John Keells Holdings

 

1)    Introduction

The company's financial statements have been compared and examined annually to understand its performance and growth. Decision makers should have a complete awareness of the company's financial condition. The financial statements provide a summary of all business activity over the year. The annual reports of public limited companies contain four statements. They are the income statement, balance sheet, cash flow statement, and equity statement. Two parties do financial statement analysis to reveal the true significance of the facts recorded in the accounts. The internal and external stakeholders are those people. External stakeholders use the analysis to comprehend the total business value and financial performance, including stockholders, potential investors, customers, creditors, and the government. Internal parties, on the other hand, management, internal auditors, and staff use it as a monitoring tool to manage funds. Analysis of financial statements can be used to evaluate the performance in the present, past, or future. It can compare data from the same type of company each year or data from various companies. The most popular methods for analyzing financial statements are ratio analysis, vertical analysis, and horizontal analysis. The following report will analyze data and discuss the financial performance of John Keels Holdings PLC using these three methodologies.

2)    Background of the Company

With a history spanning over 150 years and a reputation for strength, stability, and durability, John Keells Holdings is a recognizable company. Over time, they have developed their company model revolt around various industries, each carefully chosen to mirror the most important economic development sectors. As one of the largest diversified conglomerates in Sri Lanka, John Keells Holdings works to uphold the greatest standards of governance and transparency. Business has been comprised of transportation, consumer foods, retail, leisure, property, financial services and Information Technology and Plantation Services.

3)    Financial Statement Analysis

Financial Statement Analysis critically evaluates the financial data present in the financial statements to comprehend and make judgments on the business's activities. It studies the relationships between various financial facts and figures as presented in a set of financial statements and their interpretation to understand profitability and operational efficiency to assess its financial health and future prospects. Financial statements are analyzed using one of three methods. Horizontal analysis is the process of analyzing a company's financial performance over time. It is carried out by examining the items’ value over two or more years. The horizontal analysis includes trend analysis as well. The vertical analysis compares a corporation’s financial performance to a base amount. It investigates the vertical effect sections of the business and their proportions. Ratio analysis develops statistical linkages by using key relationships between financial statement components and critical measures.

3. 1) Horizontal Analysis of Financial Position

The horizontal analysis compares financial accounts from many years; a corporation can make decisions based on that. The current year's results are typically contrasted with the base year (the base year is assumed to be 100) to determine how the financial data has evolved over time.

