Executive
Summary
Financial statement analysis
entails analyzing financial reports to comprehend an organization's financial
performance. Decisions about lending and investing can be based on the
findings.
LAUGFS Gas PLC is a public limited
company incorporated in Sri Lanka under the Companies Act No. 17 of 1982 and
re-registered as required under the provisions of Companies Act No. 7 of 2007
and is listed on the Colombo Stock Exchange since December 2010.
The principal activities of LAUGFS
Gas PLC are downstream business of Liquefied Petroleum Gas (LPG) and other
related products and services. The Company caters to domestic, commercial and
industrial LPG markets.
During the past years under review has challenged the LP gas
sector as the country’s economic downturn put pressure on the domestic foreign
exchange reserves. LAUGFS Gas being the only private sector LP gas supplier to
the Sri Lankan market faced severe shortages in meeting the local demand on the
insufficiency of foreign currency for LPG purchase. This negatively reflected
on the overall financial performance of the Company and the Group as sales and
distribution activities were limited to available supplies.
1.0
Introduction
Financial statement analysis is a
quantitative technique that focuses on examining a company's balance sheet and
income statement in order to evaluate business and financial ratios for
representations, business appraisal, and financial forecasts.
There are two main approaches to
financial statement analysis. The first method involves the application of
horizontal, vertical, and trend analysis. Horizontal analysis compares
financial information over a series of reporting periods, whereas vertical
analysis is a proportional examination of a financial statement in which each
line item is listed as a percentage of another item. This usually means that
every line item on an income statement is expressed as a percentage of gross
sales, whereas every line item on a balance sheet is expressed as a percentage
of total assets. Thus, horizontal analysis is the assessment of many time
periods' outcomes, whereas vertical analysis is the review of the percentage of
accounts to each other within each time period.
The use of various types of ratios
is the second approach of examining the financial statements. Ratios are used
to determine the size of one number in comparison to another. There are various
types of ratios, each of which is intended to investigate a different aspect of
a company's performance.
Financial Statement Analysis Controversies
While financial statement analysis
is an effective tool, there are certain considerations to keep in mind that can
interfere with the interpretation of the data. These are the issues:
• Periodically comparability - For
example, an expense may appear in cost of Salest of goods sold in one period
and administrative expenses in another.
• firm comparability - Because each
firm aggregates financial information differently, the outcomes of their ratios
are not comparable. This can cause an analyst to form inaccurate conclusions
about a company's results in relation to its competitors.
• Operational data - Financial
analysis solely looks at a company's financial information, not its operational
information.
2.0
LAUGFS Holding (PVT)
Ltd.
2.1 Profile of the Company
LAUGFS Gas PLC is a well-known LPG
provider that is subsidiary of the LAUGFS group. The global creation of the
LAUGFS conglomerate dates back to the mid-1990s. It was founded in 1995. Mr. WKH Wegapitiya and Mr. UK Thilak De Silva
founded LAUGFS Holdings. Power and
energy, manufacturing, consumer retail, logistics, and other industries are
among them. LAUGFS has risen to become one of the world's most important LPG players.
For example, they are the largest LPG distributor in Bangladesh, distributing
60000MT of LPG each year. They made significant investments in the LPG
industry. They built South Asia's largest LPG transshipment facility in Sri
Lanka's Hambanthota International Port.
LAUGFS Gas PLC's exposure to Sri
Lanka commenced in 2001. When the government liberalized the LPG industry, the
company began operations. Then, as the second player in the Sri Lankan LPG
market, LAUGFS Gas PLC emerged. The company was listed on the Colombo Stock
Exchange. They now operate throughout the entire island. Their main storage and
filling facility is located in Mabima and has a capacity of 3000MT LPG. LAUGFS currently controls 30% of the domestic
market and 60% of the industrial bulk market. They established dealer locations
throughout the island, and they currently cover the entire island's LPG demand.
