Financial Analysis of Accent Group Limited

This report deals with the overall financial analysis of Accent Group Limited for the years 2016, 2017 and 2018. The report includes horizontal and vertical analysis of company’s income statement and profit and loss statement. A ratio analysis has also been performed which measure company’s performance from all the financial aspects. The report concludes that Accent Group Limited has shown a positive trend in its financial performance and position.

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.

Financial analysis 3
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.

Financial analysis 7
Similarly, the total liabilities has comprises of 35.19% in 2018 and 40.52% in 2017 which was
more than the portion of liabilities in 2016. Reduction in liabilities in recent year was majorly
contributed by the repayment of long term loan and trade creditors. Shareholder’s equity
increased overall indicating good performance of the company.
Financial ratio analysis
Profitability ratios
 Rate of return on net sales
The NPR of Accent group was lowest in 2017 reported at 4.61% as compare to other years.
This was due to the high operating expenses during the year. However, the trend got changed
and company made profits in 2018 reflected by the increased NPR of 6.26%. Also the
revenue has reflected a constant growth over the years.
 Rate of return on total assets
The ratio was highest in 2018 at 7.69% which reflected that the company has utilized its assets
efficiently to generate more revenue (Gibson, 2011). However, the same was lowest in 2017
because of the declining profit before interest and tax and the increased operating expenses.
Also, upsurge in fixed assets has also contributed in the fall of ratio in 2017.
 Asset turnover
In case of Accent, this ratio was highest in 2017 despite of the fact that during this year,
company has reported low ROA and NPR. This determines that the firm has utilized its assets
more appropriately and due to the fact that it has maintained fixed assets in high ratio as compare

Financial analysis 8
to others. However, the ratio got reduced in 2018 to 1.15 due to the proportionate increase in
assets and sales.
 Rate of return on ordinary shareholders’ equity
In 2018, the company has made maximum returns to its shareholders because of the high profits
made during the year. The ROE was at 11.58% in 2018 whereas the same was 8.72% in 2017.
Low profits resulted in low returns to shareholders in 2017.
 Earnings per share
As per the annual report, the EPS of Accent Group is highest in 2018 at 0.082 which indicates
that the profitability position of the company is strongest in 2018 as compare to other past years.
Liquidity ratios
 Working capital
It is basically the difference between current assets and current liabilities of the firm. It can be
seen that Accent has highest working capital of £64103 in 2016 which constantly reduced over
the years. This means that the company is lacking behind in maintaining its working capital as its
liabilities are increasing (Godwin and Alderman, 2012).
 Current ratio
In all the three years, the current ratio was higher than 1 which depicted that Accent has
sufficient assets to meet its short term obligations. In 2016, the company experienced strong
liquidity which reduced in further years. This was due to the reduction in the amount of current
assets and increase in amount of liabilities.

Financial analysis 9
 Acid-test ratio
Accent has the lowest quick ratio in 2018 which shows that the firm does not have enough liquid
assets and cash balance to meet their financial obligations smoothly. It lack liquid resources and
this was due to the weak conversion cycle of the firm.
 Inventory turnover
Fewer fluctuations are been there in the ITR of Accent Group over the last three years. The
highest was in 2017 at 3.01 times which was due to the fact that the company has converted
inventory into sales more quickly in that year. However, the lowest ITR in 2016 indicates that
the company was not efficient enough to make best use of its resources.
 Days in inventory
Furthermore, less number of days are been taken by Accent to release its inventory in 2017. On
the other side, in 2018 and 2016 the time taken was 126 and 135 days respectively.
 Gross profit percentage
The company has highest gross margin in 2018 accounted at 56.56%. The ratio has shown a
constant increase over the past three years. This was due to the continuous upsurge in Accent’s
sales and relatively lower increment in its COGS.
 Accounts receivable turnover
As far as managing the accounts receivables is concerned, the firm has performed best in 2018 as
it has the highest ratio. The upsurge is due to the reduction in company’s average debtors and
increase in its sales.

