CIC Holdings PLC Financial Statement Analysis

 1.0Introduction

 

1.1 Introduction to the Report

 

This report shows the connection between two years term financial summaries of CIC Holdings PLC. In this project the analytical ratios such as Horizontal Analysis, Vertical Analysis, Trend Analysis and Ratio Analysis are practically used to show above connection.

The main purpose of this project is to compare the financial statements of CIC Holdings within two years and reach conclusions about their financial strength and relative stability. And also by using this, can take an understanding about the tasks about the monetary parts of the organization regards to Profitability of the organization, Market worth, Venture pattern, Profit installment arrangements, Resource and liabilities usage, Devaluation system, Assets and liabilities management, Product sale and cost plan, Management policies and other accounting procedures of the organization.

After studying this project, all the investors and shareholders can judge the financial position of the organization and make their future decisions.

 

1.2 Advantages of Analyzing Financial Statements

When considering Financial Statements Analysis, it helps to make future decisions with a proper understanding about the organizational financial performances. And also this helps an organization to evaluate the effectiveness of the current strategies and make adjustments to achieve its goals.

And this Financial Statements Analysis helps to identify the Strengths and Weaknesses of the organization and Risks, the organization has to face. By examining the key financial metrics such as, Revenue, Growth, Profitability and Cash Flow, can determine which aspects of the business are performing well and which may need improvements. And this data allows you to focus on the areas, that will have the most significant impact on your organization’s overall success.

And also conducting Financial Statements Analysis helps you to benchmark your business against industry standards and competitors. Comparing your financial performances with that of similar businesses can highlight areas where your company may be drifting or excelling. This information helps you to identify best practices and adapt your strategies to better compete in the market place.

And when the organization is seeking an opportunity for a loan or attract investors, providing a complete financial statement analysis is essential. Because by that the lenders and investors can take an idea about the ability of the business to repay debts and generate profits.

And also for the Financial Planning and Forecasting also this Financial Statements Analysis is key component. By examining historical financial data, the trends and patterns, that can inform the future projections, can be identified. This accurate financial forecasting helps to make strategic decisions and allocate resources effectively as well as to ensure that your business remains on the track to achieve its goals.

 

1.3 Introduction to the Organization

CIC Holdings PLC is a leading conglomerate in Sri Lanka with core interests in the local agriculture sector. The company was incorporated in 1964 as a part of Imperial Chemical Industries (ICI) in UK. At present, CIC has exposure to Agri Produce, Livestock Solutions, Crop Solutions, Health & Personal Care, and Industrial Solutions. Agri produce primarily include rice, dairy, and fresh produce whilst livestock solutions consist of poultry, dayold-chicks (DOCs), feed business and vet care. Crop Solutions segment caters to plant nutrition, plant protection and seeds. Health and personal care segment consist of pharmaceuticals, medical devices, and personal care. Industrial Solutions segment’s core business is the supply of binders for local paint industry. Plastic packaging, water treatment solutions, dry rubber are other areas that fall under this segment.

 

2       Horizontal Analysis

Horizontal Analysis is used review the company’s financial statements over multiple periods. This allows users to easily spot trends and growth patterns. Under this Rupee Change and Percentage changes are calculated.

Ø  Rupee Change = Analysis Period Amount – Based Period Amount                            

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.1 Horizontal Analysis of Financial Position

          2.1.1 Rupee Change

 

	Rupee Change
	2021	2022
Assets
Non- Current Assets
Property, Plant and Equipment	67941	285640
Investment Property	-	-
Capital work in process	-	-
Biological assets	-	-
Intangible assets	23153	-7438
Deferred tax assets	-	-
Investment in subsidiaries	163335	0
Equity accounted investees	0	0
Equity investments as fair value through OCI	56803	973286
Total Non- Current Assets	311232	1251488
Current Assets
Inventories	-97328	-374512
Biological assets	-	-
Income tax receivables	-	-
Trade receivables	-6868	-47288
Contract assets	3527	15935
Other receivables	-250721	368631
Equity investment at fair value through OIC	4614	-2291
Deposits with bank	-	601308
Cash in hand at the bank	-332420	137185
Total Current Assets	3540	698968
Total Assts	169184	1950456
Equity and Liabilities
Equity attributable to equity holders and company
Stated capital	0	0
Capital Reserves	76673	238477
Revenue Reserves	775978	830925
Total Equity	852651	1069402
Non- Current Liabilities
Loans and Borrowings	-1216	-2614
Retirement Benefits obligations	-8017	-7633
Grants	-	-
Deferred tax liabilities	45911	73510
Total Non- Current Liabilities	36678	63263
Current Liabilities
Trade payables	371519	800670
Contract liability	3442	20214
Income tax payable	-	72148
Accruals and other payables	145295	101849
Loans and borrowing	-1366288	-177090
Total Current Liabilities	-720125	817791
Total Liabilities	-683447	881054
Total Equity and Liabilities	169204	1950456

