Executive Summary
The main objective of
financial statement analysis is to evaluate the company's past and present
performance. Alumex PLC's financial statements were examined using horizontal,
vertical, trend, ratio, and Altman Z-Score analysis. Regarding growth and revenue
over the five years, Alumex exhibits an average performance.
Alumex PLC's revenue has
decreased significantly from year 2019 to year 2020. Reducing revenue has
affected to reduce profit after tax badly and indicates an unfavorable
condition for the company. Since the higher amount of loans and borrowings
company's total liabilities have increased year on year.
Alumex PLC's total revenue
has dropped suddenly in year 2020 than the other years due to the unfavorable
conditions of the country. But in year 2022, profit for the year has increased
by 282% when compared to the base year indicating good health for the company.
Cost of sales takes a higher
portion as more than 70% of total revenue over the five years. Gross profit for
the year is -1.27% compared to the total revenue in year 2020, which depicts an
unfavorable condition for Alumex PLC.
Ratio analysis has revealed
the company's liquidity and profitability positions in efficient manner.
Current liabilities are higher than the current assets over first four years of
Alumex PLC. Company's working capital amount for year 2018, 2019, 2020 and 2021
takes a negative value. Company’s equity ratio is lower than the debt ratio due
to investors' reluctance to make internal investments in the company. Since the
assets have a bigger creditor contribution financial risk of Alumex PLC has
risen. Alumex PLC shows lower level of profit margin ratios over the five
years. In year 2020, profit margin takes a negative value due to the net loss
of that year. Further, basic earnings per share and return on total assets show
the inefficient performance of the company. Price-earnings ratio and dividend
yield not in satisfied level over five years. Therefore, investors fear to
invest in the company due to unclear picture about its future growth.
The financial statement of
Alumex PLC shows that the company is not in the safe level and there is a high
possibility for the bankruptcy according to Altman z-Score analysis.
Top management should decide
both long-term and short-term strategies to enhance the growth of the company.
 |
1.Introduction
Financial
statement analysis is a technique for looking over and evaluating a company's
financial statements to assess its past, present, or anticipated future
performance. A greater ability to make economic decisions is provided by the
process of evaluating the financial statements. Companies must also include
their financial figures in the yearly report which the company distribute to
its stakeholders. The second phase in the process is to successfully examine
the financial statements that have been created in order to satisfy standards
so that future profitability and cash flows can be predicted.
As
a result, the fundamental goal of financial statement analysis is to use data
about the company's previous performance to forecast how it will perform in the
future. Finding potential issue areas and solving them is another crucial goal
of financial statement analysis.
Financial
statement analysis is used by various people. These can be categorized as
either internal users or external users. Internal users are the members of the
management of the company who review financial statements to make decisions
that affect how the business is run. External users, on the other hand, may not
necessarily be affiliated with the business but still have a financial stake.
These parties include proprietors, investors, creditors, the government, staff
members, clients, and the general public.
The
financial statements of Alumex PLC have been examined and evaluated in this
report. Horizontal Analysis, Trend Analysis, Vertical Analysis, Ratio Analysis
and Altman Z-Score Analysis can be used to assess the financial
statements of Alumex PLC. This study concludes with a discussion of the theory
and practice of financial statement analysis for Alumex PLC.
2. Background
of the Company
Alumex
PLC is the undisputed market leader in Sri Lanka for Aluminium extrusions.
Founded in 1986, Alumex started commercial operations in 1988. Alumex PLC, a
subsidiary of Hayleys PLC, was listed on the Dirisavi Board of the Colombo
Stock Exchange in 2013. Over the past three decades, Alumex PLC has led from
the front to transform Sri Lanka’s Aluminium extrusion industry on par with
global standards. Alumex PLCs’ current capacity stands at over 1,850 metric tons
of Aluminium extrusion manufacturing capacity per month, combined with melting
and casting, die manufacturing, extruding, surface finishing of profiles and
component items. Alumex PLC is the leading expert in Sri Lanka for mill
finished, anodized, powder coated and wood finished Aluminium profiles for
industrial and architectural use. Positioned with 9 distribution centers, 3
LUMIN concept centers, and an island-wide network of dealers and distributors
across all nine provinces, we serve a wide range of customers including
fabricators, contractors and engineering industry buyers from the residential,
commercial and industrial segments.
Alumex
PLC has a diverse portfolio catering to all segments of the market through a
broad gamut of UKAS accredited architectural, hardware, and industrial products
including the globally recognized international proprietary systems for doors,
windows, and facades manufactured under license from reputed global principals.
The most recent addition to our product portfolio is the DIY (Do-It-Yourself)
range of prefabricated doors and windows for the retail market and the Alumex
Building System - custom designed to support ground mounted solar installations
for the expansion of the renewable energy sector.
Our
global expansion strategy launched in 2019 has made excellent progress, with
our value-added engineering solutions now highly sought after in the USA,
Australia, Europe, Asia, and Africa.
Vision
of Alumex PLC
To
be the Premier Aluminium Extrusion Manufacturer in the South Asian Region.
Mission
of Alumex PLC
We
will create customer intimacy with innovative Aluminium solutions through
world-class sustainable manufacturing practices.
3. Literature
Review
Financial
statement analysis analyzes a company's balance sheet, income statement, or
statement of cash flows to assess its performance or value. Horizontal
Analysis, Trend Analysis, Vertical Analysis, Ratio Analysis and Altman’s Z
Score Analysis were used to analyze the financial statements of Alumex PLC.
3.1 Horizontal
Analysis / Comparative Financial Statement Analysis
Horizontal
analysis is an approach to analyzing financial statements. This method of
analysis is used to identify changes in financial statements over time and
assess those changes. Over a number of accounting periods, it compares
historical data, which includes ratios and line items. A month, a quarter, or a
year might be used as the accounting period. The amount of the same line of the item is compared in an
absolute comparison to its amounts in the previous accounting periods and when
comparing numbers in percentages, the amount that has increased or decreased is
given as a percentage of the amount from the base year. It also depicts how
income, costs, and other financial statement line items have changed over time.
The importance of the horizontal analysis can
be discussed as follows,
·
Financial performance of the company can
be seen by investors, analysts, and other stakeholders.
·
Changes in various line items and ratios
are examined, and the financial success of a corporation over time is
evaluated. Further research is done on negative trends and alterations.
·
It is also simpler to identify
underperformance in a company when using horizontal analysis.
The
ability to analyze data from many time periods and to more easily spot changes
in patterns are two reasons why horizontal analysis is crucial. This can be
useful while deciding whether to invest in a business or not.
3.2 Trend
Analysis
Financial
statement trend analysis enables information users to identify percentage
changes in the chosen data over time. Users can, for instance, determine
whether a company's net profit is rising, falling, steady, or if there are
variations over time.
In
many instances, it is crucial to look at trends over a certain amount of time
since it allows for the assessment of new trends that can affect performance in
the years to come. In this regard, the five-year overview of particular
financial data, which can be found in all annual reports, is helpful. Index
numbers rather than percentage changes are utilized when more than two years
are taken into account.
In
essence, one year is chosen and set to 100% as the foundation year. The
percentage of the base year is used to represent all other years and the value of the same item for other
years is measured in relation to the value of the base year.
Making
predictions and setting prices are only a few benefits of employing a trend
analysis of financial statements to find linkages and patterns. A trend
analysis of financial statements has drawbacks such as the reliance on past
data and the possibility of erroneous data points.
3.3 Vertical
Analysis / Common Size Financial Statement Analysis
Vertical
analysis of financial statements is a technique that identifies the
relationship between items in the same financial statement by representing all
amounts as a percentage of the overall amount. With this technique, various
goods from the same accounting period are compared to a single item. These
financial statements are referred to as common size financial statements. The
income statement and balance sheet are both the subjects of the vertical
analysis.
The
main benefit of adopting vertical analysis of financial statements is the
ability to compare the income statements and balance sheets of businesses of
various sizes. Comparing the absolute sums of businesses of various sizes does
not allow for the drawing of inferences about their financial status and performance.
To
determine the relative proportions of various account balances, the vertical
analysis is typically done for a single accounting period. To find changes in
accounts over time, vertical analysis over a number of periods is also helpful.
It can be used to spot suspicious changes in account behavior.
3.4 Ratio
Analysis
Financial
ratio analysis is a method for evaluating the relationship (or ratio) between
two or more pieces of financial information taken from the financial statements
of an organization. It means ratio analysis entails comparing two figures to
create a ratio and determining if the ratio represents a strength or weakness
in the state of the business. The major purpose of it is to enable fair
comparisons across periods of time and between various businesses or sectors.
Ratio
analysis can be used to determine whether the business;
·
Is profitable
·
Has enough money to pay its employees
higher wages
·
Has enough money to pay its bills
·
Is using its assets efficiency
There are numerous financial
ratios that are used for ratio analysis and they are grouped into the four categories
as follows,
1.
Liquidity and Efficiency Ratios
Liquidity and Efficiency
ratios measure a company’s ability to meet its debt obligations using its
current assets and how well the business is using its assets and liabilities to
generate sales and earn profits.
2.
Solvency Ratios
Solvency ratios measure a
company’s long-term financial viability. These ratios compare the debt levels
of a company to its assets, equity, or annual earnings.
3.
Profitability Ratios
Profitability ratios measure
a business’ ability to earn profits, relative to their associated expenses.
4.
Market Ratios
Market ratios help investors
to predict how much they will earn from specific investments.
Analyzing a ratio can reveal significant
relationships and bases of comparison that help find circumstances and trends
that are challenging to spot when looking at the ratio's individual components
alone.
3.5 Altman
Z-Score Analysis
Altman’s Z-score Model is a numerical
measurement that is used to predict the chances of bankruptcy. American Edward
Altman published the Z-score Model in 1968 as a measure of the probability of a
company going bankrupt. Altman’s Z-score model combines five financial ratios
to predict the probability of a company becoming insolvent in the next two
years.
