Stock Market Information

Z-Score Analysis-ACL Cables PLC

ACL Cables PLC is the largest manufacturer of Cables in Sri Lank. Having pioneered the industry in 1962, today ACL has grown to a Group of Companies holding a 70% share of the cable market in Sri Lanka. One of the principle objectives of ACL is to participate in the infrastructure development of the country and the region, by providing cables and conductors for the transmission, distribution and utilization of electricity. ACL continues to innovate and lead the field in the introduction of new products, modern technology and machinery. In the four decades of its existence, the Company has evolved into a specialized manufacturer and supplier of the widest range of quality cables and conductors in the country, while possessing the most advanced technology in the Asian region in the manufacture of low voltage cross linked polyethylene cables

Company situation from 2012 to 2016 based on the Z Score value

Zones of Discrimination:

Z > 2.9 -“Safe” Zone

1.23 < Z < 2.9 -“Grey” Zone

Z < 1.23 -“Distress” Zone

During the last five years company is in the Grey Zone” and in the last year it showing the value of 2.915 which means the company moving towards the “Safe Zone”.

	2012	2013	2014	2015	2016
WorkingCapital	1252237	1176519	1141493	1925728	2540644
Total assets	5753019	6412829	6701663	8922951	7865440
T1	0.218	0.183	0.170	0.216	0.323
Retained Earning	1091535	1278476	1316826	1838647	2268886
Total assets	5753019	6412829	6701663	8922951	7865440
T2	0.190	0.199	0.196	0.206	0.288
Earning before Tax	297466	203616	118135	612220	710555
Total assets	5753019	6412829	6701663	8922951	7865440
T3	0.052	0.032	0.018	0.069	0.090
Market value of Equity	3749364	3923057	3653534	4551944	6043305
Total liabilities	3023389	3505644	3756724	5306912	3767173
T4	1.240	1.119	0.973	0.858	1.604
Sales	5553012	6734982	6328771	7895398	6790555
Total assets	5753019	6412829	6701663	8922951	7865440
T5	0.965	1.050	0.944	0.885	0.863
Z	2.406	2.325	2.065	2.172	2.915
Current assets	3897763	4341973	4653010	5766345	5193345
Current liabilities	2645526	3165454	3511517	3840617	2652701
Working Capital	1252237	1176519	1141493	1925728	2540644
Market price per share	62.6	65.5	61	76	100.9
No of shares	59894	59894	59894	59894	59894
Market value of Equity	3749364	3923057	3653534	4551944	6043305

FINANCIAL ANALYSIS OF DIPPED PRODUCT PLC (DPL)

 Z-score Analysis

This is a multiple discriminant analysis technique, developed as a powerful diagnostic tool measuring solvency with ability to identify bankrupt firms, 12 months in advance. Signals can be identified whether the company is in safe zone, grey zone or distress zone.

According to the Z scores derived from DPL financials, both 2011 and 2012 seems good years for the company as it is located in safe zone. However due to drop in natural rubber price, global rubber industry crises and the social pressure on Rathupaswala incident have led DPL into grey zone in 2013 and 2014 leaving the facts to be carefully looked at for the decision making figureheads. With proper strategic planning and co-operation of entire staff, DPL has moved to the safe zone with the enhanced production capacity in Biyagama export processing zone.

 Free Cash Flow Analysis

Free cash flow reflects the amount available for business activities after allowances for financing and investing requirements to maintain productive capacity at current levels. Except 2012, all other years recorded a negative result in free cash flow analysis. In 2012, cash generated from operating activities is positive. Due to less amount invested in property, plant and equipment, less proceeds from its sale and comparably less dividends paid has resulted positive amount as free cash flows. Growth and financial flexibility depend on adequate free cash flow. Thus in 2012 indicate as a year of financial flexibility. In 2013, the negative amount has resulted due to greater investment in new production facility located in Biyagama. In addition, the dividend paid is also higher compared to previous years. Both 2014 and 2015 reflect negative free cash flow as a result of significant investment in PPE.