 

Property, Plant and Equipment, under the Non- Current Assets have significantly increased over the years. So the highest value is in 2022. But the Intangible Assets has decreased in 2022 than 2021. But when considering Total Non- Current Assets, it has increased in 2022 than 2021, due to the significant increment of Property, Plant and Equipment and Equity investments as fair value through OCI in 2022.

And when considering Total Current Assets, it also has significant increment in 2022, than 2021. That is due to the increment of Contract assets, Other receivables, Deposits with bank and Cash in hand at the bank. But wen considering Inventories, it has significantly decreased than 2021, in 2022.

Due to the higher values for Current and Non- Current Assets, 2022 has the highest value for Total Assets.

When considering Total Equity, the highest value for that is also recorded in 2022. And for Total Current Liabilities and Total Non- Current Liabilities also, the highest values are recorded in year 2022. Due to that 2022 has the highest value for Total Liabilities also. Trade Payables under the Current Liabilities has a significant increment in 2022 than 2021.

 

 

 

 

 

 

2.1.2 Percentage Change

 

	2021 (%)	2022  (%)
Assets
Non- Current Assets
Property, Plant and Equipment	3.26	3.16
Investment Property	-	-
Capital work in process	-	-
Biological assets	-	-
Intangible assets	79.02	44.14
Deferred tax assets	-	-
Investment in subsidiaries	11.22	10.09
Equity accounted investees	0.00	0.00
Equity investments as fair value through OCI	28.68	22.29
Total Non- Current Assets	8.18	7.57
Current Assets
Inventories	-3.99	-4.16
Biological assets	-	-
Income tax receivables	-	-
Trade receivables	-0.26	-0.26
Contract assets	6.90	6.46
Other receivables	-39.16	-64.36
Equity investment at fair value through OIC	21.73	17.85
Deposits with bank	-	-
Cash in hand at the bank	-58.33	-139.97
Total Non- Current Assets	0.06	0.06
Total Assts	1.49	1.47
Equity and Liabilities
Equity attributable to equity holders and company
Stated capital	0.00	0.00
Capital Reserves	5.19	4.93
Revenue Reserves	47.74	32.31
Total Equity	20.74	17.18
Non- Current Liabilities
Loans and Borrowings	-1.52	-1.55
Retirement Benefits obligations	-4.68	-4.91
Grants	-	-
Deferred tax liabilities	15.92	13.73
Total Non- Current Liabilities	6.80	6.37
Current Liabilities
Trade payables	28.91	22.42
Contract liability	4.75	4.53
Income tax payable	-	-
Accruals and other payables	30.76	23.52
Loans and borrowing	-27.95	-38.79
Total Current Liabilities	-10.72	-12.01
Total Liabilities	-9.42	-10.40
Total Equity and Liabilities	1.49	1.47

The percentage value for Total Non- Current Assets has decreased for 2022 than 2021. But for Total Current Assets both 2022 and 2021 have the same percentage value. For Total Assets, there is a slight decrement (.02) in 2022 than 2021.

When Considering Total Equity and Total Liabilities, for them also 2021 has the highest percentage values.