Statement of Financial Position

	2016	2017	2018	2019	2020	2021
Assets
Non-Current Assets
Property, plant and equipment	52736375	64,396,373	87,259,873	97,688,488	111,533,759	113,076,642
Right- of - use assets	10888158	13,206,058	13,004,939	-	37,170,270	40,616,850
Lease rentals paid in advance				14412888	-
Investment property	4878406	5,366,180	12,427,058	13985379	15,007,996	14,867,586
Intangible assets	2337860	2,118,160	2,010,191	3405692	3,288,989	4,852,978
Investments in subsidiaries	-	-	-	-	-	-
Investments in equity accounted investees	16949464	17,718,887	22,335,347	25169094	28,329,492	28,629,936
Non-current financial assets	22635444	27,666,621	32,878,254	35186305	40,078,469	62,589,803
Deferred tax assets	129837	143,548	171,503	1,252,978	902,382	1,089,027
Other non-current assets	35557148	41,692,316	53,599,347	77,274,785	79,582,749	104,580,215
	146112692	172,308,143	223,686,512	268,375,609	315,894,106	370,303,037
Current assets
Inventories	4,664,833	5,605,712	6,689,541	9,547,014	50,168,754	54,296,123
Trade and other receivables	9,998,949	11,687,429	12,273,372	14,420,945	12,186,327	17,456,698
Amounts due from related parties	133,031	111,639	139,640	225,634	389,766	123,553
Other current assets	2,303,431	3,265,327	4,390,258	5,515,708	6,513,353	5,919,453
Short term investments	72,635,070	79,174,327	64,386,093	52,756,625	38,457,970	69,262,761
Cash in hand and at bank	5,127,463	5,119,185	10,882,856	12,955,209	13,333,743	19,432,579
Total assets	240,975,469	277,271,762	322,448,272	363,796,744	436,944,019	536,794,204
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated Capital	58,701,977	62,790,080	62,802,327	62,806,482	62,881,295	63,101,661
Revenue reserves	67,564,513	77,193,184	87,265,501	82,834,219	87,885,071	90,651,930
Other components of equity	28,715,262	38,651,568	49,852,263	58,646,116	66,085,354	72,403,140
Non-controlling interest	13,498,570	15,695,543	24,944,488	26,071,923	26,872,142	16,830,098
Total equity	168,480,322	194,330,375	224,864,579	230,358,740	243,723,862	242,986,829
Non-current liabilities
Insurance contract liabilities	27205282	31,700,278	30,230,539	32833058	38185839	45160611
Interest-bearing loans and borrowings	13706848	14,202,636	18,521,034	21276504	50925346	118965640
Lease liabilities	-		-	-	19910124	24234968
Deferred tax liabilities	2029371	2,336,241	7,089,179	7756673	8294955	7720111
Employee benefit liabilities	1660880	1,880,287	1,971,420	2085826	2343911	2814006
Non-current financial liabilities	861802	838,891	191,403	1652138	3619863	3660952
Other non-current liabilities	3095181	3,933,882	6,704,368	10276667	12613909	19545655
	48559364	54,892,215	64,707,943	75880866	135893947	222101943
Current liabilities
Trade and other payables	12,755,466	14,136,040	16,077,499	19744821	23881479	35,287,700
Amounts due to related parties	28982	10,434	5,168	92532	2073	1385
Income tax liabilities	1873472	2,395,379	2,078,807	1504819	1747597	1988170
Short term borrowings	821,243	1,380,238	3,128,508	9970906	5803771	6,903,737
Interest-bearing loans and borrowings	2,991,582	2,918,854	2,062,465	3204613	5,206,020	9,507,473
Lease liabilities	-	-	-		1,382,662	1472297
Other current financial liabilities			-		-	2991093
Other current liabilities	2,234,856	2,944,118	3,513,214	2,978,728	1,623,137	1733398
Bank overdrafts	3230182	4,264,109	6,010,089	20,060,719	17679,471	11820179
Total equity and liabilities	240975469	277,271,762	322,448,272	363,796,744	436,944,019	536,794,204

 

 

 

 

