ABSTRACT
The major goals of this
study is to analyze the financial statements of selected company over 5 years
to identify the patterns and trends associated with income statement and
statement of financial position. The financial statement will be analyzed vertically,
horizontally as part of this study, which is to provide financial managers with
data they may use to guide business decisions. The financial statement uses the
necessary tools, processes, and analytical approaches for company analysis. It
serves as both a diagnostic tool for assessing funding, investment, and
operational activities as well as a tool for management and other corporate
decision-making. Financial reports are used by managers to assess the company's
state of affairs and to notify shareholders about the viability of their
investment decisions. Analysis of the company's financial statements is crucial
for prospective investors since they want to understand the company's current
financial situation before deciding whether or not to invest.
1.
INTRODUCTION
Annual comparison and
evaluation of a company's financial statements is done to determine performance
and growth of a company. The company's financial health should be fully
understood by the decision-makers. The financial statements provide as an
overview of key financial information related to all business activities
throughout the year. The income statement, the balance sheet, the cash flow
statement, and the statement of equity are the four primary statements that
public limited businesses include in their annual reports.
To reveal the true
significance of the facts recorded in the accounts, financial statement
analysis is done. External stakeholders and internal stakeholders are the two
principal parties with an interest in the analysis. The analysis is used by
external stakeholders to comprehend the total business worth and financial
health, including stockholders, potential investors, customers, creditors, and
the government. Internal parties, on the other hand, such management, internal
auditors, and staff, use it as a monitoring tool to manage funds.
Analysis of financial
statements can be assessed for past, present, or potential future performance.
It can compare data from the same kind of company each year, the significant
relationship between two different types of data in the same year, or data from
various companies (competitors). The most popular methods for analyzing
financial statements are ratio analysis, vertical analysis, and horizontal
analysis and trend analysis. These four methods will be used in the subsequent
report to analyze data and go through the financial performance of Hemas
Holdings PLC.
1.1. BACKGROUND OF THE COMPANY - HEMAS
HOLDINGS PLC
Hemas Holdings PLC
engages in five diversified businesses in Asia. Established in 1948, Hemas started with a
simple intent: to help families live healthfully. This core belief has informed
their growth for over 70 years. Today, as a leading public quoted company with
over 4,500 employees, they bring healthful living to life through a portfolio
of world-class products and services in the Consumer, Healthcare and Mobility
sectors.
Woven into the
socioeconomic fabric of Sri Lanka, Hemas has also expanded regionally with
operations in Bangladesh and West Bengal. The
original business, Hemas (Drugs) Limited, was set up as a wholesale and retail
Chemist & Druggist in Dam Street, the heart of the wholesale trading center
of Colombo. By 1951, this was expanded to include "Science House"
which was dealing with laboratory supplies and equipment.
Seeking to
maintain the entrepreneurial thrust of their founder, they moved into various
diversifications activities, starting with manufacturing of toiletries in 1962
in collaboration with a French multinational. In the Seventies they moved into
the blossoming travel and tourism sector and over the years established themselves
in a leading position. In 1993 they restructured and renamed the original
business as 'Hemas Holdings (pte) Limited' to be their driving force into the
21st century and in 2003 they became a public quoted company listed in the
Colombo Stock Exchange.
As a leader in the home and personal care sector, Hemas brands encompass
a range of products for babies and adults in hair care, skin care, toiletries,
fragrances and oral care. Hemas brands also includes one of Sri Lanka’s most
loved brand Atlas, which is a market leader in school stationery and notebooks,
pens, pencils and colour products. The business produces and markets a wide
range of products across multiple categories. Hemas takes pride in using local
insights to innovate and develop winning consumer-centric propositions, which
have helped establish their brands as trusted household names with leading
positions in the market. The success of the business continues to be driven by
its deep understanding of the Sri Lankan consumer, coupled with an unwavering
commitment to offer superior quality and value via its products and services.
2.
FINANCIAL STATEMENT ANALYSIS
Financial statement analysis
is the process of examining a company's financial statements in order to assess
its performance and state financially. It entails looking over and evaluating
financial documents including income statements, balance sheets, and cash flow
statements in order to learn more about the profitability and general financial
health of a firm.
