Contamination Issues with Vitamins Supplements in Asian Markets

The provided content discusses the usefulness of publicly available information contained in annual reports, specifically for investors. It highlights that annual reports provide valuable insights into a company's vision and mission, future prospects, and strategic focus. The report also includes product summaries, financial highpoints, and management discussions, which enable investors to assess the company's performance and make informed decisions.

AGL Limited & Blackmores Limited
Financial Analysis
Group and Individual Component

Analysis of Financial Reports
Executive Summary
The company was recognized in 1930 by Mr Maurice Blackmore who had a dream and desire for
naturopathy which gave the company its task. This English immigrant had ideas which were ahead of
their times. Maurice Blackmore strong Confidence in health-giving properties of herbs and minerals
gave path to the whole system of healthcare based on naturopathy principles. It’s been 80 years since
Blackmore’s has been one of the industry leaders when it comes to healthcare. Blackmore’s Ltd. is
one of the leading natural health brands.
1

Analysis of Financial Reports
Contents
Collaborative Group Component...........................................................................................................3
OVERVIEW of AGL Limited...........................................................................................................3
Role of Income Statement, Balance Sheet & Cash Flow Statement in Shareholders Decision
Making Process.................................................................................................................................3
Key Assets, Liabilities, Equity Classes, Incomes, Expenses of AGL Ltd. and the Influence of
underlying accounting conventions, concepts and managerial judgement on them...........................4
Individual Component...........................................................................................................................7
Nature, Strategy & Prospects.............................................................................................................7
Analysis of Financial Performance and Position of the Blackmore’s................................................8
Limitation of Ratio Analysis from Investor’s Point of View...........................................................10
Usefulness of publicly available information contained in Annual Reports....................................11
Conclusion...........................................................................................................................................11
Reference:........................................................................................................................................12
Appendix:............................................................................................................................................13
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Analysis of Financial Reports
Collaborative Group Component
OVERVIEW of AGL Limited
AGL is one of the leading integrated energy companies in Australia. It is one of the companies
which do not simply concentrate on profit making. It has been seen over the years that the
company has addressed its responsibility towards the society and the environment. The company
while providing secure and affordable energy to its customer it is also taking action to dutifully
reduce the Greenhouse gas emission which is occurred due to its business. AGL has been in the
business since 175 years which makes it one of the most experienced and diversified integrated
energy companies in Australia. AGL has got its business spread over eastern part of Australia. It
not only serves its customer by providing their energy needs which includes gas, solar PV,
electricity and related products and services. Over the years AGL has successfully managed to
make a diverse power generation portfolio. AGL’s revised strategic objective and organisation
structure is going to allow the company to remain in forefront which will allow the company to
shape the market and respond effectively to government policies and manage the transition of new
business model. (AGL, 2015)
Role of Income Statement, Balance Sheet & Cash Flow Statement in Shareholders Decision
Making Process
Income Statement, Balance Sheet & Cash flow statement portrays the several parts of process in
the organisation. Income Statement, Balance Sheet & Cash flow statement all statement is
required to be analysed separately as well as jointly to make a decision on investment. By
analysing only one statement, say ‘Statement of Financial Position’, then investor would just
know about the information that is left after the operations of the business at certain period of
time which is definitely not sufficient to make decision. (Singhal D K, 2015)
Cash Flow Statement provides the company with comprehensive cash movement. It provides the
information about the financial strength of the company. The exhaustive analysis of cash flow
statement is necessary for those investors who aim to invest in the company. The cash flow
statement would let the investor if the company is running out of cash which generally is very
difficult to spot is the company is showing huge profit figure in its income statement. Cash flow
statement can also warn the existing investors of the company by highlighting the huge cash
outflows made by the owners of the company. (Muhammad I, n.d.)
3

