Trend Analysis Report
The company chosen for this assignment is Guinness Anchor Berhad (GAB). The reasons for picking this company is due to its ability to adopt new business models in the ever competitive beer and breweries industry. Secondly, despite the effects of the world economic recession that has hit many companies within the industry, the company has been registering an increasing growth in its annual income.
Guinness Anchor Berhad (GAB) is Malaysian Multinational Corporation that was established as a merger between Malayan Breweries (Malaya) and the Guinness Malaysia Bhd in the year 1989. The company trades its shares on the Malaysian Securities Exchange commonly known as Bursa Malaysia. GAB was incorporated in the year 1964 under the name Guinness Malaysia Limited. After a successful operation for close to three years from its operation, the company changed its name to Guinness Malaysia Berhad. Further, a merger was initiated as a result of improving both the efficiency and profitability of the two firms. The company adopted the name Guinness Anchor Berhad after the merger of Malayan Breweries (Malaya) and Guinness Malaysia Berhad. The company’s headquarters is based at Selangor, Malaysia on 23.72 acres of land.
Further, Guinness Anchor Berhad has received several certifications both nationally and internationally. For instance, in the year 2002 the company received MS 1480: 2007 award. The Malaysian Ministry of Health issued this award due to the steps it had taken to control and deal with hazardous situations at work. Additionally, they awarded the company ISO: 9002 Certification in the year 1995. In the year 2008, the company further upgraded from ISO: 9002 to MS ISO: 9001.
The company deals in the production, marketing, selling and distribution of beer products both nationally and internationally. The product range of the enterprise is both alcoholic and non-alcoholic beverages. Some of the alcoholic products that are manufactured by the corporation are Guinness, Tiger, Heineken, Anglia Shandy, Kilkenny, Anchor Strong and Anchor Smooth amongst others. On the other hand, an example of a non-alcoholic product produced by the company is Malta. Moreover, the company imports other products such as Smirnoff Ice, Strongbow, Affligen, Paulaner and Kirin Ichiban that trade under the Guinness Anchor Berhad’s brand name.
The section analysis the trend of the company’s annual sales revenue for four trading periods. This information is from the annual financial reports of the company for the year ended 30th June 2011 - 2014. The company reported total revenues of 1488.7 million, 1623.7 million, 1676.3 million and 1610.6 million Malaysian Ringgits in the financial years ended 20th June 2011, 2012, 2013 and 2014 respectively.
Between the fiscal year 2011 and 2012, the company’s total revenues reduced by 9.07 percent. In the fiscal year ended 2013, the company’s total revenues were 1676.3 million Malaysian Ringgits. This change shows a 3.24 % decrease as compared to the total income reported by the firm in the preceding year. Lastly, between the financial years ended 2013 and 2014, the company’s total revenues increased by 3.92 %. It is deductable that the trend of company’s total revenue is not consistent because it keeps rising and falling. The change in the total revenues of a firm can be effected by either the change in the selling activities of a company or a change in the cost of selling activities.
Pie Chart of GAB’S Common-Size Income Statement
A pie chart to common-size income statement is a representation of the expenses and net profits as a percentage of a company’s gross revenues (sales). This table shows the annual values of the company for a period of four financial years.
Financial Ratios Analysis
The section involves the calculation of the four financial ratios. The ratios evaluated are ROA, Profit Margin, Debt to Equity Ratio, and ROE of the company over a period of four financial years ended 30th June 2011, 2012, 2013 and 2014.
Return on Assets (ROA) = Net Income / Total Assets x 100%
2011 = 181.4 / 685.1 x 100%
2012 = 207.4 / 779.4 x 100%
2013 = 217.6 / 739.0 x 100%
2014 = 198.2 / 701.7 x 100%
Profit Margin = Net Income / Net Sales x 100%
2011 = 181.4 / 1,488.7 x 100%
2012 = 207.4 / 1,623.7 x 100%
2013 = 217.6 / 1,676.3 x 100%
2014 = 198.2 / 1,610.6 x 100%
Debt to Equity Ratio = Total debt / Total equity
2011 = 168.5 / 516.6
2012 = 399.7 / 379.7
2013 = 373.4 / 365.5
2014 = 344.9 / 356.8
Return on Equity (ROE) = Net Income / Stockholder’s Equity
2011 = 181.4 / 516.6
2012 = 207.4 / 379.7
2013 = 217.6 / 365.5
2014 = 198.2 / 356.8
The analysis of the pie chart to common size income statement shows that a greater percentage of the company’s sales revenues is consumed by the cost of goods sold (COGS). The percentages of COGS were 67.99%, 66.30%, 66.30% and 64.10% for the financial years 2011, 2012, 2013 and 2014 respectively. The increase in the cost of goods sold might be as a result of the rise in the cost of doing business in the industry. Secondly, the company’s selling & administrative expenses have been experiencing an increasing trend. For instance, this increased from 15.56% to 33.70% to 33.70% to 35.90%. The increase in the selling & administrative expenses was due to the rise in the cost of distribution. In an effort to increase the company’s profit margin, the management of the enterprise should initiate a workable framework of continually reducing its expenses. This will ensure an increase company’s net income and hence maximize its returns.
The company recorded an increasing trend in its return on asset over the four year. These were 26.48%, 26.61%, 29.45% and 28.25 % in the financial years 2011, 2012, 2013 and 2014 correspondingly. These ratios were favorable because the company was able to generate revenue from the total assets invested out of the shareholders’ income.
Lastly, the company had an increasing trend in its profit margin. In the financial years, 2011, 2012, 2013 and 2014, the company’s profit margins were 12.19%, 12.77%, 12.98% and 12.31% respectively. These values show that the company has been raising income out of its annual trading activities.
In conclusion, the company is financially healthy since it can fund all its business activities and generate profits to the shareholders. However, the management of the company should work on stabilizing its debt to equity ratio because this ratio is useful to the organizations that offer credit facilities to access a firm’s ability to pay. The company’s debt to equity ratio was fluctuating during the evaluated four years.
"GUINNESS ANCHOR BHD (GUIN:Kuala Lumpur): Financial Statements." Bloomberg.com. Bloomberg. Web. 20 Feb. 2015. <http://www.bloomberg.com/research/stocks/financials/financials.asp?ticker=GUIN:MK>.
"GUINNESS ANCHOR BHD (GUIN:Kuala Lumpur): Financial Statements." Bloomberg.com. Bloomberg. Web. 20 Feb. 2015. <http://www.bloomberg.com/research/stocks/financials/financials.asp?ticker=GUIN:MK&dataset=balanceSheet&period=A¤cy=native>.