Altman used a weighting method with other
ratios that gauged the likelihood of a corporation filing for bankruptcy while
developing the Z-score model. In total, Altman produced three distinct Z-scores
for various business models. The first version, which was introduced in 1968,
was created especially for publicly traded manufacturing firms with assets more
than $1 million. Private corporations and non-manufacturing businesses with
assets under $1 million were excluded from the initial model. Later in 1983, Altman
developed two other models for use with smaller private manufacturing
companies. Model A Z-score was developed specifically for private manufacturing
companies, while Model B was created for non-publicly traded companies. The
1983 Z-score models comprised varied weighting, predictability scoring systems,
and variables.
4. Horizontal
Analysis
Rupee
Change = Analysis Period Amount – Base Period Amount
Percent
Change = (Rupee Change / Base Period Amount) * 100%
Time
Period = 2018 – 2022
The
Base Year = Immediate Previous Year
|
Analysis Year |
Base Year |
|
2018 |
2017 |
|
2019 |
2018 |
|
2020 |
2019 |
|
2021 |
2020 |
|
2022 |
2021 |
4.1 Horizontal
Analysis of the Income Statement
Rupee
Change
(All
values are in Thousand Rupees)
Table 1: Horizontal Analysis of the Income Statement (Rupee Change)
|
|
2017 & 2018 |
2018 & 2019 |
2019 & 2020 |
2020 & 2021 |
2021 & 2022 |
|
Revenue |
-167,068 |
649,888 |
-164,897 |
1,210,503 |
3,480,550 |
|
Cost of
Sales |
166,146 |
552,680 |
-191,380 |
619,360 |
2,927,262 |
|
Gross
Profit |
-333,214 |
97,208 |
26,483 |
591,143 |
553,288 |
|
Other
Income |
8,445 |
-86,069 |
-103,094 |
200,601 |
-173,110 |
|
Selling
and Distribution Expenses |
22,325 |
45,886 |
34,866 |
-59,933 |
76,217 |
|
Administrative
Expenses |
26,537 |
74,215 |
-32,184 |
30,760 |
227,322 |
|
Operating
Profit |
-373,631 |
-108,962 |
-79,293 |
820,917 |
76,639 |
|
Finance
Cost |
90,863 |
273,782 |
-13,277 |
-147,236 |
270,822 |
|
Finance
Income |
9,226 |
3,051 |
-6,118 |
28,332 |
396,723 |
|
Profit
Before Tax |
-455,268 |
-379,693 |
-72,134 |
996,485 |
202,540 |
|
Income
Tax Expenses |
-134,380 |
-41,518 |
-12,831 |
124,676 |
52,404 |
|
Profit
for the Year |
-320,888 |
-287,333 |
-110,145 |
871,809 |
150,136 |
|
|
|
|
|
|
|
|
Total Other
Comprehensive Income for the Year, Net of Tax |
-196,514
|
258,527
|
-142,005
|
57,844
|
46,893 |
|
Actuarial
Gains/ (Losses) on Defined Benefit Plans |
-902
|
6,064
|
4,033
|
-4,054
|
-9,234
|
|
Revaluation
Surplus of Land & Buildings |
-86,613
|
201,263
|
-201,263 |
0
|
139,952
|
|
Income
Tax Effect |
-108,999 |
51,200 |
55,225 |
1,275 |
-23,202 |
|
Adjustment
to Opening Deferred Tax on Revaluation Reserve |
0
|
0
|
0
|
60,623
|
-60,623
|
|
Total
Comprehensive Income for the Year, Net of Tax |
-517,402
|
-28,806
|
-252,150
|
929,655
|
197,027
|
Total
revenue of the company has decreased from year 2017 to year 2018 by Rs.
167,068,000. But it has increased from year 2018 to year 2019 by a considerable
amount. However, total revenue has decreased by a significant amount from year
2019 to year 2020 due to the declining sales as a result of April Easter Sunday
terrorist attacks and COVID-19 pandemic. Cost of sales and gross profit also
have fluctuated during five years. All expenses show an increasing trend over
the five years when compared to the base years. Profit before tax and profit
for the year has reduced by considerable amounts for first three years and it
has increased for last two years when compared to the base years. Total
comprehensive income has also changed due to actuarial gains and losses,
revaluation surplus and etc. from one year to another year.
Percentage
Change
Table 2: Horizontal Analysis of the Income Statement (Percentage
Change)
|
|
2017 & 2018 |
2018 & 2019 |
2019 & 2020 |
2020 & 2021 |
2021 & 2022 |
|
Revenue |
-4.14% |
16.81% |
-3.65% |
27.82% |
62.57% |
|
Cost of
Sales |
5.63% |
17.72% |
-5.21% |
17.79% |
71.39% |
|
Gross
Profit |
-30.84% |
13.01% |
3.14% |
67.88% |
37.84% |
|
Other
Income |
4.12% |
-40.29% |
-80.81% |
819.38% |
-76.91% |
|
Selling
and Distribution Expenses |
15.73% |
27.94% |
16.59% |
-24.46% |
41.18% |
|
Administrative
Expenses |
11.67% |
29.22% |
-9.81% |
10.39% |
69.57% |
|
Operating
Profit |
-40.78% |
-20.08% |
-18.28% |
231.63% |
6.52% |
|
Finance
Cost |
149.52% |
180.56% |
-3.12% |
-35.73% |
102.24% |
|
Finance
Income |
102.99% |
16.78% |
-28.81% |
187.42% |
913.08% |
|
Profit
Before Tax |
-52.66% |
-92.78% |
-244.30% |
-2338.78% |
21.23%
|
|
Income
Tax Expenses |
-66.75% |
-62.02% |
-50.47% |
990.28% |
38.18% |
|
Profit
for the Year |
-48.39% |
-83.95% |
-200.45% |
-1579.45% |
18.39% |
|
|
|
|
|
|
|
|
Total
Other Comprehensive Income for the Year, Net of Tax |
-234.24%
|
-229.55%
|
-97.33%
|
1482.80%
|
75.95%
|
|
Actuarial
Gains/ (Losses) on Defined Benefit Plans |
23.88%
|
-129.60%
|
291.19%
|
-74.82%
|
-676.98% |
|
Revaluation
Surplus of Land & Buildings |
-100.00%
|
- |
-100.00%
|
- |
- |
|
Income
Tax Effect |
-10312.11% |
-47.43% |
-97.33%
|
-84.05%
|
9587.60%
|
|
Adjustment
to Opening Deferred Tax on Revaluation Reserve |
- |
- |
- |
- |
-100.00%
|
|
Total
Comprehensive Income for the Year, Net of Tax |
-69.26%
|
-12.54%
|
-125.54%
|
-1812.33% |
22.43%
|
Year
2017 & 2018
Total
revenue has decreased by 4.14% from year 2017 to year 2018. Cost of sales
increased from year 2017 to year 2018 and it leads to decrease the gross profit
by 30.84% from year 2017 to year 2018. Gross profit has reduced due to
inability of controlling the production cost. Other income, selling and
distribution expenses and administrative expenses have increased from year 2017
to year 2018. Increasing of other income is lower than the increasing of
expenses. Therefore, operating profit has reduced by 40.78% in year 2018 when
compared to the year 2017. Furthermore, both finance cost and finance income
has increased in year 2018 than previous year. Profit before tax has reduced by
52.66% in year 2018 than the base year. The reason can be inefficient control
of the expenses of Alumex PLC. Income tax expense also has reduced by 66.75%
and profit for the year has reduced by 48.39% when compared to the base year of
2017. Total comprehensive income for the year has reduced by 69.26% due to the
changes in total other comprehensive income.
Year
2018 & 2019
From
year 2018 to year 2019, total revenue of Alumex PLC has increased by 16.81%
which implies a favorable situation for the company. Cost of sales has
increased by 17.72% and due to the increased value of total revenue gross
profit has increased by 13.01% when compared to the previous year. It implies
that, company has controlled the production cost efficiently. Other income has
reduced, but expenses have increased from year 2018 to year 2019. Therefore,
operating profit has reduced by 20.08% in year 2019 than year 2018. Finance
cost has increased by a considerable percentage as 180.56% than finance income.
Profit before tax has reduced by 92.78%, because of higher interest-bearing
loans and borrowings. Income tax expense has decreased by 62.02% and profit for
the year has decreased by 83.95% than year 2018. Total comprehensive income has
decreased by 12.54% than the base year of 2018.
Year
2019 & 2020
With
the effect of April Easter Sunday terrorist attacks and COVID-19 pandemic the
total revenue of the company has dropped by 3.65% when compared to the year
2019. Cost of sales has decreased by 5.21% in year 2020 than year 2019.
Decreased cost of sales has caused to increase the gross profit by 3.14% from
year 2019 to year 2020. Other income has decreased by 80.81% due to the lack of
operations during the lockdown situation. Due to the increasing expenses in
year 2020, operating income of the company has reduced by 18.28%. Both finance
cost and finance income has reduced. Profit before tax has reduced by a
considerable percentage as 244.30% since the drop in sales. Income tax expense
has reduced by 50.47% and profit for the year has decreased by 200.45% due to
the increasing costs than the revenue. Total comprehensive income has declined
by 125.54%, because of the fluctuations of total other comprehensive income.
Year
2020 & 2021
Total
revenue has increased by 27.82% from year 2020 to year 2021 and cost of sales
has increased by 17.79%. Gross profit has increased by 67.88% in year 2021 when
compared to year 2020. Other income has risen by a significant percentage as
819.38%. Selling and distribution expenses and administrative expenses have
fluctuated when compared to the previous year. Operating profit has increased
by 231.63% than the base year of 2020. Finance cost and income have fluctuated
and profit before tax has declined by 2338.78%. The impact of COVID-19 has
affected to reduce profit before tax by a considerable amount. Income tax
expense has increased by 990.28% and profit for the year has reduced by
1579.45% in year 2021 when compared to the base year of 2020. Total
comprehensive income has declined by 1812.33% due to the changes in total other
comprehensive income.
Year
2021 & 2022
Total
revenue has increased by 62.57% in year 2022 than the previous year of 2021.