When considering the Percentage Changes within the Financial Position, there in not a significant increment or decrement between any item within 2021 or 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.2 Horizontal Analysis of Income Statement

 

          2.2.1. Rupee Change

 

	2021	2022
Revenue	1062249	163264
Cost of sales	807594	-33602
Gross profit	254655	196866
Other income	210415	493413
Distribution expenses	50366	-2081
Impairment reversal/ loss on trade receivable	4486	-23960
Administrative expenses	42249	105509
Other expenses	-27584	-36581
Results from operating activities	0	695256
Finance Income	27078	5659
Finance cost	-272475	-19092
Profit before tax	695106	720007
Income tax expenses	45755	-9098
Profit from continuing operations	649351	729105
Profit from discounted operations	-7018	-11591
Profit for the year	642333	717514
Other comprehensive income
Actuarial gains/ loss on retirement benefit obligation	-6165	-15742
Surplus of revaluation of land	-	82299
Deferred tax charge on revaluation surplus	-	19751
Deferred tax charge on revaluation reserve due to rate change	-	-
Realization of deferred tax due to disposal	-	-
Income tax on other comprehensive income	-2603	-3778
Net gain/loss from fair value change in financial assets	-22031	21543
Equity- accounted investees- share of IOC	-	-
Other comprehensive income for the year	179600	121683
Total comprehensive income for the year	1027881	595831

 

 

 

 

 

 2.2.2 Percentage Change

	2021 (%)	2022 (%)
Revenue	12.13	1.66
Cost of sales	12.64	-0.47
Gross profit	10.75	7.50
Other income	48.12	76.18
Distribution expenses	4.21	-0.17
Impairment reversal/ loss on trade receivable	10.33	-50.03
Administrative expenses	14.30	31.25
Other expenses	-42.71	-98.87
Results from operating activities	0.00	43.39
Finance Income	118.63	11.34
Finance cost	-46.56	-6.11
Profit before tax	107.85	53.75
Income tax expenses	17.48	-2.96
Profit from continuing operations	169.64	70.64
Profit from discounted operations	-37.32	-98.35
Profit for the year	159.95	68.73
Other comprehensive income
Actuarial gains/ loss on retirement benefit obligation	-21.96	-71.85
Surplus of revaluation of land	-	35.55
Deferred tax charge on revaluation surplus	-	35.55
Deferred tax charge on revaluation reserve due to rate change	-	-
Realization of deferred tax due to disposal	-	-
Income tax on other comprehensive income	-33.11	-71.85
Net gain/loss from fair value change in financial assets	-26.62	35.47
Equity- accounted investees- share of IOC	-	-
Other comprehensive income for the year	174.41	-43.06
Total comprehensive income for the year	344.21	44.92

 

 

When considering the Revenue, Gross Profit and Cost of Sales, each has a significant increment in 2021 than 2022. But for the other incomes 2022 has the highest value.

Distribution Expenses and Administrative Expenses have increased 2021 significantly. Finance Income has increased from a significant level in 2021 than 2022 and the Finance Cost has decreased in 2021 than 2022 significantly.

Profit before Tax has increased in 2021 than 2022. As well as the Profit for the Year has increased in 2021 than 2022 significantly.

 When considering the Total Comprehensive Income, it has decreased in 2022 than 2021 from a significant level.

 

3.0 Trend Analysis

3.1 Trend Analysis of Financial Position

 

	2018	2019	2020	2021	2022
Total Non-Current Assets	100	96.36	93.00	100.61	131.22
Total Current Assts	100	100.32	109.94	110.00	122.06
Total Assets	100	98.71	102.49	104.02	121.60
Total Equity	100	102.84	105.64	127.55	155.03
Total Non-Current Liabilities	100	128.40	282.13	273.90	303.97
Total Current Liabilities	100	95.39	96.11	85.81	97.51
Total Liabilities	100	96.48	100.79	91.30	103.54

 

 

Here the Total Non- Current Liabilities shows a rapid increment in 2020 and then it has gradually increased over the years 2021 and 2022. But the others have not shown such increment or decrement.

Here Total Non-Current Assets, Total Current Assets, Total Assets and Total Equity have  increased gradually over the years. But Total Current Liabilities and Total Liabilities show simple fluctuations over the years.