Analysis of Financial Reports
It’s the only place where the capital expenses are shown as the expense and hence the investors
can gather knowledge about the company’s investment in capital assets. The cash flow statement
can provide the existing investors with the information of change in working capital like if the
company is building up the stock or letting the receivable grow or it’s making quick payment to
its suppliers etc. The investors, both existing as well as proposed, can verify the finance activities
of the company in the cash flow statement. By doing this, they can gather information about the
company’s debt i.e. loan payment made, payment of interest on such loan. At what intervals and
instalments the loans are repaid can also be understood by perusal of cash flow statement.
(Tutor2u, n.d.)
The investor can gather valuable information by simply analysing Income Statement. The
information recorded in the journals and ledgers can be seen directly impacting the Income
Statement. Company’s sales, profitability, operating income retained earnings can all be known
by going through the income statement of a given period. The two income statement of two
different periods can also be analysed together so that the information can be compared. The
numbers gathered by observing an income statement can help the investors to conclude whether
the company is operating its business in a rational manner. The investors can compare the
information and conclude if the company is growing in regard to sales, profitability, operating
income etc. (Muhammad I, n.d.)
Balance Sheet of the company indicates what the company has and what the company owes. The
balance sheet will let the investors know till what time the company will be able to retain its
financial power. The difference between the total asset and total liability is nothing but Net Worth
of the company. The owner’s equity can be thoroughly assessed so as to know the number of
shares issued and the value of the stock. The information gathered in balance sheet about the
company’s ability to finance its operations can be useful to underwriters also. The information
gathered in balance sheet about the company’s ability to finance its operations can be useful to
underwriters also. The credit worthiness of the company can be explained by balance sheet of the
company. Thus the investors, before investing can verify the productivity and solvency of the
company by analysing Income Statement, Balance Sheet & Cash flow statement. Thus Income
Statement, Balance Sheet & Cash flow statement plays a very important role as a whole to make a
decision with regard to invest by the existing as well as proposed investors. (Tutor2u, n.d.)
Key Assets, Liabilities, Equity Classes, Incomes, Expenses of AGL Ltd. and the Influence of
underlying accounting conventions, concepts and managerial judgement on them
4

Analysis of Financial Reports
The Assets and Liabilities have the ability to influence the firms reported position and
performances as assets represents possible future economic benefit controlled by an enterprise
while liability of the company is obligations to other enterprises. For example, for knowing the
liquidity of the company, current assets and current liability comes into picture. The liquidity ratio
considers current assets and liabilities for demonstrating the financial liquidity of the company.
The current assets of the AGL Company includes items like Sundry Debtor of $1,894 Million,
Inventory of $396 million, and Cash of $259 etc. and current liability includes current tax liability
of $86, creditors of $1,377, provision of $191which can be effortlessly prejudiced by the
underlying accounting conventions. Say, even a trivial modification in method of calculating the
inventory, say from LIFO to FIFO, can have a substantial consequence on inventory thus varying
the current ratios of the company. The provisions involve management’s judgment thus it can
influence without any difficulty the financial results of the company, being very subject,
indirectly impacting the ratios. (Net MBA, n.d.)
Also the company’s fixed asset which includes Property, plant & equipment of $6,958 million,
Oil and gas assets of $544 million, and Intangible assets of $3,266 million and Investment in joint
venture of $91 million can impact the financial analysis. Any change in the accounting
conventions and the concept used for fixed assets like the method of depreciation adopted or
change in the same can have a considerable change in the ratios calculated. The company’s fixed
assets are subject to impairment which is governed by the accounting standard. If the company
doesn’t follow the impairment of assets rules then financial analysis will show misleading results.
Further Intangible assets can also be influenced by the method of amortization that the company
uses. Thus in a way almost all the assets as well as liabilities play a vital role while calculating
financial performance of the company. Thus the management has to be very prudent while
making decisions about accounting convention and concepts. (Singhal D K, 2015)
The items that are shown in income statement are widely used to calculate the profitability of the
company. The management has to also consistently apply their judgement from period to period.
In accounting for income and expenditure two accounting concepts and conventions that are to be
considered are accrual concept and matching concept. Thus this will call for management’s
judgement. In income statement the item that accrue for the period are to be recorded which is
further used by the analysts or investors to verify the company’s performance and position. All
the operating expenditures are to be properly accounted for, any change in the expenditure due to
accounting concepts and conventions can have a direct impact on the financial analysis. Thus
accounting concepts and conventions can have an underlying effect on the key incomes and
expenditure based on which financial decisions are made. The management have to carefully
make judgement about the entire item that is going to form part income statement. (Net MBA,
n.d.)
5