Cost of sales has increased by 71.39%. Gross profit of Alumex PLC has increased
by 37.84% and it indicates that, the company has controlled the sales cost in
effective manner. Other income has reduced and expenses have increased in year
2022 compared to the year 2021. Operating profit has increased by 6.52%.
Finance cost has increased by 102.24% due to higher amount of short term and
long-term expenses. Finance income has increased by 913.08% from year 2021 to
year 2022. Profit before tax has risen by 21.23% in year 2022 than the year of
2021. Income tax expense has increased by 38.18% and profit for the year has
increased by 18.39% in year 2022 than the base year. The reason to increase
profit for the year is efficient control of the expenses. Total comprehensive
income has increased by 22.43% in year 2022 than year 2021 and increasement of
total other comprehensive income can be the reason.
4.2 Horizontal
Analysis of the Statement of Financial Position
Rupee
Change
(All
values are in Thousand Rupees)
Table 3: Horizontal Analysis of the Statement of Financial Position
(Rupee Change)
|
|
2017 & 2018 |
2018 & 2019 |
2019 & 2020 |
2020 & 2021 |
2021 & 2022 |
|
Assets |
|
|
|
|
|
|
Non-Current
Assets |
|
|
|
|
|
|
Property,
Plant and Equipment |
1,385,170 |
479,085 |
-83,133 |
55,126 |
625,278 |
|
Intangible
Assets |
4,305 |
8,698 |
16,885 |
29,481 |
-12,622 |
|
Right-of-Use
Assets |
0 |
0 |
45,820 |
152,505 |
74,450 |
|
Investments
in Subsidiaries |
0 |
0 |
0 |
0 |
0 |
|
Total
Non-Current Assets |
1,389,475 |
487,783 |
-20,428 |
237,112 |
687,106 |
|
Current
Assets |
|
|
|
|
|
|
Inventories |
535,960 |
151,002 |
89,851 |
-14,031 |
1,576,891 |
|
Trade
and Other Receivables |
102,449 |
22,741 |
-66,672 |
103,843 |
469,421 |
|
Prepaid
Expenses |
-66,737 |
7,483 |
24,625 |
76,504 |
1,073,675 |
|
Income
Tax Receivables |
13,965 |
25,158 |
12,111 |
-51,234 |
0 |
|
Other
Current Financial Assets |
-1,233 |
0 |
0 |
0 |
0 |
|
Cash
and Cash Equivalents |
52,264 |
-147,077 |
10,767 |
398,502 |
373,984 |
|
Total
Current Assets |
636,668 |
59,307 |
70,682 |
513,584 |
3,493,971 |
|
Total
Assets |
2,026,143 |
547,090 |
50,254 |
750,696 |
4,181,077 |
|
|
|
|
|
|
|
|
Equity
and Liabilities |
|
|
|
|
|
|
Stated
Capital |
0 |
0 |
0 |
0 |
0 |
|
Reserves |
-114,538 |
139,624 |
-5,285 |
55,338 |
109,826 |
|
Retained
Earnings |
29,929 |
-118,352 |
-52,697 |
508,752 |
606,396 |
|
Total
Equity |
-84,609 |
21,272 |
-57,982 |
564,090 |
716,222 |
|
|
|
|
|
|
|
|
Non-Current
Liabilities |
|
|
|
|
|
|
Interest
Bearing Loans and Borrowings |
621,750
|
65,000
|
155,200
|
-530,925
|
305,964
|
|
Non-Current
Portion of Lease Liability |
0
|
0
|
33,039
|
153,804
|
99,203
|
|
Retirement
Benefit Liability |
14,006 |
2,648 |
11,933 |
17,414 |
20,301 |
|
Deferred
Tax Liabilities |
114,185 |
31,023 |
-5,735 |
-235 |
3,400 |
|
Total
Non-Current Liabilities |
749,941 |
98,671 |
194,437 |
-359,942 |
428,868 |
|
Current
Liabilities |
|
|
|
|
|
|
Trade
and Other Payables |
-5,996 |
12,736 |
39,500 |
632,180 |
1,165,670 |
|
Current
Portion of Long-Term Interest-Bearing Borrowings |
380,000
|
147,500 |
200,400
|
8,750
|
-85,258
|
|
Current
Portion of Lease Liability |
0 |
0 |
23,698 |
-5,069 |
-1,328 |
|
Short-Term
Interest-Bearing Borrowings |
1,044,546
|
250,093
|
-338,551
|
-117,660
|
1,787,502
|
|
Other
Current Financial Liabilities |
0 |
14,413 |
-13,622 |
-791 |
0 |
|
Provisions |
-2,563 |
2,405 |
2,374 |
3,250 |
3,912 |
|
Income Tax
Liabilities |
-55,176 |
0 |
0 |
25,888 |
165,489 |
|
Total
Current Liabilities |
1,360,811 |
427,147 |
-86,201 |
546,548 |
3,035,987 |
|
Total
Liabilities |
2,110,752 |
525,818 |
108,236 |
186,606 |
3,464,855 |
|
Total
Equity and Liabilities |
2,026,143 |
547,090 |
50,254 |
750,696 |
4,181,077 |
Total
non-current assets have increased by Rs. 1,389,475,000
from year 2017 to year 2018. It has reduced by Rs. 20,428,000 from year 2019 to
year 2020 which implies an unfavorable situation for the company. Total current
assets also have increased by a considerable amount of Rs. 3,493,971,000 from
year 2021 to year 2022. Total assets have increased by a significant amount of
Rs. 50,254,000 from year 2019 to year 2020. Total equity has decreased by Rs.
57,982,000 from year 2019 to 2020. Total non-current liabilities have decreased
by a considerable amount of Rs. 359,942,000 from year 2020 to year 2021 which
implies a favorable condition for the company. But current liabilities have
increased by Rs. 3,035,987,000 from year 2021 to year 2022. Furthermore, total
liabilities have increased by a considerable amount from year to year which
implies an unfavorable situation for Alumex PLC.
Percentage
Change
Table 4: Horizontal Analysis of the Statement of Financial Position
(Percentage Change)
|
|
2017 & 2018 |
2018 & 2019 |
2019 & 2020 |
2020 & 2021 |
2021 & 2022 |
|
Assets |
|
|
|
|
|
|
Non-Current
Assets |
|
|
|
|
|
|
Property,
Plant and Equipment |
81.26% |
15.50% |
-2.33% |
1.58% |
17.66% |
|
Intangible
Assets |
10.22% |
18.74% |
30.63% |
40.94% |
-12.44% |
|
Right-of-Use
Assets |
- |
- |
- |
332.84% |
37.54% |
|
Investments
in Subsidiaries |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Total
Non-Current Assets |
78.20% |
15.41% |
-0.56% |
6.53% |
17.75% |
|
Current
Assets |
|
|
|
|
|
|
Inventories |
59.03% |
10.46% |
5.63% |
-0.83% |
94.38% |
|
Trade
and Other Receivables |
14.32% |
2.78% |
-7.93% |
13.42% |
53.47% |
|
Prepaid
Expenses |
-53.46% |
12.88% |
37.55% |
84.82% |
644.07% |
|
Income
Tax Receivables |
- |
180.15% |
30.96% |
-100.00% |
- |
|
Other
Current Financial Assets |
-100.00% |
- |
- |
- |
- |
|
Cash
and Cash Equivalents |
33.77% |
-71.04% |
17.96% |
563.43% |
79.70% |
|
Total
Current Assets |
33.43% |
2.33% |
2.72% |
19.23% |
109.72% |
|
Total
Assets |
55.04% |
9.59% |
0.80% |
11.91% |
59.26% |
|
|
|
|
|
|
|
|
Equity
and Liabilities |
|
|
|
|
|
|
Stated
Capital |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Reserves |
-15.17% |
21.81% |
-0.68% |
7.14% |
13.23% |
|
Retained
Earnings |
3.95% |
-15.01% |
-7.87% |
82.43% |
53.86% |
|
Total
Equity |
-4.71% |
1.24% |
-3.34% |
33.67% |
31.98% |
|
|
|
|
|
|
|
|
Non-Current
Liabilities |
|
|
|
|
|
|
Interest
Bearing Loans and Borrowings |
121.44%
|
5.73%
|
12.95%
|
-39.21%
|
37.18%
|
|
Non-Current
Portion of Lease Liability |
- |
- |
- |
465.52%
|
53.09%
|
|
Retirement
Benefit Liability |
16.95% |
2.74% |
12.02% |
15.66% |
15.78% |
|
Deferred
Tax Liabilities |
111.51% |
14.32% |
-2.32% |
-0.10% |
1.41% |
|
Total
Non-Current Liabilities |
107.59% |
6.82% |
12.58% |
-20.69% |
31.07% |
|
Current
Liabilities |
|
|
|
|
|
|
Trade
and Other Payables |
-0.54% |
1.16% |
3.55% |
54.79% |
65.27% |
|
Current
Portion of Long-Term Interest-Bearing Borrowings |
- |
38.82%
|
37.99% |
1.20%
|
-11.57%
|
|
Current
Portion of Lease Liability |
- |
- |
- |
-21.39% |
-7.13% |
|
Short-Term
Interest-Bearing Borrowings |
6209.77%
|
23.56%
|
-25.81%
|
-12.09%
|
209.00%
|
|
Other
Current Financial Liabilities |
- |
- |
-94.51% |
-100.00% |
- |
|
Provisions |
-33.22% |
46.68% |
31.41% |
32.73% |
29.68% |
|
Income
Tax Liabilities |
-100.00% |
- |
- |
- |
639.25% |
|
Total
Current Liabilities |
114.62% |
16.76% |
-2.90% |
18.92% |
88.37% |
|
Total
Liabilities |
112.02% |
13.16% |
2.39% |
4.03% |
71.95% |
|
Total
Equity and Liabilities |
55.04% |
9.59% |
0.80% |
11.91% |
59.26% |
Year
2017 & 2018
The
property, plant and equipment has increased by 81.26% from year 2017 to year
2018 which implies a favorable condition for the company. Intangible assets
have increased by 10.22% than the base year of 2017. Overall non-current assets
have increased by 78.20% from year 2017 to year 2018 showing a good signal for
the company. Inventories have risen by 59.03% in year 2018 when compared to the
year 2017. It is favorable situation for a manufacturing company. Trade and
other receivables have increased by 14.32% and prepaid expenses has reduced by
53.46% in year 2018 when compared to the previous year. Cash and cash
equivalents have risen by 33.77% from year 2017 to year 2018. However, total
current assets have increased by 33.43% in year 2018 than year 2017. Therefore,
overall total assets of Alumex PLC have risen by 55.04% which indicates a good
signal for the growth of the company. No change in stated capital of the company
when compared to the previous year. Reserves have decreased by 15.17% and
therefore total equity has declined by 4.71% in year 2018 than year 2017. Interest
bearing loans and borrowings have increased by 121.44% from year 2017 to year
2018 and it shows an unfavorable situation for the company. However, total
non-current liabilities have increased by 107.59% in year 2018 than the base
year. If trade and other payables have decreased by 0.54%, short-term
interest-bearing borrowings have increased from year 2017 to 2018 by a
significant amount as 6209.77%. It has caused to increase the total current
liabilities by 114.62% compared to the base year. However, total liabilities
have increased by 112.02% in year 2018 than the base year of 2017.
