Financial Analysis of Accent Group Limited

RUNNING HEAD: FINANCIAL ANALYSIS
Financial statement analysis

Financial analysis 2
Executive summary
This report deals with the overall financial analysis of Accent Group Limited for the years 2016,
2017 and 2018. The data is derived from company’s annual report and is evaluated to understand
the performance of the company over the years. It commences with a brief introduction about the
concept and outlines the core activities of Accent Group. In later part, horizontal and vertical
analysis are performed based on the quantitative data available in the annual report of the
company. Both the analysis suggested that the firm has improved its performance in 2018 as
compare to other years. The report also focuses on the ratio analysis of the company in order to
measure its performance and position from each and every aspect. The profitability, liquidity and
solvency position of Accent has improved and become strong in 2018. However, the same were
lowest in 2017 where the company did not perform well and made low profits. In the last, a
conclusion has been provided covering the findings of the analysis.

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Contents
Introduction.................................................................................................................................................4
Horizontal analysis......................................................................................................................................5
Vertical analysis..........................................................................................................................................6
Financial ratio analysis................................................................................................................................7
Profitability ratios....................................................................................................................................7
Liquidity ratios........................................................................................................................................8
Gearing ratios........................................................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12
Appendix...................................................................................................................................................13

Financial analysis 4
Introduction
Financial statement analysis is a procedure of evaluating and analysing the items of company’s
financial statements over the year. The analysis helps the management and investors to take
important decisions regarding the company. It provides the overview of firm’s financial position
and performance over the years.
Accent Group Limited is an Australia based retail company which is listed on Australia
Securities Exchange (ASX). It commenced its business in 1981 and has its headquarters situated
at Waterloo, Australia. The core activities of the company involve retailing, distribution and
taking franchise for footwear business, Apparel and different types of accessories across New
Zealand and Australia (Accent Group. 2018). Formerly, the group was known as RCG
Corporation Limited and now it is named as Accent Group. It is considered as the regional leader
of distribution of lifestyle footwear having more than 420 stores and 10 distribution brands
across various countries. The brands owned by Accent involve Platypus Shoes, Podium Sports,
Merrell, CAT, Vans, Dr. Martens, Saucony and many others (Bloomberg. 2018).
The report focuses on the financial analysis of Accent Group for the years 2016, 2017 and 2018.
It includes horizontal and vertical analysis of company’s income statement and profit and loss
statement. Each item of the accounts has been properly analysed and the changes are noticed.
Further, a ratio analysis has also been performed which measure company’s performance from
all the financial aspects. On the basis of these different analyses, significant conclusion has been
made in the end of the report.

Financial analysis 5
Horizontal analysis
It is one of the techniques of financial analysis and is otherwise called trend analysis. It
demonstrates the fluctuations or changes in the items of financial statements over the number of
years. It fundamentally shows the pattern pursued by the organization in the previous years by
critically assessing the accessible information (Sinha, 2012). For the most part, the analysis is led
for the statement of at least two or more than two years where the underlying time period is
considered as the base year and afterward the progressions are been figured over the periods. The
vacillations are indicated both in rate and dollar form by applying suitable formula (Higgins,
2012).
The calculation done in Appendix, shows horizontal analysis of the Accent Group Limited’s
balance sheet and P&L account. It has been noticed that the revenue of the firm has increased by
45.05% in 2017 as compare to 2016 while the same reported a mere upsurge of 10.54% in 2018.
The upsurge in 2017 was due to the completion of the acquisition of Hype DC which is the
leading retailer of branded lifestyle footwear in Australia. In addition to that, the advertising and
rental expenses of the company have reduced in 2018 to 18% and 15% respectively. In contrast
to it the finance cost increased by 12.97% and income tax expense showed a hike of 47.06% in
the current year as compare to 2017. The same expenses were up by 8.05% and -4.94% in 2017
in comparison with 2016. On a whole, the net profit of Accent Group increased by 49.90% in
2018 while the same was reduced by 2.75% in 2017. The reason behind the fall was the huge
increase in company’s total expenses as compare to prior year. However, the situation got
changed in 2018 and Accent reported high and increased profits.
As far as balance sheet is considered, the total assets of the firm reduced by 2.95% in 2018 while
the same were up by 38.06% in 2017. The sale of property, plant and equipment, collection from

Financial analysis 6
receivables and release of inventories in 2018 has reduced the overall assets of the firm. Similar
trend has been noticed in the liabilities as they have been reduced by 15.70% in comparison to
2017 where they increased by 74.06%. This huge fall was due to the repayment of long term
borrowings and creditors. The shareholder’s equity has also reported a slightest increase of
5.74% in 2018 while the same was 21.01% in 2017 when compared to 2016. The reason was the
high issued capital of the company during 2017 which has been increased by 0.43% only in
recent year. Overall, the position has improved as Accent has reported high profits and low
financial risk.
Vertical analysis
Vertical analysis identifies the relationship between the various elements of the statement. On
income statement, total revenue is been represented as a basis for calculating the percentage of
other items. On balance sheet, the total assets and liabilities become the base for same thing
(Fridson and Alvarez, 2011). Looking at the income statement, it can be observed that the net
profit of the company was 6.88% in 2016 which further reduced to 4.61% in 2017. This was due
to the increased expenses of the company in that year. However, the trend got reversed and the
net profit margin of the company goes up to 6.26% of the total revenue in 2018. Minor increases
in expenses and upsurge in revenue has stimulated growth in the overall profit of Accent Group.
Expenses like advertising, employee benefit and rental expenses comprise major part of
company’s total revenue which eventually affects the net profits of the firm.
The balance sheet reported that the cash balance was initially 9.88% of total assets in 2016 which
further reduced to 7.43% and 6.41% in 2017 and 2018. Inventories and intangible assets cover
major part of the total assets. However, the total assets of the firm have reduced on a whole.