stock Exchange. It is also the first company in Sri Lanka to export quality jewellery, under an international brand name.” (Blue Diamonds Jewellery Worldwide PLC, 2016/2017).

Trend Analysis

	2013	2014	2015	2016	2017
ASSETS
Non-current assets
Property, plant and equipment	100	92.9766029	87.39218224	79.3178092	73.60893083
Leasehold property	100	98.6692819	97.33856373	96.0078456	94.66658148
Intangible assets	100	68.2720811	36.54416223	14.3572236	0
Financial assets - Available-for-sale	100	4505.85504	107.508432	102.828131	95.81270183
Investment in subsidiary	100	0	7.566425651	7.56642565	0
Financial assets - loans and receivables	100	104.12858	117.080501	131.906455	134.9775631
Loan receivable
Related part receivable	100	0	0	0	0
Total non-current assets	100	96.700333	91.65544454	91.8815339	88.66777549
Current assets
Inventories	100	120.415667	114.9802058	95.7618032	78.45250051
Amounts due from related parties	100	0	0	753.032582	0
Loan receivable
Trade and other receivables	100	93.3013724	27.5734575	127.922019	124.7556253
Short term investments	100	108.795391	120.1668534	127.174639	137.1795766
Cash and cash equivalents	100	58.2977279	179.8910282	70.6456539	32.84840606
Total current assets	100	100.798226	123.5658474	94.7469501	72.18665085
Total assets	100	99.650449	114.6280779	93.944377	76.80284117

·         In the trend analysis 2013 considers as the base period. The fluctuations of other years are explained by considering 2013 as the base period.
When referring to the company’s statement of financial position within the period of 2013 to 2017 it’s important to identify the trends in each important element.

·         When referring to the financial assets available for sale it demonstrates an unusual trend. In 2014 it starts with 4506% of increase and it starts to decline year by year gradually. The key reason for this is concerned as according to the financial statements in 2013, the inclusion of unquoted investments. It’s a onetime investment took place with Fior Drissage Jewelers Ltd

·         Total none current assets demonstrate in overall a declining trend but when it comes to total current assets it demonstrates a increasing pattern up to 2015 then it illustrates a decreasing pattern. Eventually in total assets until 2015 it shows a gradual increment, then it show a decline in trend. Since the representation of current assets in total assets are significantly high. The changes of current assets reflects on total assets.

·         As a whole when concerning about the trend in total assets it indicates an adverse trend for “Blue Diamonds Jewellery Worldwide PLC”.

	2013	2014	2015	2016	2017
EQUITY AND LIABILITIES
Equity
Stated capital	100	100	179.2887728	179.288773	179.2887728
General reserves	100	100	95.90582148	95.9058215	95.90582148
Revaluation reserve	100	100.928073	100.9280729	100.928073	100.9280729
Financial assets available-for-sale reserve	100	35.5290721	93.25616021	97.4598612	103.7609008
Accumulated losses	100	161.243752	310.8688675	438.420349	557.8884218
Total equity	100	87.9622348	111.3429367	86.088198	62.4327278
Non-current liabilities
Employee benefits	100	106.335933	140.8941407	120.065695	115.0627098
Bimputh Loan payable				0
Total non-current liabilities	100	106.335933	140.8941407	120.065695	373.7274487
Current liabilities
Trade payables	100	1030.29399	100.629957	110.789603	116.1713205
Current taxation	100	47.7612108	199.5705662	255.771313	434.5945298
Other payables and accruals	100	90.9725196	117.8297027	160.664117	135.8607381
Bank overdraft	100	0	0	22954890.8	29953735.38
Related party payables	100	0	4868.787601	0	0
Total current liabilities	100	354.793872	177.2348668	257.363092	282.700995
Total liabilities	100	287.249388	167.3554659	220.038135	307.4469736
Total equity and liabilities	100	99.650449	114.6280779	93.944377	76.80284117

·         When it comes to the equity and liabilities. With comparing the base year stated capital and general reserves from 2015 to 2017 illustrate a constant and static trend. But revaluation reserve demonstrate a static trend from the 2014 onwards.

·         Accumulated losses demonstrate an infrequent trend in its behavior. From 2015 to 2017 it demonstrate that accumulated losses increased unexpectedly enormous amounts. This represents the losses that the organization incurred annually as an accumulated amount.