3.1.1) Rupee Change

Rupee Change = Analysis period Amount – Base Period Amount

The Base Year = 2016

Time Period = 2017 to 2021

	2017	2018	2019	2020	2021
Assets
Non-Current Assets
Property, plant & equipment	11,659,998	34,523,498	44,952,113	58,797,384	60,340,267
Right- of - use assets	2,317,900	2,116,781	0	26,282,112	29,728,692
Lease rentals paid in advance	0	0	14,412,888	0	0
Investment property	487,774	7,548,652	9,106,973	10,129,590	9,989,180
Intangible assets	-219,700	-327,669	1,067,832	951,129	2,515,118
Investments in subsidiaries	-	-	-	-	-
Investments in equity accounted investees	769,423	5,385,883	8,219,630	11,380,028	11,680,472
Non-current financial assets	5,031,177	10,242,810	12,550,861	17,443,025	39,954,359
Deferred tax assets	13,711	41,666	1,123,141	772,545	959,190
Other non-current assets	6,135,168	18,042,199	41,717,637	44,025,601	69,023,067
	26,195,451	77,573,820	122,262,917	169,781,414	224,190,345
Current assets
Inventories	940,879	2,024,708	4,882,181	45,503,921	49,631,290
Trade and other receivables	1,688,480	2,274,423	4,421,996	2,187,378	7,457,749
Amounts due from related parties	-21,392	6,609	92,603	256,735	-9,478
Other current assets	961,896	2,086,827	3,212,277	4,209,922	3,616,022
Short term investments	6,539,257	-8,248,977	-19,878,445	-34,177,100	-3,372,309
Cash in hand and at bank	-8,278	5,755,393	7,827,746	8,206,280	14,305,116
Total assets	36,296,293	81,472,803	122,821,275	195,968,550	295,818,735
	0	0	0	0	0
EQUITY AND LIABILITIES	0	0	0	0	0
Equity attributable to equity holders of the parent	0	0	0	0	0
Stated capital	4,088,103	4,100,350	4,104,505	4,179,318	4,399,684
Revenue reserves	9,628,671	19,700,988	15,269,706	20,320,558	23,087,417
Other components of equity	9,936,306	21,137,001	29,930,854	37,370,092	43,687,878
Non-controlling interest	2,196,973	11,445,918	12,573,353	13,373,572	3,331,528
Total equity	25,850,053	56,384,257	61,878,418	75,243,540	74,506,507
	0	0	0	0	0
Non-current liabilities	0	0	0	0	0
Insurance contract liabilities	4,494,996	3,025,257	5,627,776	10,980,557	17,955,329
Interest-bearing loans and borrowings	495,788	4,814,186	7,569,656	37,218,498	105,258,792
Lease liabilities	0	0	0	0	0
Deferred tax liabilities	306,870	5,059,808	5,727,302	6,265,584	5,690,740
Employee benefit liabilities	219,407	310,540	424,946	683,031	1,153,126
Non-current financial liabilities	-22,911	-670,399	790,336	2,758,061	2,799,150
Other non-current liabilities	838,701	3,609,187	7,181,486	9,518,728	16,450,474
	6,332,851	16,148,579	27,321,502	87,334,583	173,542,579
Current liabilities	0	0	0	0	0
Trade and other payables	1,380,574	3,322,033	6,989,355	11,126,013	22,532,234
Amounts due to related parties	-18,548	-23,814	63,550	-26,909	-27,597
Income tax liabilities	521,907	205,335	-368,653	-125,875	114,698
Short term borrowings	558,995	2,307,265	9,149,663	4,982,528	6,082,494
Interest-bearing loans and borrowings	-72,728	-929,117	213,031	2,214,438	6,515,891
Lease liabilities	0	0	0	0	0
Other current financial liabilities	0	0	0	0	2,991,093
Other current liabilities	709,262	1,278,358	743,872	-611,719	-501,458
Bank overdrafts	1,033,927	2,779,907	16,830,537	14,449,289	8,589,997
Total equity and liabilities	36,296,293	81,472,803	122,821,275	195,968,550	295,818,735

 

 

 

 

 

 

 

 

 

 

3.1.2) Percentage Change

Percentage Change = (Rupee Change/Base period Amount)*100%

	2017	2018	2019	2020	2021
Assets
Non-Current Assets
Property, plant and equipment	22%	65%	85%	111%	114%
Right- of - use assets	21%	19%	0%	241%	273%
Lease rentals paid in advance	-	-	-	-	-
Investment property	10%	155%	187%	208%	205%
Intangible assets	-9%	-14%	46%	41%	108%
Investments in subsidiaries	-	-	-	-	-
Investments in equity accounted investees	5%	32%	48%	67%	69%
Non-current financial assets	22%	45%	55%	77%	177%
Deferred tax assets	11%	32%	865%	595%	739%
Other non-current assets	17%	51%	117%	124%	194%
	18%	53%	84%	116%	153%
Current assets	-	-	-	-	-
Inventories	20%	43%	105%	975%	1064%
Trade and other receivables	17%	23%	44%	22%	75%
Amounts due from related parties	-16%	5%	70%	193%	-7%
Other current assets	42%	91%	139%	183%	157%
Short term investments	9%	-11%	-27%	-47%	-5%
Cash in hand and at bank	0%	112%	153%	160%	279%
Total assets	15%	34%	51%	81%	123%
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated capital	7%	7%	7%	7%	7%
Revenue reserves	14%	29%	23%	30%	34%
Other components of equity	35%	74%	104%	130%	152%
Non-controlling interest	16%	85%	93%	99%	25%
Total equity	15%	33%	37%	45%	44%
Non-current liabilities
Insurance contract liabilities	17%	11%	21%	40%	66%
Interest-bearing loans and borrowings	4%	35%	55%	272%	768%
Lease liabilities	-	-	-	-	-
Deferred tax liabilities	15%	249%	282%	309%	280%
Employee benefit liabilities	13%	19%	26%	41%	69%
Non-current financial liabilities	-3%	-78%	92%	320%	325%
Other non-current liabilities	27%	117%	232%	308%	531%
	13%	33%	56%	180%	357%
Current liabilities
Trade and other payables	11%	26%	55%	87%	177%
Amounts due to related parties	-64%	-82%	219%	-93%	-95%
Income tax liabilities	28%	11%	-20%	-7%	6%
Short term borrowings	68%	281%	1114%	607%	741%
Interest-bearing loans and borrowings	-2%	-31%	7%	74%	218%
Lease liabilities	-	-	-	-	-
Other current financial liabilities	-	-	-	-	-
Other current liabilities	32%	57%	33%	-27%	-22%
Bank overdrafts	32%	86%	521%	447%	266%
Total equity and liabilities	15%	34%	51%	81%	123%

