ANNUAL REPORT ANALYSIS OF CEYLON COLD STORES PLC (2017- 2021)

 

1.0 INTRODUCTION

 

Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. External stakeholders use it to understand the overall health of an organization as well as to evaluate financial performance and business value. Internal constituents use it as a monitoring tool for managing the finances.

●        Financial statement analysis is used by internal and external stakeholders to evaluate business performance and value.

●        Financial accounting calls for all companies to create a balance sheet, income statement, and cash flow statement which form the basis for financial statement analysis.

●        Horizontal, vertical, and ratio analysis are three techniques analysts use when analyzing financial statements.

 

Ceylon Cold Stores PLC now counts over 150 years in business. In that time, they have continuously evolved their products and processes and empowered their team to ensure that technology, industry expertise, and innovation will keep them at the forefront of our business sector for many years. With Elephant House, the iconic beverage and ice-cream brand, CCS has touched the lives of many a Sri Lankan for generations. The entire range of Elephant House products, including ice creams, popsicles, flavored milk products, fruit-based beverages, water, energy drinks, carbonated soft drinks, and chasers, with their flavor and goodness, is an integral part of the daily lives of millions of people at home and around the world.

 

CCS operates state-of-the-art factories both at Ranala and at Awissawella where they employ the current technologies while adhering to the strictest standards of quality and hygiene at every step of the production, packaging, and warehousing process. Adopting the best manufacturing practices, a highly effective and knowledgeable management team remains in charge of the manufacturing facilities to ensure that it’s continually run at optimal capacity to harness operational efficiencies and step up productivity

 

 

2.0 FINANCIAL ANALYSIS OF CEYLON COLD PLC

 

2.1 Horizontal Analysis

 

Horizontal Analysis
Year	2017%	2018%	2019%	2020%	2021%
Total revenue	14.60	-2.31	-14.83	0.09	-9.03
cost of sales	13.83	6.19	-13.86	-4.41	-5.30
gross profit	15.88	-16.09	-16.83	9.66	-15.95
other operating income	85.87	-43.28	318.05	29.70	27.75
Selling and distribution expenses	4.90	8.12	17.13	17.09	-3.13
Administrative expenses	25.88	11.34	4.87	3.16	3.71
Other operating expenses	30.33	-16.03	-0.57	-19.85	-42.91
Results from operating activities	32.82	-25.94	-29.21	13.27	-29.18
Finance cost	-54.94	-86.25	1600.74	-85.84	846.39
Finance income	42.09	-25.89	-54.68	8.89	-21.60
Net finance income / (cost)	54.14	-23.70	-65.51	39.48	-50.05
Profit before tax	35.71	-26.99	-30.11	14.35	-30.68
Tax expense	25.14	-32.91	-34.01	13.76	-90.17
Profit for the year	39.29	-25.19	-29.04	14.50	-15.69

Table 1- Horizontal Analysis

	2018%	2019%	2020%	2021%
current assets	4.32	-13.47	1.55	3.39
Current Liabilities	3.60	-15.88	10.22	17.90
total liabilities	8.88	-10.22	6.38	5.32
Sales on account	-2.31	-14.83	0.09	-9.03
Account receivable	-0.46	-5.60	-5.48	13.16
Average account receivable	9.49	-3.03	-5.54	3.58
cost of sales	6.19	-13.86	-4.41	-5.30
Inventories	-9.45	3.67	16.73	-8.27
average inventory	12.01	-3.22	10.32	3.27
total assets	8.15	10.20	1.93	1.69
average total assets	56.81	8.87	7.27	1.85
total equity	7.93	16.35	0.90	0.80

 

Table 2- Horizontal Analysis

 