The goals of financial
statement analysis are to comprehend a company's financial management and to
pinpoint areas that need improvement. Internal stakeholders use financial
statement analysis as a monitoring tool for managing finances, while external
stakeholders use it to comprehend the entire performance and financial worth of
an organization.
Financial statement
analysis gives important information about the financial health of a company,
allowing evaluating risks, spot possibilities, and choosing investments or
commercial endeavors more wisely. Analysis of financial statements serves as a
measure for comparing a company's performance to that of its peers and rivals. Investor
trust and confidence are increased via financial statement analysis. Investors
can evaluate a company's financial soundness and prospective profits by using
financial statement analysis data.
There are four common
place approaches to financial statement analysis:
v Horizontal
analysis
v Vertical
analysis
v Ratio
analysis
v Trend
analysis
Although financial
statement analysis is an effective method for assessing a company's financial
health, it has several drawbacks such as lack of information, use of historical
data, external factors etc.
2.1.
HORIZONTAL ANALYSIS
The result of a
horizontal analysis is often shown as a percentage growth over the same line
item in the base year and compares previous data (such as ratios and line
items). This makes it simple for financiers to see trends and growth patterns
and make estimates for the future. This kind of study also makes it simpler to
compare growth rates among sector competitors and provides insight into an
organization's operational results, including whether it is functioning
financially and efficiently.
For the Horizontal
analysis of Hemas Holdings PLC, 2018 used as the base year for calculations and
time period of 2019 to 2023 was used in the analysis. Below Tables shows the
Horizontal analysis of the Hemas Holdings PLC financial position and Income
Statement.
When it comes to the
rupee & percentage change under horizontal analysis of financial position, we
can see a significant declining trend until 2022 from 2020 in most of the
items. But in 2023, there is a significant increase in lot of items under
financial position. Effect of Covid 19 & economic crisis may cause to the
declining trend up to 2022. In terms of assets we can see that company has
invested significant amount of funds in 2022 & 2023 but they maintained a
fixed level of assets up to 2021 and no major investments in assets until 2022.
In terms of total
liabilities, the same scenario has happened. There is an increase in total
liabilities in 2022 and 2023 when comparing with the time period of 2019 to
2021. Stated capital hasn’t changed significantly until 2023 same capital was
maintained until now. When analyzing the change in investment in property plant
and equipment, there is a sudden increase in 2023 and it causes to increase the
asset value significantly. Investment property value also increased year by
year.
By looking at the overall
horizontal analysis of Hemas PLC financial position, we can conclude that there
is a overall significant increase in most of the items in 2023 when compare
with 2019-2022. It shows a growth potential of the company and they were able
to achieve a good financial position in 2023 despite of economic crisis that
has happened recently.
Table 2 Horizontal Analysis of Financial
Position –Percentage change
Source: Annual Reports and Workings
Table 3 Horizontal Analysis of Income Statement-Rupee
change
Source: Annual Reports and Workings
Above table shows the
horizontal analysis of income statement of Hemas Holdings PLC from 2019 to
2023. We can see a significant growth of Total revenue category over the years.
2023 has the highest total revenue which is more than double the total revenue of
2022. Cost of sales also increased compared to total revenue over years. 2023
year was able to achieve a gross profit which more than 3 times of 2022.
Finance cost and finance
income has fluctuated over these 5 years and can’t see a specific pattern or a
trend on these items. Administrative expenses show a negative change in 2021
but it increased from 2022 onwards significantly. Selling and distribution
expenses come to a decreasing trend up to 2021 but shows a increase from 2022
onwards.
Table 4 Horizontal Analysis of Income
Statement-Percentage change
Source: Annual
Reports and Workings
After analyzing percentage change of
income statement of Hemas Holdings PLC, it shows clearer picture than rupee
change. There is a significant decrease in most of the items of 2021when
comparing with all other years. This could be due to the effect of Covid 19 in
2021. Other income and gains category increased from 64% to 165% within a year
and it is a significant point to consider in 2021 and 2022. Gross profit has
decreased in 2020 but shows a good percentage growth from 2021 to 2023.