 

 

 

3.2 Trend Analysis of  Income Statement

 

	2018	2019	2020	2021	2022
Revenue	100	98.38	96.04	107.70	109.49
Cost of Sales	100	97.18	91.94	103.57	103.09
Gross Profit	100	102.22	109.16	120.90	129.97
Other Income	100	124.20	108.98	161.42	284.40
Distribution Expenses	100	92.40	96.48	100.54	100.38
Administrative Expenses	100	67.83	46.41	53.05	69.62
Other Expenses	100	101.88	23.79	13.63	0.15
Finance Income	-	-	-	-	-
Finance Cost	100	174.94	138.10	73.80	69.29
Profit Before Tax	100	120.68	620.16	1288.98	1981.76
Income Tax Expenses	100	4.46	131.64	154.65	150.07
Profit for the year	100	25.76	104.97	272.87	460.42
Total Comprehensive Income for the year	100	174.11	331.52	1472.66	2134.15

 

 

According to here, the Profit before tax has shown a rapid fluctuation over the years. And Total Comprehensive Income for the year has shown a rapid increment over the years. But the others have not shown such movements. They have shown a gradual increment or slight fluctuations over the years.

 

4.0 Vertical Analysis

Vertical Analysis is a method of financial statement analysis in which each line item is listed as a percentage of base figure within the statement.

Here the line items on income statement can be stated as a percentage of Total Assets or Total Equity and Liabilities. Then this Total Assets or Total Equity and Liabilities are called as Base amount.

And the line items in the balance sheet is stated as a percentage of Total Revenue. Then the Total Revenue is called as the Base Amount.

 

Ø  Common- Size Percentage = (Analysis Amount/ Base Amount) *100

 

4.1 Vertical Analysis of Financial Position

 

	Common Size Percentage (%)
	2021	2022
Assets
Non- Current Assets
Property, Plant and Equipment	18.64	18.06
Investment Property	-	-
Capital work in process	-	-
Biological assets	-	-
Intangible assets	0.45	0.33
Deferred tax assets	-	-
Investment in subsidiaries	14.04	12.01
Equity accounted investees	0.31	0.27
Equity investments as fair value through OCI	2.21	9.10
Total Non- Current Assets	35.65	39.78
Current Assets
Inventories	20.29	14.58
Biological assets	-	-
Income tax receivables	-	-
Trade receivables	22.84	19.19
Contract assets	0.47	0.52
Other receivables	3.38	5.62
Equity investment at fair value through OIC	0.22	0.17
Deposits with bank	5.98	9.57
Cash in hand at the bank	2.06	2.78
Total Current Assets	55.24	52.44
Total Assts	100.00	100.00
Equity and Liabilities
Equity attributable to equity holders and company
Stated capital	8.74	7.48
Capital Reserves	13.47	13.29
Revenue Reserves	20.81	23.96
Total Equity	43.02	44.73
Non- Current Liabilities
Loans and Borrowings	0.68	0.56
Retirement Benefits obligations	1.41	1.15
Grants	-	-
Deferred tax liabilities	2.90	3.02
Total Non- Current Liabilities	4.99	4.74
Current Liabilities
Trade payables	14.36	18.22
Contract liability	0.66	0.71
Income tax payable	1.09	1.47
Accruals and other payables	5.35	5.33
Loans and borrowing	30.52	24.80
Total Current Liabilities	51.98	50.53
Total Liabilities	56.98	55.27
Total Equity and Liabilities	100.00	100.00

 

When considering the Non- Current Assets, there is not a significant increment or decrement of items between 2021 and 2022. There are only slight increments or decrements. However, the Total Non- Current Assets has increased in 2022 than 2021.

As in Non- Current Assets, in Current Assets also, there are not a considerable variations between 2021 and 2022. But the Total Current Assets has increased in 2022 slightly than 2021.

Equity and Liabilities also show the same trend as above. When considering Total Non- Current Liabilities, Total Current Liabilities and Total Liabilities year 2021 has the highest percentage value for them. But for Total Equity year 2021 has the highest percentage value. But there is not a considerable gap among them.