2.2 Product Range Performance
LAUGFS main business is the supply of LPG. They operate at
various business levels as follows:
Domestic
According to analysis, 42% of the population
exclusively utilizes household gas cylinders. Because of the huge demand, the
domestic sector contributes a large amount of LAUGFS revenue. LAUGFS provides
three types of residential gas cylinders to meet household demand: 12.5kg, 5kg,
and 2.5kg cylinders. They deserve the courtesy for pioneering the 2.5kg pack,
which revolutionized the industry. It is popular, particularly among
housewives, because it is inexpensive, simple to use, and easy to store. They
estimate that if a cylinder is properly maintained, it can be refilled a
hundred times.
Commercial
This area caters to the commercial
business sector, such as SMEs. Hotels, bakeries, restaurants, and other
food-related businesses fall into this group. Aside from LP gas, they also
offer after-sales services and commercial consulting.
Industrial Bulk
This facility caters to large-scale
businesses that rely heavily on gas as a primary source of energy. Demand for
bulk LPG is mostly created by the tile, confectionery, rubber, and steel
industries; for example, Lanka Walltiles PLC and Lanka Aluminum PLC fall into
this category. Apart from gas supply, LAUGFS offers piping systems, big storage
tanks, vaporizers, pressure regulators, safety auditing checks, and other
services to these large-scale businesses. LAUGFS Gas Ltd has constructed
storage facilities throughout the island for the convenience of their
large-scale customers.
Accessories and value-added services
Apart from LPG, LAUGFS additionally
offers accessories such as authorized regulators, valves, and pipes for both
the household and commercial markets.
LAUGFS also offers technical
assistance for energy solutions. They have a professional team with extensive
expertise of the energy industry.
They also provide their clients
training and development services. Companies can hire a LAUGFS energy expert
team to educate their staff in the energy sector, both theoretically and
practically. This facility is largely used by bulk businesses like steel and
tile companies.
2.3
Share Market Performance
Figure 01: Share
price performance
3.0
Sample and the
Financial Data
The information gathered from the
company's financial statements, which include the Comprehensive Income
Statement, Statement of Financial Position, and Cash Flow Statement. The financial
reports for 2016/2017, 2017/2018,2018/2019, 2019/2020, 2020/2021,
2021/2022 are included in the following
statement.
LAUGFS GAS PLC – Statement of Financial Position
Figure 02:
LAUGHS Statement of Comprehensive Income (2018-2022)
Figure 03: CFL
Statement of Comprehensive Income (2018-2022)
4.0
Financial Report
Analysis
4.1 Vertical Analysis
Overview
Financial statement analysis is a
quantitative procedure that primarily analyzes the business's balance sheet and
income statement in order to interpret business and financial ratios of the
business performance evaluation, as well as financial forecasting.
I. Vertical Analysis
II. Horizontal Analysis
III. Ratio Analysis
This research examines Laugh Gas
PLC's financial status utilizing vertical, horizontal, trend, and ratio
analysis.
4.2 Vertical Analysis on
Statement of Comprehensive Income
Vertical analysis is a financial
analysis tool that evaluates each line item on the financial statements as a
percentage of its overall category. In this case, each component of the income
statement will be calculated as a percentage of the company's revenue. Each
asset element on the balance sheet will be determined as a percentage of total
assets, and each equity and liability element will be calculated as a
percentage of total equity and liabilities.
This application is designed to
evaluate financial information from a single reporting period. The
proportionate relationship of the elements is measured using the vertical
analysis technique. Vertical analysis is also utilized to determine the
business's trend through time.
Revenue is primarily comprised of
product sales to third-party customers. Revenue is calculated based on the fair
value of the consideration received or due, excluding taxes collected on behalf
of third parties, rebates, discounts, and certain marketing expenses that are
not distinguishable from sales. The Group views the sale and delivery of
products to be one performance obligation, and revenue is recognized when
control is transferred to a customer.
The vertical analysis table below
is obtained from Laugh Gas PLC's financial reports for the fiscal years
2017/2018 to 2021/2022.
4.2.1 Cost of sales
By the analysis of cost of Salest
of sales it was noted that over the 5 years the majority of cost of Salest was
for sales. On average this represent 91% of the cost of Salest. The notable
increase in the cost of Sales of sales was noted in 2021/22 fiscal year this
accounts for 99% of component of the revenue. Over these 5 years the minimum
cost of Sales was noted in the year 2021 with 89.49%.
