CATEGORIES:
BiologyChemistryConstructionCultureEcologyEconomyElectronicsFinanceGeographyHistoryInformaticsLawMathematicsMechanicsMedicineOtherPedagogyPhilosophyPhysicsPolicyPsychologySociologySportTourism
Profitability Ratios· Net Profit Margin = Adjusted Net Profit before Taxes / Sales *100 = (141) / 6,329 = -2.22% Net profit margin is used to represent the profit from trading operations before any costs of servicing long-term finance are taken to account.[9] It is a very good measure to find the company’s operational performance. In this case, profit margin is negative- a very bad sign. One of the reasons for that is the increased operation cost, which is understandable due to the extremely high petrol prices before and during the recession.
· Return on Equity = Net Income / Total Equity Return on Assets = Net Income / Total Assets = (125) / 3898 = -0.032 * 100 = -3.2% Shows how a company managed to reinvests its earnings in order to generate additional revenue in the future. This measure is important as it considers prospective opportunities of the company relevant for the investors. [10]The negative result shows that .company is not going to earn much revenue in the future. Activity (Efficiency Ratios) · Accounts Receivable Days = (Accounts Receivable / Sales) * 365 = 988 / 6529 * 365 = 55.23 This means that the company will need 55 days to collect the payments for its services. The result is higher than 50 which mean that CEVA has collection problems and a pressure on the cash flows. · Fixed Asset Turnover = Sales / Gross Fixed Assets = 6329 / 2501 = 2.53 The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.[11]Compared with the previous year, it has declined.
Altman Z- Score [12] X1 is working capital /total asset = 0,05 Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + X5 = 1.2 *0,05 + 1.4*0,03 + 3.3*0,08 + 0.6*0,00008+ 1,5 = 0,06+0,042+0,264+0,000048+1,5 = 1,86 The Altman Z-score is a measure of a company's financial strength that uses a weighted sum of several factors to predict company’s bankruptcy. CEVA logistics presents low results which suits in grey zone (.8 and 2.7), what means that company has good chances going bankrupt within 2 years of operations from the date of financial figures given. Updates for the latest period (2009) The latest figures taken from the second quarter of 2009 did not show any Improvement. On the other hand, there was a further decrease in various sections of the balance sheet and the total business presentation. Group equity decreased significantly from -136 to -196 million EURO. Consolidated revenue has decreased by 16.1% from 1,595 to 1,336 million EUR compared with the same period last year of 2008 three month after 30 June. The reason for that is clear: global economic crisis. However, there was an increase in the revenue since March 2009 at a rate of 2.8%. The figures were largely affected by the fluctuations of the currencies, especially, the US dollar and the British pound sterling .EBIT decreased by 22.5% in the three month ended June 2009 from 89 million euro to 69 million euro. Loss before income tax has increased from 13 million euro to 18 million euro for the three month ended 30 June 2008 and 2009 respectively. This was caused by a number of factors including an increase in depreciation and amortisation, higher operating prices and others. Cash has decreased from 164 million euro at 30 Dec. 2008 to 152 million euro by 30 June 2009. Capital expenditure has also increased. For the three month period ended 30 June 2008 and 2009 it increased from 25 million euro to 29 million euro. However, there were a few positive moments in the financials of the company. Cash generated from operations increased from 41 million euro to 94 million euro. This was driven by the improvements in the working capital, which resulted in a 68.3% decrease 126 million euro to 40 from 30 Dec. 2008 to 30 Jun 2009. In addition, the company managed to keep the rate of total assets quite similar to the one in the end of 2008 – around 3,700 ~ 3,800 million EURO. Overall, year 2009 is not going that good for the company. Year 2009 seems to be even worse than 2008. [13]
