Bidvest NamibiaÔÇÖs financial position analysis
The following report analyse Bidvest Namibia’s financial condition based on the financial statements data prepared according to International Financial Reporting Standards (IFRS) for the period from 01.07.2013 to 30.06.2014.
Revenue for the group increased by 10.4% to N$3,7bn against N$3.4bn the previous year however the trading profit or bottom line profit declined by 16.7% The shrinking selling prices and profitability in Fishing especially the oversupply of DRC market knocked down the profit margin.
The debt-to-equity was equal to 0.34 on 30.06.2014. The debt ratio was equal to 0.25 at the end of the period. The debt ratio went down by 0.04 for the year.
According to the debt ratio, the percentage of the borrowed capital (liabilities) is significantly lower than the admissible value and makes 25.3% of overall capital on the last day of the period analysed. On the one hand it positively describes the financial situation of Bidvest Namibia. On the other hand it says about missed opportunities to use borrowed capital for the extension of activity and acceleration of development rates. Bidvest Namibia has the opportunity to borrow without damaging its’ financial position. This would allow the development rates and enhanced return of capital invested by owners to accelerate.10.4%). The chart below demonstrates the change in revenue and a comprehensive income for Bidvest Namibia. The gross profit was equal to NAM $ 871,994,000 thousand for the entire period reviewed. In comparison with the previous financial year, the gross profit rose slightly.
During the period reviewed (30.06.13–30.06.14), the company posted a gross profit and earnings before interest and taxes (EBIT), which was NAM $ 519,540,000 thousand. The total comprehensive income was NAM $ 344,091,074 thousand during the period 01.07.2013–30.06.2014. According to the principles for stable company development, investments with the least liquid assets (non-current assets) should first be made with help from the most long-term sources of financing, i.e. with the help of own capital (equity). An indicator of this rule is the non-current assets to net worth ratio. The ratio was equal to 0.49 on 30.06.2014. For the period analysed (30.06.2013–30.06.2014), it was found that the ratio reduced moderately. At the end of the period reviewed, the value of the ratio can be characterised as very good.
The structure of liabilities of Bidvest Namibia by maturity dates appears in the following way: non-current liabilities make about one third, while current liabilities make two thirds respectively of total liabilities of the company. It is demonstrated with the current liability ratio, which is equal to 0.65 on the last day of the period analysed (30.06.2014).
The revenue was NAM $ 3,703,495,000 thousand during the period reviewed (from 30.06.2013 to 30.06.2014). At the same time for the same period of the prior the revenue was equal to NAM $ 3,354,987,000 thousand (i.e. and went up by NAM $ 348,508,000 thousand, or by 10.4%). The chart below demonstrates the change in revenue and a comprehensive income for Bidvest Namibia. The gross profit was equal to NAM $ 871,994,000 thousand for the entire period reviewed. In
comparison with the previous financial year, the gross profit rose slightly.
During the period reviewed (30.06.13–30.06.14), the company posted a gross profit and earnings before interest and taxes (EBIT), which was NAM $ 519,540,000 thousand. The total comprehensive income was NAM $ 344,091,074 thousand during the period 01.07.2013–30.06.2014
To assess the liabilities that the company should repay for the use of borrowed capital, an interest coverage ratio was calculated. The acceptable value is deemed to be not less than 1.5. In this case, the interest coverage ratio was 229.1 for the last year, which is evidence of Bidvest Namibia’s capability to pay interest on borrowed assets. It should take into account that not all interest payments are necessarily included on the income statement. In certain cases interest is included in investments in non-current assets and as a result it is not used to calculate the indicated ratio.
The most important ratio of business profitability is the return on equity (ROE), which reflects the profitability of investments by the owners. For the 2013/14, a return on equity was 17.1% per annum. It is a good rate. But its’ assessment is influenced not only with the factors inside the company, but also the economic environment where the company is located (inflation rate, interest rates, etc.).
Analysis of the Business Activity (Turnover Ratios)
To assess Bidvest Namibia’s business activity, the table below provides the main rates of turnover: receivables, inventory, current and total assets turnovers; accounts payable and capital turnovers of the company. Turnover ratios have strong industry specifics and depend on activity. This is why an absolute value of the ratios does not permit making a qualitative assessment.
During the last year, the average collection period (Days Sales Outstanding) was 51 day and the average days payable outstanding was 63 days as shown in the table. The data on asset turnover, on average, during the period reviewed, shows that Bidvest Namibia gains revenue equal to the sum of all the assets every 273 day.
The labour productivity ratio was calculated using the information on the number of employees (the ratio of revenue from sales to the average number of employees).
The labour productivity was equal to 1,194,676 thousand NAM $/employee for the year.
The main financial state indicator values and Bidvest Namibia’s activity results are classified by qualitative assessment according to the results of the analysis for the year and are given below.
Financial indicators with outstanding values:
on 30 June, 2014, the value of the non-current assets to net worth ratio equal to 0.49 is extremely good;
the current ratio (3.87) completely corresponds to the standard criteria for this rate;
an outstanding relationship between liquid assets (current assets minus inventories) and current liabilities (quick ratio is 2.97);
the cash ratio is 1.72 at the end of the period reviewed (a high cash at hand required for current payments);
return on total assets was during the year 12.4% per annum;
Long-term resources of the financing of the company’s activity are enough to form a normal amount of working capital which would cover the available inventories.
There are the following positive financial characteristics:
The debt-to-equity ratio and debt ratio demonstrate good values, but say about too cautious attitude of Bidvest Namibia to use of the borrowed capital, which is only 25.3% of the total balance of the company. On the other hand it might show how liquid the company is and don’t know what to do with the cash. The establishment of the SME support is commendable;
return on equity (ROE) was 17.1% per annum during the year 2013/14;
the net worth is higher than the share capital of the company;
earnings before interest and taxes (EBIT) showed NAM $ 519,540,000 thousand for the last year, but it compares negatively with the previous value (NAM $ -99,767,000 thousand);
The income from financial and operational activities (comprehensive income) was NAM $ 344,091,074 thousand during the last year.
To be continued