·         Total equity show an increment until 2015. From 2015 to 2017 it demonstrates a decline. This explains the company started to lose their equity share holders gradually. This could be sue to the continuous lose making in an increasing pattern consecutively.

·         When referring to the total none current liabilities it shows a fluctuating trend. But from 2016 to 2017 it shows a significant escalation.

·         When referring to the bank overdraft it demonstrate a highly unusual increment in the trend. With comparing to 2013 in 2016 and 2017 it shows a gigantic increment

·         Total current liabilities in the other hands decreases up to 2015 but then demonstrate a gradual increase. As a result total liabilities replicates the same trend. It’s clear that since equity capital started to get decreased they have decided to pay more attention to short and long term liabilities. Taking bank overdraft facility could demonstrate as a example

	2013	2014	2015	2016	2017
Revenue	100	61.0082294	50.06570177	78.9339517	32.77663746
Cost of sales	100	87.1049029	90.67113967	143.109456	82.89656643
Gross loss	100	10.4823303	61.1709081	96.8717015	104.524455
Selling and distribution expenses	100	63.5536363	168.3856405	101.254181	111.1968559
Administrative expenses	100	83.8770739	134.8274211	118.213529	86.70329549
Other Income	100	326.206321	83.02062585	0	0
Loss from operations	100	134.059601	286.1960742	263.590175	231.9555778
Net finance income	100	108.774754	96.5239277	137.074632	54.80241262
Share of profit of associate (net of tax)	100	69.2434528	0	0	0
Loss/Profit before income tax	100	140.797292	334.320108	296.568805	276.475882
Income tax expense	100	47.7068392	270.9901035	203.305647	157.0726221
Loss/Profit for the year	100	138.900105	333.0294402	294.668098	274.0424393

·         When referring to the income statement it shows fluctuations throughout the period as a trend but highest sale increment recorded in 2016 as per the chairman’s’ report company has opened a new show room in 2016 .

·         Other income shows a significant trend since it demonstrate a significant increment in 2014 and it demonstrates a drastic drop down from 2015 to 2017. In 2014 the company gain a profit from disposal of property, plant and equipment along with the income generated from selling of sand dust and wasted iron. 

·         When it comes to loss from operations it illustrates an increase up to 2015 and then it gradually decreases. The major reasons can be identified that in 2015 since it shows the peak of the trend, a higher proportion of director’s remunerations and salaries and wage costs are incurred.

·         Other than that when it comes to income tax expenses up it demonstrate a fluctuating trend but from 2015 in reach at its peak in the trend within the period.

·         As a whole from 2013 to 2017 loss for the year has increased from a 2013 to 2015 but 2015 onward it shows a gradual decline in trend.

Trend analysis able to provide significant information about the organization by looking at its past trends. When looking at the statement of financial position from 2013 to 2017 even id demonstrated an increment in the asset base within first three years 2015 onwards it shows a decline in the asset base from 2015 onwards. Liabilities and equity as a whole while equity base gradually declining from 2015 liabilities demonstrate an increase in the trend from 2014 onwards. In the income statement it shows the revenue is declining. But it demonstrates a declining trend in loses.

Horizontal analysis

	2013	2014	2015	2016	2017
ASSETS
Non-current assets
Property, plant and equipment	-3.00364768	-7.023397117	-6.006264447	-9.239239483	-7.19747363
Leasehold property	15.10940982	-1.330718135	-1.348665066	-1.367102702	-1.397035949
Intangible assets	934.6481065	-31.72791889	-46.47275778	-60.71267538	0
Financial assets - Available-for-sale	32.17425945	44.05855041	-0.976140282	-0.043534273	-0.068224801
Investment in subsidiary	0.04930685	0	0	0	0
Financial assets - loans and receivables		4.128580435	12.43839157	12.6630425	2.328247349
Loan receivable			-5.425026197	-17.47657138	-21.84911729
Related part receivable	-4.039621556	-100
Total non-current assets	52.27191367	-3.299667026	-5.217033158	0.246673171	-3.497719616
Current assets
Inventories	-17.1935747	20.41566696	-4.513915288	-16.71453137	-18.07537255
Amounts due from related parties	-9.869879468	-100	0	0	0
Loan receivable			34.35340387	72.54899521	14.50441339
Trade and other receivables	9.127379597	-6.698627611	-70.44688969	363.9317336	-2.475253396
Short term investments		8.795390907	10.45215467	5.831712415	7.867085757
Cash and cash equivalents	-45.28650728	-41.70227208	208.572966	-60.72863965	-53.50258049
Total current assets	-24.58756505	0.798225825	22.58732369	-23.32270438	-23.81110865
Total assets	-12.17063501	-0.349551025	15.03016702	-18.04418362	-18.2464735

·         Within the horizontal analysis it demonstrate the percentage change in a particular number with comparison to the previous year. Within the period of 2013 to 2017 in the income statement the intangible assets have risen significantly in 2013. Compared to 2012 it is 934% .the major reason for that is during the year of 2013 they have invested more money in additional computer software.