Profit before tax has a
negative 35% change in 2020 but was able to make its position stable after 2021
while maintaining a 72% in 2023. Overall we can see that even though there is a
decrease in most of the figures in 2021, in general Hemas PLC is performing
well in terms of Income statement.
2.2.
VERTICAL ANALYSIS
Vertical analysis, in
which each line item on a financial statement is listed as a percentage of
another item, is the proportional examination of a financial statement. As an
example, every line item under Assets is expressed as a percentage of total
assets, whereas every line item on an income statement is expressed as a
percentage of sales. This explains overall performance in terms of revenues and
costs to analysts. This makes it simpler to compare different
companies within the same sector and enables analysts to find correlations easily.
For the Vertical analysis
of Hemas Holdings PLC, data from 2019 to 2023 was analyzed and below Tables
shows the Vertical analysis of the Hemas Holdings PLC financial position and
Income Statement.
When analyzing financial
position, property plant and equipment represent nearly 30% of the total assets
in most of the years while trade and other receivables show a 25% on average
from total assets. We can see there is a slight reduction of investment in
property plant and equipments in 2023 and it shows that company is reduced
their investment in PPE in recent years. Company was able to maintain an
average percentage on Trade and other receivables in all years except 2021.
There is a slight
reduction of stated capital proportion in 2022 and 2023. It maintained on
average 12% of total liabilities and equity until 2021 but shows a reduction in
recent years. Trade and other payables and retained earnings have the highest
proportion from total equity and liabilities from all 5 years. Together these
two items represent nearly 60% of total equity and liabilities.
Hemas holdings PLC were
able to maintain current liabilities to 1% from total equity and liabilities in
all years. We can see an increase in borrowings of the company in 2023 nearly 3
times as 2022. It is a significant point to consider. This significant change
shows from the company debt ratio as well.
Table
6 Vertical Analysis
of Income Statement
Source: Annual Reports and Workings
By analyzing above table
of vertical analysis of income statement, the entire figure represent as a
proportion of total revenue. Cost of sales represent on average 70% of total
revenue in all years. Selling and distribution and administrative expenses
together represent 25% of total revenue but has a slight decrease in 2023
compared to other years. Finance cost has significantly increased in 2023 due
to the high borrowings in 2023 which also represent from debt ratio.
Income tax expense
represents on average 2% from total revenue and profit for the year varies from
year to year but most of the years it contains 5% on average of total revenue.
Gross profit represents 30% from sales in most of the years.
2.3.
TREND ANALYSIS
The long-term direction
of market sentiment can be predicted using trend analysis, which makes use of
previous data (such as price changes and transaction volume). It is predicated
on the notion that past events will repeat themselves in the future, assisting
a corporation in better anticipating and preparing for upward trends and
downward reversals within specific market segments. An investor will make money
if they follow trends rather than going against them, hence trend analysis is a
beneficial strategy.
Table
7 Trend Analysis of
Financial Position
|
|
2019 |
2020 |
2021 |
2022 |
2023 |
|
|
|||||
|
Total Non-Current
Assets |
102% |
112% |
100% |
98% |
108% |
|
Total Current Assets |
114% |
111% |
118% |
160% |
221% |
|
Total Assets |
109% |
112% |
110% |
132% |
171% |
|
Total Equity |
110% |
108% |
115% |
126% |
135% |
|
Total Non-Current
Liabilities |
90% |
142% |
86% |
89% |
144% |
|
Total Current
Liabilities |
114% |
106% |
111% |
155% |
227% |
|
Total Liabilities |
108% |
115% |
105% |
139% |
207% |
Source: Annual Reports and Workings
According to the trend
analysis of financial position, total noncurrent assets shows a decreasing
trend up to 2021 but again shows an increasing trend from 2022 onwards. Over
the years, total current assets have a significant increasing trend while
having a 221% increase in 2023 compared to 2018. Total assets also were able to
achieve a increasing trend from 2019 to 2023.
Even though total current
liabilities have a increasing trend over these 5 years, Total noncurrent
liabilities has fluctuated throughout these 5 years while showing a 86% change
in 2021 which is the minimum.