The Revenues of the Company in 2017 and 2020 have increased by 14.6% and 0.09% compared to previous years. But in 2018, 2019 and 2021 revenues have decreased by orderly 2.31, 14.83, and 9.03. cost of the sales in 2017 and 2018 have increased by orderly 13.83 and 6.19 and in 2019, 2020 and 2021 have decreased by orderly 13.86, 4.41, 5.30. when it comes to the gross profit, 2017 and 2020 show a positive change when compared to last year. But in 2018, 2019, and 2021, a reduction of the percentage can be seen. Although other operating income in 2018 has decreased by 43.28 compared to 2019, other years show a positive change. Other operating expenses in 2018, 2019, 2020, and 2021 have decreased by orderly 16.03, 0.57, 19.85, and 42.91.  profit before tax in 2017 and 2020 have positive change and 2018, 2019 and 2021 have negative change compared to the last years. Finally, when it comes to the profit for the year, in 2017 and 2020, it shows an increment by orderly 39.29 and 14,50. But in 2018, 2019, and 2021 it shows decrement by orderly 25.19, 29.04 and 15.69 compared to the previous years. The below graph shows how the horizontal analysis has happened over last 5 years.

Figure 1 - Horizontal Analysis

 

 

 

 

 

 

 

2.2 Vertical Analysis

 

 

Vertical Analysis
Year	2018%	2019%	2020%	2021%
current assets	4.32	-13.47	1.55	3.39
Current Liabilities	3.60	-15.88	10.22	17.90
total liabilities	8.88	-10.22	6.38	5.32
Sales on account	-2.31	-14.83	0.09	-9.03
Account receivable	-0.46	-5.60	-5.48	13.16
Average account receivable	9.49	-3.03	-5.54	3.58
cost of sales	6.19	-13.86	-4.41	-5.30
Inventories	-9.45	3.67	16.73	-8.27
average inventory	12.01	-3.22	10.32	3.27
total assets	8.15	10.20	1.93	1.69
average total assets	56.81	8.87	7.27	1.85
total equity	7.93	16.35	0.90	0.80

 

Table 3- Vertical Analysis

When the last 4 years are considered, in 2018, 2020 and 2021 current assets show a positive change by orderly 4.32%, 1.55%, and 3.39%. but in 2019, it has decreased by 13.47%. current liabilities in 2018, 2020 and 2021 have increased by orderly 3.6%,10.22% and 17.9%.  as well as total liabilities also shows the same increment and decrement compared to the previous years.

Sales on account in 2018, 2019, and 2021 have negative percentage values ( -2.31, -14.83, and -9.03) compared to the previous years. But in 2020 sales on the account has increased by an orderly 0.09%. Account receivable in 2018, 2019, and 2020 has decreased by orderly 0.46, 5.06 and 5.48. but in 2021 it shows a positive value and it is 13.16%. cost of sales in 2018 has increased by 6.19% compared to the previous year. Average inventory in 2019 is also has increased compared to the previous year. In all 4 years, total assets show positive increment in the company, as well as the total equity also shows positive increment.

Figure 2 - Vertical Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

2.3 Ratio Analysis

2.3.1 Liquidity and Efficiency

Table 4- Liquidity and Efficiency

	2017	2018	2019	2020	2021
current ratio	1.57	1.58	1.62	1.50	1.31
Acid test ratio	1.04	1.12	1.05	0.89	0.84
Account receivable turnoverr	8.91	7.95	6.98	7.40	6.50
Merchandise turnover	8.52	8.08	7.19	6.23	5.71
Total Asset Turnover	0.96	0.60	0.47	0.43	0.39

Interpretation:

1. Current ratio = current assets / current liabilities

All 5 years have enough money to run the business. It shows 3:1 ratio and its better ratio for the company.

 

2. Acid test ratio = (Current asset - inventory) / Current Liabilities

If the acid test ratio is less than 1 is not good and if its more than 1 it shows a good figure.  According to the above calculations. In 2020 and 2021 figures are less than 1 and 2017, 2018, and 2019 figures are more than 1.

