FIN600 Report: Financial Performance Analysis of Blackmores Limited

This report provides a comprehensive financial analysis of Blackmores Limited, an Australian health supplements company. It begins with an introduction to the company's background, business activities, and market position. The analysis then delves into the company's financial statements, current performance, and economic outlook, highlighting key aspects such as sales in China and the impact of market changes. The core of the report focuses on ratio analysis, including profitability, efficiency, liquidity, and gearing ratios for 2018 and 2017. The report provides calculated ratios, and discusses their implications for the company's financial health and performance. The report concludes with recommendations and an overall assessment of Blackmores Limited, considering its financial performance, market position, and future prospects, including suggestions for strategic improvements. The appendices contain the financial data used for the ratio calculations.

Company
FIN600 TX YYYY
NAME: STUDENT ID:

Student name – ID FIN600 TX YYYY
Assignment – Company
Executive Summary
The company chosen for review is Blackmores Limited which is engaged in the business of health
care supplements. This report talks about the meaning of the various ratio and what they indicate.
Further, the suggestions have been given for the company.
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Student name – ID FIN600 TX YYYY
Assignment – Company
Contents
Page Number
1 Introduction 2
1.1 Background and Business
2 Company Analysis
2.1 Analysis of financial statements of the business
Current Financial performance, economic outlook
3 Ratio Analysis
3.1 Profitability ratios
3.2 Efficiency ratios
3.3 Liquidity ratios
3.4 Gearing ratios
4 Recommendations and overall assessment
5 References/Bibliography
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Student name – ID FIN600 TX YYYY
Assignment – Company
Appendices – attached Excel Spreadsheet
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Student name – ID FIN600 TX YYYY
Assignment – Company
1 Introduction
1.1 Background and Business
The company undertaken for review is Blackmores Limited which is an Australian Health
supplements company which was founded in the year 1930. The founder of the company was
Maurice Blackmores. The company had successfully opened its first food shop in the country of
Australia in Brisbane, Queensland. If considered today, the company is listed in the ASX 200
companies and has the market value of its share of an amount of $2 billion. The company also gives
an employment to about 843 people and also manufactures a wide variety of products. The example
of the products being manufactured include vitamins, minerals along with various health
supplements. The company operates in about 17 markets all across the Asia Pacific region of the
world. The company under review was inducted into the Queensland Business Leaders Hall of
Fame (Blackmores, 2019).
2 Company Analysis
2.1 Financial statements, Current Financial performance, economic outlook
The founder of the company was of the view that the properties of the herbs and the minerals helps
in the development of the entire system of the health care which was based upon some naturopathic
principles. His viewpoints majorly existed on the natural health, the medicines that could prevent
diseases and also the environment along with recycling that dated to the early years of 1930. It was
his view point that led to the development of many medicines that could treat different illnesses and
also help in the maximisation of health. The founder of the company Maurice was responsible for
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Student name – ID FIN600 TX YYYY
Assignment – Company
the starting up of the various health food stores in the areas of Brisbane during the year of 1938 and
he also worked with his colleagues and friends for the purposes of establishing the college of
naturopathic facts. He also led to the establishment of many professional associations in the country
of Australia itself. It were his beliefs that still hold truth and his relevant teachings and thought
process were successfully incorporated into the various training programs of the various
practitioners concerned with the natural health.
It was then during the year of 1975 that his son Marcus took the company to greater heights and that
led the company to become a world most appreciated company in the natural health on one side
whereas it kept its core to the founding principles on the other. Till today, the company enjoys an
unmatched heritage at heart and also enjoys a holistic approach when it comes to health and the
well-being of the people. The company has remained committed when it came to the delivering of
the new and the innovative products and supply the relevant health information and these have been
passed on to the customers (Blackmores, 2019).
The company led to a decrease in the amount of sales in the country of China. This happened
majorly due to the change in the strategy which was being used and also targeted and affected the
trade in china. The net effect of this led to an increase in the amount of the sales to the Chinese
consumers which led to the growth of 8% when compared with the previous year.
The investors of the company sold off the majority of its shares when the company announced that
it would be burgeoning sales in the Chinese market and also a decrease in the sales of the company
by 11%. This would ultimately lead to the weakening of the earnings during the second half of the
year. The company made majority of the sales to the country of China in the health conscious
middle class which led the company to report double sales in the country of China (SMH, 2019).
3 Ratio Analysis
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Student name – ID FIN600 TX YYYY
Assignment – Company
3.1 Profitability and Market ratios
The following table shows the calculated ratios:
2018 2017
Return on
Assets (Profit / Average total assets)
Profit / ((Year
1 Total A +
Year 2 Total
A)/2)
Profit /Year 2
Total A
0.039464712 0.140785202
3.95% 14.08%
Return on
Equity (Profit / Average equity)
Profit / ((Year
1 OE + Year 2
OE)/2)
Profit /Year 2
OE
0.093004415 0.324506904
9.30% 32.45%
Net Profit
Margin Net profit / Sales or revenue NP/ Revenue NP/ Revenue
0.115153642 0.105092727
12% 11%
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Student name – ID FIN600 TX YYYY
Assignment – Company
Gross Profit
Margin Gross profit / Sales or revenue GP/ Sales GP/ Sales
0.61390304 0.57086714
61% 57%
Net Interest
Income
Net Interest Income / Average Earning
Assets
NII / ((Year 1
earning A +
Year 2 earning
A)/2)
NII / Year 2
earning A
for banks only 0 0
0.00% 0.00%
Expense ratio Expenses (excluding tax) / Net sales Exp / Revenue Exp / Revenue
(using operating expenses/operating