The Cost of Salest of Sales of
sales drastically increase in 2021/22 due to
increase in natural gas prices in the world market the cost of Sales has
nearly quadrupled and the start of Ukraine Russia War has reduced the world production of natural
gas by a large margin.
Figure 04: Cost
of Sales (2018-2022)
The COS in 2019 was reduced by
almost 3%. This could be accounted by the Global Pandemic Covid -19 in 2019
where imports in the final half of the fiscal year. Another factor helps to
reduced the COS is the slight growth in SL economy in the first Quarter (Post
easter bombing economic measures undertaken)
4.2.2 Gross profit
The laugh Gas PLC has enjoyed a
healthy Gross profit margin for the last five years despite heavy economic
turmoil. The minimum Gross profit was
noted in 2022 as this directly corelate with a sudden depreciation of LKR
against the dollar by nearly 200%. This heavily increased the cost of Sales.
The government undertook initiative to control the price of LPG Gas to regulate
a cost of living for the people of Sri Lanka. This saw an increase in cost
without an increase in the product pricing thereby incurring heavy losses for
the company.
The average gross profit noted over
the last 5 years was 8.25%. The maximum profit was noted in 2019 and the
minimum was recorded in 2022.
4.2.3 Other Income
Other Income generated by Laugh Gas
PLC was noted to be fairly consistent over the last 5 years with a maximum of
2.56% noted of total revenue and in 2020 minimum of 1.45% of total revenue was
noted in 2022.
The company invest in a number of
other income sources and key consistent performances were noted in Expiration
of Refundable Deposits Liability & sundry income. And these were consistent
over the last 5 years.
4.2.4 Selling and
Distribution Expenses
Selling and distribution expenses
as a % of revenue is fairly consistent over the last 5 years. The maximum cost
was noted of 9.8% of total revenue in the year 2020. The minimum was noted in 2018. The average similar distribution
cost for laugh Gas products is at 7.88% against revenue over the 5 years.
4.2.5 Income Tax Expenses
The average income taxe over the
last5 years was 0.56% of total revenue. A notable variation is noted in the
income tax returns were noted in the year 2020 & 2022 and these were
recorded as 0.71% of revenue and 2.75% of revenue which has come in to the
company. These could be tax returns for maintaining consumer retail prices
despite increases in cost of production. The highest tax expenses was noted in
2018.
4.2.6 Profit for the year
The average profit after tax on
revenue is at -9.25% over the last 5 years. A sharp increase to -18.65% in the
loss was noted in 2022 which directly coincide with an increase in world
natural gas prices and Ukraine Russia war which has pampered availability of
natural gas.
Without taking in to the account
the year 2022 the average net loss after tax is -6.92%. The company has
experienced this loss consistently in these 4 previous years.
4.2.7 Administration
expenses
The company experienced consistent
administration expenses throughout the 5 years averaging at 5.80% on revenue.
The minimum expenses were incurred in the year 2022 and the maximum was noted
in 2019 & 2021 each boasting 6.49% of the revenue.
4.3 Vertical Analysis on
Statement of Financial Position
4.3.1 Total Non-Current Assets
The average noncurrent assets position represents 76% of the
total assets during 2015 - 2019. In financial year 2018/2019 the non-current
assets represented 48% of the total assets which is the lowest during analysis
period.
4.3.2 Current Assets
The average represent of the current assets from the total
assets for the determined financial years is 20%. During 2018/2019 total
current assets have increased drastically due to inventories, trade receivables
and other financial assets.
4.3.3 Capital and Reserves
Figure 05: Vertical Analysis on Statement of Financial
Position (2018-2022)
4.3.4 Non-current
Liabilities
Non-current liabilities, which
account for 41% of total liabilities, increased by 18% to Rs. 20,941Mn as a
result of currency exchange losses as of the reporting year 2021/22.
4.3.5 Current Liabilities
Current liabilities climbed by 28%
to Rs. 30,572Mn during the fiscal year as trade payables, interest bearing
loans and borrowings, and income tax payables increased.