 

The value of property plants & equipment has drastically increased over the years.  The highest value is recorded in 2021. Investment property value has significantly increased in 2021 compared to the base year. Intangible assets have also increased dramatically. Between 2017 and 2021, non-current assets gradually increased. Over time, there has been a large growth in the percentage of inventory value. The largest portion of the inventory comprises the work-in-progress value.  Trade receivable value has also increased.  The overall value of current assets has increased compared to the base year of 2016.

The stated capital value has not changed all that much. The explanation for the company's low dividend payment ratio is that reserves improved in value in 2021. Another equity value components have increased since the value of foreign currency translation reserve value has significantly increased compared to 2016. Trade and other payables, interest-bearing loans and borrowings, short-term borrowings, and the value of bank overdrafts have all increased in relation to liabilities.

 

 

 

 

 

 

 

 

 

3.2) Horizontal Analysis of the Income Statement

	2016	2017	2018	2019	2020	2021
Sale of goods	58,180,108	68,238,202	81,974,902	124,818,922	127,834,824	114,454,483
Rendering of services	35,101,730	38,034,899	39,240,170	10,637,226	11,120,928	13,221,167
Revenue	93,281,838	106,273,101	121,215,072	135,456,148	138,955,752	127,675,650
Cost of Sales	(65,057,256)	(75,158,110)	(91,932,377)	(107,668,833)	(112,874,121)	(108,747,058)
Gross Profit	28,224,582	31,114,991	29,282,695	27,787,315	26,081,631	18,928,592
Other operating income	2,132,239	1,765,187	2,084,111	1,925,698	2,241,751	2,626,544
Selling and distribution expenses	(3,615,527)	(3,900,667)	(4,226,827)	(5,939,294)	(5,518,526)	(4,761,037)
Administrative expenses	(10,565,233)	(11,435,797)	(12,488,091)	(12,411,130)	(13,143,112)	(12,927,716)
Other operating expenses	(3,608,555)	(3,170,105)	(3,190,163)	(3,705,496)	(2,872,908)	(1,314,409)
Results from operating activities	12,567,506	14,373,609	11,461,725	7,657,093	6,788,836	2,551,974
Finance cost	(993,802)	(436,278)	(520,797)	(2,722,289)	(3,165,519)	(4,669,206)
Finance income	8,010,952	10,033,281	11,268,141	12,051,601	9,357,342	10,688,722
Change in insurance contract liabilities	(3,430,533)	(4,869,288)	(2,449,379)	(3,422,893)	(5,617,431)	(7,031,692)
Change in contract liability due to transfer of one off surplus	-	-	3,381,934	-	-	-
Change in fair value of investment property	262,875	483,554	896,380	324,653	573,373	(253,425)
Share of results of equity accounted investees (net of tax)	2,781,233	3,302,955	3,596,430	4,727,345	4,466,457	4,158,793
Profit before tax	19,198,231	22,887,833	27,634,434	18,615,510	12,403,058	5,445,166
Tax expense	(3,406,366)	(4,771,068)	(4,514,629)	(2,378,114)	(2,662,263)	(1,494,275)
Profit for the year	15,791,865	18,116,765	23,119,805	16,237,396	9,740,795	3,950,891

 