3. Account receivable turn over = sales on account / average account receivable

This ratio measures how many times a company covert it is receivable in to cash each year. According to the above data, from 2017 to 2021, the company has converted its receivables in to cash orderly 8.52, 8.08,7.19,6.23, and 5.71 times

4. Merchandise turn over = cost of sales / Average inventory

This shows how many times the company has replaced the stocks. According to the above calculations, in 2017 – 8.52 times, in 2018 – 8.08times, in 2019 – 7.19 times, in 2020 – 6.23 times, and in 2021 5.71 times, stocks have been replaced.

 

5. Total assets turn over = Sales / Total Assets

 

This ratio shows the utilization of the total asset. If we look at the calculations, there is a gradual slight decrease in this ratio. This shows the total assets are properly not being utilized for the purpose of earning interest. This decrease shows some degree in- the efficiency of the organization.

 

Figure 3- Liquidity and Efficiency ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.3.2 Solvency Ratios

	2017	2018	2019	2020	2021
Debt ratio	22.98	23.14	18.85	19.67	20.38
Equity ratio	77.02	76.86	81.15	80.33	79.62

 

 

 

Table 5-Solvency Ratios

Interpretation

1. Debt ratio = Total liabilities / total assets *100

This ratio shows that how much portion of the assets are covered by the liabilities of the organization.

2. Equity ratio = Equity / total assets *100

This ratio is showing increasing trend except in 2018 in which it was at its lowest value because increase in equity is lower increase than assets.

Figure 4 - Solvency ratios

 

 

 

2.3.3 Profitability ratio

	2017	2018	2019	2020	2021
profit margin	22.74	17.41	14.51	16.60	15.38
Gross Margin	1.62	1.67	1.68	1.65	1.68
Return on Total Assets	21.35	14.77	9.51	10.68	8.86

Table 6-Profitability ratio

Interpretation

1. Profit margin = Profit after tax/net sale x 100

This ratio interprets the net profit as a percentage of net sales. In 2017, the ratio was pretty good but in 2018, there was an enormous decline, which is Alarming for the organization and it should take action for its improvement. Higher ratio results in higher market position of the organization.

 

2. Gross margin = Gross profit / Net Sales * 100

The gross profit margin ratio shows the gross profit as a % of the net sale. there was nominal change. This ratio is favourable for the company, there may be two reasons for this increase, one is to increase interest-earning or lower the interest expenses

 

3. Return on total assets ( in%) = Net income/ total asset x 100

This ratio shows the relationship between net profit and total assets. It is the main objective of an organization to maximize its return on assets. 

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Figure 5 - Profitability ratio

 

 

2.3.4 Market Ratios

Year	2017	2018	2019	2020	2021
Price Earnings ratio	21.7	35.17	41.7	29.15	25.27
Dividend Yield	3.95	1.58	2.61	3.05	2.73

 

Table 7- Market Ratios

 

1. Price-earnings ratio = Market price per share / Earning per share

 

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its earnings per share (EPS).

 

2. Dividend Yield = Annual dividend per share/ Market price per share * 100

 

The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price

 

             Figure 6 - Market Ratios

 

2.4 Company situation from 2017 to 2021 based on the Z Score value

Zones of Discrimination:

Z = 1.2 T1+ 1.4T2+3.3T3+0.6T4+0.999T5

Z > 2.9 - “Safe” Zone

1.23 < Z < 2.9 - “Grey” Zone

Z < 1.23 - “Distress” Zone

During 2017 and 2018 company is in the “Grey Zone” and in 2019 and 2020 company is in the “distress zone”. In the last year, it showed a value of 2.40 which means the company moving towards the “Safe Zone” but still in “Grey Zone”.

