285ACC: Download the Consolidated Financial Statements of Fraser and Neave

Coursework Question

Download the Consolidated Financial Statements of Fraser and Neave for the Financial Year 2020

– https://www.fraserandneave.com/investor-relations/annual-reports/2020

Based on the Consolidated Financial Statements (focusing on reported financial information for the GROUP during the Year 2020 and Year 2019, answer the following questions:

(a) Calculate for two years’ ratios relevant to analyze the following aspects:

  • Profitability,
  • Liquidity,
  • Efficiency,
  • Gearing (Capital Structure)
  • Investment

You are expected to calculate at least 15 sets of ratios for both years. Students are advised to use the following table format for the computation of ratios. The formula used and the financial numbers for the workings are to be clearly shown. Ratio Workings 2020 Workings 2019

(b) Based on the ratios computed above (a) produce a report analyzing significant changes over the 2 years.

(c) What does the Consolidated Statement of Profit or Loss indicate regarding the Strength and Weakness of the company’s financial performance?
(Hint: Use key analytical methods including horizontal and vertical analysis of the profit & loss and financial ratios focusing on profitability)

(d) Using information from the findings obtained above prepare a summary report (of approximately 500 words) to recommend on the financial prospects of the company to potential investors.

Gearing Ratio Analysis

Gearing Ratio 2019 2020 Difference
Debt to Equity Ratio 0.42 0.41 ↓0.01
Interest Coverage Ratio 13.15 10.81 ↓2.34
  • Debt to Equity Ratio

According to the table above, the Debt to Equity Ratio fell by 0.01 between 2019 and 2020. The data indicates that total debt fell by $8,347,000 from 2019 to 2020, while total equity rose by $62,542,000, resulting in a decrease of 0.01 in the ratios. A debt-to-equity ratio of 0.41 indicates a more fiscally sustainable business, there is almost twice the number of assets as there are debts. In other words, Fraser & Neave is able to keep nearly double the number of investors funding the company’s assets as debtors. (Understand what this ratio measures and write your analysis)

Investor Ratio Analysis

Investor Ratio 2019 2020 Difference
Earning Per Share (Diluted) 10.30 Cents 10.52 Cents ↓0.22
Dividend Per Share 5.00 Cents 5.50 Cents ↓0.50
Dividend payout ratio 48.54% 52.28% ↓ 3.74
Price Earnings (PE) Ratio 15.3 11.37 ↓3.93
  • Price Earnings (PE) Ratio

According to the table above, the Price Earnings (PE) Ratio dropped by 3.93 between 2019 and 2020. It demonstrates that Fraser & Neave’s suffered a $0.44 decreased in the price of their ordinary shares at the close and a $0.01 dropping in earnings per share from 2019 to 2020. Despite the decrease in ordinary share price, the ratio remained over 10, indicating that Fraser & Neave’s is still in demand in the market.

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