Ceylon Grain Elevators PLC

R.N.S. Ranasinghe
RAT/AC/2018/F/0041
Advanced Financial Reporting – HNDA 3201
CGE Plc is the largest supplier of products and services not only in the poultry industry in Sri
Lanka but also in various field. This report provides information on the profitability, leverage,
liquidity and asset management of the CGE Plc for the years 2020, 2019 and 2018.
Looking at the last three years, the current ratio of 2019 shows 3.13 and it is a good situation
for a business. But it usually needs to be as 2:1. This refers to the ability of current asset to
meet business current liabilities.
The overall leverage ratio of the business is in good situation. The debt ratio shows a law
leverage and the equity ratio is a high leverage. This means that the business has more equity
capital than debt capital. Equity ratio is higher value generally indicate that a company’s
effectively fund its asset requirements with a minimal amount of debt. The business maintains
a very good interest coverage rate. A good interest coverage ratio is considered important by
both market analysts and investors, since a company cannot grow and may not even be able to
survive unless it can pay the interest on its existing obligations to creditors.
Profitability ratios measure the company’s use of its assets and control of its expenses to
generate an acceptable rate of return. The gross profit margin of the business has gradually
increased. A higher gross profit margin indicates that a company earn make a reasonable profit
on sales, if it keeps overhead cost in control. The business maintains other profitable ratios in
a business-friendly manner.
The Return on year end Capital Employed ratio shows how much profit each Rupees of
employed capital generates. ROCE has decreased in 2020 compared to 2018. Obviously, a
higher ratio would be more favorable because it means that more Rupees of profit are generated
by each Rupees of capital employed. The dividend cover ratio has decreased a lot compared to
2018. A low dividend cover can make it impossible to pay the same level of dividends in a bad
year’s trading or to invest in company growth.
Net asset turnover ratio is gradually increase based on 2018. The stock holding period has been
steadily decline from year to year. This means that the wholesale business has less storage time
and more times it sells. On the other hand, debtor’s turnover ratio also gradually increase year
to year. This means that more and more debtors turn into cash in a year. The creditors turnover
ratio of the CGE Plc has gradually increased and the business is in good shape. Because the
number of repayments of creditors increases in a year, they have opportunity to become a
reliable buyer. The working capital turnover ratio in 2018 was 3.36 times but in 2020 it has
come down to 2.86 times. A low capital turnover ratio means that the organization has too
many outstanding liabilities with its suppliers. Such a low working capital turnover ratio can
lead to inventory shortage or bad debts.
Ratio analysis also crucial to benchmark one’s performance in comparison to industry
competitors, identify gaps, assess competitive advantages, strengths, weakness, opportunities
and threats. This information can be used by decision makers to improve the organization’s
position in the industry.
 Attachment - 01

2020 2019 2018

Liquidity Ratios
01 Current ratio 2.8: 1 3.1: 1 2.8: 1
02 Quick ratio 1.8: 1 1.9: 1 1.2: 1
Leverage Ratios
03 Debt equity ratio 0.13 0.13 0.07
04 Debt ratio 6.9% 13.1% 4.1%
05 Debt to capital employed ratio 9.13% 9.45% 5.63%
06 Equity ratio 54.02% 6.97% 55.9%
07 Interest coverage ratio 10.45 times 15.75 times 13.88 times
Profitability Ratios
08 Gross profit ratio 11.39% 10.05% 10.95%
09 Net profit ratio 6.88% 6.94% 7.09%
10 Net profit margin 9.17% 8.46% 9.28%
11 Operating income ratio 10.14% 9.03% 10%
12 Operating expenses ratio 3.40% 3.41% 3.49%
Profitability Ratios based on Investment
13 Return on year end capital employed 17.66% 16.03% 20.07%
14 Dividend cover ratio 1.95 times 5.46 times 8.06 times
15 Earnings per share Rs.15.73 Rs.14.99 Rs.14.84
Asset Management Ratio
16 Net asset turnover ratio 2.13 times 1.92 times 1.96 times
17 Closing inventory holding period 76 days 85 days 90 days
18 Stock turnover ratio 4.79 times 4.28 times 4.04 times
19 Debtors turnover ratio 27.11 times 22.7 times 23.72 times
20 Debtors collection period 13 days 16 days 15 days
21 Creditors payment ratio 37 days 32 days 30 days
22 Creditors turnover ratio 9.99 times 11.40 times 12.13 times
23 Fixed asset turnover ratio 4.45 times 4.09 times 4.99 times
24 Asset turnover ratio 1.32 times 1.40 times 1.48 times
25 Working capital turnover ratio 2.86 times 3.13 times 3.36 times
 Attachment - 02
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

2020 2019 2018

Revenue 18,462,998 17,713,305 17,085,577
Cost of sales (16,360,364) (15,932,877) (15,213,510)
Gross profit 2,102,634 1,780,428 1,872,067
Other operating income 21,848 48,697 50,725
Selling and distribution expenses (230,754) (233,150) (225,879)
Administrative expenses (377,952) (370,209) (371,179)
Operating profit 1,515,776 1,225,766 1,325,734
Interest income 341,049 368,051 373,889
Net finance cost (179,081) (101,595) (123,163)
Share of profit of equity – accounted investees,
net of tax 14,580 6,384 9,779

Profit before tax 1,692,324 1,586,239

Taxation (421,450) (268,753) (375,329)
Profit after tax 1,270,874 1,210,910
 Attachment - 03
STATEMENT OF FINANCIAL POSITION

2020 2019 2018

ASSET
Non-current assets
Property, plant and equipment 2,573,866 2,804,901 2,651,957
Improvements over leased land and buildings 135,122 142,527 151,184
Right-of-use assets 678,096 709,072 0
Intangible assets 32,330 25,077 24,558
Investment in associate company 62,694 48,114 41,730
Biological assets 647,194 593,972 555,918
Deferred tax assets 21,172 - -
Total non-current assets 4,150,474 4,323,663 3,425,347

Current assets
Biological assets 23,264 20,484 17,898
Inventories 3,624,211 3,169,067 4,245,805
Trade and other receivables 629,787 732,421 821,514
Amount due from related companies 7,411 99 -
Current tax receivable 10,596 10,596 27,277
Cash and cash equivalents 5,574,923 4,375,190 3,033,328
Total current assets 9,870,192 8,307,857 8,145,822
Total assets 14,020,666 12,631,520 11,571,169

EQUITY
Stated capital 1,017,996 1,017,996 1,017,996
Retained earnings 6,555,874 6,178,635 5,461,400
Total equity attributable to equity holders
7,573,870 7,196,631 6,479,396
of the parent
Non-controlling interest 2,055,639 1,842,801 1,556,631
Total equity 9,629,509 9,039,432 8,036,027

LIABILITIES
Non-current liabilities
Deferred tax liabilities 245,578 293,140 379,071
Employee benefits 173,583 116,618 101,176
Lease liabilities 548,394 533,947 -
Total non-current liabilities 987,555 943,705 480,247

Current liabilities
Trade and other payables 1,952,353 1,324,035 1,471,052
Amount due to related companies 1,261,803 1,126,437 1,583,843
Lease liabilities 209,446 197,911 -
Total current liabilities 3,423,602 2,648,383
3,054,895
Total liabilities 4,391,157 3,592,088 3,535,142
Total equity and liabilities 14,020,666 12,631,520 11,571,169