3.2.1) Rupee Change

	2017	2018	2019	2020	2021
Sale of goods	10,058,094	23,794,794	66,638,814	69,654,716	56,274,375
Rendering of services	2,933,169	4,138,440	-24,464,504	-23,980,802	-21,880,563
Revenue	12,991,263	27,933,234	42,174,310	45,673,914	34,393,812
Cost of Sales	-10,100,854	-26,875,121	-42,611,577	-47,816,865	-43,689,802
Gross Profit	2,890,409	1,058,113	-437,267	-2,142,951	-9,295,990
Other operating income	-367,052	-48,128	-206,541	109,512	494,305
Selling and distribution expenses	-285,140	-611,300	-2,323,767	-1,902,999	-1,145,510
Administrative expenses	-870,564	-1,922,858	-1,845,897	-2,577,879	-2,362,483
Other operating expenses	438,450	418,392	-96,941	735,647	2,294,146
Results from operating activities	1,806,103	-1,105,781	-4,910,413	-5,778,670	-10,015,532
Finance cost	557,524	473,005	-1,728,487	-2,171,717	-3,675,404
Finance income	2,022,329	3,257,189	4,040,649	1,346,390	2,677,770
Change in insurance contract liabilities	-1,438,755	981,154	7,640	-2,186,898	-3,601,159
Change in fair value of investment property	220,679	633,505	61,778	310,498	-516,300
Share of results of equity accounted investees (net of tax)	521,722	815,197	1,946,112	1,685,224	1,377,560
Profit before tax	3,689,602	8,436,203	-582,721	-6,795,173	-13,753,065
Tax expense	-1,364,702	-1,108,263	1,028,252	744,103	1,912,091
Profit for the year	2,324,900	7,327,940	445,531	-6,051,070	-11,840,974

 

3.2.2) Percentage Change

	2017	2018	2019	2020	2021
Sale of goods	17%	41%	115%	120%	97%
Rendering of services	8%	12%	-70%	-68%	-62%
Revenue	14%	30%	45%	49%	37%
Cost of Sales	16%	41%	65%	73%	67%
Gross Profit	10%	4%	-2%	-8%	-33%
Other operating income	-17%	-2%	-10%	5%	23%
Selling and distribution expenses	8%	17%	64%	53%	32%
Administrative expenses	8%	18%	17%	24%	22%
Other operating expenses	-12%	-12%	3%	-20%	-64%
Results from operating activities	14%	-9%	-39%	-46%	-80%
Finance cost	-56%	-48%	174%	219%	370%
Finance income	25%	41%	50%	17%	33%
Change in insurance contract liabilities	42%	-29%	0%	64%	105%
Change in contract liability due to transfer of one off	0%	0%	0%	0%	0%
Change in fair value of investment property	84%	241%	24%	118%	-196%
Share of results of equity accounted investees (net of tax)	19%	29%	70%	61%	50%
Profit before tax	19%	44%	-3%	-35%	-72%
Tax expense	40%	33%	-30%	-22%	-56%
Profit for the year	15%	46%	3%	-38%	-75%

 

Although revenue has increased, the percentage is less than the percentage increase in the cost of sales. Since the corporation has had more debt facilities, finance costs have also increased. Selling and distribution costs have increased by 24% compared to 2017 Administrative income also has increased by 14%. Tax expense has been reduced compared to 2017.

 

 

 

 

 

 

3.3) Trend Analysis of Financial Position

	2016	2017	2018	2019	2020	2021
Total Non-current Assets	100%	18%	53%	84%	116%	153%
Total Current Assets	100%	11%	4%	1%	28%	76%
Total Assets	100%	15%	34%	51%	81%	123%
Total Equity	100%	15%	33%	37%	45%	44%
Total Non-current liabilities	100%	13%	33%	56%	180%	357%
Total Current liabilities	100%	17%	37%	140%	140%	200%
Total Liabilities	100%	14%	35%	84%	167%	305%

 

The percentage of non-current liabilities have been increased since the company obtained loans. The total assets percentage has been increased because non-current assets value has increased significantly. The value of write-to-use assets has dramatically increased. Since the corporation acquired loan capital rather than share capital, the overall equity percentage has decreased.