 

 

 

 

4.2 Vertical Analysis of  Income Statement

 

	2021 (%)	2022 (%)
Revenue	100.00	100.00
Cost of sales	73.28	71.75
Gross profit	26.72	28.25
Other income	6.60	11.43
Distribution expenses	12.69	12.46
Impairment reversal/ loss on trade receivable	0.49	0.24
Administrative expenses	3.44	4.44
Other expenses	0.38	0.00
Results from operating activities	16.32	23.02
Finance Income	0.51	0.56
Finance cost	3.18	2.94
Profit before tax	13.64	20.64
Income tax expenses	3.13	2.99
Profit from continuing operations	10.51	17.65
Profit from discounted operations	0.12	0.00
Profit for the year	10.63	17.65
Other comprehensive income
Actuarial gains/ loss on retirement benefit obligation	0.22	0.06
Surplus of revaluation of land	2.36	3.14
Deferred tax charge on revaluation surplus	0.57	0.75
Deferred tax charge on revaluation reserve due to rate change	0.30	-
Realization of deferred tax due to disposal	-	-
Income tax on other comprehensive income	0.05	0.01
Net gain/loss from fair value change in financial assets	0.62	0.82
Equity- accounted investees- share of IOC	-	-
Other comprehensive income for the year	2.88	1.61
Total comprehensive income for the year	13.51	19.26

 

When considering the Cost of Sales and Gross Profit, there are not considerable fluctuations over the years 2021 and 2022. But year 2021 has the highest percentage value for Cost of Sales and year 2022 has the highest percentage value for Gross Profit.

When considering Other Income 2022 has the highest percentage value. For Distribution Expenses year 2021 has the highest percentage value. But it is not considerable. Year 2022 has the highest percentage value for Administrative Expenses.

In 2022 the Finance Income has increased from .05% than 2021. But Finance cost and Income Tax Expenses have decreased from .24% and .14% respectively in 2021. However year 2022 has the highest percentage values for both Profit before Tax and Profit for the Year.

When considering Total Comprehensive Income for the year 2022 has the highest percentage value for that.

 

5.0 Ratio Analysis

Ratio Analysis is a quantitative method to get an idea about a company’s Liquidity, Efficiency, Solvency and Profitability etc. by studying its financial statements such as balance sheets and income statements etc.

There are 4 essential Financial Ratios in a Business. They are,

1.      Liquidity and Efficiency Ratios

2.      Solvency Ratios

3.      Profitability Ratios

4.      Market Ratios

 

·         Liquidity and Efficiency Ratios – Provides an insight about the company’s ability to meets its short- term obligations and efficiently manages its assets.

 

·         Solvency Ratios – Shows the company’s ability to generate future revenues and meet long- term obligations.

 

 

·         Profitability Ratio – Assess a company’s ability to earn profits from its sales or operations, assets or shareholder’s equity.

 

·         Market Ratios – Used to analyze the financial performances of a company to understand their position in the market.

 

 

 

 

 

 

 

 

 

 

5.1 Liquidity and Efficiency Ratios

 

	2022	2021
Working Capital (Current Assets – Current Liabilities)	257320	376143
Current Ratio (Current Assets/ Current Liabilities)	1.04	1.06
Quick -Acid Ratio (Quick Assets/Quick Liabilities)	0.75	0.67
Account Receivable Turnover (Revenue/ Average Accounts Receivable)	3.13 times	3.11 times
Merchandise Turnover (Cost of Goods Sold/ Average Inventory)	3.32 times	3.01 times
Day's Sales Uncollected (Account Receivable/ Revenue) *365	122.37 days	112.46 days
Day's Sales Inventory (Ending Inventory/ Cost of Sales) *100	100.27 days	118.80 days
Total Assets Turnover (Revenue/ Average Total Assets)	0.80	0.86

 

5.1.1        Working Capital – Working Capital is a financial matric, which shows the difference between the company’s Current Assets and Current Liabilities. This helps to plan for future needs and ensure the company has enough cash and cash equivalents to meet its short- term obligations. In CIC Holdings the working capital has decreased over the years 2021 to 2022.

 

5.1.2        Current Ratio – This measures the company’s ability to cover its short- term obligations with its current assets. For this a higher number is preferred. When considering CIC Holdings, that ratio has slightly fluctuated over the years 2021 and 2022. However 2021 has the highest ratio.

 

 

5.1.3        Quick- Acid Ratio – This measures the company’s ability to use its near cash or quick assets to pay its immediate liabilities such as short- term debts etc.. A higher number is preferred for this also.                                                                                                                                            According to the table that ability also has slightly increased from 2021 to 2022.

 

5.1.4        Account Receivable Turnover – This measures, how effective a business is collecting debts and extending credits. A higher number is preferred for this because it indicates a shorter time between sales and cash collection.