Analysis of Financial Reports
The shareholder’s capital form part of many ratios which are calculated for making investment
decisions. Equity again is widely used in making financial decisions. The company’s share capital
is of $ 8,815. Based on which the existing investor know where they stand and the proposed
investor predicts whether to invest in the company. Any equity shares issued for inadequate
consideration or for non-cash odes can distort the ratios calculated for the financial analysis. The
equity and its classes have to be presented in a manner in financial statement as per accounting
concepts and conventions. Thus any item of key items of income or expenditure, asset or liability
if underestimated or overestimated can have an impact on financial position or performance of the
company. The equity and its classes has to be interpreted and recognised in a manner as specified
by the accounting standard thus it can be said that it will have an underlying effect on the
financial decisions to be made and on the ratios which are plainly calculated for financial
purposes. (Deloitte, n.d.)
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Analysis of Financial Reports
Individual Component
Nature, Strategy & Prospects
For over 80 years Blackmore group has been into the industry of healthcare. In May 1985, the
company got listed. The company had 170 ranges of products available in the market in 2015. The
company has its business extended in many countries. As per the company’s Chairman, Mr Marcus
Blackmore, The Blackmores Group’s strategic focus is:
 Preserve market leadership in Australia
 Spread the revenue stream by rising the market of Blackmores in Asia
 Boost and diagnose the role of innovation and research through investing in BioCeuticals
 To sustain unparalleled quality standard.
 Encouraging the staff by applying policies like profit share program whereby 10% of profit
are shared by the staff. (Blackmores, 2016)
The company’s strategy and prospects are as follows:
 Constant growth of Blackmores in Asian Market by founding Asian based regional
management and operating structure. This would aid decision making and operating
efficiency.
 Understanding the consumers in essential Australian Market. Improving Digital and E-
Commerce. Invest significantly in Brand. (Blackmores, 2016)
 Finance in and with their supply chain partners, which would ultimately help the company to
improve their operational efficiency. Further leverage their Central Services business model.
Enhancing their improved size into scale paybacks.
 Venture in Blackmores Institute which would help Blackmore to strengthen its position as a
strong leader in the area of research and development. (Blackmores, 2016)
7

Analysis of Financial Reports
Analysis of Financial Performance and Position of the Blackmore’s.
The company has reported grand financial results in the year 2015. The company had continued to
operate proficiently; as a result it manufactured 35 million units and shipped them to 25000 points of
distribution in the year 2015. The company’s operational efficiency can be observed in its current
financial year’s Group Sales which stood at $471.6 million. As matched to financial year 2014,
current year’s sales were up by 36%. The company reported profit after tax of $46.6 million which as
compared to previous year had improved by drastic percentage of 83%. The company succeeded to
decrease its debt by 87% in the current financial year. Now it stands at $7.1 million. The cash flow
statement also voices for itself as the operating activities has folded from the last year’s cash flow
performance from operating activities. The company’s asset per share for 2015 is $5.27 which has
again improved by 38% from previous year. The company’s Earning per share is 270.7 cents which
has amplified by 81.4% as compared to previous year. Last year the company paid total ordinary
dividend of 127 cents per share (fully Franked) hence making it palpable that the dividend per share
had increased by 60% which was impressive. In Australian market itself the company’s profitability
grew by 88% which makes the company the utmost dependable company for healthcare in Australia.
(Saiduzzaman S, n.d.)
The management’s performance can be measured using variety of profitability ratio. If the company’s
financial position is compared with its past year performance, it can be said that current year company
has fared really well. The operating profit ratio has come up to 15.32% as compared to last year which
was 11.47%. As the operating profit ratio rose consequently it can be seen that net profit ratio also
have risen as compared to last two year’s performance. Net Profit ratio measures the overall
performance of the company which is good in 2015 as it stands at 9.87% as compared to previous
year which stood at 7.33% and 7.64% in 2014 and 2013 respectively. The competency of the
company in deploying its assets is evident by Return on assets ratio. Presently the company ratio is
27.3% which better by approximately 10% from last year. The management is managing the assets of
the company more efficiently then the ratio will be more. Return on equity shows an increasing trend
from the last year thus investment in equity is being employed efficiently. Return on equity is 35%
for the current year which is really good as matched to past years. There is an increase in past three
years performance as far as profit per share is concerned. The company which gives them the
maximum return is normally preferred by investors. Current year’s earnings per share have increased
by 82%. In term of cents it is 270 cents per share. (Saiduzzaman S, n.d.)
The company’s ability to generate sales using its assets can be measured by using Investment turnover
Ratio. Investment turnover of the company is good in 2015 i.e. 1.6 times and it has enhanced as
compared to last years which stood at 1.46 times and 1.41 times in 2014 and 2013 respectively. The
current ratio helps in judging the company’s liquidity. The company’s current ratio is 1.63 times
8