3.4) Trend Analysis of the Income Statement

	2016	2017	2018	2019	2020	2021
Sale of goods	100%	17%	41%	115%	120%	97%
Rendering of services	100%	8%	112%	-70%	-68%	-62%
Revenue	100%	14%	130%	45%	49%	37%
Cost of Sales	100%	16%	141%	65%	73%	67%
Gross Profit	100%	10%	104%	-2%	-8%	-33%
Other operating income	100%	-17%	98%	-10%	5%	23%
Selling and distribution expenses	100%	8%	117%	64%	53%	32%
Administrative expenses	100%	8%	118%	17%	24%	22%
Other operating expenses	100%	-12%	88%	3%	-20%	-64%
Results from operating activities	100%	14%	91%	-39%	-46%	-80%
Finance cost	100%	-56%	52%	174%	219%	370%
Finance income	100%	25%	141%	50%	17%	33%
Change in insurance contract liabilities	100%	42%	71%	0%	64%	105%
Change in contract liability due to transfer of one off	100%	0%	100%	0%	0%	0%
Change in fair value of investment property	100%	84%	341%	24%	118%	-4%
Share of results of equity accounted investees (net of tax)	100%	19%	129%	70%	61%	50%
Profit before tax	100%	19%	144%	-3%	-35%	-72%
Tax expense	100%	40%	133%	-30%	-22%	-56%
Profit for the year	100%	15%	146%	3%	-38%	-75%

 

The cost of sales has risen faster than revenue growth. The cost of sales has reached its peak in 2020. Finance, administration, marketing, and distribution costs have gradually climbed.

3.5) Vertical Analysis of Financial Position

Understanding the relationship between individual items on a balance sheet and the net income, expressed as a percentage, is made simpler by vertical analysis.

Common Size Percentage = Analysis Amount/Base Amount * 100%

 

 

 

	2017	2018	2019	2020	2021
Assets
Non-Current Assets
Property, plant and equipment	23%	27%	27%	26%	21%
Right- of - use assets	5%	4%	0%	9%	8%
Lease rentals paid in advance	0%	0%	4%	0%	0%
Investment property	2%	4%	4%	3%	3%
Intangible assets	1%	1%	1%	1%	1%
Investments in equity accounted investees	6%	7%	7%	6%	5%
Non-current financial assets	10%	10%	10%	9%	12%
Deferred tax assets	0%	0%	0%	0%	0%
Other non-current assets	15%	17%	21%	18%	19%
Total Non-Current Assets	62%	69%	74%	72%	69%
Current assets
Inventories	2%	2%	3%	11%	10%
Trade and other receivables	4%	4%	4%	3%	3%
Amounts due from related parties	0%	0%	0%	0%	0%
Other current assets	1%	1%	2%	1%	1%
Short term investments	29%	20%	15%	9%	13%
Cash in hand and at bank	2%	3%	4%	3%	4%
Total Current Assets	38%	31%	26%	28%	31%
Total assets	100%	100%	100%	100%	100%
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated capital	23%	19%	17%	14%	12%
Revenue reserves	28%	27%	23%	20%	17%
Other components of equity	14%	15%	16%	15%	13%
Non-controlling interest	6%	8%	7%	6%	3%
Total equity	70%	70%	63%	56%	45%
	0%	0%	0%	0%	0%
Non-current liabilities	0%	0%	0%	0%	0%
Insurance contract liabilities	11%	9%	9%	9%	8%
Interest-bearing loans and borrowings	5%	6%	6%	12%	22%
Lease liabilities	0%	0%	0%	5%	5%
Deferred tax liabilities	1%	2%	2%	2%	1%
Employee benefit liabilities	1%	1%	1%	1%	1%
Non-current financial liabilities	0%	0%	0%	1%	1%
Other non-current liabilities	1%	2%	3%	3%	4%
Total Non-Current Liabilities	20%	20%	21%	31%	41%
Current liabilities
Trade and other payables	5%	5%	5%	5%	7%
Amounts due to related parties	0%	0%	0%	0%	0%
Income tax liabilities	1%	1%	0%	0%	0%
Short term borrowings	0%	1%	3%	1%	1%
Interest-bearing loans and borrowings	1%	1%	1%	1%	2%
Lease liabilities	0%	0%	0%	0%	0%
Other current financial liabilities	0%	0%	0%	0%	1%
Other current liabilities	1%	0%	0%	0%	0%
Bank overdrafts	2%	2%	6%	4%	2%
Total Current Liabilities	10%	10%	16%	13%	13%
Total equity and liabilities	100%	100%	100%	100%	100%

 

Over the past five years, non-current assets have increased by more than 50%. This is in decent form. The percentage of current assets is largely steady. When short-term investments fall, the share of the inventory rises. Over the past five years, the proportion of non-current liabilities has grown. The interest-bearing loan percentage has increased while the equity percentage has decreased.  The total equity percentage is 45%   and it is not healthy.