Financial analysis 10
 Days’ sales in receivables
With high DTR in 2018, Accent Group has taken least time in converting its receivables during
the same year. This reflected the efficient management of debtors in order to generate more
revenue.
Gearing ratios
 Debt ratio
Accent Group’s solvency position was the strongest in 2016 as its debt ratio was lowest during
that year as compare to others. In 2016 the ratio was 33% which further increased to 41% and
then again fall to 35% in 2018. The reason for having low ratio was high reliance on equity
rather than debt. Also, in 2018 the reduction in company’s total liabilities reduced its debt ratio
reflecting low financial risk (Bragg, 2012).
 Debt to equity ratio
Similarly, the D/E ratio of the company was lowest in 2016 at 0.16 which increased to 0.28 in
2017. In 2018, the ratio fall to 0.19 again due to the repayment of company’s long term debt.
Although, its short term financial obligations has increased during the year but the payment of
long term borrowings led to the overall reduction in debt portion. This has improved the
solvency position of the company.
 Times interest earned ratio
The ICR of Accent Group was highest in 2018 at 14.30 times due to the increased EBIT of the
company as compare to its interest costs. However, the ratio was lowest in 2017 which reflected

Financial analysis 11
high chances of bankruptcy because of the high portion of external debt (Jenter and Lewellen,
2015).
Conclusion
From the above analysis, it can be interpreted that Accent Group Limited has improved its
performance in 2018 as compare to 2017 and 2016. The company’s profitability has increased to
a certain level because of the efficient utilization of its assets and available resources. In addition
to this, the solvency position of Accent has also improved in the recent year as the company
relied more on equity rather than increasing its debt component. It was competent enough to
repay its long term borrowings which on n whole reduced its debt and lower its financial
leverage. Overall, the firm has performed quite well in 2018 in comparison to others.

Financial analysis 12
References
Accent Group (2018). About Us. [Online]. Available at: http://www.accentgr.com.au/about-us/
Bloomberg (2018). Company Overview of Accent Group Limited. [Online]. Available at:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=10636950
Bragg, S. M. (2012). Business ratios and formulas: a comprehensive guide (Vol. 577). New
Jersy: John Wiley & Sons.
Fridson, M.S. and Alvarez, F. (2011). Financial statement analysis: a practitioner's guide (Vol.
597). New Jersey: John Wiley and Sons.
Gibson, C. H. (2011). Financial reporting and analysis. USA: South-Western Cengage
Learning.
Godwin, N., and Alderman, C. (2012). Financial ACCT2. USA: Cengage Learning.
Higgins, R. C. (2012). Analysis for financial management. New York: McGraw-Hill/Irwin.
Jenter, D. and Lewellen, K. (2015). CEO preferences and acquisitions. The Journal of
Finance, 70(6), pp.2813-2852.
Sinha, G. (2012). Financial statement analysis. New Delhi: PHI Learning Pvt. Ltd.

Financial analysis 13
Appendix
Horizontal analysis
Income statement
2018 2017 2016
Revenue 703181 10.54% 636153 45.05% 438574
Other Income 2 -96.08% 51 -73.30% 191
Expenses
Finished Goods 292100 -8.81% 320332 52.82% 209608
Changes in Merchandise Inventories 13390 -59.92% 33408 363.36% 7210
Employee Benefits Expenses 145508 12.21% 129671 58.09% 82021
Impairment of Brand Name -100.00% 9714
Write off of assets 65
Depreciation and Amortisation Expenses 24133 11.39% 21665 51.51% 14299
Rental Expenses on operarting Leases 81644 15.15% 70904 75.38% 40428
Advertising and Promotion Expenses 24425 18.01% 20697 48.32% 13954
Travel and Telecommunication
Expenses 5962 34.07% 4447 15.84% 3839
Warehousing and Freight Expenses 22107 10.88% 19938 19.83% 16639
Acquisition-related costs -100.00% 700
Provisions for doubtful debts -100.00% 331
Other Expenses 28350 6.33% 26663 52.18% 17521
Finance Costs 4581 12.97% 4055 8.05% 3753
Profit before income tax expenses 60918 47.06% 41424 -3.40% 42882
Income tax expense 16918 40.14% 12072 -4.94% 12699

Financial analysis 14
Net Income 44000 49.90% 29352 -2.75% 30183
Statement of Financial Position
2018 2017 2016
Current assets
Cash and cash equivalents 38772 -16.22% 46279 3.83% 44573
Trade receivables 18370 -7.48% 19856 -22.05% 25472
Inventories 98556 -11.96% 111946 42.54% 78534
Derivative financial instruments 4614 0 0
Other current assets 1367 -58.05% 3259 19.38% 2730
Total current assets
16167
9 -10.84%
181340
19.85%
151309
Non-current assets
Property, plant and equipment 74664 -0.18% 74800 75.50% 42620
Intangible assets
34505
1 -0.78%
347758
41.44%
245875
Derivative financial instruments 676
Receivables 341 -51.63% 705 -18.87% 869
Deferred tax assets 22310 20.59% 18501 73.69% 10652
Total non-current assets
44304
2 0.29%
441764
47.25%
300016
Total assets 60472 -2.95% 623104 38.06% 451325