·         In 2016 the trade and other receivables increased from 364% comparing to 2015. According to the organizations’ financial reports the main reason is 2015 trade receivables demonstrate the lowest within the five years period whereas in 2016 it demonstrates the highest.

·         Apart from the above standalone difference in 2015 with comparison to 2014 in cash and cash equivalents it demonstrate a 208% of increment. Comparing to 2014 in 2015 the inclusion of repo has increased where there is no inclusion in 2014. Since repo simply means a repurchase agreement it should be in a form of short term loan. It’s a questionable are where it should be under current assets or current liabilities.

	2013	2014	2015	2016	2017
EQUITY AND LIABILITIES
Equity
Stated capital	-80.42908864	0	79.28877283	0	0
General reserves	0	0	-4.094178519	0	0
Revaluation reserve	0	0.92807287	0	0	0
Financial assets available-for-sale reserve	96.2147943	-64.47092795	162.4784573	4.50769252	6.465266388
Accumulated losses	-93.29976323	61.24375208	92.79436471	41.03063874	27.24966407
Total equity	-8.03003604	-12.03776523	26.58038644	-22.68194055	-27.47818021
Non-current liabilities
Employee benefits	-36.28393454	0.063359326	0.324990879	-0.147830463	-0.041668728
Bimputh Loan payable	0			0	0
Total non-current liabilities	-36.28393454	0.063359326	0.324990879	-0.147830463	2.112691347
Current liabilities
Trade payables	-2.768032166	930.2939851	-90.23288901	10.09604509	4.857601678
Current taxation	-80.2410131	-52.23878919	317.8507261	28.16083969	69.91527472
Other payables and accruals	-58.94898811	-9.027480379	29.52230323	36.3528151	-15.43803254
Bank overdraft	3.174603175	-100	0	0	30.48955748
Related party payables		0	0	-100	0
Total current liabilities	-52.55269336	254.7938723	-50.04567987	45.21019298	9.845196787
Total liabilities	-49.01355788	187.2493882	-41.73861712	31.47950327	39.72440425
Total equity and liabilities	-12.17063501	-0.349551025	15.03016702	-18.04418362	-18.2464735

·         In 2015 with comparison to 2014 financial assets available-for-sale reserve has increased by 162%. Referring to the exact values this reserve represent negative value which represent a loss. It demonstrates the loss has been significantly increased from 2014 to 2015. But it does not provide any explanation for that in a note.

·         Trade payables in 2014 with comparison to 2013 indicates 930% of increment. The company obtained a credit facility of USD 2,750,000 from Seylan Bank PLC by previous years by pledging inventory of jewelry as security is the key reason for this.  As a final result of lots of procedures that they have recognized their final liability of 36,160,377 to the Seylan Bank PLC.

·         Total current liabilities from 2013 to 2014 has increased by 255% which is another standalone factor to be looked at. The main reason can be described as the liability that has recognized in 2014. It has significantly effected in current liabilities to rise in 2014.

	2013	2014	2015	2016	2017
Revenue	16.76969091	-38.99177055	-17.93615022	57.66073171	-58.47586909
Cost of sales	14.81400487	-12.89509709	4.094186025	57.83352515	-42.0747107
Gross loss	22.48515185	-110.4823303	483.5621126	58.36237271	7.899885593
Selling and distribution expenses	-3.499549921	-36.44636369	164.9504424	-39.86768653	9.819520122
Administrative expenses	-24.73855594	-16.12292611	60.74406845	-12.32233943	-26.6553528
Other Income	-97.94107295	226.206321	-74.54965753	-100
Loss from operations	312.9004873	34.0596006	113.4842062	-7.898745413	-12.00143257
Net finance income	-72.52746614	8.774753709	-11.26256378	42.01103875	-60.02001853
Share of profit of associate (net of tax)	-15.5967991	-30.75654717	-100
Loss/Profit before income tax	-275.6474448	40.79729156	137.4478261	-11.29196305	-6.775130273
Income tax expense	-80.22311949	-52.29316076	468.0319798	-24.97672613	-22.74064985
Loss/Profit for the year	-319.9399058	38.9001048	139.7618351	-11.51890409	-6.999624058

·         When referring to the income statement it within the 2013 to 2017 period of time even the gross loss demonstrates a significant decline in 2014 in 2015 it shows a steep increase of 483% with regarding to the previous year. This is due to in 2014 it demonstrate higher revenue and lower cost of sale with comparing to 2015. 