 

 

3.6) Vertical Analysis of Income Statement

	2017	2018	2019	2020	2021
Revenue	100%	100%	100%	100%	100%
Cost of Sales	71%	76%	79%	81%	85%
Gross Profit	29%	24%	21%	19%	15%
Other operating income	2%	2%	1%	2%	2%
Selling and distribution expenses	4%	3%	4%	4%	4%
Administrative expenses	11%	10%	9%	9%	10%
Other operating expenses	3%	3%	3%	2%	1%
Results from operating activities	14%	9%	6%	5%	2%
Finance cost	0%	0%	2%	2%	4%
Finance income	9%	9%	9%	7%	8%
Change in insurance contract liabilities	5%	2%	3%	4%	6%
Change in contract liability due to transfer of one off	0%	3%	0%	0%	0%
Change in fair value of investment property	0%	1%	0%	0%	0%
Share of results of equity accounted investees (net of tax)	3%	3%	3%	3%	3%
Profit before tax	22%	23%	14%	9%	4%
Tax expense	4%	4%	2%	2%	1%
Profit for the year	17%	19%	12%	7%	3%

 

Cost of sales has remained almost at t 75% every year, meanings the gross profit is 25 % of total revenue. Admin expenses are higher compared to other expenses. It is 10% from the total revenue.

4)    Ratio Analysis

Ratio analysis is a crucial component of interpreting the findings of financial statements. Users are given access to critical financial data, and it highlights areas that need further examination. Ratio analysis is a technique that involves rearranging data by using mathematical correlations, albeit it can be difficult to interpret. 

4.1) Liquidity & Efficiency

Ratio	2017	2018	2019	2020	2021
Working Capital (Rs.million)	76,914	65,886	37,863	63,724	94,786
Current Ratio	3.7	3.0	1.65	2.1	2.3
Acid Test Ratio	3.5	2.8	1.49	1.24	1.56
Accounts Receivable Turnover	9.09	9.88	9.39	11.40	7.31
Total Asset Turnover	0.41	0.40	0.39	0.35	0.26
Days sales in inventory	27.22	26.56	32.36	162.23	182.24

 

Working Capital: The net current assets readily available for regular business operations are known as working capital. In test questions, the components are typically inventories, trade receivables, trade payables, and bank overdrafts. It is defined as current assets less current liabilities. In John Keels Holdings, the working capital decreased from 2017 to 2020 but significantly increased in 2021.

Current Ratio: The current ratio is the best single measure of whether short-term creditors' claims are met by assets that are anticipated to be converted to cash in a time frame roughly matching their maturity. This ratio should not be too high since too much liquidity is not suitable. It indicates that there is extra money to be invested within the company. The highest recorded in 2017 and 2018. The ideal current ratio is 2:1 (Pandey, 2010).In 2020 and 2021 the ratio has become 2:1 which illustrates that the liquidity position is good.

Acid Test Ratio: Acid Test or Quick Ratio A ratio is a metric used to assess a company's capacity to meet short-term financial obligations by utilizing liquid assets that are more liquid (Wardiyah, 2017). The acid test ratio values of John Keels Holdings have decreased from 2017 but are more than zero yearly. Therefore, it is good.

Accounts Receivable Turnover: Accounts receivable turnover is a ratio that indicates the amount of time it takes to convert receivables into cash. The bigger the value, the better the efficiency of the company. The highest value can be seen in 2020 but decreased in 2021 by 35%. Therefore, the company needs to arrange a method to collect receivables as soon as possible (Riyanto, 2008).

Total Asset Turnover: The ratio gauges how effectively assets generate sales. A higher efficiency rate should be indicated by a value larger than 1. From 2017 to 2021, the numbers are less than one, showing that the average total assets exceed the total revenue. This indicates that the business is less effective.

Day’s sales in inventory: The average number of days it takes for an organization to convert its inventory into sales. John Keels Holdings has recorded the highest number of days in 2021. This is not good. Therefore, the marketing team should take care of the speed of sales.