Year
2018 & 2019
From
year 2018 to year 2019 the property, plant and equipment has increased by 15.50%.
Intangible assets have increased by 18.74% in year 2019 than the base year. Therefore,
overall non-current assets have increased by 15.41% from year 2018 to year 2019.
Inventories have risen by 10.46% in year 2019 when compared to the year 2018. It
indicates that, the company’s ability to maintain the production without any
shortage of the inventories. Trade and other receivables have increased by 2.78%
and prepaid expenses has risen by 12.88% in year 2019 when compared to the
previous year. Cash and cash equivalents have declined by 71.04% from year 2018
to year 2019 which indicates liquidity problems within the company. However,
total current assets have increased by 2.33% in year 2019 than year 2018.
Therefore, overall total assets of Alumex PLC have risen by 9.59%. Stated
capital of the company has not changed when compared to the previous year of
2018. Reserves have increased by 21.81% and therefore total equity has increased
by 1.24% in year 2019 than year 2018. Interest bearing loans and borrowings
have increased by 5.73% and total non-current liabilities have increased by 6.82%
in year 2019 than the base year. Trade and other payables have increased by 1.16%,
short-term interest-bearing borrowings have increased from year 2018 to 2019 by
23.56%. Therefore, total current liabilities by 16.76% compared to the base
year. However, total liabilities have increased by 13.16% in year 2019 than the
base year of 2018.
Year
2019 & 2020
The
value of property, plant and equipment has decreased by 2.33% from year 2019 to
year 2020 which implies an unfavorable condition for the company. Intangible
assets have increased by 30.63% and overall non-current assets have decreased
by 0.56% from year 2019 to year 2020 which implies a bad condition for the
company. Inventories have increased by 5.63% in year 2020 when compared to the
year 2019. Trade and other receivables have decreased by 7.93% and prepaid
expenses has risen by 37.55% in year 2020 than the previous year. Cash and cash
equivalents have risen by 17.96% from year 2019 to year 2020. However, total
current assets have increased by a small percentage as 2.72% in year 2020 than
year 2019. Therefore, overall total assets of Alumex PLC have risen by 0.80%
which implies a lack of growth of the company. No change in stated capital of
the company when compared to the previous year. Reserves have decreased by 0.68%
and therefore total equity has declined by 3.34% in year 2020 than year 2019.
Interest bearing loans and borrowings have increased by 12.95% from year 2019
to year 2020. However, total non-current liabilities have increased by 12.58%
in year 2020 than the base year. Trade and other payables have increased by 3.55%
and short-term interest-bearing borrowings have decreased from year 2019 to 2020
by 25.81%. Total current liabilities have decreased by 2.90% compared to the
base year. However, total liabilities have increased by 2.39% in year 2020 than
the base year of 2019.
Year
2020 & 2021
The
property, plant and equipment value has increased by 1.58% from year 2020 to
year 2021 and right of use assets have increased by 332.84% in year 2021 than
the year of 2020 considerably. Intangible assets have increased by 40.94% than
the base year of 2020. However, total non-current assets have increased by 6.53%
from year 2020 to year 2021. Inventories have declined by 0.83% in year 2021
when compared to the year 2020 and it is an unfavorable situation for a
manufacturing company like Alumex PLC. Trade and other receivables have
increased by 13.42% and prepaid expenses has increased by 84.82% in year 2021
when compared to the previous year. Cash and cash equivalents have risen by 563.43%
from year 2020 to year 2021 which implies a higher liquidity position in the
company. Total current assets have increased by 19.23% in year 2021 than year
2020. Then, total assets of Alumex PLC have increased by 11.91%. Stated capital
has not change and reserves have increased by 7.14%. However, total equity has increased
by 33.67% in year 2021 than year 2020 due to increasement of the retained
earnings by 82.43% which implies company has remained a huge portion of profit
with the company rather than paying for dividends to stakeholders. Interest
bearing loans and borrowings have declined by 39.21% and total non-current
liabilities have declined by 20.69% in year 2021 than the base year and it
shows a favorable situation. The value of trade and other payables have increased
by 54.79% and short-term interest-bearing borrowings have decreased from year
2021 to 2020 by 12.09%. Total current liabilities have increased by 18.92%
compared to the base year. However, total liabilities have increased by 4.03%
in year 2021 than the base year of 2020.
Year
2021 & 2022
The
property, plant and equipment has increased by 17.66% from year 2021 to year
2022 and the company’s intangible assets have declined by 12.44% than the base
year of 2021. Total non-current assets have increased by 17.75% from year 2021
to year 2022. Inventories have risen by 94.38% in year 2022 when compared to
the year 2021 which shows the higher production capacity of the company. Trade
and other receivables have increased by 53.47% and prepaid expenses has risen by
644.07% in year 2022 when compared to the previous year. Cash and cash
equivalents have risen by 79.70% from year 2021 to year 2022. Total current
assets of Alumex PLC have increased by 109.72% in year 2022 than year 2021. Total
assets have risen by 59.26% and it is a good position for the company. No
change in stated capital of the company when compared to the previous year.
Reserves have increased by 13.23%. Retained earnings have increased by 53.86%
in year 2022 than year 2021 Therefore, total equity has increased by 31.98% than
previous year. Total non-current liabilities have increased by 31.07% in year
2022 than the base year. Trade and other payables have increased by 65.27%
while short-term interest-bearing borrowings have increased from year 2021 to
2022 by 209%. Total current liabilities have increased by 88.37% compared to
the base year. However, total liabilities have increased by 71.95% in year 2022
than the base year of 2021.
5.Trend
Analysis
Trend
Analysis = (Analysis Period Amount / Base Period Amount) * 100
The
Base Year = 2018
5.1 Trend
Analysis of the Income Statement
Table 5: Trend Analysis of the Income Statement
|
|
2018 (Base) |
2019 |
2020 |
2021 |
2022 |
|
Revenue |
100% |
117% |
113% |
144% |
234% |
|
Cost of
Sales |
100% |
118% |
112% |
131% |
225% |
|
Gross
Profit |
100% |
113% |
117% |
196% |
270% |
|
Other
Income |
100% |
60% |
11% |
105% |
24% |
|
Selling
and Distribution Expenses |
100% |
128% |
149% |
113% |
159% |
|
Administrative
Expenses |
100% |
129% |
117% |
129% |
218% |
|
Operating
Profit |
100% |
80% |
65% |
217% |
231% |
|
Finance
Cost |
100% |
281% |
272% |
175% |
353% |
|
Finance
Income |
100% |
117% |
83% |
239% |
2421% |
|
Profit
Before Tax |
100% |
7% |
-10% |
233% |
283% |
|
Income
Tax Expenses |
100% |
38% |
19% |
205% |
283% |
|
Profit
for the Year |
100% |
16% |
-16% |
239% |
282% |
|
|
|
|
|
|
|
|
Total
Other Comprehensive Income for the Year, Net of Tax |
100%
|
-130%
|
-3%
|
-55%
|
-96%
|
|
Actuarial
Gains/ (Losses) on Defined Benefit Plans |
100%
|
-30%
|
-116%
|
-29%
|
168%
|
|
Revaluation
Surplus of Land & Buildings |
- |
- |
- |
- |
- |
|
Income
Tax Effect |
100% |
53% |
1% |
0% |
22% |
|
Adjustment
to Opening Deferred Tax on Revaluation Reserve |
- |
- |
- |
- |
- |
|
Total
Comprehensive Income for the Year, Net of Tax |
100%
|
87%
|
-22%
|
382%
|
468%
|
Total revenue depicts a favourable upward trend over
the year 2019, 2020, 2021 and 2022 when compared to the base year of 2018
showing highest revenue increasement in year 2022. Cost of sales of Alumex PLC
show an increasing trend over the years compared to base year and highest rise
has recorded in year 2022. Gross profit also depicts an upward trend over year
2019, 2020, 2021 and 2022 compared to the base year of 2018.
Figure 1: Gross Profit
Operating profit has fluctuated over five years
compared to base year of 2018. Profit before tax has fluctuated over years of
2019, 2020, 2021 and 2022 compared with base year and highest increasement has
recorded in year 2022. Profit before tax for year 2020 shows a negative
percentage as -10% and it depicts a decreasing trend. Profit for the year also
a negative percentage as -16% and it also shows a decreasing trend compared to
base year of 2018. The reason for that is, earning negative profit before and
after the tax amount. For year 2021 and 2022 shows an upward trend for profit
for the year compared to base year of 2018.