4.4 Horizontal Analysis
Overview
Horizontal financial statement
analysis is comparing a financial ratio, a benchmark, or a line item over a
number of accounting periods. Trend analysis is another name for this type of
analysis. Horizontal analysis allows for the evaluation of relative changes in
several things throughout time. It also shows the evolution of sales, costs,
and other financial statement line items through time.
Accounting periods might have two
or more periods. Accounting periods might be monthly, quarterly, or annual.
When determining the right number of accounting periods, the analyst's
judgement will be required.
Horizontal financial statement
analysis can be performed on any item in the income statement, balance sheet,
or cash flow statement. This analysis can be performed on revenue, cost of
sales, expenses, assets, cash, equity, and liabilities, for example. It can
also be applied to earnings per share (EPS), price earnings ratio, dividend
payout, and other comparable ratios. For Example, This analysis can be
performed on revenue, cost of sales, expenses, assets, cash, equity, and
liabilities, for example. It can also be applied to earnings per share (EPS),
price earnings ratio, dividend payout, and other comparable ratios.
Horizontal analysis can be
accomplished using one of two methods: absolute comparison or percentage
comparison.
• Absolute Comparison:
Comparing the absolute currency
amounts of various goods across time is one method of undertaking horizontal
analysis. For example, cash in hand at the end of an accounting period can be
compared to cash in hand at the end of earlier accounting periods. This
strategy is useful for determining the elements that change the most.
• Percentage Comparison:
The second way of horizontal
analysis compares percentage differences in specific elements across time. To
facilitate comparison, absolute currency quantities are transformed into
percentages. This strategy is effective for comparing the performance of two
companies of varying size and scope.
4.4.1 Horizontal Analysis of Statement of
Comprehensive Income
Figure 06:
Horizontal Analysis on Statement of Comprehensive Income
Figure 07: Trend Analysis (2018-2022)
4.4.2 Gross Profit
Due to rising LPG import costs and
rupee depreciation, gross earnings decreased by 23% to Rs 2,144 million, with
gross profit margins falling to 10% in 2017/18 from 17% the previous year.
During the year 2018, LPG prices jumped by 23% from 2017.Group gross margins
dropped to 1% from 11% in 2021 and consolidated gross profits dropped by 91% to
Rs. 339Mn.Throughout the year, a number of factors had an impact on the Group's
expenses. Depreciation of currencies and fluctuating contract prices on the
global market. The retail price of LPG was restricted to a maximum of Rs. 1,856
for a 12.5kg cylinder during the first two quarters of the year. At the same
time, the cost of LPG was US$ 656.50 per MT on the international market.
4.4.3 Profit Before Tax (PBT)
Loss before tax increased dramatically
from Rs. 915Mn to Rs. 4,570Mn in 2022. This was mostly brought on by a lack of
supply, difficulty obtaining foreign cash for LC opening, and other
macroeconomic issues that hindered Sri Lanka's economic activity.
Loss after taxes totaled Rs. 3,
982Mn, which was 505% more than the previous year's loss. The sum of the equity
investors' post-tax loss was Rs. 4,077Mn.
4.4.4 Profit for the year
Group In ongoing operations, the
loss after tax was Rs 1,628 mn as opposed to Rs 623 million in the 2017.
This was principally brought on by
increased import prices for LPG, rising costs for selling and distributing it,
and growing borrowing charges. The group recorded a profit of Rs 296 million
from terminated operations due to the sale of the non-core businesses.
4.5
Figure 08:
Horizontal Analysis on Statement of Financial Position
Horizontal Analysis on Statement of Financial
Position
|
Figure 08:
Horizontal Analysis on Statement of Financial Position |
Figure 09: Trend Analysis (2018-2022)
4.5.1 Total Non-Current Assets
In the financial year 2017/2018 a
decrease by 22% recorded in non-current assets compare to the base year 2017.