Financial analysis 15
1
Current liabilities
Trade & other payables 80965 -8.87% 88849 50.63% 58986
Short term borrowings 22625 49.86% 15097 50.77% 10013
Derivative financial instruments 251 -95.03% 5054 -23.52% 6608
Provision for income tax 10497 31.38% 7990 52.60% 5236
Employee Benefits 6107 24.81% 4893 52.76% 3203
Deferred lease incentives 7174 44.96% 4949 56.61% 3160
Others
Total current liabilities
12761
9 0.62%
126832
45.44%
87206
Non-current liabilities
Long term borrowings 51000 -42.45% 88625 121.56% 40000
Derivative financial instruments 184 -74.08% 710 -63.92% 1968
Deferred tax liabilities 15447 12.88% 13685 87.11% 7314
Employee Benefits 64 -89.56% 613 84.64% 332
Deferred lease incentives 18494 -15.89% 21987 167.55% 8218
Total non-current liabilities 85189 -32.19% 125620 117.22% 57832
Total liabilities
21280
8 -15.70%
252452
74.06%
145038
Equity
Issued capital 38697 0.43% 385310 20.67% 319319

Financial analysis 16
3
Reserves 12151 278.77% 3208 130.79% 1390
Retained earnings -8184 -58.25% -19603 20.40% -16282
Total equity
39094
0 5.97%
368915
21.18%
304427
Non-Controlling Interest 973 -43.98% 1737 -6.61% 1860
Shareholder's Equity
39191
3 5.74%
370652
21.01%
306287
Total Liabilities and Equities
60472
1 623104 451325
Vertical analysis
Income statement
2018 2017 2016
Revenue
70318
1
100.00
%
63615
3
100.00
%
43857
4
100.00
%
Other Income 2 0.00% 51 0.01% 191 0.04%
Expenses
Finished Goods
29210
0 41.54%
32033
2 50.35%
20960
8 47.79%
Changes in Merchandise Inventories 13390 1.90% 33408 5.25% 7210 1.64%
Employee Benefits Expenses
14550
8 20.69%
12967
1 20.38% 82021 18.70%

Financial analysis 17
Impairment of Brand Name 9714 1.53%
Write off of assets 65 0.01%
Depreciation and Amortization
Expenses 24133 3.43% 21665 3.41% 14299 3.26%
Rental Expenses on operating Leases 81644 11.61% 70904 11.15% 40428 9.22%
Advertising and Promotion Expenses 24425 3.47% 20697 3.25% 13954 3.18%
Travel and Telecommunication
Expenses 5962 0.85% 4447 0.70% 3839 0.88%
Warehousing and Freight Expenses 22107 3.14% 19938 3.13% 16639 3.79%
Acquisition-related costs 700 0.16%
Provisions for doubtful debts 331 0.08%
Other Expenses 28350 4.03% 26663 4.19% 17521 3.99%
Finance Costs 4581 0.65% 4055 0.64% 3753 0.86%
Profit before income tax expenses 60918 8.66% 41424 6.51% 42882 9.78%
Income tax expense 16918 2.41% 12072 1.90% 12699 2.90%
Net Income 44000 6.26% 29352 4.61% 30183 6.88%
Statement of Financial
Position
2018 2017 2016
Current assets
Cash and cash equivalents 38772 6.41% 46279 7.43% 44573 9.88%
Trade receivables 18370 3.04% 19856 3.19% 25472 5.64%

Financial analysis 18
Inventories 98556 16.30%
11194
6
17.97% 78534
17.40%
Derivative financial instruments 4614 0.76%
Other current assets 1367 0.23% 3259 0.52% 2730 0.60%
Total current assets
16167
9
26.74%
18134
0
29.10%
15130
9 33.53%
Non-current assets
Property, plant and equipment 74664 12.35% 74800 12.00% 42620 9.44%
Intangible assets
34505
1
57.06%
34775
8
55.81%
24587
5 54.48%
Derivative financial instruments 676 0.11%
Receivables 341 0.06% 705 0.11% 869 0.19%
Deferred tax assets 22310 3.69% 18501 2.97% 10652 2.36%
Total non-current assets
44304
2
73.26%
44176
4
70.90%
30001
6 66.47%
Total assets
60472
1
100.00
%
62310
4
100.00
%
45132
5
100.00
%
Current liabilities
Trade & other payables 80965 13.39% 88849 14.26% 58986 13.07%
Short term borrowings 22625 3.74% 15097 2.42% 10013 2.22%
Derivative financial instruments 251 0.04% 5054 0.81% 6608 1.46%
Provision for income tax 10497 1.74% 7990 1.28% 5236 1.16%