Analysis of Financial Reports
which is practical. Still the company is very much in the position to pay off its debt which a one year
period, even though the current ratio has fallen from the last year’s which stood at 2.25 times. There
has been a dramatic fall in debt to equity ratio since the company has paid off its major amount of
debt in current financial year. Last year it stood at 52.19% now debt to equity ratio stands at 5.31%
which makes the company literally debt free. It can be said that the company’s debt ratio too has
experienced an extreme amendment. The debt ratio in 2015 is 2% which was 22% last year in 2014
and 29% in 2013. Thus the company doesn’t have a negative net worth. (Singhal D K, 2015)
One of the most used leverage ratio is Interest coverage. The company has been able to cope up with
the interest payments. Increasing trends has been seen in the interest coverage which is a good
indication. Enough profit has been generated by the company to cover its interest payments. In 2015,
its ratio was 21 times as compared to 8 times in 2014 and which was almost same in 2013 too.
However, gearing ratio is anticipated to be low. Sound financial stability of the company can be
indicated by lower gearing ratio. The company’s gearing ratio in the financial year 2014 and 2013 was
34% and 41% respectively. The strong financial stability of the company can be evidently seen as the
gearing ratio has fallen by %5 as compared to last year performance. The amount of dividend that the
company pays to the investors may interest those investors who are particularly interest in the
dividend that they get by the company. As compared to the last year the dividend pay-out is low but
the dividend per share is increased as compared to the last year which is good. (Saiduzzaman S, n.d.)
On perusal of the company’s cash flow statement it can is evident that the company has progressed
really well when comparison is made with the last year. For the financial year 2014 company’s cash
and cash equivalent was $18599 thousand which rose to $36931 in the financial year 2015 that is
nearly 98% up. On analysing individual activities the company’s cash flow from operating activities
has risen by 88%. On analysing investing activities it can be seen that the investment in fixed assets
has been made by the company in the current year. Further it has also repaid a significant amount of
debt in the current year $29 million which explains it negative balance in finance activities. Overall
strong liquidity position can be seen if cash flow statement is pictured as a whole which is good for
the investors. Hence largely the company has given a classic performance in the current financial
year. (Saiduzzaman S, n.d.)
Regardless of governing the Australian Market of nearly than 80 years, Blackmores Limited is still
facing a ruthless competition from its competitor Swisse Wellness. Swisse Wellness overtook
Blackmores Limited in 2014 which is expected to happen in 2015 with its retail value share of 16%
while that of Blackmores is 15% which is very near. Both the companies are concentrating and have
placed their target on is Asian Markets which the most sensitive area. There is substantial request for
the uncontaminated Australian vitamins supplement in the Asian market as the Asians are fronting
contamination issues with the domestically available vitamins supplements. Swisse Wellness is
9

Analysis of Financial Reports
regarded as one of the top brands in Chinese Market, since it had made $49 million profit in just three
months for Biostime International. Its revenue would be very close to the figure reported by the
Blackmores if the three months revenue generated is extrapolated out to full twelve months revenue.
It hasn’t managed to overtake its rival in Asian Markets even though the Blackmores Asian sales were
up by 26% which is $ 84 million. Hence Blackmores, to see itself making substantial place in Asian
market is clearly trying hard, which its rival has fruitfully achieved. (Saiduzzaman S, n.d.)
Limitation of Ratio Analysis from Investor’s Point of View
 The ratios, at times, are regarded as unpredictable as based on which the ratios are calculated
are all historic information. (Ugwu A, n.d.)
 The ratios at times confuse comparison because of prevailing different accounting concepts
and conventions and management’s judgement.
 It is a backup since one can’t always say that a particular ratio is good or bad hence it is not
the only tool that is used for financial analysis.
 Since seasonal factors can distort the ratios calculated for a financial period. The ratios must
be calculated after considering the seasonal factors which investors are not aware of.
 Inflationary factors, another thing that investors fail to apply while doing ratio analysis. It
may lead to inappropriate conclusions when the inflation is not considered while calculating
the ratios
 If the company is Conglomerate Company then the data becomes unmatched which
overthrows the only purpose of ratio analysis. Usually the reason for calculation of ratios is
that the data of one company can be either compared with that of its rival or with the industry.
 The future prospects of management are not considered in Ratio analysis which is a draw
back for investors. (Ugwu A, n.d.)
10