Conclusion 2008 was a very difficult year for the CEVA Logistics Plc. The main reason for that is global economic crisis which brought significant problems to many companies providing logistics services because they depend on the world oil prices as petrol is required to run all of transport.[14] Much of is required for the airplane transportation which plays a significant role for any logistics company. The question is how much all these companies were prepared for the hard times and how they managed to deal with the turnout decreases and financial problems. It seems that CEVA tried to write off most of its financial problems on the global recession, increased operation costs and fluctuating currency ratios. That is correct identification of the financial problems during the economic recession. Sector of logistics transportation of cargos is huge. There are numbers of different logistics companies operating throughout the world. As a consequence, the competition among those firms is also huge. Therefore, the comparison of CEVA with the other firms is very important in order to have more realistic view on the company’s financial review. Figures provided in the consolidated balance sheet and the income statement clearly identifies severe financial problems. The most important key ratios, such as ROCE were negative. This is absolutely unacceptable. Therefore it is highly undesirable to invest right now. CEVA has a large amount of debts which are due until 2012. There is absolutely no guarantee that the company will manage to pay them back. In addition, all the figures show that there is a quite large chance that the company might not manage to repay the loans back. This ratio is the most important as it show’s actual “health” of the group. Identifying the actual weak side It was clearly seen that there are much more of negative than positive. First, the revenue generated has actually increased after 2007. However, the reason of that increase is the purchase of TNT Logistics. CEVA’s goodwill is declining showing that the investors do not trust the company and are not willing to invest money in it. The “public opinion” of the other to investors is very important. The figures of the total lost for 2008 and half of 2009 are quite close (125 million EURO) and (109 Million EURO) respectively, which shows that the financial situation gets worse. Moreover, according to the updated figures, the total group equity was negative by the end of 2008 (136) millions EURO and in the middle of 2009 the negative figure increased even more to (196) millions EURO. All these key figures identify considerable problems in the company’s financial performance. ROCE is the most important aspects in this case. The reason is quite reasonable. Ratio found in calculations was negative showing that there is no capital return. These key measures clearly that it is better not to do any business with that company for at least the nearest two year for sure. Moreover, the company has large debts with exceeding accounts receivable days. Also Altman Z- Score provided that company has possibility to get bankrupted within two years. To sum up, the CEVA group has serious financial problems at this moment. More is yet to come next year with even worse financial results. However, it is interesting for the investor. CEVA will require significant cash increases to support its current position. My advice is to wait for a year or two and watching the company. If it will manage to cope with the financial problems during the economic recession and finish year 2010 with some improvements then it would be a high time to invest in order to gain the maximum profit.
Bibliography 1. L.S Rosen “Accounting – A Decision Approach” 2. Risdon, Martin S.”Financial statement analysis”
11. http://en.wikipedia.org/wiki/CEVA_Logistics 12. http://www.cevalogistics.com/en-US/aboutus/History/Pages/default.aspx 13. http://www.investopedia.com/terms/c/currentratio.asp 14. http://www.investopedia.com/terms/w/workingcapital.asp#axzz1Q6guN6iE 15. http://www.investopedia.com/terms/p/profitmargin.asp 16. http://www.investopedia.com/terms/r/roce.asp 17. http://www.investopedia.com/terms/f/fixed-asset-turnover.asp#ixzz1Q76gUWh7.
19. http://moneyterms.co.uk/z-score/
[1] http://en.wikipedia.org/wiki/CEVA_Logistics [2] www.cevalogistics.com [3] http://www.cevalogistics.com/en-US/aboutus/History/Pages/default.aspx [4] http://www.cevalogistics.com/en-US/Financial%20reports/CEVA%20Group%20Plc%20-%20Annual%20Report%202009%20-%20FINAL%20glossy%2015%20Mar%202010.pdf [5] L.S Rosen “Accounting – A Decission Approach” [6] Fridson, MartinS.”Financial statement analysis” [7] http://www.investopedia.com/terms/c/currentratio.asp [8] http://www.investopedia.com/terms/w/workingcapital.asp#axzz1Q6guN6iE [9] http://www.investopedia.com/terms/p/profitmargin.asp [10] http://www.investopedia.com/terms/r/roce.asp [11]http://www.investopedia.com/terms/f/fixed-asset-turnover.asp#ixzz1Q76gUWh7. [12] http://moneyterms.co.uk/z-score/ [13] www.cevalogistics.com/.../CEVA%20Annual%20Report%202008%20-FINAL.pdf [14] http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-09-091/EN/KS-SF-09-091-EN.PDF Date: 2015-12-24; view: 984
|