Figure 2: Profit After Tax
5.2 Trend
Analysis of the Statement of Financial Position
Table 6: Trend Analysis of the Statement of Financial Position
|
|
2018 (Base) |
2019 |
2020 |
2021 |
2022 |
|
Assets |
|
|
|
|
|
|
Non-Current
Assets |
|
|
|
|
|
|
Property,
Plant and Equipment |
100% |
116% |
113% |
115% |
135% |
|
Intangible
Assets |
100% |
119% |
155% |
219% |
191% |
|
Right-of-Use
Assets |
- |
- |
- |
- |
- |
|
Investments
in Subsidiaries |
100% |
100% |
100% |
100% |
100% |
|
Total
Non-Current Assets |
100% |
115% |
115% |
122% |
144% |
|
Current
Assets |
|
|
|
|
|
|
Inventories |
100% |
110% |
117% |
116% |
225% |
|
Trade
and Other Receivables |
100% |
103% |
95% |
107% |
165% |
|
Prepaid
Expenses |
100% |
113% |
155% |
287% |
2135% |
|
Income
Tax Receivables |
100% |
280% |
367% |
0% |
0% |
|
Other
Current Financial Assets |
- |
- |
- |
- |
- |
|
Cash
and Cash Equivalents |
100% |
29% |
34% |
227% |
407% |
|
Total
Current Assets |
100% |
102% |
105% |
125% |
263% |
|
Total
Assets |
100% |
110% |
110% |
124% |
197% |
|
|
|
|
|
|
|
|
Equity
and Liabilities |
|
|
|
|
|
|
Stated
Capital |
100% |
100% |
100% |
100% |
100% |
|
Reserves |
100% |
122% |
121% |
130% |
147% |
|
Retained
Earnings |
100% |
85% |
78% |
143% |
220% |
|
Total
Equity |
100% |
101% |
98% |
131% |
173% |
|
|
|
|
|
|
|
|
Non-Current
Liabilities |
|
|
|
|
|
|
Interest
Bearing Loans and Borrowings |
100%
|
106%
|
119%
|
73%
|
100%
|
|
Non-Current
Portion of Lease Liability |
-
|
-
|
-
|
-
|
-
|
|
Retirement
Benefit Liability |
100% |
103% |
115% |
133% |
154% |
|
Deferred
Tax Liabilities |
100% |
114% |
112% |
112% |
113% |
|
Total
Non-Current Liabilities |
100% |
107% |
120% |
95% |
125% |
|
Current
Liabilities |
|
|
|
|
|
|
Trade
and Other Payables |
100% |
101% |
105% |
162% |
268% |
|
Current
Portion of Long-Term Interest-Bearing Borrowings |
100%
|
139%
|
192%
|
194% |
171%
|
|
Current
Portion of Lease Liability |
- |
- |
- |
- |
- |
|
Short-Term
Interest-Bearing Borrowings |
100%
|
124%
|
92%
|
81%
|
249%
|
|
Other
Current Financial Liabilities |
- |
- |
- |
- |
- |
|
Provisions |
100% |
147% |
193% |
256% |
332% |
|
Income
Tax Liabilities |
- |
- |
- |
- |
- |
|
Total
Current Liabilities |
100% |
117% |
113% |
135% |
254% |
|
Total
Liabilities |
100% |
113% |
116% |
121% |
207% |
|
Total
Equity and Liabilities |
100% |
110% |
110% |
124% |
197% |
For
the trend analysis of Alumex PLC, year 2018 is considered as the base year.
Total non-current assets show an increasing trend when compared to the base
year. It is a favorable condition for the company. Property, plant and
equipment shows an increasing trend up to year 2019 and in year 2020, it shows
a decreasing trend. Inventories also shows an upward trend with small
fluctuations. Cash and cash equivalents show a decreasing trend for year 2019
and 2020. After year 2020, it shows an increasing trend. Total current assets
show an upward trend. Total assets depict an increasing trend over period of
2019, 2020, 2021 and 2022 when compared to the base year of 2018.
Figure 3: Total Assets
Total
Equity, total non-current liabilities and total current liabilities show a mix
of increasing and decreasing trend compared with year 2018. Total liabilities
reveal an upward trend for years of 2019, 2020, 2021 and 2022 compared to base
year of 2018.
Figure 4: Total Equity
Figure 5: Total Liabilities
6.Vertical
Analysis
Vertical
Analysis = (Analysis Amount / Base Amount) * 100
|
Financial Statement |
Base Amount |
|
Income Statement |
Revenue |
|
Balance Sheet |
Total Assets |
6.1 Vertical
Analysis of the Income Statement
Table 7: Vertical Analysis of the Income Statement
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Revenue
(Base) |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
|
Cost of
Sales |
80.68% |
81.30% |
79.99% |
73.72% |
77.71% |
|
Gross
Profit |
19.32% |
18.70% |
20.01% |
26.28% |
22.29% |
|
Other
Income |
5.52% |
2.82% |
0.56% |
4.05% |
0.57% |
|
Selling
and Distribution Expenses |
4.25% |
4.65% |
5.63% |
3.33% |
2.89% |
|
Administrative
Expenses |
6.57% |
7.27% |
6.80% |
5.87% |
6.13% |
|
Operating
Profit |
14.03% |
9.60% |
8.14% |
21.13% |
13.84% |
|
Finance
Cost |
3.92% |
9.42% |
9.47% |
4.76% |
5.92% |
|
Finance
Income |
0.47% |
0.47% |
0.35% |
0.78% |
4.87% |
|
Profit
Before Tax |
10.58% |
0.65% |
-0.98% |
17.15% |
12.79% |
|
Income Tax
Expenses |
1.73% |
0.56% |
0.29% |
2.47% |
2.10% |
|
Profit
for the Year |
8.85% |
1.22% |
-1.27% |
14.68% |
10.69% |
|
|
|
|
|
|
|
|
Total
Other Comprehensive Income for the Year, Net of Tax |
-2.91%
|
3.23%
|
0.09%
|
1.11%
|
1.20%
|
|
Actuarial
Gains/ (Losses) on Defined Benefit Plans |
-0.12%
|
0.03%
|
0.12%
|
0.02%
|
-0.09%
|
|
Revaluation
Surplus of Land & Buildings |
0.00%
|
4.46%
|
0.00%
|
0.00%
|
1.55%
|
|
Income
Tax Effect |
-2.79% |
-1.26% |
-0.03% |
0.00% |
-0.26% |
|
Adjustment
to Opening Deferred Tax on Revaluation Reserve |
0.00%
|
0.00%
|
0.00%
|
1.09%
|
0.00%
|
|
Total
Comprehensive Income for the Year, Net of Tax |
5.94%
|
4.45%
|
-1.18%
|
15.79%
|
11.89%
|
Cost
of sales are more than 80% of total revenue for year 2018 and 2019. It shows
the inefficient control of cost of sales over the five years. Therefore, gross
profit is less than 20% of total revenue over first two years. After year 2019,
cost of sales is lower than 80% of total assets and therefore, gross profit of
Alumex PLC has been increased more than 20 cents per one unit of sale.
Operating
profit shows a decreasing trend for first three years and it has increased up
to 21.13 cents per one unit of sales for year 2021. Profit before income tax is
lower than the operating profit over the five years. For year 2020, profit
before tax is -0.98% of total assets. The reason can be increasing finance cost
than the operating income of the company. Profit for the year shows a
significant variation for first two years and the highest profit for the year
has been recorded as 14.68 cents per one unit of sale in the year of 2021. In
year 2020, profit for the year is -1.27% of total revenue which implies an
unfavorable situation for Alumex PLC. The reason may be inability of the
company to coverup their costs through their revenue. But for year 2018, 2021
and 2022, there is a favorable condition in the net profit when compared to the
total revenue of the Alumex PLC.
Due
to the changes in other comprehensive income, total comprehensive income for
the year has been changed with huge percentages.