Overall, Hemas Holdings
PLC is having a increasing trend in most of the main items in financial
position compared to 2018.
Table
8 Trend Analysis of
Income Statement
Source: Annual Reports and Workings
Above table shows the
trend analysis of Income statement of Hemas Holdings PLC from 2019 to 2023. By
analyzing this we can see that total revenue has a significant increasing trend
over studied years while showing a 228% increase in most recent year of 2023.
Cost of sales also follows the same pattern over years. Other income and gains
shows an increasing trend up to 2022 but it shows a decreasing trend in 2023
which is significant.
In terms of expenses,
finance cost has the most significant increasing trend due to the high
borrowing cost in 2023. It has a 665% change compared to 2018. Selling and
distribution and administrative expenses also show a decrease trend in 2021but
again increased in 2022 & 2023.
Over the years, income
tax expense shows an increasing trend while having the highest in 2023. Profit
for the year has a significant drop in 2020 but managed to increase over the
years up to 2023.
2.4.
RATIO ANALYSIS
2.4.1.
LIQUIDITY & EFFICIENCY RATIOS
Liquidity
ratios are mainly used to assess a company's capacity to settle its short-term
debt obligations. These ratios are used by prospective creditors and lenders to
decide whether to extend credit or debt. Liquidity ratios compare various
combinations of liquid assets to the amount of current liabilities. These
ratios figure out if a business can use its liquid, or current, assets to pay
its current liabilities. There are two commonly used liquidity ratios namely,
Current ratio and Acid test ratio.
Table
9 Liquidity &
Efficiency Ratios
Source: Annual Reports and Workings
2.4.1.1. CURRENT RATIO
The current ratio can be
identified as one of the important indicators when it comes to determining a
company’s ability to pay its short-term obligation using its current assets. This
ratio reflects the overall financial health of a company. A good current ratio
is typically anywhere between 1.5 and 2, but it can sometimes depend on
the industry the company falls within.
When it comes to analysis
of current ratio in Hemas, we can see that they were able to maintain a current
ratio of nearly 1.5 times in recent years. That means they are in a good
position to settle their short-term debt obligations from their current assets.
2.4.1.2. ACID TEST
RATIO
The acid test ratio, also
known as the quick ratio, is a formula used to assess a company's capacity to
make on-time payments by comparing its short-term assets to short-term
obligations and determining if it has sufficient cash on hand to cover those
immediate commitments. The acid test ratio doesn’t include current assets that
are hard to liquidate, such as inventory, but does include short-term debt.
For most industries, this
ratio should be above 1. By analyzing above table, we can see that Hemas PLC
was able to maintain a quick ratio nearly to one in recent years except
2023.
2.4.1.3. ACCOUNTS
RECEIVABLE TURNOVER
By analyzing how long it
takes to collect the outstanding debt over the course of the accounting period,
the accounts receivable turnover ratio, also known as receivables turnover, is
used in company accounting to assess how successfully businesses are managing
the credit that they give to their customers. The ratio of
accounts receivable turnover should be higher. Businesses should maintain a
ratio of at least 1.0 to ensure that it collects the full amount of typical
accounts receivables.
Hemas PLC was able to
achieve a higher ratio in recent years and they were able to maintain the
highest accounts receivable turnover ratio in 2023.
2.4.1.4. INVRNTORY
TURNOVER
The average number of
times a business sells and replaces its inventory annually is known as
inventory turnover. Significant turnover corresponds to a low investment in
inventory, while low turnover corresponds to a significant investment.
Continual monitoring of inventory turnover is good management practice, in
order to maintain a relatively low investment in this area.
The optimal inventory
turnover ratio for the majority of industries will be between 5 and 10, meaning
the business will sell and refill inventory every one to two months. When it
comes to Hemas PLC, except 2023, they were not able to maintain a good ratio
for Inventory Turnover.
2.4.1.5. DAYS SALES
UNCOLLECTED
The number of days
between the day of sales and the day the receivables are collected is used to
calculate the liquidity of the receivables. The company's liquidity is better
the fewer days there are. Over the years, the value has changed, and the fact
that it exceeds 100 days is not good. The ideal time frame is under 30 days.