Financial analysis 19
Employee Benefits 6107 1.01% 4893 0.79% 3203 0.71%
Deferred lease incentives 7174 1.19% 4949 0.79% 3160 0.70%
Others
Total current liabilities
12761
9
21.10%
12683
2
20.35% 87206
19.32%
Non-current liabilities 0.00%
Long term borrowings 51000 8.43% 88625 14.22% 40000 8.86%
Derivative financial instruments 184 0.03% 710 0.11% 1968 0.44%
Deferred tax liabilities 15447 2.55% 13685 2.20% 7314 1.62%
Employee Benefits 64 0.01% 613 0.10% 332 0.07%
Deferred lease incentives 18494 3.06% 21987 3.53% 8218 1.82%
Total non-current liabilities 85189 14.09%
12562
0
20.16% 57832
12.81%
Total liabilities
21280
8
35.19%
25245
2
40.52%
14503
8 32.14%
Equity 0.00%
Issued capital
38697
3
63.99%
38531
0
61.84%
31931
9 70.75%
Reserves 12151 2.01% 3208 0.51% 1390 0.31%
Retained earnings -8184 -1.35% -19603 -3.15% -16282 -3.61%
Total equity
39094
0
64.65%
36891
5
59.21%
30442
7 67.45%
Non-Controlling Interest 973 0.16% 1737 0.28% 1860 0.41%

Financial analysis 20
Shareholder's Equity
39191
3
64.81%
37065
2
59.48%
30628
7 67.86%
Total Liabilities and Equities
60472
1
100.00
%
62310
4
100.00
%
45132
5
100.00
%
Ratio analysis
Profitability Ratios
Rate of return on net sales 2018 2017 2016
Net income (A) 44000.0 29352.0 30183.0
Net sales (B) 703,181.0 636,153.0 438,574.0
(A/B) 6.26% 4.61% 6.88%
Rate of return on total assets 2018 2017 2016
EBIT (A) 47206.7 32190.5 32810.1
Average total assets (B) 613,912.5 537,214.5 431,780.5
(A/B) 7.69% 5.99% 7.60%
Asset turnover 2018 2017 2016
Net sales (A) 703181.0 636153.0 438574.0
Average total assets (B) 613,912.5 537,214.5 431,780.5
(A/B) 1.15 1.18 1.02

Financial analysis 21
Rate of return on ordinary
shareholders’ equity 2018 2017 2016
Net income (A) 44000.0 29352.0 30183.0
Average shareholders' equity (B) 379,927.5 336,671.0 273,627.5
(A/B) 11.58% 8.72% 11.03%
Earnings per share (Annual
Report) 0.082 0.0549 0.0642
Liquidity ratios
2018 2017 2016
Working capital (current assets -
current liabilities)
34060 54508 64103
Current ratio 2018 2017 2016
Current assets (A) 161679.0 181340.0 151309.0
Current liabilities (B) 127,619.0 126,832.0 87,206.0
(A/B) 1.27 1.43 1.74
Acid Test Ratio 2018 2017 2016
Quick assets (A) 61906.0 67011.0 71196.0
Current liabilities (B) 127,619.0 126,832.0 87,206.0
(A/B)

Financial analysis 22
0.49 0.53 0.82
Inventory turnover 2018 2017 2016
COGS (A) 305490.0 286924.0 202398.0
Average inventory (B) 105,251.0 95,240.0 74,989.5
(A/B) 2.90 3.01 2.70
Days in inventory 2018 2017 2016
Days (A) 365 365 365
ITR (B) 2.9 3.0 2.7
(A/B) 126 121 135
Gross profit percentage 2018 2017 2016
Gross profit (A) 397691.0 349229.0 236176.0
Sales (B) 703,181.0 636,153.0 438,574.0
(A/B) 56.56% 54.90% 53.85%
Accounts receivable turnover 2018 2017 2016
Sales (A) 703181.0 636153.0 438574.0
Average debtors (B) 19,113.0 22,664.0 24,586.5
(A/B) 36.79 28.07 17.84
Days’ sales in receivables 2018 2017 2016

Financial analysis 23
Days (A) 365 365 365
DTR (B) 36.79 28.07 17.84
(A/B) 10 13 20
Gearing ratios
Debt ratio 2018 2017 2016
Total Liabilities (A) 213781 254189 146898
Total Assets (B) 604721.00 623104.00 451325.00
(A/B) 0.35 0.41 0.33
Debt to equity ratio 2018 2017 2016
Total Debt (A) 73625 103722 50013
Total equity (B) 390940 368915 304427
(A/B) 0.19 0.28 0.16
Times interest earned ratio 2018 2017 2016
EBIT (A) 65499.0 45479.0 46635.0
Interest expense (B) 4581 4055 3753
(A/B) 14.30 11.22 12.43