In CIC Holdings that value has slightly increased in 2022 than 2021.

 

5.1.5        Merchandise Turnover – This measures the number of times the merchandise is sold and replaced during the year. For this also a higher number is preferred. Because it indicates a shorter time between merchandise sold and replaced during the year.

 

5.1.6        Day’s Sales Uncollected – This indicates that the average how many days it takes to collect an accounts receivable or number of times debtors will pay money. If the days are higher, that indicates the poor credit control by the management of the company.

In CIC Holdings, year 2022 has the highest day for that. But in 2021, it has taken less days than 2022.

 

5.1.7        Day’s Sales Inventory – This measures the average time required for the company to convert its inventory into sales. For this also a lower number of days is desired.

According to the table CIC Holdings has taken less days to convert its inventories into sales in 2022 than 2022.

 

5.1.8        Total Assets Turnover – This measures the efficiency of a company to use its assets to produce sales. If this value id high, that means the company is more efficient in producing sales.

Year 2021 has a slightly higher value for this.

 

 

5.2 Solvency Ratio

 

Ratio	2022 (%)	2021 (%)
Debt Ratio (Total Liabilities/ Total Assets) *100	55.27	56.98
Equity Ratio (Total Shareholder’s Equity / Total Assets) *100	44.73	43.02
Time Interest Earned (Profit before Tax+ Finance Expense)/ Finance Expense	9.65	5.28

 

5.2.1        Debt Ratio – This measures, what portion of the company’s assets are contributed by the creditors.

 

5.2.2        Equity Ratio – This measures, what portion of company’s assets are contributed by the owners.

 

5.2.3        Time Interest Earned – The ability of firm’s operations to provide the protection the long- term creditors. A higher number is preferred for this.

 

 

5.3 Profitability Ratios

	2022	2021
Profit Margin (Net Income/Net Sales) *100	17.65	10.63
Gross Margin [(Net Sales – Cost of Sales)/Net Sales] *100	28.25	26.72
Return on Total Assets (Net Income/ Average Total Assets) *100	14.08	9.11
Return on Common Shareholder's Equity (Net Income/ Average Shareholder’s Equity) *100	32.03	23.00
Book Value per Common Share (Total Equity/ No of Shares Issued)	1.59               per share	1.31                 per share
Basic EPS                                                                    (Net Income/ No of Shares Issued)	9.72                                               per share	8.26                                per share

 

5.3.1        Profit Margin – This measures the company’s ability to earn a net income from sales. If this has a higher value, that means the company is in a good condition.                                                       

                                                                                                                                                            

5.3.2        Gross Margin – The amount remaining from Rs.1/= in sales, that is left to cover operating expenses and a profit after considering cost of sales. If the value is high, it is good and don’t have to fear on expenses.                                                                                                                                                                    

 

5.3.3        Return on Total Assets – This shows how effectively a company uses its assets to generate earnings. This is the best overall measure of a company’s profitability. A higher number for this, shows the well- managed company with a healthy return on assets.

 

                                                                                                                                                                           

5.3.4        Return on Common Shareholder’s Equity – This shows, how well the company employs the owner’s investment to earn income. For this also a higher number is preferred.

 

5.3.5        Book Value for Common Share – This measures the liquidation at reported amount.

 

5.3.6        Basic Earnings per Share – This measures, how much income was earned for each

share of common stock outstanding. For this also, higher values are preferred.

 

 

 

 

 

 

5.4 Market Ratios

 

	2021	2022
Price Earnings Ratio (Market Price per Share/ Earning per Share)	6.162228	3.919753
Dividend Yield (Annual dividends per Share/ Market Price per Share) *100	2.46	2.62

 

 

5.4.1        Price – Earnings Ratio – This measure often used by the investors as general guideline in gauging stock values. Generally higher the Price- Earning Ratio, the more opportunity a company has for growth.

 

5.4.2        Dividend Yield - This ratio identifies the return, in terms of cash dividends on the current market price of the stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conclusions

According to the study, the company should enhance the employs’ efficiency and by that the productivity. And also should minimize the mistakes, while doing the tasks.

And also the firm should check the manufacturing process to provide better products.

Further the company should pay a special attention to existing credit policy and well market strategies to develop the profit of the company