After 30 years ethnic war, Sri Lankan economy is continued to grow being one of the fastest growing and emerging economies in South Asia. The manufacturing sector has many challenges specially cost of capital and high cost labor, but being in the business among hard times. When Dipped Product PLC is concerned, the company is averagely performing well through the global challenges of drop in natural rubber prices and intense completion from China and other rival countries. In addition, DPL has to put its all efforts on re-building the image and the production capacity after Rathupaswala incident where the year 2014 was most challenging year for the company.

DPL has managed to maintain its profit margins in a satisfactory manner. After 2014, EPS rose from 6.55 to 10. 27 in 2015 indicate a considerable improvement. The revenue base is continued to increase over the period and assets base is also recorded a growth momentum. The position of cash flow needs to be improved, specially cash generated from operations is required to be further improved in order to balance the investing and financing activities throughout the year. Since DPL is a subsidiary of Hayleys conglomerate, the consultancy assistance can be gained to improve the financial position even better.  

         Z – Score Analysis-Regins ( Lanka) PLC

Z- Score analyse describe the level of solvency in the organization activities by yearly. Equation of the Z- Score in Regins (Lanka) Company can be calculated as follows;

Z =  6.56x1 + 3.26x2 + 6.72 x3 + 1.05x4

 Based on the above calculations Z-Score for the Regins (Lanka) Company as follows,

Years	2011	2012	2013	2014	2015
Z score	2.65312	3.49580	3.73471	5.37527	7.10173

Model for the Z- Score for the Regins (Lanka) Company as follows;

Z > 2.60  - Safe Zone

1.1 <  Z > 2.60 – Grey Zone

Z < 1.1  - Distress Zone

Based on the above calculations Regins (Lanka) Company in safe zone in the beginning on 2011 yaer. They have achieved Z–score ration. 

Introduction

 LAUGFS Holdings is one of the largest diversified business conglomerates and a trusted name in Sri Lanka. Founded in 1995, LAUGFS today has expanded across 20 industries, establishing a strong presence as a leader and pioneer in the power and energy, retail, industrial, services, leisure, logistics and the real estate sectors in Sri Lanka and beyond.

(Courtesy: www. laugfs.lk)

 The role of financial reporting by companies is to provide information about their performance, financial position and changes in the financial position that is useful to a wide range of users in making economic decisions. The role of financial statement analysis is to take financial reports prepared by companies, combined with other information, to evaluate the past, current and prospective performance and financial position of a company for the purpose of making investment, credit and other economic decisions. As Laughs being a prominent company in Sri Lanka conducting financial statement analysis for Laughs PLC is found important at this juncture.

 The following were the objectives to analyse the financial statement of Laughs PLC

·         To analyse the Working Capital Position of Laughs PLC.

·         To study the Cash position of Laughs PLC

·         To find out the Profitability Position of Laughs PLC

·         To measure the Returns of Laughs PLC.

·         To study the Efficiency of Laughs PLC in managing its assets

·         To scrutinize the Liquidity position of Laughs PLC.

·         To scrutinize the common size analysis

Period of the Study A period of five years is taken for the analysis purpose from 2013-2017

Overview of the statements of financial position at LAUGHS PLC for the last five years

 Ratio Analysis

 This is the liquidity and efficiency ratios related to Laughs PLC

liquidity and efficiency

Ratio	2013	2014	2015	2016	2017
Working Capital	1505189177	999582445	1027096960	2711060850	-636830728
Current Ratio	2.48	2.41	2.54	1.57	1.37
Acid Test Ratio	0.96	1.23	1.56	1.21	0.89
Acounts Recievable  Turnover	2.12	2.44	2.35	2.68	3.45
Days sale Uncollected	100.23	110.58	121.38	163.54	186.32
Merchandise Turnover	2.66	2.84	3.97	2.88	2.31
Days Sales in Inventory	2.43	3.35	3.35	3.44	3.23
Total Asset  Turnover	0.75	0.89	1.22	1.26	1.45

Solvency ratios of LAUGHS PLC

Ratio	2013	2014	2015	2016	2017
Debt Ratio	0.4	0.41	0.38	0.64	0.73
Equity Ratio	0.48	0.47	0.4	0.33	0.29
Times Interest Earned	3.43	3.56	3.8	3.3	2.9