Hemas PLC was not able to maintain a good ratio throughout recent years and
most of the years they have 03 months gap in day’s sales uncollected ratio.
2.4.1.6. DAYS SALES IN
INVENTORY
Days Sales in Inventory
(DSI), also referred to as inventory days, is a calculation of how long it
typically takes a company to turn its inventory into sales. Additionally, a
smaller value is preferable. This company has ratio on average to 100 days in
all recent years. The value exceeds 60 days, indicating average performance.
2.4.1.7. TOTAL ASSET
TURNOVER
The asset turnover ratio
is a metric that reveals how effectively a business uses its own assets to
produce income or sales. To determine how many sales were produced from each rupee
of firm assets, the ratio compares the gross revenue of the company to the
average total number of assets. The more assets are used effectively by the
organization, the greater the asset ratio.
The value should be
greater than 1 to indicate a higher efficiency rate. Hemas PLC was able to
maintain a good ratio over recent 5 years which indicates an efficient use of
company assets.
2.4.2. SOLVANCY RATIOS
A company's ability to
cover long-term liabilities is determined by its solvency ratio, which also
demonstrates how well it generates cash flow to pay off future debt
obligations. Solvency ratios provide information about a company's financial
standing and aid shareholders, managers, and investors in assessing
profitability. Solvency ratios take into account a number of different
variables and are frequently a component of a bigger analysis that assesses
whether a company can sustain profitability over the long term. Below table
shows the solvency ratios of Hemas PLC over recent 5 years.
Table
10 Solvancy Ratios
|
Ratio |
2019 |
2020 |
2021 |
2022 |
2023 |
|
Debt Ratio |
49.2% |
51.1% |
47.4% |
52.2% |
60.3% |
|
Equity Ratio |
50.8% |
48.9% |
52.6% |
47.8% |
39.7% |
|
Debt-Equity Ratio |
0.97 |
1.05 |
0.90 |
1.09 |
1.52 |
|
Time Interest Earned |
5.9 |
4.0 |
9.9 |
7.3 |
2.9 |
Source: Annual Reports and Workings
2.4.2.1. DEBT RATIO
The debt ratio reveals a
company's level of leverage. It offers information on the percentage of a
company's financing that comes from debt as opposed to assets. The ratio
enables investors to understand the risk they would be taking if they invest in
a company that uses more debt to raise money. The ratio also enables them to
evaluate how effectively a corporation uses debt to develop and grow its
operations. Purely from a risk standpoint, debt ratios of 0.4 or less are
preferred, whereas a debt ratio of 0.6 or more makes borrowing money more
challenging. While a low debt ratio signals a corporation is more creditworthy,
holding too little debt carries danger as well.
By analyzing above table,
we can see that Hemas PLC was at a low debt proportion up to 2021 but they have
increased their debt capital from 2022 to present which means they are more
funded by debt capital than equity capital.
2.4.2.2. EQUITY RATIO
A financial
indicator called the equity ratio calculates how much leverage a corporation is
using. It uses investments in assets and the amount of equity to determine how
well a company manages its debts and funds its asset requirements. A low equity
ratio suggests that the company largely used debt to buy assets, which is
typically considered as an indication of greater financial risk. Equity ratios
with higher value generally indicate that a company’s properly funded its asset
requirements with a small amount of debt.
Over the years, we can
see that Hemas PLC is gradually decreasing their equity proportion in recent
years. It shows a lowest amount in 2023 which is 39.7%. It is clear that this
company is moving to a debt financing than equity financing in recent years.
2.4.2.3. DEBT TO
EQUITY RATIO
When seeking to
comprehend a company's financial health and determine whether or not an
investment is profitable, the debt-to-equity ratio (D/E) is a financial
leverage ratio that can be useful. It is regarded as a gearing ratio that
contrasts the capital or equity of the owner with the debt, or money that the
business has borrowed. A company's total liabilities are compared to its shareholder
equity using this ratio. It emphasizes a company's reliance on borrowed funds
and its capacity to fulfill those financial obligations, making it one among
the most significant corporate valuation indicators.