With the sale of the group's non-core businesses, the group's assets, which
totaled Rs 31,395mn, decreased by (12%) from the previous year. Total assets
grew by 13% to Rs.35bn as we invested Rs.6.5bn in enhancing our capacity with
the bulk of it invested in the LPG Import/Export Terminal. (Annual Report,
2019) Total assets of the Group increased by 37% to Rs. 57,703Mn. Non-current
assets, forming 89% of Group assets increased to Rs. 51,162Mn.The net book
value of property, plant and equipment amounted to Rs. 42, 010Mn, an increase
of Rs.14,900Mn due to revaluation of assets and benefiting from foreign
currency appreciation.
4.5.2 Total Current Assets
Total current assets recorded
continues year on year growth from 2017 to 2022. During the period current assets has decreased to
87% in 2020 and increase to maximum of 123% in 2018. Current assets primarily
driven by inventories and trade and other receivables decreased by 20% to Rs.
6,540Mn. Value of inventory decreased to Rs. 1,941Mn compared to Rs. 2,956Mn.
Trade and other receivables declined by 24% to Rs. 3,420Mn. (Annual Report,
2022)
4.5.3 Total Assets
Total assets increased by 13% to
Rs.35 billion as LAUGFS invested Rs.6.5 billion in expanding our capacity,
the majority of which was put in the LPG Import/Export Terminal in 2018. In
2022, the Group's total assets increased by 37% to Rs. 57,703Mn. Assets
increased by 3% to Rs. 45,431Mn in 2021. Total assets increased by 12% to Rs.
39.7 billion in 2020 due to the acquisition of our own fleet of gas tankers for
LPG transportation, the largest LPG storage and transhipment terminal in South
Asia, and bottling and distribution businesses in Sri Lanka and Bangladesh.
Total assets increased by 13% to Rs.35 billion as we invested Rs.6.5 billion in
expanding our capacity, the majority of which was put in the LPG Import/Export
Terminal. With the disposal of the organization's non-core operations, group assets
fell by (12%) year on year to Rs 31,395 million.
4.4.4 Equity
Total equity comprises of stated
capital, other reserves and retained earnings. In 2017/18 fiscal year loss
before tax increased dramatically from Rs. 915Mn to Rs. 4,570Mn this year. This
was mostly brought on by a lack of supply, difficulty obtaining foreign cash
for LC opening, and other macroeconomic issues that hindered Sri Lanka's
economic activity. Loss after taxes totaled Rs. 3, 982Mn, which was 505% more
than the previous year's loss. The sum of the equity investors' post-tax loss
was Rs. 4,077Mn. Equity grew by 1,034% to Rs. 6,189Mn for the year 2022
4.4.5 Non-Current Liabilities
2022 Non-current liabilities, which
account for 41% of total liabilities, increased by 18% to Rs. 20,941Mn as a
result of currency translation losses as of the reporting date. Non-current
liabilities, which account for 43% of total liabilities, fell by 2% to Rs.
17,675Mn in 2021 as long-term borrowings were repaid throughout the year. Debt
obligations became due in 2020. Non-current liabilities were 17% lower at Rs.
8,425Mn.
4.4.6 Current Liabilities
2022 Current liabilities climbed by
28% to Rs. 30,572Mn during the fiscal year as trade payables, interest bearing
loans and borrowings, and income tax payables increased. 2021 Current
liabilities climbed by 14% to Rs. 23,825Mn during the fiscal year, as trade
payables and short-term borrowings increased. Since 2018, the current
liabilities have constantly increased in comparison to the base year.
4.4.7 Total Equity and Liabilities
Equity dropped by 31% to Rs. 546
million as retained losses increased to Rs. 3,192 million from Rs. 2,336
million in 2020.
4.6 Ratio Analysis
Ratio analysis is a quantitative
method of gaining insight into a company's profitability, operational
efficiency, and liquidity by studying its financial statements such as the
balance sheet and income statement. Ratio analysis is a cornerstone of fundamental
equity analysis.
Investors and analysts employ ratio
analysis to evaluate the financial health of companies by scrutinizing past and
current financial statements. Comparative data can demonstrate how a company is
performing over time and can be used to estimate likely future performance.
This data can also compare a company's financial standing with industry
averages while measuring how a company stacks up against others within the same
sector.
The ratio analysis is mainly used
in two major ways.
• Trend
analysis
Compare the financial ratios of the
company over a period to determine the trend of the business.