·         Loss from operation in 2013 shows a significant increment with comparing to 2012 due to the low amount of losses has recorded in 2012 with comparing to 2013. But it shows losses are gradually declining from 2015 to 2017. 

·         When it comes to income tax expenses in 2015 it demonstrate a sudden increment compared to the 2014.the key reason for that as per the income statement of 2015 it explains that current tax on none business income for the year the rate has changed from  12% to 28% . in 2015 onwards it records as 28%

·         Loss for the year seems to be gradually decline from 2015 onwards.

Within the Horizontal analysis it’s clear that total asset base of the organization seems to be declining from 2015 onwards when concerning about the year by year percentage change.  From 2015 onward it demonstrates total equity base starts declining whereas the total liabilities starting to get increase. But at the same time it demonstrates from 2015 onwards the losses are gradually in a declining pattern. Organization at this plat form demonstrates a higher uncertainty

Vertical analysis

	2013	2014	2015	2016	2017
ASSETS
Non-current assets
Property, plant and equipment	13.80264	12.878244	10.523102	11.65365	13.228648
Leasehold property	0.812128	0.8041322	0.689634	0.829967	1.0010232
Intangible assets	0.195392	0.1338658	0.0622921	0.029861	0
Financial assets - Available-for-sale	0.043558	1.9695459	0.0408526	0.047677	0.0543393
Investment in subsidiary	2.065572	0	0.1363453	0.166364	0
Financial assets - loans and receivables	9.709658	10.145994	9.9173922	13.63324	17.06429
Loan receivable	0	1.2479753	1.0260546	1.033161	0.9876324
Related part receivable	1.380002	0	0	0	0
Total non-current assets	28.00895	27.179757	22.395673	27.39393	32.335932
Current assets
Inventories	44.18751	53.39533	44.323251	45.04235	45.136621
Amounts due from related parties	0.163944	0	0	1.314132	0
Loan receivable	0	0.1501033	0.1753182	0.369113	0.5169821
Trade and other receivables	7.314508	6.8484752	1.759484	9.960007	11.88141
Short term investments	1.057149	1.1541634	1.1082296	1.431086	1.8882011
Cash and cash equivalents	19.26794	11.272171	30.238044	14.48938	8.2408538
Total current assets	71.99105	72.820243	77.604327	72.60607	67.664068
Total assets	100	100	100	100	100

·    In the vertical analysis above, from 2013 to 2017 income statements have been considered. Within the first part of the vertical analysis none current assets and current assets have demonstrated a higher representation as a percentage of total assets. Since current assets represents a higher volume it demonstrates most of the organizational assets are liquid and the company is able to reinvest or purchase plant assets. 

·    The major reason for current assets demonstrate a higher representation than the total none current assets could be since “Blue Diamonds Jewellery Worldwide PLC” is a manufacturing company they tend to maintain different types of inventories. In 2015 cash and cash equivalents has significantly gone up as a percentage of total assets. The main reason for this is, unlike in other years within 2013 to 2017 period in 2015 specifically there’s repo inclusion in the cash and cash equivalents. And there’s no bank overdraft amount for 2015.  