 

	2017	2018	2019	2020	2021
working capital	1,278,768	1,349,957	1,224,225	1,073,191	795,666
total assets	14,878,408	16,090,503	37,568,000	48,236,000	54,975,000
T1	0.09	0.08	0.03	0.02	0.01
Retained Earning	9,477,355	10,440,113	10,705,248	10,726,025	10,703,419
total assets	14,878,408	16,090,503	37,568,000	48,236,000	54,975,000
T2	0.64	0.65	0.28	0.22	0.19
Earning before Tax	5,089,748	3,750,358	2,042,648	3,067,185	2,375,000
total assets	14,878,408	16,090,503	37,568,000	48,236,000	54,975,000
T3	0.34	0.23	0.05	0.06	0.04
Market value of Equity	2185645	1790750	464830	878355	8909677.5
Total liabilities	2,251,257	2,332,412	1,962,112	2,162,612	2,549,691
T4	0.97	0.77	0.24	0.41	3.49
Sales	-8,645,685	-9,180,421	-7,908,379	-7,559,793	-7,158,838
total assets	14,878,408	16,090,503	37,568,000	48,236,000	54,975,000
T5	-0.58	-0.57	-0.21	-0.16	-0.13
Z	2.13	1.67	0.55	0.63	2.40

Table 8 - Z Score value

3.0   CONCLUSION

 

According to the Ceylon Cold Store PLC annual report figures, in 2020 and 2021, there had been a significant decrement of the revenue than the previous year. This happens due to the COVID-19 pandemic situation of the country. Because of recovering the situation, the Z value of 2021 has increased and we can see it is moving towards “safe zone”.

 

4.0 REFERENCES

●       ccs-annual-report-202021. (n.d.).

●       STAYING FOCUSED STAYING AHEAD Ceylon Cold Stores PLC-Annual Report 2017/18. (n.d.).

●       Relentless. (n.d.). https://www.elephanthouse.lk/downloads.html

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.0   APPENDIX

	2016	2017	2018	2019	2020	2021
Total revenue	12,190,925	13,971,391	13,649,255	11,625,320	11,635,796	10,584,847
cost of sales	-7,595,030	-8,645,685	-9,180,421	-7,908,379	-7,559,793	-7,158,838
gross profit	4,595,895	5,325,706	4,468,834	3,716,941	4,076,003	3,426,009
other operating income	62,206	115,625	65,585	274,176	355,610	454,299
Selling and distribution expenses	-1,242,054	-1,302,891	-1,408,629	-1,649,912	-1,931,915	-1,871,380
Administrative expenses	-459,707	-578,693	-644,336	-675,745	-697,072	-722,939
Other operating expenses	-298,541	-389,100	-326,744	-324,890	-260,401	-148,675
Results from operating activities	2,948,822	3,916,707	2,900,770	2,053,472	2,325,911	1,647,314
Finance cost	-10,860	-4,893	-673	-11,446	-1,621	-15,341
Finance income	98,277	139,638	103,488	46,903	51,075	40,045
Net finance income / (cost)	87,417	134,745	102,815	35,457	49,454	24,704
Profit before tax	3,053,186	4,143,457	3,025,144	2,114,362	2,417,753	1,675,891
Tax expense	-772,173	-966,316	-648,274	-427,808	-486,694	-47,851
Profit for the year	2,281,013	3,177,141	2,376,870	1,686,554	1,931,059	1,628,040

 

	2017	2018	2019	2020	2021
current assets	3,530,025	3,682,369	3,186,337	3,235,803	3,345,357
Current Liabilities	2,251,257	2,332,412	1,962,112	2,162,612	2,549,691
total liabilities	3419746	3,723,386	3,342,830	3,556,191	3745445
Pre-paid expenses
Sales on account	13,971,391	13,649,255	11,625,320	11,635,796	10,584,847
Account receivable	1,720,333	1,712,353	1,616,420	1,527,884	1,728,984
Average account receivable	1,567,534	1,716,343	1,664,387	1,572,152	1,628,434
cost of sales	-8,645,685	-9,180,421	-7,908,379	-7,559,793	-7,158,838
Inventories	1,192,696	1,079,965	1,119,560	1,306,877	1,198,847
average inventory	1014499.5	1136330.5	1099762.5	1213218.5	1252862
total assets	14,878,408	16,090,503	17,732,291	18,075,372	18,381,421
average total assets	14618920.5	22923659.5	24956648.5	26769977	27266082.5
total equity	11,458,662	12,367,117	14,389,461	14,519,181	14,635,976