• Industry
comparison
The company ratios compare and
analysis with the competing industries to access the present position of the
company.
These ratios can be mainly
segregate in to five main categories.
·
Profitability Ratios
·
Efficiency Ratios
·
Liquidity Ratios
·
Solvency Ratios
·
Market Performance Ratios
In this report the financial ratios
of the Convenience Foods (Lanka) PLC are analyzed and interpreted.
4.6.1 Profitability Ratios
Every company's primary priority is
its profitability. Profitability ratios are one of the most commonly utilized
methods in financial ratio analysis. They are used to discover the bottom line
for the company's managers and the return on equity for its investors.
Profitability metrics are crucial to both firm managers and owners. In order to drive the business in the right direction,
management must have a gauge of profitability. If a corporation has outside
investors who have purchased stock in the company, management must demonstrate
profitability to those equity investors.
|
Profitability Ratios |
2017/2018 |
2018/2019 |
2019/2020 |
2020/2021 |
2021/2022 |
|
Return on Equity |
-36% |
-100% |
-174% |
-99% |
-118% |
|
Return on Assets |
0.11% |
1.53% |
0.76% |
2.93% |
1.20% |
|
Gross Profit Margin |
10.04% |
13.22% |
10.38% |
10.51% |
0.98% |
|
Net Profit Margin |
-7.62% |
-5.21% |
-6.21% |
-1.85% |
-11.51% |
Figure 10:
Profitability Ratios Comparison
Return on Equity
A financial indicator based on
shareholders' equity that gauges a company's profitability and efficiency in
generating profits for its shareholders. Investors and analysts frequently use
it to evaluate a company's performance and capacity to properly use its equity
capital.
In 2017/2018 fiscal year the return
on equity was at -36%. The following 4 years also shows a negative return on
equity showing a poor financial health over the years. The fiscal year 2019/20
marked the worst return on equity. This however coincide with the global Covid
-19 pandemic and the easter bombing.
Return on Asset
A financial ratio that compares a
company's profitability to its total assets. It reveals how successfully a
company's assets are being used to generate profits.
The Return on Assets does not show much variation over the last
5 years and LAUGFS PLC maintains a lower ROA which is observed in this market
sector. The changes observed on the return on investment were a low of 0.11% in
2017/2018 and a high of 2.93% in 2020/21.This also indicates the utilization of
assets to generate income has been fairly consistent.
Gross Profit
The gross profit margin of an
organization is a measure of its profitability that is computed as the gross
profit as a percentage of revenue. The amount available after deducting the
cost of goods sold (COGS) or direct costs of earning revenue from revenue is
the gross profit.
The gross profit margin through the years of LAUGH PLC
2018/2019,2019/20, 2020/21 shows a consistent gross profit margin in to maximum
noted in 2019/2020 and a minimum noted in 2017/18. This indicates an insight
into the efficiency of LAUGFS production and sales processes. This gross profit
indicates that the LAUGFS is able to sell its products at a price higher than
the cost to produce them, which is a positive sign of profitability. However
this has not observed in 2021/22 due to several variables influenced the
Group's costs during the year. Currency depreciation, contract price volatility
in the global market.
Net Profit
A financial measurement that
reflects the percentage of a company's income that is converted into net profit
after deducting all expenses such as operational costs, taxes, interest, and
other related charges. It is an important profitability ratio used to evaluate
an organization's ability to generate profit from its operations.
The net profit of the
Group shows a continuous loss over the last 5 year period. The highest net loss
was observed in the fiscal year 2021/2022 and the lower net loss was noted in
the fiscal year 2017/18.
Figure 11: Gross
Profit and Net Profit Comparison
4.6.2 Efficiency ratios
Efficiency ratios are financial
indicators that measure how well a business uses its resources in order to
generate revenue, manage assets, and control expenses. These ratios contribute
in determining a company's overall operational efficiency and effectiveness.