Investors
prefer businesses with low D/E ratio and when it comes to Hemas PLC they were
able to maintain a average level of this ratio throughout recent years but in
2023 they tend to increase the D/E ratio compared to recent years.
2.4.2.4. TIME INTREST
EARNED
The times
interest earned ratio is a typical solvency metric that is used by investors as
well as creditors. The times interest earned ratio, also known as the interest
coverage ratio, measures a company's capacity to pay its debts' interest
obligations. It is calculated by dividing income before interest and taxes by
interest expense. An organization with a high times interest earned ratio often
performs better and has less risk. A high calculation, however, can also
indicate that a business does not prioritize growth and might not be a wise
long-term investment.
2.4.3.
PROFITABILITY RATIOS
A company's
capacity to make a profit in relation to its sales, assets, and equity is
gauged by profitability ratios. A higher value typically denotes better
financial health. However, when taken as a whole, these ratios are just
numerical values. When compared against an industry benchmark, the firm's
rivals, or its prior performance, they offer useful information.
Below table
shows the various profitability ratios of Hemas PLC over 4 years period of
time.
Table
11 Profitability
Ratios
|
Ratio |
2019 |
2020 |
2021 |
2022 |
2023 |
|
Profit Margin Ratio |
5.7% |
2.3% |
5.2% |
6.1% |
4.4% |
|
Gross Margin Ratio |
34% |
32% |
30% |
28% |
28% |
|
Return on Total Assets |
6.1% |
2.1% |
5.2% |
6.9% |
5.8% |
|
Return in common shareholders’ equity |
13.7% |
4.9% |
11.2% |
14.3% |
13.7% |
|
Book value per common share |
47.1 |
47.1 |
53.5 |
59.7 |
64.4 |
Source: Annual Reports and Workings
2.4.3.1. PROFIT MARGIN
RATIO
Investors and creditors
frequently use a profit margin ratio to assess a company's capacity to turn
sales profits into net income. Investors want confirmation that there are
enough earnings to be able to give dividends, while creditors want to make sure
a company produces enough money to pay back its loans.In other words, these
outside sources are looking for evidence that the company is managed well. When
the profit margin is very low, it is a sign that the business has to implement
a tougher budget in order to reduce its expenses.
After
analyzing Income statement of Hemas, we can see that except year 2020, they
were able to maintain a profit margin nearly to 5% in all the recent years and
they report highest in 2022.
2.4.3.2. GROSS MARGIN
RATIO
A profitability metric known as gross margin compares a
company's gross profit to its revenue or sales. The gross margin of a business
is presented as a percentage. Gross. A corporation maintains more capital the
larger its gross margin, which it can utilize to cover other expenses or pay
off debt. A higher gross margin indicates that company retains more capital.
In terms of gross margin also, Hemas was able to maintain a
percentage nearly to 30% in recent 5 years while achieving highest in 2019.
There is a slight decrease in gross margin in 2022 & 2023.
2.4.3.3. RETURN ON
TOTAL ASSETS
The Return on Assets (ROA) ratio evaluates a company's
ability to effectively manage its assets in order to produce profits over time.
This accounting ratio benefits management and investors because the primary
purpose of a company's assets is to produce revenue and profits. It helps in
figuring out how well the business can turn its asset investments into profits.
An organization is more efficient and productive at managing its balance sheet
to produce profits if its return on investment (ROI) is higher. A lower ROA,
however, indicates room for improvement.
Except 2020, Hemas was able to achieve a good ROA ratio
nearly to 6% while maintaining industry standard. Even though there is a decrease
in 2020 and 2021, they were able to increase ROA when coming to recent years.
2.4.3.4. RETURN ON
COMMON SH EQUITY
The ROCE metric shows how much net income a company makes
for every rupee invested in common equity. Companies that generate cash flows
more effectively are those with better return on equity. Investors typically
place more trust in businesses with high and stable ROCE. ROEs
of 15–20% are generally considered good.
Even though Hemas was not able to achieve industry average
of ROCE, except 2020, they maintained on average 13% of ROCE in recent years
while achieving the highest in 2022.