Figure 6: Vertical Analysis for Income
Statement (2022)
6.2 Vertical
Analysis of the Statement of Financial Position
Table 8: Vertical Analysis of the Statement of Financial Position
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Assets |
|
|
|
|
|
|
Non-Current
Assets |
|
|
|
|
|
|
Property,
Plant and Equipment |
54.14% |
57.06% |
55.29% |
50.19% |
37.08% |
|
Intangible
Assets |
0.81% |
0.88% |
1.14% |
1.44% |
0.79% |
|
Right-of-Use
Assets |
0.00% |
0.00% |
0.73% |
2.81% |
2.43% |
|
Investments
in Subsidiaries |
0.53% |
0.48% |
0.48% |
0.43% |
0.27% |
|
Total
Non-Current Assets |
55.48% |
58.42% |
57.64% |
54.86% |
40.56% |
|
Current
Assets |
|
|
|
|
|
|
Inventories |
25.30% |
25.50% |
26.72% |
23.68% |
28.90% |
|
Trade and
Other Receivables |
14.33% |
13.44% |
12.28% |
12.44% |
11.99% |
|
Prepaid
Expenses |
1.02% |
1.05% |
1.43% |
2.36% |
11.04% |
|
Income
Tax Receivables |
0.24% |
0.63% |
0.81% |
0.00% |
0.00% |
|
Other
Current Financial Assets |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Cash
and Cash Equivalents |
3.63% |
0.96% |
1.12% |
6.65% |
7.50% |
|
Total
Current Assets |
44.52% |
41.58% |
42.36% |
45.14% |
59.44% |
|
Total
Assets (Base) |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
|
|
|
|
|
|
|
|
Equity
and Liabilities |
|
|
|
|
|
|
Stated
Capital |
4.97% |
4.54% |
4.50% |
4.02% |
2.53% |
|
Reserves |
11.22% |
12.47% |
12.29% |
11.76% |
8.36% |
|
Retained
Earnings |
13.81% |
10.71% |
9.79% |
15.96% |
15.42% |
|
Total
Equity |
30.00% |
27.72% |
26.58% |
31.74% |
26.31% |
|
|
|
|
|
|
|
|
Non-Current
Liabilities |
|
|
|
|
|
|
Interest
Bearing Loans and Borrowings |
19.87% |
19.17% |
21.48% |
11.67% |
10.05% |
|
Non-Current
Portion of Lease Liability |
0.00% |
0.00% |
0.52% |
2.65% |
2.55% |
|
Retirement
Benefit Liability |
1.69% |
1.59% |
1.76% |
1.82% |
1.33% |
|
Deferred
Tax Liabilities |
3.79% |
3.96% |
3.84% |
3.42% |
2.18% |
|
Total
Non-Current Liabilities |
25.35% |
24.71% |
27.60% |
19.56% |
16.10% |
|
Current
Liabilities |
|
|
|
|
|
|
Trade and
Other Payables |
19.30% |
17.82% |
18.30% |
25.31% |
26.27% |
|
Current
Portion of Long-Term Interest-Bearing Borrowings |
6.66%
|
8.43%
|
11.55% |
10.44%
|
5.80%
|
|
Current
Portion of Lease Liability |
0.00% |
0.00% |
0.38% |
0.26% |
0.15% |
|
Short-Term
Interest-Bearing Borrowings |
18.60%
|
20.97%
|
15.43%
|
12.12%
|
23.52%
|
|
Other
Current Financial Liabilities |
0.00% |
0.23% |
0.01% |
0.00% |
0.00% |
|
Provisions |
0.09% |
0.12% |
0.16% |
0.19% |
0.15% |
|
Income
Tax Liabilities |
0.00% |
0.00% |
0.00% |
0.37% |
1.70% |
|
Total
Current Liabilities |
44.65% |
47.57% |
45.82% |
48.69% |
57.59% |
|
Total
Liabilities |
70.00% |
72.28% |
73.42% |
68.26% |
73.69% |
|
Total
Equity and Liabilities |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
Property,
plant and equipment are more than 50% of total assets over first four years. Due
to Alumex PLC is a manufacturing company, this is a good indication for the
company. But this has been reduced to 37.08 cents per one unit of total assets
invested by the Alumex PLC in the year of 2022. Total non-current assets also
show a higher percentage of total assets as more than 50% except year 2022. It
means the highest portion of the total assets has acquired by total non-current
assets. Inventories of the company are more than 20% of the total assets. It
revealed that, Alumex PLC is in a good position since they have enough
inventory for manufacturing activities. Trade and other receivables show a
considerable percentage of total assets and it shows small fluctuations over
the five years. Prepaid expenses are a small percentage of total assets and it
has increased slightly for year 2022. Cash and cash equivalents are less than
10% of the total assets over the five years and it shows that, the liquidity of
the company is less. Tiny fluctuations can be seen in the total current assets
for the five years and it is more than 40% of total assets. Total equity is
less than 50% of total assets over five years. Therefore, total equity of Alumex PLC per one
unit of total assets invested by the company shows an unfavorable condition
over five years.
Total
non-current liabilities have fluctuated slightly for over five years. In year
2018 the percentage of total non-current liabilities can be presented as 25.35%
of total assets and the reason was increasing the value of interest-bearing
loans and borrowings. On the other hand, total current liabilities show an
increasing trend when compared to the total assets of the company and total current
liabilities are more than 40% of total assets over the five years. Total
liabilities are more than 60% of total assets throughout five years and there
is an increasing trend of total liabilities and it is unfavorable for the
company.
Figure 7: Vertical Analysis for
SOFP (2022)
7. Ratio Analysis
(Note:
All values are in Thousand Rupees)
Working
Capital
Table 9: Working Capital
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Working Capital |
-7,072 |
-374,912 |
-218,029 |
-250,993 |
206,991 |
Working
Capital refers to the difference between a company’s current assets and its
current liabilities. It is a measure of a company’s operational efficiency and
short-term financial health. Working
capital used in day-to-day trading operations of a business. In Alumex PLC, the
amount of working capital for year 2018, 2019, 2020 and 2021 takes a negative
value. It shows that company has a larger amount of current liabilities than
current assets. It implies that, company’s efficiency level is very low for these
four years. The reason is increasing the trade and other payables value than
the trade and other receivables value in a huge amount over these four years. But
in year 2022, the working capital amount takes a positive value and company’s
short-term financial health is good in year 2022.
7.1 Liquidity
and Efficiency Ratios
7.1.1 Current Ratio
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Current Assets |
2,540,955 |
2,600,262 |
2,670,944 |
3,184,528 |
6,678,499 |
|
Current Liabilities |
2,548,027 |
2,975,174 |
2,888,973 |
3,435,521 |
6,471,508 |
|
Current Ratio |
1.00:1 |
0.87:1 |
0.92:1 |
0.93:1 |
1.03:1 |
The
current ratio is an indication of the liquidity in a firm and it measures the
firm has enough resources to meet their short-term obligations. Current ratio
compares the firm’s current assets to its current liabilities. High current
ratio indicates the high ability to pay for the creditors of the company. In
Alumex PLC, current ratio is 1:1 in year 2018 and it implies that, current
assets are just enough to pay down the short-term obligations. Current ratio has
decreased form year 2018 to year 2019 and for year 2019, 2020 and 2021 current
ratio is lower than 1. It means company does not have enough to pay for its
short-term obligations. The reason is increasing current liabilities than the
current assets over year 2019, 2020 and 2021. It is not a good indication for
the company. But in year 2022, current ratio value is higher than 1 and it
indicates company has enough current assets to pay off its current liabilities.
It shows a desirable and favorable situation for the company. Since all current
ratios have not reached to the optimum level of 2:1 Alumex PLC is not in a good
position throughout the five years. The behavior of the current ratio over five
years can be illustrated as follows;
Figure 8: Current Ratio
7.1.2 Acid-Test Ratio
Table 10: Acid-Test Ratio
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Quick Assets |
1,038,986 |
939,808 |
896,014 |
1,347,125 |
2,190,530 |
|
Current Liabilities |
2,548,027 |
2,975,174 |
2,888,973 |
3,435,521 |
6,471,508 |
|
Acid-Test Ratio |
0.41:1 |
0.32:1 |
0.31:1 |
0.39:1 |
0.34:1 |
Acid-Test
Ratio measures how sufficient a company’s short-term assets are to cover its
current liabilities. Acid-Test Ratio considers about all current assets except
inventories and prepaid expenses which are having low liquidity level. In
Alumex PLC highest Acid-Test ratio has recorded in year 2018 and it has
gradually declined in years of 2019 and 2020. Year 2020 shows the lowest
Acid-Test Ratio over five years. In year 2021 Alumex PLC have 0.39 quick assets
to cover their current liabilities and in year 2022 it has reduced to 0.34.
Company’s quick assets are not enough to cover its current liabilities in each
year. Due to that reason Acid-Test Ratio is lower than zero in every year. Therefore,
company is not in a good position over the five years.
Figure 9: Acid-Test Ratio
7.1.3
Accounts Receivables Turnover
Table 11: Accounts Receivables Turnover
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Revenue |
3,866,900 |
4,516,788 |
4,351,891 |
5,562,394 |
9,042,944 |
|
Average Trade
Receivables |
766,759
|
829,354
|
807,388
|
825,974
|
1,112,606
|
|
Accounts
Receivables Turnover |
5.04
times
|
5.45
times
|
5.39
times
|
6.73
times
|
8.13 times |
Accounts
Receivables Turnover describes how efficiently it collects on debts owed
towards credit it extended or how many times a company converts its receivables
into cash each year. If there is a higher accounts receivables turnover, the
efficiency is high. The lowest Accounts Receivables Turnover has recorded in
year 2018 as 5.04 times and it has increased in year 2019. After small
fluctuations, the highest Accounts Receivables Turnover has recorded in year 2022
as 8.13 times. It means in year 2022, Alumex PLC has the highest opportunity to
collect debts when compared with other years and company’s collection of accounts
receivables is efficient in year 2022. It indicates healthy performance of the
company.
Figure 10: Accounts Receivables
Turnover
7.1.4 Merchandise Turnover
Table 12: Merchandise Turnover
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Cost of Goods Sold |
3,119,674 |
3,672,354 |
3,480,974 |
4,100,334 |
7,027,596 |
|
Average Inventory |
1,175,899
|
1,519,380
|
1,639,807
|
1,677,717
|
2,459,147
|
|
Merchandise Turnover |
2.65
times |
2.42
times |
2.12
times |
2.44
times |
2.86
times |
The Merchandise Turnover shows how many times
a company has sold and replaced inventory during a given period. Company’s
ability to selling goods is high when Merchandise Turnover is high. Alumex PLC
shows the highest Merchandise Turnover in year 2022. It implies that, company
has a higher ability to sell their goods in 2022 than another four years. In
year 2018, Merchandise Turnover is 2.65 times and it indicates that, Alumex PLC
can sell or replace the inventory 2.65 times per year. After 2018, Merchandise
Turnover started to decrease up to year 2020 and again it started to increase.
It is a good signal for the company.
Figure 11: Merchandise Turnover
7.1.5 Days’ Sales Uncollected
Table 13: Days' Sales Uncollected
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Accounts
Receivables |
817,983 |
840,724 |
774,052 |
877,895 |
1,347,316 |
|
Net Sales |
3,866,900 |
4,516,788 |
4,351,891 |
5,562,394 |
9,042,944 |
|
Day’s Sales
Uncollected |
77.21
days |
67.94
days |
64.92
days |
57.61
days |
54.38
days |
Days’ sales uncollected is the ratio that can
be used to estimate the number of days before receivables will be collected. If
number of days are high, it is a bad position for the company it indicates an
insufficient collection process within the company. The highest Days’ Sales
Uncollected ratio can be seen in year 2018 as 77.21 days and it has decreased
gradually. The lowest ratio has recorded in year 2022 and the decreasing trend
is a favorable indication for the company.
Figure 12: Days' Sales Uncollected
7.1.6 Days’ Sales in
Inventory
Table 14: Days' Sales in Inventory
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Ending Inventory |
1,443,879 |
1,594,881 |
1,684,732 |
1,670,701 |
3,247,592 |
|
Cost of Goods Sold |
3,119,674 |
3,672,354 |
3,480,974 |
4,100,334 |
7,027,596 |
|
Days’ Sales in Inventory |
168.93 days
|
158.52 Days |
176.65 Days |
148.72 days |
168.67 Days |
Days’ Sales in Inventory measures the average
number of days it takes for a firm to sell off the inventory. It means Day’s
Sales in Inventory indicates the liquidity of inventory. According to Alumex
PLC, year 2020 shows the highest Days’ Sales in Inventory ratio. The value has
fluctuated over five years and company shows the average performance throughout
the five years. Year 2021 shows the lowest days and it is a good position for
the company.