Analysis of Financial Reports
Usefulness of publicly available information contained in Annual Reports
The only source for the investors is financial Information which is available publicly. It shows
thoroughly inside and outside of the company in which they intend to make investment in or of which
they already are investors. The helpfulness is:
 The investors can assess what is the company’s Vision and Mission in the statement given in
the annual report. Company’s future prospects and strategic focus can be known by the
investors. (Ugwu A, n.d.)
 The company’s product summary and financial highpoints of past 5 to 10 years can be
scrutinized in the annual report which otherwise is not possible to get access to.
 Whether the company has been able to achieve it strategic goals can be known by going
through the director’s report, targeted revenue achieved or not. Whether the strategies
followed have proven favourable to the company or not.
 Management Discussions and Analysis i.e. MDA shows the past trends of the company to its
investors. The swot analysis is also given of the company.
 Verification of the company’s compliance with legal regulation and corporate governance can
be seen in the annual report which indirectly decides the smooth future of the company.
 Verification by investors about the authenticity of information presented in the annual report
can be done by going through Auditor’s Report. (Ugwu A, n.d.)
 Users and the investors can know the financial position of the company by going through the
financial statement and its notes to accounts. It gives the consolidated financial information. It
guarantees the companies obedience with the standards and helps the investors assess the
company’s reliability in making decision and following rules.
Conclusion
Annual reports are the only source of information which has to be made publically available to the
investors. The investors not only know about the future prospects of the company but also can get the
internal information that is necessary for them to know. The information made publicly available is of
larger use to investors. The accounting concepts and conventions and the judgement made by the
management can be seen in the annual report and its impact on financial analysis and the technique
used to analyse the report can also be seen. (Deloitte, n.d.)
11

Analysis of Financial Reports
Reference:
 AGL, 2015, Annual Report, [Online], Available at
https://www.agl.com.au/-/media/AGL/About-AGL/Documents/Investor-Centre/
150826_AnnualReport_1466512.pdf?la=en [Accessed on 25/08/2016]
 Muhammad I, n.d., The impact of accounting concepts and conventions on business decisions,
[Online], Available at
http://www.academia.edu/20813318/The_impact_of_accounting_concepts_and_conventions_
on_business_decisions [Accessed on 25/08/2016]
 Tutor2u, n.d., Accounting Concepts and Conventions, [Online], Available at
http://www.tutor2u.net/business/reference/accounting-concepts-and-conventions [Accessed
on 25/08/2016]
 Ugwu A, n.d., The Role Of Accounting Concepts And Convention In Financial Reporting,
[Online], Available at https://afribary.com/read/3308/the-role-of-accounting-concepts-and-
convention-in-financial-reporting-7374 [Accessed on 25/08/2016]
 Saiduzzaman S, n.d., Ratio Analysis Theory,[Online], Available at
http://www.academia.edu/5563190/Ratio_Analysis_Theory [Accessed on 25/08/2016]
 Singhal D K, 2015, Financial Management, Available at [Offline], [Accessed on 25/08/2016]
 Blackmores, 2016, Terms of Service, [Online], Available at
https://www.blackmores.com.au/terms [Accessed on 25/08/2016]
 Deloitte, n.d., Financial reporting framework in Australia,[Online] Available at
http://www.iasplus.com/en/jurisdictions/oceania/australia [Accessed on 25/08/2016]
 Net MBA, n.d., Financial Ratio, [Online], Available at
http://www.netmba.com/finance/financial/ratios/ [Accessed on 25/08/2016]
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Analysis of Financial Reports
Appendix:
Particulars 2015 2014 2013
Sales 4,71,615.00 3,46,760.00 3,26,603.00
EBIT (Opearting Profit) 72,264.00 39,789.00 38,703.00
Net Profit 46,556.00 25,429.00 24,976.00
Shareholder's Equity 1,32,915.00 1,04,226.00 98,051.00
Total Assets 2,93,407.00 2,36,594.00 2,31,477.00
Current Assets 1,87,844.00 1,31,376.00 1,24,030.00
Current Liabilities 1,14,998.00 58,040.00 45,035.00
Net debt 7,069.00 54,401.00 69,043.00
Interest Expense 3,432.00 4,826.00 4,752.00
Operating Ratio (Operating Profit/Sales *100) 15.32 11.47 11.85
Net Profit Ratio (Net Profit/Sales *100) 9.87 7.33 7.65
Return on Assets (Net Profit / Total Assets *100) 27.30 17.00 19.10
Return on Investment (Net Profit / Shareholders Equity *100) 35.03 24.40 25.47
Earnings Per share (Total Earnings / No. of Share) 270.70 149.20 147.90
Investment Turnover (Sales/Total Assets) 1.61 1.47 1.41
Current Ratio (Current Assets / Current Liabilities) 1.63 2.26 2.75
Debt to Equity Ratio (Debt/Equity) 0.05 0.52 0.70
Debt Ratio (Total Debt/Total Assets) 2.41 22.99 29.83
Interest Coverage (Profit / Interest Expenses) 21.06 8.24 8.14
Gearing ratio {Debt/ (Debt + Equity)}/100 5.05 34.29 41.32
Dividend Payout Ratio (Dividend/Earnings)*100 0.75 0.85 0.86
13