	2013	2014	2015	2016	2017
EQUITY AND LIABILITIES
Equity
Stated capital	65.14215	65.370658	101.88827	124.32098	152.068
General reserves	42.1983	42.346322	35.306032	43.079349	52.69418
Revaluation reserve	5.479825	5.5500818	4.8248924	5.8871873	7.201142
Financial assets available-for-sale reserve	-0.0485	-0.017291	-0.039455	-0.050311	-0.06552
Accumulated losses	-18.6368	-30.15608	-50.54258	-86.97433	-135.376
Total equity	94.13499	83.093695	91.437162	86.26287	76.52196
Non-current liabilities
Employee benefits	1.594432	1.7014009	1.9597821	2.0377646	2.388709
Bimputh Loan payable	0	0	0	0	5.369895
Total non-current liabilities	1.594432	1.7014009	1.9597821	2.0377646	7.758604
Current liabilities
Trade payables	1.212447	12.535582	1.0643853	1.4298511	1.833936
Current taxation	0.166832	0.0799605	0.2904591	0.4542141	0.944032
Other payables and accruals	2.836363	2.5893618	2.915584	4.850761	5.017397
Bank overdraft	2.03E-05	0	0	4.9645396	7.924069
Related party payables	0.054918	0	2.3326279	0	0
Total current liabilities	4.27058	15.204905	6.6030563	11.699366	15.71943
Total liabilities	5.865011	16.906305	8.5628384	13.73713	23.47804
Total equity and liabilities	100	100	100	100	100

·    In Equity and liabilities as a percentage stated capital, general reserves and total equity represent a higher percentage. More importantly financial assets available for sale reserve and accumulated reserves demonstrate negative values. According to the annual report they haven’t provided any important information regarding this significant amount of accumulated losses specially. From 2013 to 2017 each year accumulated losses as a percentage of total equity and liability illustrate a gradually increasing pattern.

·    From 2013 to 2017 it demonstrates an increment in current liabilities than none current liabilities in each year as a percentage of total equity and liabilities. This simply could illustrates the company have to pay more interest than if the company has refinanced with the business.   

·    As a percentage of total equity and liability, financial assets available-for-sale reserve from 2014 onward each year demonstrates a increasing pattern. This represents an uncertain condition in terms of finance to “Blue Diamonds Jewellery Worldwide PLC”

	2013	2014	2015	2016	2017
Revenue	100	100	100	100	100
Cost of sales	73.2581	104.5947	132.6736	132.819	185.2797
Gross loss	26.74189	4.594747	32.67358	32.819	85.2797
Selling and distribution expenses	16.094	16.76551	54.12895	20.645	54.60004
Administrative expenses	50.2884	69.13894	135.4272	75.3132	133.0268
Other Income	1.077305	5.7602653	1.7864227	0	0
Loss from operations	38.5632	84.73893	220.4433	128.777	272.9065
Net finance income	7.278841	12.977824	14.033205	12.64024	12.170194
Share of profit of associate (net of tax)	0.373708	0.4241528	0	0	0
Loss/Profit before income tax	30.9107	71.33695	206.4101	116.137	260.7363
Income tax expense	0.64307	0.502861	3.48072	1.65631	3.081712
Loss/Profit for the year	31.5538	71.83981	209.8908	117.793	263.818

·         In the vertical analysis of income statement the base as a norm considers as the revenue. Within the five years period it can be seen that cost of sales as a percentage of revenue demonstrates an increasing pattern.  

·         When concerning about the gross loss it can be seen that 2014 onwards it demonstrates a significantly increasing pattern. This explains direct costs that are related to manufacturing are increased within the period significantly.

·         Except for the decline in 2015 to 2016 the selling and distribution expenses demonstrate an increasing pattern as a percentage of sales in each consecutive year within the five years period. This indicates money invested in selling and distribution is not much effective in driving the sales growth.

·         The loss from operations from 2013 to 2015 demonstrates a significant increment as a percentage of revenue in each year then it shows a slight decline then again it increases. Loss for the year demonstrates the same type of behavior since loss from operations reflects directly on the loss for the year.  

Within the vertical analysis of financial statements when we referring to the statement of financial position it clearly demonstrate that total none current assets from 2015 onwards demonstrate an increase whereas total asset demonstrate a gradual decline since current asset represent the highest presentation out of assets it shows a gradual decline in organization’s asset base. When referring to the total equity and liabilities it clearly demonstrate that out of total equity and liabilities from 2015 onward equity base illustrate a decline parallel to that total liabilities from 2015 onwards demonstrate an increase. It clearly visible that organization is losing its main back bone of financial structure which happens to the equity share holders. But the company is unable to stop their resistance due highly increasing accumulated loss within the period. When referring to the organizations income statement cost of production is gradually increasing as a percentage of revenue. And the overall loss within the period pictures organizations high level of uncertainty.

Ratio Analysis

Within the ratio analysis “Blue Diamonds Jewellery Worldwide PLC” performance is going to be measured by using four specific types of ratios.

1.       Liquidity and Efficiency ratios.

2.       Solvency ratios

3.       Profitability ratios

4.       Market ratios.