Figure 13: Days Sales in Inventory
7.1.7 Total Asset
Turnover
Table 15: Total Asset Turnover
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Revenue |
3,866,900 |
4,516,788 |
4,351,891 |
5,562,394 |
9,042,944 |
|
Average Total
Assets |
4,694,195
|
5,980,811
|
6,279,483
|
6,679,958
|
9,145,845
|
|
Total Assets Turnover |
0.82
times |
0.76
times |
0.69 times |
0.83 times |
0.99 times |
Total Assets Turnover measures the efficiency
of company’s assets in generating sales or revenue. It implies that, efficiency
of assets in producing sales is measured through the Total Assets Turnover
Ratio and if it is higher than 1, it indicates higher efficiency level within
the company. In year 2022, there is the highest Total Assets Turnover and it
depicts a higher efficiency rate in the company than the other four years. The
lowest ratio has recorded in year 2020 as 0.69 times. The ratios are lower than
1 over the five years and it means company’s efficiency level is low. The
reason is increasing the average total assets value than the total revenue over
five years.
Figure 14: Total Assets Turnover
7.2 Solvency Ratios
7.2.1 Debt Ratio
Table 16: Debt Ratio
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Total Liabilities |
3,995,001 |
4,520,819 |
4,629,055 |
4,815,661 |
8,280,516 |
|
Total Assets |
5,707,266 |
6,254,356 |
6,304,610 |
7,055,306 |
11,236,383 |
|
Debt Ratio |
70.00% |
72.28% |
73.42% |
68.26% |
73.69% |
Debt ratio indicates the percentage of a
company’s assets that are provided via debt and it measures what portion of
company’s assets are contributed by creditors. Higher the debt ratio implies
more levered company and it shows the company has more financial risk. Debt
ratio has fluctuated over the five years and the highest debt ratio has
recorded in year 2022 and lowest one is in year 2021. However, there are high
debt ratios over the five years and it emphasizes its assets consist of higher
contribution from creditors. Therefore, Alumex PLC faces for financial risk and
it is not a good situation for the company.
Figure 15: Debt Ratio
7.2.2 Equity Ratio
Table 17: Equity Ratio
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Total Shareholder’s
Equity |
1,712,265 |
1,733,537 |
1,675,555 |
2,239,645 |
2,955,867 |
|
Total Assets |
5,707,266 |
6,254,356 |
6,304,610 |
7,055,306 |
11,236,383 |
|
Equity Ratio |
30.00% |
27.72% |
26.58% |
31.74% |
26.31% |
Equity ratio is the financial tool measures
the leverage taken by the firm and it measures the portion of a company’s
assets are contributed by the owners. The highest equity ratio is in year 2021
as 31.74%. The lowest contribution has recorded in year 2022. The contribution
of the owners is very low over the five years due to investors’ unwillingness
to invest within the company. It implies that, assets consist of higher
contribution from creditors. It is not a good sign for the company.
Figure 16: Equity Ratio
7.2.3 Times Interest Earned
Table 18: Times Interest Earned
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Profit Before
Income Tax |
409,220 |
29,527 |
-42,607 |
953,878 |
1,156,418 |
|
Interest Expense
(Finance Cost) |
151,632
|
425,414
|
412,137
|
264,901
|
535,723
|
|
Profit before
Income Tax and Interest Expense |
560,852
|
454,941
|
369,530
|
1,218,779 |
1,692,141
|
|
Times Interest Earned |
3.70
times |
1.07
times |
0.90
times |
4.60
times |
3.16
times |
Times Interest Earned Ratio is the measure of
a company’s ability to honor its debt payments. This can be known as the common
measure of the ability of a firm’s operations to provide protection to the
long-term creditors. The highest Times Interest Earned Ratio has recorded in
year 2021 which implies that, Alumex PLC has a higher possibility to pay its debt
obligations. There are some fluctuations of Times Interest Earned Ratio over
the five years and the company is in a favorable situation in year 2018, 2019,
2021 and 2022 due to values are greater than 1. It means firm’s operations
provide a protection for long-term creditors. But in year 2020, company’s Times
Interest Earned value is lower than 1 and it implies the lower possibility to
pay its debt obligations in year 2020. Increasing interest expenses than the
profit before income tax and interest expenses is the reason for that.
Figure 17: Times Interest Earned
7.3 Profitability
Ratios
7.3.1 Profit Margin
Table 19: Profit Margin
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Net Income |
342,281 |
54,948 |
-55,197 |
816,612 |
966,748 |
|
Net Sales |
3,866,900 |
4,516,788 |
4,351,891 |
5,562,394 |
9,042,944 |
|
Profit Margin |
8.85% |
1.22% |
-1.27% |
14.68% |
10.69% |
Profit Margin Ratio describes a company’s
ability to earn a net income from sales. The highest net profit margin of Alumex
PLC is in year 2021 as 14.68% and it indicates a higher profitability for the
company in year 2021 than the other years. Profit margin Ratio is 8.85% in year
2018 and it has decreased to 1.22% in year 2019 by a considerable amount. Due
to the net loss in year 2020, profit margin for year 2020 takes a negative
value as -1.27%. It is an unfavorable condition for the company. But, in year
2021, the profit margin has increased by a large amount compared with year 2019
and it is a good indication to the company. Again, it has decreased to 10.69%
in year 2022. It emphasizes that, profit margin has not increased yearly and
therefore, it is an unfavorable sign for the company.
Figure 18: Profit Margin
7.3.2 Gross Margin
Table 20: Gross Margin
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Gross Profit |
747,226 |
844,434 |
870,917 |
1,462,060 |
2,015,348 |
|
Net Sales |
3,866,900 |
4,516,788 |
4,351,891 |
5,562,394 |
9,042,944 |
|
Gross Profit Margin |
19.32% |
18.70% |
20.01% |
26.28% |
22.29% |
Gross Profit Margin measures the amount
remaining from 1 Rupee in sales that is left to cover operating expenses and a
profit after considering cost of sales. Alumex PLC has recorded its highest
Gross Profit Margin Ratio in year 2021 and it indicates the good survival of
the company. Lowest ratio in year 2019. After year 2019, the ratio has
increased up to 20.01% by a small amount. There is an increasing trend of Gross
Margin Ratios from year 2019 to year 2021. Therefore, Alumex PLC is in
profitable condition. But in year 2022, Gross Margin Ratio has decreased by a
little amount.
Figure 19: Gross Margin
7.3.3 Return on Total Assets
Table 21: Return on Total Assets
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Net Income |
342,281 |
54,948 |
-55,197 |
816,612 |
966,748 |
|
Average Total
Assets |
4,694,195
|
5,980,811
|
6,279,483
|
6,679,958
|
9,145,845
|
|
Return on Total Assets |
7.29% |
0.92% |
-0.88% |
12.22% |
10.57% |
Return on Total Assets Ratio indicates the
percentage of how profitable a company’s assets are in generating revenue. This
ratio considered the best overall measure of a company’s profitability. Return
on Total Assets Ratio has decreased from year 2018 to year 2019 by a
considerable amount. The highest Ratio has recorded in year 2021 as 12.22%,
which implies higher efficiency than the other years and it has decreased up to
10.57% in year 2022. Return on Total Assets Ratio takes a negative value in
year 2020 due to the net loss of that year. But in year 2021, ratio has reached
to the highest level showing favorable profitability condition within the
company
Figure 20: Return on Total Assets
7.3.4 Return on Common Shareholders’ Equity
Table 22: Return on Common Shareholders’' Equity
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Net Income |
342,281 |
54,948 |
-55,197 |
816,612 |
966,748 |
|
Average
Shareholders’ Equity |
1,754,570
|
1,722,901
|
1,704,546
|
1,957,600
|
2,597,756
|
|
Return on Common Shareholders’ Equity |
19.51%
|
3.19%
|
-3.24%
|
41.71%
|
37.21%
|
*No preference shares issued
Return on Common Shareholders’ Equity
measures how much money common shareholders receive from a company compared
with how much they invested originally. The highest Return on Common
Shareholders’ Equity has recorded in year 2021. It indicates the company has
employed the owner’s investments to earn income in an efficient manner. The
ratio has declined from year 2018 to year 2019. In year 2020, the ratio is -3.24%
due to net loss of year 2020 and it is an unfavorable condition for the company.
Due to the way of employing owner’s investment is inefficient Return on Common
Shareholders’ Equity Ratio has declined from year 2021 to year 2022.
Figure 21: Return on Common
Shareholders' Equity
7.3.5 Book Value per Common Share
Table 23: Book Value per Common Share
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Total Equity |
1,712,265 |
1,733,537 |
1,675,555 |
2,239,645 |
2,955,867 |
|
No. of Common
Shares Outstanding |
299,303
|
299,303 |
299,303
|
598,606
|
598,606
|
|
Book Value per Common Share |
5.72:1
|
5.79:1 |
5.60:1 |
3.74:1
|
4.94:1
|
Book Value per Common Shares Ratio measures
the liquidation at reported amounts. Year 2019 shows the highest Book Value per
Common Shares Ratio and it indicates the higher liquidation at reported amount.
Book Value per Common Share Ratio has decreased from year 2019 to year 2021 and
it depicts the law liquidation and it is a bad indication for the company. But
in year 2022, ratio has increased to 4.94 and it is a good signal regarding
liquidation.