Different efficiency ratios concentrate on different parts of a company's
operations and are frequently used to assess a company's performance over time
or against its competitors.
|
Efficiency Ratios |
2017/2018 |
2018/2019 |
2019/2020 |
2020/2021 |
2021/2022 |
|
|
Accounts Receivable
Turnover |
5.15 |
6.15 |
7.05 |
8.29 |
8.76 |
|
|
Merchandise Turnover |
12.84 |
12.39 |
13.91 |
14.03 |
13.99 |
|
|
Debtor Collection Period
(Days) |
71 |
59 |
52 |
44 |
42 |
|
|
Inventory Holding Period
(Days) |
28 |
29 |
26 |
26 |
26 |
|
|
Asset Turnover Ratio |
0.64 |
Figure 12:
Efficiency Ratios and Average |
0.72 |
0.87 |
0.69 |
Asset Turnover Ratio
The Asset Turnover Ratio is a
financial metric that measures a company's ability to generate sales revenue
from its assets. It assesses how successfully a corporation uses its assets to
generate sales.
Figure 13: Asset
Turnover times Figure 12:
Efficiency Ratios and Average
LAUGHS PLC maintains a fairly
consistent Asset Turnover Ratio averaging to 0.75 times. However in 2021/2 it
shows a lowest Asset Turnover of 0.69 showing the inefficient asset management
of the company.
Merchandise Turnover Ratio
The ratio indicates how many times
a company's inventory was sold and replenished during a particular time frame.
This ratio is critical for making pricing, production, and purchasing new
inventory decisions.
LAUGHS on a average sells it entire
inventory LAUGFS maintain appropriate liquidity through implementing strong
inventory management systems, centralizing credit management, and regularly
evaluating the Group's liquidity needs.
Working Capital Cycle
The Working Capital Cycle (WCC),
also known as the Cash Conversion Cycle (CCC), is a financial indicator that
evaluates how long it takes a company to convert its investment in inventory
and other current assets into cash by selling products and receiving payments
from consumers. It is a key metric for determining a company's operational
efficiency and liquidity.
Accounts Receivable Turnover
Accounts Receivable Turnover is a
financial metric that indicates how well a company manages its receivables, or
the values due by consumers for goods or services offered on credit. This ratio
indicates how rapidly a corporation collects outstanding receivables over a
specified time period, usually a year.
4.6.3 Gearing Ratios/Solvency Ratios
Figure 14:
Liquidity Ratios and Average
|
Liquidity Ratios |
2017/2018 |
2018/2019 |
2019/2020 |
2020/2021 |
2021/2022 |
|
Current Ratio |
0.75 |
0.47 |
0.31 |
0.34 |
0.21 |
|
Quick Asset/Acid Test
Ratio |
0.62 |
0.35 |
0.23 |
0.22 |
0.15 |
Current Ratio
It is a financial indicator that
measures a company's capacity to cover its short-term commitments with its
short-term assets. It is a widely used indication of a company's financial
health and ability to satisfy future obligations.
The Group's current ratio dropped
to 0.21 times. In comparison to 2021, the Group's fast assets ratio decreased
to 0.15 times from 0.22 times.
Quick Ratio
The Quick Ratio, also referred to
as the Acid-Test Ratio, is a financial indicator used to analyze a company's
short-term liquidity as well as capability to meet its most liquid financial
obligations. Because it eliminates inventory and other less liquid assets from
the computation, it is a more strict measure of liquidity than the current
ratio.
Figure 16:
Solvency Ratios and Average Figure 15:
Current Ratio and Quick Asset Ratio comparison
Gearing ratio / Solvency ratio
The gearing ratio and solvency
ratio are financial measurements that are used to evaluate a company's
financial leverage and capacity to satisfy long-term debt obligations. These
ratios provide information on the capital structure and general financial
health of the company.
The gearing ratio, commonly known
as the debt-to-equity ratio, calculates the percentage of a company's total
capital that is financed by debt versus equity. It is computed by dividing
total debt by shareholders' equity.