2.4.3.5. BOOK VALUE
PER COMMON SHARE
By dividing the amount of equity accessible to common
stockholders by the total number of outstanding shares, the book value per
share (BVPS) is determined. The book value per share can reveal how a company's
stock is valued when compared to the most recent market price per share. Over
the years, Hemas was able to increase their BVPS gradually while achieving the
highest in 2023. We can see a good movement of BVPS in Hemas.
2.4.4.
MARKET PROSPECTS
Market value ratios are another name for market prospect
ratios. Investors rely on them as essential instruments to evaluate the
probable return on an investment. The price-to-earnings (P/E) ratio, which
assesses the correlation between a company's stock price and earnings per
share, is the most used market prospect ratio. Market prospect ratios are
frequently used by investors to contrast businesses operating in the same
sector or industry. This enables them to spot businesses that can be
undervalued or overvalued in comparison to their competitors.
Below table illustrates the Market prospect ratios of Hemas
Holdings PLC for recent 5 years.
Table
12 Market Prospects
Ratios
|
Ratio |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
|
Price earnings Ratio |
27.63 |
13.27 |
27.15 |
15.27 |
6.49 |
9.08 |
|
Dividend Yield |
1.5% |
6.6% |
2.6% |
0.5% |
9.4% |
3.6% |
Source: Annual Reports and
Workings
2.4.4.1. PRICE EARNING
RATIO
The relationship between a company's stock price and
earnings per share (EPS) is known as the price-earnings ratio (P/E Ratio). It
is a well-liked ratio that helps investors understands the worth of the
organization. The price you must pay per unit of current earnings is shown by
the P/E ratio, which also displays market expectations. There is a significant
decrease of P/E ratio of Hemas in 2022 and 2023 when comparing with recent
years and they were able to achieve the highest ratio in 2018.
2.4.4.2DIVIDEND YEILD
The dividend yield ratio, which measures the risk inherent
in investing in a company, is the ratio between the company's current dividend
and its current share price. Investors seeking dividend income from stocks
should continue to focus on those with at least a 3%–4% yield.
Even though there is a low dividend yield until 2021, Hemas
has a significant growth in dividend yield in 2023 & 2023 which indicates a
good movement.
2.4.5. RATIO ANALYSIS IN SUMMARY
3. CONCULTION
The goal of financial statement analysis is to comprehend
and analyze the data in the financial statement in order to assess the firm's
financial stability and profitability and to estimate the firm's future
prospects. Stakeholders, both inside and outside the company use the analysis'
findings. Hemas Holdings PLC has been thoroughly examined in the aforementioned
paper. Five financial years' worth of data was collected, and horizontal,
vertical; trend analysis and ratio analyses were carried out in this study.
According to the vertical and horizontal analysis, except
year 2021, company was able to maintain average figures in all the years. Year
2021 was a challenging year to almost all industries in world due to the effect
of Covid 19. Hemas Holdings also faced the challenges of Covid 19 and their
performance also getting down in 2021, but they were managed to overcome these
effects in 2022 and 2023 despite of the economic crisis ongoing in the country.
After analyzing financial statements via ratio analysis, The
Company’s liquidity position is at a good position. For a corporation, neither
too much nor too little liquidity is advantageous. The Hemas Holdings PLC has
kept the level of liquidity constant. We can infer that the company's
performance is not much efficient from the ratio test that was used to assess
its efficiency. This may also be the cause of the effect of Covid 19 and
Economic crisis. The senior management should therefore concentrate more on
finding ways to boost efficiency. After analyzing the debt position of the
company, they have increased their debt financing in to a greater extend in
recent year 2023. This should be carefully investigated and must follow-up
because high debt may cause several complications in future due to high finance
cost. Market ratios don't demonstrate
consistent growth. Over the years, the P-E ratio and dividend yield have
changed erratically. Investors cannot determine with certainty if the company
is growing or not, hence there is risk in investing in the company.
To sum up, we can suggest that company must evaluate their
internal and external policies and strategies because by analyzing financial
statements we could identify several implications positively and negatively.
The business should pay close
attention to its business plans and develop procedures that will stabilize its
performance.
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