income) 0.838389377 0.85224125
84% 85%
Cash return on
sales
Net cash flow from operating activity /
Sales or Revenue
$ op activities /
REV
$ op activities /
REV
0.096418733 0.08256484
10% 0.08256484
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Student name – ID FIN600 TX YYYY
Assignment – Company
Earnings per
share
Profit for shareholders / Number of
ordinary shares $xx per share $xx per share
EPS taken from annual report 4.064 3.426
Price earnings
ratio Share price 30 June / Earnings per share $XX / EPS $XX / EPS
share price 30 June taken from annual
report 34.1166 2.9912
XX times XX times
Earnings yield EPS / Share price 30 June EPS / $XX EPS / $XX
share price 30 June taken from annual
report 34.11663386 26.56450671
3411.66% 2656.45%
Dividends per
share
Dividends - Special dividends/ No of
shares $XX per share $XX per share
(determined) DPS taken from annual report 2.899988675 3.400014873
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Student name – ID FIN600 TX YYYY
Assignment – Company
Return on assets ratio is the ratio which shows the profitability of the company in relation with the
total assets of the company. This ratio indicates the way in which the company has performed when
it comes to the profits and the amount of the capital the company is able to generate from
employing its assets. The higher this ratio, the more is its productivity and the more effective its
management is when it comes to the utilization of the economic resources. A higher ratio is
recommended for the company. This ratio shows a decrease which means issues for the company
(Corporate finance institute, 2019).
The Return on Equity is the ratio which indicates the return that the company earns on the equity
which has been invested into the company of the shareholders. This ratio indicates the amount of
the return son the investment which have been invested by the shareholders of the company. A
higher ratio is recommended for the company. This ratio shows a decrease which means issues for
the company (Economic times, 2019).
The net profit ratio is the ratio which shows the amount of the revenue which is left in the
hands of the company after all of the expenses have been deducted from the amount of the
revenue generated by the company. This helps in the measurement of the profit of the company
which could be extracted from its total amount of the sales. The gross sales equation after all of
the expenses along with sales allowances equals to the net sales. A higher ratio is recommended
for the company. This ratio shows an increase which shows good performance of the company
(Bragg, 2019).
Gross profit margin ratio is the ratio of profitability which helps in the calculation of the sales over
and above the cost of goods sold. This is the ratio which suggests the efficiency of the company
when it comes to using the material and labour to be used and also sell its products profitably. In
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Student name – ID FIN600 TX YYYY
Assignment – Company
other words, it could be said that this is the amount of the sales left over and above all of the direct
costs that have been incurred. These are the costs that directly are connected with the cost of the
goods sold and comprise of the direct labour and the raw materials. A higher ratio is recommended
for the company. This ratio shows an increase which shows good performance of the company (My
accounting course, 2019).
An expense ratio is the ratio which is charged by the company for the purposes of managing the
funds of the investor (Economic times, 2019).
The return on sales ratio indicates the efficiency of the company when it comes to the generation of
profits from its revenue. It helps in the measurement of the performance of the business operations
of the company by the way of analyzing the % of the total amount of the revenues earned by the
company into the profits that are being generated by the company. A higher ratio is recommended
for the company. This ratio shows a decrease which shows good performance of the company (My
accounting course, 2019).
The earnings per share or the EPS is the financial measure of the company which indicates the
profitability of the company. This is calculated by the way of dividing the net income which has
been earned by the company and dividing the same by the way of outstanding shares. This is the
tool which the various participants in the market use for the purposes of assessing the future
prospect of the company. A higher ratio is recommended for the company. This ratio shows an
increase which shows good performance of the company (Economic times, 2019).
The price earnings ratio is the ratio which shows the connectivity between the stock price and the
earnings that the company earns on each share or on each dollar invested into the company. This
ratio helps the investors in assessing the company and whether the company would be able to meet
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Student name – ID FIN600 TX YYYY
Assignment – Company
its future expectations or not. A higher ratio is recommended for the company. This ratio shows an
increase which shows good performance of the company (Corporate finance institute, 2019).
The ratio of earnings yield is the reverse of the price earnings ratio. The price earnings ratio and the
earnings yield ratio indicate the same result. A higher ratio is recommended for the company. This
ratio shows an increase which shows good performance of the company (Equity master, 2019).
The dividend per share is the total amount of the dividend which has been earned by the company
and is allocated to each one of the share which is outstating for the company. This amount of
dividend per share helps an investor in understanding the income from the company and the amount
which the company earns on each share. These are the dividends that are usually paid in cash to the
investors of the company. A higher ratio is recommended for the company. This ratio shows a
decrease but this does not mean that the performance of the company has deteriorated since it
means that the company has set aside its major earnings for investment in future (corporate finance
institute, 2019).
The profitability ratios of the company throws light on the profits that have been earned by the
company. A higher ratio shows that the management of the company is efficient enough to generate
profits and there is as such no issues that the company would be exposed to in the near future.
Hence, the high these ratios are, the better it is for the company. The majority of the ratios that have
been calculated above shows a decrease when compared with the previous year of 2017. Hence, an
improvement in the operations of the company is recommended.
3.3 Efficiency ratios
The following table shows the calculated ratios:
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