4.2) Solvency

Ratio	2017	2018	2019	2020	2021
Debt Equity Ratio	11.7%	13.2	23.7	41.4	71.2
Interest Cover Ratio	52.8	54	7.8	4.9	1.7

 

Debt Equity Ratio: debt as a proportion of non-controlling shareholders' funds.  The highest percentage was recorded in 2021. Increasing debt capital increase the financial cost since the company has to pay the interest. The finance cost has increased by 32% in 2021 compared to 2020. Therefore, the company should issue equity to obtain more capital.

Interest Cover Ratio: Analyzes the ease with which a corporation can make interest payments on its existing debt. The ratio reached its lowest in 2021. The higher the company's debt and the likelihood of bankruptcy, the lower the interest coverage ratio. The profits of the company have been negatively impacted because of the pandemic. That is the reason behind the lower interest cover Ratio. The Company should pay attention to building new business strategies to boost profits.

 

 

 

4.3) Profitability

Ratio	2017	2018	2019	2020	2021
Net Profit Margin	13.6%	15.3%	9.3%	6.0%	3.3%
Gross Profit Margin	29.27%	24.15%	20.51%	18.76%	14.82%
Return On Total Assets	6.99%	7.71%	4.73%	2.43%	0.81%
Return on Equity	9.8	11.1	7.5	4.5	2.2
Market Value per Share	137.9	159.6	156	115.4	148.5
Basic EPS	11.9	15.20	11.13	7.14	3.62

 

Net Profit Margin: Demonstrate a company's capacity to produce net profits following taxation. The lowest value was recorded in 2021. It can be identified as a bad indication of the performance of the company.

Gross Profit Margin: Calculates a company's effectiveness and performance by dividing its gross profit by all of its net sales. The gross profit ratio also reached its lowest in 2021.

Return on Total Assets: Determining how well a company profits from all of its assets is crucial when investing. The lowest rate was recorded in 2021. This is not good since investors will be demotivated to invest within the company.

Return on Equity: Profit is a proportion of the average shareholder's money attributable to shareholders. The lowest value was obtained in 2021.

Market Value per Share: Find the market capitalization, sometimes known as the "market cap," of a corporation. Market value has increased in 2021 compared to 2020. It is a good sign since investors will be motivated to buy shares of the company.

Earnings per Share: This ratio shows the amount of income generated per share of outstanding common stock. When purchasing and selling shares, this is an important issue to consider. It is advantageous to purchase shares when the value is high; when the value is low, it is unfavorable. The lowest value was obtained in 2021. Therefore, it is not suitable to buy shares.

4.4) Market Ratio

Ratio	2017	2018	2019	2020	2021
PE Ratio	11.58	10.5	14.01	16.16	41.02
Dividend Yield	3.98%	3.75%	3.84%	3.03%	1.01%

 

Price-Earnings Ratio: The ratio is used to evaluate businesses and determine whether they are over or undervalued. The P/E ratio aids investors in estimating a stock's market value in relation to its earnings. The value has increased over time. The highest value is recorded in 2021. This indicates that there is a possibility that the company stocks are overvalued.

Dividend Yield Ratio: Evaluates the annual dividend value in relation to the share price of an asset. The lowest value was recorded in 2021. When a company's dividend yield is low compared to other companies in its industry, one of two things may be true: either the stock price is high because the market believes the company has promising future prospects and is not overly concerned about the company's dividend payments, or the company is in financial trouble and cannot afford to pay reasonable dividends. However, a corporation with a high dividend yield may also exhibit a declining share price. The company has not obtained many profits to pay dividends. That can be identified as the reason for the low dividend yield.

5)    Conclusion

John Keels Holding has shown somewhat slower performance and revenue decline. According to the trend analysis, the cost of sales has increased more than the revenue. The ratio analysis shows that the liquidity position is in good shape. Due to the low profitability, the company's performance is inefficient. The expense of sales is the cause. The business needs to take measures to lower its general expenses and cost of sales. The corporation might make bulk purchases and earn discounts to lower the transaction cost. Decreases in the cost of sales statistics can also be achieved through automation and supplier leveraging. The fact that they have a lower return on assets ratio shows that they have not used their assets to generate income as intended. Over time, earnings per share have fallen. This is bad since it can demotivate investors.

Forecasting should be used by John Keels Holdings to assess potential growth avenues and place more emphasis on lowering the cost of sales. To stabilize the company's performance, the business should pay special attention to its business strategies.