Figure 22: Book Value per Common
Share
7.3.6 Basic Earnings per Share
Table 24: Basic Earnings per Share
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Net Income |
342,281 |
54,948 |
-55,197 |
816,612 |
966,748 |
|
Weighted-Average
Common Shares Outstanding |
299,303
|
299,303 |
299,303
|
598,606
|
598,606
|
|
Basic Earnings per Share |
Rs. 1.14
per share
|
Rs. 0.18
per share |
Rs. -0.18
per share
|
Rs. 1.36
per share |
Rs. 1.61
per share |
Basic Earnings per Share Ratio measures how
much income was earned for each share of common stock outstanding. Basic
Earnings per Share Ratio has fluctuated throughout the five years. The ratio has decreased from year 2018 to
2019. In year 2020 Basic Earnings per Share is a negative value, because of
negative net income of that year. Therefore, year 2020 is not a suitable year
to buy shares. In year 2021, ratio has increased to Rs. 1.36 per share
considerably. Alumex PLC shows the highest ratio in year 2022 and it is a
favorable situation for the company and number of shares buying can be
increased.
Figure 23: Basic Earnings per Share
7.4 Market
Ratios
7.4.1 Price-Earnings Ratio
Table 25: Price-Earnings Ratio
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Market Price per
Share |
16.90 |
10.00 |
7.20 |
10.80 |
7.30 |
|
Earnings per Share |
1.14 |
0.18 |
-0.18 |
1.36 |
1.61 |
|
Price-Earnings Ratio |
14.82
times |
55.56
times |
-40.00
times |
7.94
times |
4.53
times |
Price-Earnings Ratio uses as a measure of
general guideline in gauging stock values. Price-Earnings Ratio is 14.82 times
in year 2018 and it has increased up to 55.56 times in year 2019. It shows the
highest Price-Earnings Ratio and it implies Alumex PLC has higher opportunity
for a growth in that year than the other years. Year 2020 shows a negative
Price-Earnings Ratio due to negative Earnings per share. The direct reason for
negative Price-Earnings ratio is net loss for that year. In year 2021, the
ratio has increased considerably compared with year 2020. It has decreased up
to 4.53 times in year 2022 and therefore, the opportunity to growth the company
has reduced.
Figure 24: Price-Earnings Ratio
7.4.2 Dividend Yield
Table 26: Dividend Yield
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Annual Dividends
per Share |
1.05 |
0.60 |
0.00 |
0.53 |
0.60 |
|
Market Price per
Share |
16.90 |
10.00 |
7.20 |
10.80 |
7.30 |
|
Dividend Yield |
6.21% |
6.00% |
0.00% |
4.91% |
8.22% |
Dividend
Yield Ratio measures the return on investment in stocks and shares. This ratio
indicates the return, in terms of cash dividends, on the current market price
of the stock. The highest Dividend Yield Ratio has recorded in year 2022 and it
shows a favorable condition for the company. Dividend Yield for year 2020 is
0.00% due to zero value of annual dividend per share in year 2020. Earning net
loss in year 2020, can be caused for that.
For year 2018, 2019 and 2021 Dividend Yield Ratio has fluctuated.
Figure 25: Divided Yield
8. Altman Z-Score
Analysis
X1
= Working Capital / Total Assets
X2
= Retained Earnings / Total Assets
X3
= Earnings Before Interest and Taxes / Total Assets
X4
= Market Value of Equity / Book Value of Total Liabilities
X5
= Sales / Total Assets
(Note:
All values are in Thousand Rupees)
Table 27: Altman Z-Score Analysis
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Working
Capital |
-7,072 |
-250,993 |
-218,029 |
-250,993 |
206,991 |
|
Total
Assets |
5,707,266 |
6,254,356 |
6,304,610 |
7,055,306 |
11,236,383 |
|
X1 |
-0.0012 |
-0.0401 |
-0.0346 |
-0.0356 |
0.0184 |
|
Retained
Earnings |
788,262 |
669,910 |
617,213 |
1,125,965 |
1,732,361 |
|
Total
Assets |
5,707,266 |
6,254,356 |
6,304,610 |
7,055,306 |
11,236,383 |
|
X2 |
0.1381 |
0.1071 |
0.0979 |
0.1596 |
0.1542 |
|
Earnings
Before Interest and Taxes |
560,852
|
454,941
|
369,530
|
1,218,779 |
1,692,141
|
|
Total
Assets |
5,707,266 |
6,254,356 |
6,304,610 |
7,055,306 |
11,236,383 |
|
X3 |
0.0983 |
0.0727 |
0.0586 |
0.1727 |
0.1506 |
|
Market
Value of Equity |
5,058,221
|
2,993,030
|
2,154,982
|
6,464,945
|
4,369,824
|
|
Book
Value of Total Liabilities |
3,995,001 |
4,520,819 |
4,629,055 |
4,815,661 |
8,280,516 |
|
X4 |
1.2661 |
0.6621 |
0.4655 |
1.3425 |
0.5277 |
|
Sales |
3,866,900 |
4,516,788 |
4,351,891 |
5,562,394 |
9,042,944 |
|
Total
Assets |
5,707,266 |
6,254,356 |
6,304,610 |
7,055,306 |
11,236,383 |
|
X5 |
0.6775 |
0.7222 |
0.6903 |
0.7884 |
0.8048 |
|
Z-Score |
1.9534 |
1.4613 |
1.2586 |
2.3447 |
1.8563 |
Zones
of Discrimination
Z
> 2.99 – “Safe” Zone
1.8
< Z < 2.99 – “Grey” Zone
Z
< 1.80 – “Distress” Zone
According
to the results derived through Z-Score of Alumex PLC, the company is in grey
zone for year 2018 which implies a moderate chance of filing for bankruptcy.
For year 2019 and year 2020, Z-Score value is less than 1.80 which indicates
the company is in distress area. It implies that, the company is in financial
distress and with a high probability of going bankrupt. Drop in sales due to Easter
Sunday terrorist attack and the COVID-19 pandemic and closing down the operations
of the company during the lockdown and the curfew period can be the reason for
that. But the company has moved to the grey session for year 2021 and year 2022
which shows a favorable condition for the company compares to previous years.
But the possibility of becoming bankrupt has not reduced.
9. Conclusion and Recommendations
The
fundamental goal of financial statement analysis is to give the necessary data
needed by financial statement users for decision making, evaluate the company's
present and past performance, and forecast the success or failure of the firm. The
financial statement analysis of Alumex PLC has done through Horizontal
analysis, Vertical analysis, Trend analysis, Ratio analysis and Altman Z-Score
analysis. Alumex PLC shows the average performance regarding the growth and
sales over the five years.
According
to the horizontal analysis, revenue has decreased significantly from year 2019
to year 2020 due to the considerable drop in sales amount which effected
through Eastern Attack and COVID-19 situation. Reducing revenue has affected to
reduce profit after tax badly and indicates an unfavorable condition for the
company. Total assets of Alumex PLC have increased year by year and it is a
good indication for a manufacturing company. Proper assets management process
of the company has caused to increase the assets value. Total equity has
fluctuated from one year to another year implying that, impossibility of
investing during the bad economic conditions. Since the higher amount of loans
and borrowings company’s total liabilities have increased year on year
indicating bad signals for Alumex PLC.
As
per the trend analysis, total revenue has dropped suddenly in year 2020 than
the other years due to the unfavorable conditions of the country. Not only
that, profit for the year has reduced to in year 2020 when compared to the base
year of 2018. But in year 2022, profit for the year has increased by 282% when
compared to the base year indicating good health for Alumex PLC. Total
non-current assets and total current assets have increased gradually. Total
assets also show an upward trend which showing good signal for manufacturing
company and it shows the growth of the company is high over five years. Total
liabilities also show an increasing trend which implies unfavorable conditions
for the company.
The
results of vertical analysis shows, cost of sales takes a higher portion as
more than 70% of total revenue over the five years which shows the high selling
cost and therefore, gross profit shows a lesser percentage of total revenue.
Profit for the year is -1.27% compared to the total revenue in year 2020 which
depicts an unfavorable condition for Alumex PLC. Total non-current assets takes
more than 50% of total assets except year 2022. It is a good indicator. But
total liabilities also take a large portion of total assets indicating higher
number of payables and interest bearings over the five years.
Ratio
analysis has revealed the company’s liquidity and profitability positions in
efficient manner. Current liabilities are higher than the current assets over
first four years of Alumex PLC and therefore, its’ working capital amount for
year 2018, 2019, 2020 and 2021 takes a negative value. Therefore, company’s
current ratio is lower than 1 for year 2019, 2020 and 2021 which implies
company does not have enough current assets to pay for its short-term
obligations. The reason is increasing current liabilities than the increasing current
assets over year these three years. Year 2018 and 2022 also not shows the
efficient current ratio. It indicates company's liquidity position is not at a healthy state due to unstable
liquidity level of Alumex PLC. Total assets turnover ratio is lower than 1 over the five
years and it means low efficiency level of the company. The production cost of
Alumex PLC has increased due to the inefficient performance of the company.
Then, it can be concluded that, the top management of Alumex PLC should create
strategies to increase the liquidity level and efficiency level. Then, it can
be suggested that, to increase the amount of current assets and non-current
assets of the company.
Solvency ratios indicates more debt ratio
than the equity ratio and it depicts due to investors' reluctance to make
internal investments in the company, the owners' contribution has been quite
minimal during the five years. Since the assets have a bigger creditor
contribution financial risk of Alumex PLC has risen. Therefore, to avoid this
condition, top management of Alumex PLC should increase the internal
investments.
Alumex PLC shows lower level of profit margin
ratios over the five years indicating lower profit levels of the company. In
year 2020, profit margin takes a negative value due to the net loss of that
year. Reducing sales value arisen as a result of lockdown situation of the
country can be a reason for that. However, overall profit margins are low
throughout five years which implies unstable performance of the company.
Further, basic earnings per share and return on total assets show the
inefficient performance of the company.
Price-earnings ratio and dividend yield not
in satisfied level over five years. It means there are so many fluctuations in
market ratios of Alumex PLC. Therefore, investors fear to invest in the company
due to unclear picture about the company’s future growth.
According to Altman Z-Score analysis, company
is not in the safe level and there is a high possibility for the bankruptcy.
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