Profitability Ratios Related to Laughs PLC

Ratio	2013	2014	2015	2016	2017
Profit Margin	12%	13%	15%	11%	-2%
Gross Margin	11%	16%	22%	18%	11%
Return on total Assets	17%	19%	23%	20%	5%
Return on Common shareholders	12%	14%	16%	15%	7%

 Stock Market Ratio Related to Laughs PLC

Ratio	2013	2014	2015	2016	2017
Book value per common  share	42.55	45.69	56.22	49.35	42.33
Earning Pershare	2.71	3.38	4	3.32	-1.65
Price Earning Share	2.52	2.86	6.35	5.36	Data Not Sufficient
Dividend Yield	1.56%	1.69%	3.25	2.86	-0.65

Liquidity and Efficiency Ratios

Asset Test Ratio

(Current asset - inventory) / Current Liabilities

Interpretation:

This ratio shows the relationship between the quick asset and the current liabilities and shows the company ability to pay back its current liability within its short period of time. There is a slight change in this ratio since last three years. This ratio is slightly unfavorable for the organization, it should be improved.

Working Capital

Current Asset - Current Liabilities

Interpretation:

Working capital is the difference between the current asset and current liabilities. This is the amount used for day to day operations of the company., which mean the current asset may increase, that is, in some cases good for the organization if the organization treat it like a reserve account but in other conditions its unfavorable because of less utilization of the current asset.

LEVERAGE RATIOS

 Times Interest Earned

EBIT / Interest Exp

Interpretation:

It shows how many times the company can pay its interest with its income of one year, higher the ratio will be more favorable for the organization.

 Debt - Equity Ratio

Total Debt / Total Equity

Interpretation:This ratio shows the relationship between Long term debt and total equity of the organization.

DEBT RATIO

Formula:

Total liabilities / total assets *100

Interpretation:

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

EQITY RATIO Formula:

Equity / total assets *100

This ratio is showing increasing trend except in 2017 in which it was at its lowest value because increase in equity is lower increase than assets.

Fixed Asset to Equity Ratio

Fixed asset / equity

Interpretation:

This ratio shows the relationship between fix asset of the company with the equity held by the company. This ratios show that how much times your fixed asset are of your equity. Although in laughs PLC’s case the equity was increased but fixed asset was also on increase, that is the reason of sustainability of the ratio.

Profitability Ratios

Net Profit Margin (in %)

Profit after tax / net sale x 100

Interpretation:

This ratio interprets the net profit as a percentage of net sales. In 2016, the ratio was pretty good but in 2017, there was enormous decline, That is Alarming for the organization and it should take action for its improvement. Higher the ratio results higher market position of the organization.

Return of Asset (in %)

Net income/ total asset x 100

Interpretation:

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

Sales to Fix Asset

Net sale / fixed asset

Interpretation:

This ratio also shows the utilization of the asset but the fix asset. If we look at the graph, there is gradual increase in this ratio. This shows the fix assets are properly being utilized for the purpose of earning interest.

Gross Profit Margin (%)

Gross profit / Net Sales * 100

Interpretation:

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

Activity Ratios

Total Asset Turn Over

Sales / Total Assets

This ratio shows the utilization of the total asset. If we look at the graph, there is gradual slight increase in this ratio. This shows the total assets are properly being utilized for the purpose of earning interest. In 2017 there a decrease in terms of laughs. This decrease shows some degree in- efficiency of the organization.

 

Fixed Asset Turn Over

Sales/ fixed asset

Interpretation:

This ratio shows the earning on each share of the company. With respect to Laughs PLC the steady values has lost its control in 2017. There may be some reason for this variation, this variation may be caused due to three factors, Increase or Decrease in Interest Earned, Expenses or number of shares issued.

CASH FLOWS RATIOS

Operating CF per Share

Operating cash flow / # of share out standing

Interpretation:

Operating cash flow shows the actual cash incoming and outgoing through the operation of the company/organization. Operation CF will be favourable if it shows the positive balance. Higher the Operating CF, stronger the organization will be considered.