The solvency ratio evaluates a
company's capacity to meet long-term debt obligations by comparing total assets
to total liabilities. It shows how much the company's assets would cover its
liabilities in the case of bankruptcy.
|
Solvency Ratios |
2017/2018 |
2018/2019 |
2019/2020 |
2020/2021 |
2021/2022 |
|
|
|
|
|
|
|
|
|
|
Debt Ratio |
95.41% |
96.74% |
98.02% |
98.70% |
89.27% |
|
|
Equity Ratio |
4.59% |
3.26% |
1.98% |
1.30% |
10.73% |
|
|
Times Interest Earned |
0.020575 |
Figure 16:
Solvency Ratios and Average |
0.117182 |
0.535132 |
0.263819 |
Figure 16:
Solvency Ratios and Average comparison
Debt Ratio
The debt ratio, often known as the
debt-to-equity ratio, is a financial indicator that compares a company's total
debt to total equity. It reveals the company's leverage or financial risk by
demonstrating how much of its assets are funded by debt versus equity.
LAUGFS is maintaining the debt ratio below 1 translates to the
fact that a greater portion of a company's assets is funded by equity.
Time Interest Earned
TIE, also known as the Interest
Coverage Ratio, is a financial statistic used to analyze a company's capacity
to cover interest payments on outstanding debt. It assesses the company's
ability to generate sufficient operating income to cover its interest costs.
Figure 17:
Interest Cover comparison
The firm is able to repay interest
on financial obligations’ minimum 55 times from earnings before interest and
tax.
Equity Ratio
The equity ratio, also known as the
equity-to-assets ratio or the shareholder's equity ratio, is a financial
indicator that is used to evaluate a company's financial stability and
leverage. It reveals the percentage of a company's total assets that are funded
by shareholders' equity rather than debt or liabilities.
4.6.4 Market Performance Ratios
Figure 17:
Interest Cover comparison
|
Market Performance Ratios |
2017/2018 |
2018/2019 |
2019/2020 |
2020/2021 |
2021/2022 |
|
|
Price Earnings Ratio
(Times) |
-2.4878 |
-2.80394 |
-1.98769 |
-5.79859 |
-1.65192 |
|
|
Dividend Yield |
-421.00% |
-345.00% |
0.00% |
0.00% |
0.00% |
|
|
Figure 18:
Market Performance Ratios |
(5.31) |
(4.23) |
(5.51) |
(2.15) |
(12.98) |
Earnings Per Share
Earnings
Per Share (EPS) is a financial measurement that shows the percentage of a
company's earnings that is given to each outstanding share of common stock. It
is an important measure of a company's profitability, and investors, analysts,
and shareholders frequently use it to evaluate a company's financial
performance on a per-share basis.
Dividend Yield
Dividend
yield is a financial indicator that expresses the annual dividend income an
investor can expect to earn from an investment as a proportion of the
investment's current market price. It allows investors to compare the income
potential of a dividend-paying stock or investment to its market value.
Dividend yield is frequently employed by income-seeking investors, such as
retirees or income-focused portfolios.
Price to Earnings Ratio
The
Price-to-Earnings (P/E) ratio is a financial measurement used to determine a
company's stock's relative value. Investors frequently use the P/E ratio to
determine how pricey or cheap a stock is in relation to its earnings potential.
5.0
Conclusion
This report was created to examine
LAUGFS GAS PLC's financial performance. For the years 2017/2018 through
2021/2022, methodologies such as Vertical Analysis, Horizontal Analysis, and
Ratio Analysis were used. According to the report, the firm is financially
secure and has maintained its market leader position in the LPG sector.
The year 2018-2022 under
consideration has presented challenges to the LP gas sector, as the country's
economic slump has put strain on local foreign exchange reserves. Due to a lack
of foreign cash for LPG purchases, LAUGFS Gas, the only private sector LP gas
supplier to the Sri Lankan market, had acute constraints in meeting local
demand. This had a detrimental impact on the Company's and Group's overall
financial performance since sales and distribution activities were constrained by
available supply. The performance of the 2021/22 fiscal year must thus be
considered in the light of the overall country condition and ability to meet LP
gas import requirements.
Despite the authorities lifting the maximum
price cap, downstream operations in Sri Lanka have lost revenues over the last
five years due to uncertain macroeconomic conditions.
The operations in Sri Lanka generate 27% of the
Group's income, and the affected downstream operations had a substantial
influence on the company's overall performance.
