Critical Review of Financial Performance of a Listed PLC: MBA Report

This report offers a comprehensive financial analysis of Coastal Contracts Berhad and its competitor, Carimin Petroleum Berhad, listed on Bursa Malaysia. It critically evaluates the financial performance over four years, assessing profitability (gross and net profit margins), efficiency (total asset turnover, inventory turnover), and liquidity (current and quick ratios). The analysis identifies key drivers of change affecting the oil and gas industry and the specific companies, including oil prices and government investments. The report also examines the cash flow statements and identifies any financial weaknesses, providing recommendations for improvement. Furthermore, the report assesses the companies' ability to create shareholder wealth, analyzing ratios like dividend payout and price-to-earnings, providing a detailed overview of their financial positions and performance trends. The report is written for the Financial Analysis and Management module of an MBA program.

Running head: FINANCIAL ANALYSIS AND MANAGEMENT
A critical review of the financial performance of a listed plc
Name of the Student
Name of the University
Author Note

FINANCIAL ANALYSIS AND MANAGEMENT
Table of Contents
Task 1:........................................................................................................................................3
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Critical evaluation of the key drivers of change affecting the industry and the group as a
whole:.........................................................................................................................................3
Evaluating the financial performance of the group and its competitor:.....................................3
Critically evaluating the cash flow statement of the group for a period of four years:..............3
Identifying and stating the remedial actions for the identified weakness:.................................3
Recommendations:.....................................................................................................................3
Conclusion:................................................................................................................................3
Task 2:........................................................................................................................................3
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Answer to requirement a)...........................................................................................................3
Answer to requirement b)...........................................................................................................4
Answer to requirement c)...........................................................................................................4
Answer to requirement d)...........................................................................................................4
Conclusion:................................................................................................................................4

FINANCIAL ANALYSIS AND MANAGEMENT
Task 1:
Introduction:
The report is prepared to demonstrate the competitive analysis of the companies listed
on Bursa Malaysia by assessing the financial performance and its contribution towards the
creation of the wealth for shareholders. Discussion incorporates the identified of the drivers
of change impacting the group and the industry as a whole. For the assessment of the
financial performance, the chosen company is Coastal contracts and its competitive analysis
has been done by selecting the competitor Carimin Petroleum Berhad. The financial
performance of the group is evaluated by assessing the liquidity, profitability, and capital
structure and efficiency position of the group. In addition to this, the ability of the group to
create the wealth for shareholders have also been assessed. Identification of any weakness
and poor financial performance is addressed by making suitable recommendations.
Furthermore, report also presents an evaluation of the cash flow statement of the group and
how the cash flow of the company is impacted by the changing environment. Coastal
Contracts is the group serving a diverse clientele including marine traders, oil and gas
industry, Royal Malaysian and Navy and commodities and mining sector
(Coastalcontracts.com 2020). Carimin on other hand is engaged in providing engineering and
technical support services to the oil and gas industry. Over the past decade, there has been
steady growth in the business of Carimin and it’s emerged as a dynamic contractor in
integrated rejuvenation and maintenance (Carimin.com 2020).

FINANCIAL ANALYSIS AND MANAGEMENT
Discussion:
Critical evaluation of the key drivers of change affecting the industry and the group as a
whole:
The activities within the oil and gas industry is driven by the oil price as price is the
primary factor determining the activities. Work activities has increased and the plans have
been revived by the oil majors and the organizations operating in the sector are optimistic
about securing more offshore contracts. It is also expected that the demand for marine vessels
demand would remain positive and the outlook of the activities tends to be positive. The
slowdown in the construction industry is likely to reduce the revenue of the particular
divisions of the organization and the industry as a whole. In addition to this, the growth of
civil construction division of the companies is expected to be limited in the coming years due
to the competitive environment and the current conditions of market, although, the division is
making continuous efforts in the given market conditions for securing new contracts. In the
near future, the operating environment of the business is expected to remain challenging
despite the gradual recovery of the oil and gas industry gradually due to rise in global oil
price.
In light of prevailing market conditions, Coastal group is progressing towards the
adoption of conservative approach and being selective in procuring the opportunities of
expansion and they prefer to adopt the project that are safe in terms of operational and credit
risks. The oil and gas service provider such as Carimin is also securing offshore contracts as
they are confident about the business delivering positive results in the upcoming financial
year.
Furthermore, the market demand of the infrastructure and energy sector of Malaysia is
promoted by the efforts taken by the government to enhance the investment in the

FINANCIAL ANALYSIS AND MANAGEMENT
environmentally and energy efficient assets. Companies emphasizing on the modern method
of construction and technological advancements is being encouraged by the government and
thereby provides the opportunities to the companies to prosper in the market. In order to
make the most of the market opportunities, proactive measures are being taken by the
companies for bolstering their diversified revenue and enhancing their efficiencies relating to
the cost. Therefore, it is observed that the various drivers bringing changes in the industry
where company operates are expected to impact their performance positively in the near
future.
Evaluating the financial performance of the group and its competitor:
The financial performance of the chosen organization is critically evaluated by
assessing its liquidity, efficiency and profitability position. In this regard, various ratios
depicting the overall financial performance of Coastal Contracts Berhad and Carimin
Petroleum Berhad are computed over the period of four consecutive financial years and the
computation of such financial figures assist in identifying the trend of their financial
performance. At the same time, the competitive analysis has also been performed by making
a comparison between the financial figures of both the chosen organizations.
The profitability position of Coastal contracts and Carimin Petroleum Berhad has
been assessed by computing the financial figures such as gross profit margin and net profit
margin. It helps in evaluating the profits generated by the company and whether they are
capable of generating income to meet the expenses incurred and some obligations (Garanina
and Belova 2015).
The table presented below presents the comparison between the computed financial
figures of gross profit margin.

FINANCIAL ANALYSIS AND MANAGEMENT
Gross profit
Year 2019 2018 2017 2016
Coastal contracts 43% 30% 30% 11%
Carimin petroleum
limited
11% 5% 11% 0.30%
Table 1:
It is clearly suggested by the figures that the gross profit margin of Coastal contract is
significantly higher than that of the margin recorded by Carimin Petroleum Berhad and this
value has remained consistently higher for the period of analysis. This implies that the
profitability position of former is better than the latter. For the analysis of the individual
company performance, it can be observed that the gross profit margin increased on a
consistent basis that is year on year from 11% in 2016 to 30% in year 2017 and 2018 and
further to 43%. This increase is profit has been because of falling cost of sales figures and an
average increase in revenue. However, in the present year of analysis, revenue reported
decline particularly due to fall in sales in vessels in year 2019. On other hand, the financial
figures of Carimin suggests that the current financial year has reported a significantly higher
gross margin compared to previous year. The earlier year of analysis presented a quite
fluctuating values with 11% recorded in 2017 and 5% in year 2018 (Coastalcontracts.com
2020). Increase in gross margin for Carimin is particularly due to a considerably higher
increase in value of revenue generated. This increase in revenue has been due to the improved
performance of few divisions such as MS and CHUCTMM.
Net profit
Year 2019 2018 2017 2016
Coastal contracts 9% -367% 12% 8%
Carimin petroleum
limited
6% -18% -3% 3%
Table 2:

FINANCIAL ANALYSIS AND MANAGEMENT
The table presented above depicts the computation of the net profit margin for Coastal
contracts and Caramin petroleum. Net profit margin in the current financial year is higher for
Coastal at value of 9% as against 6% for Carimin. However, it is also observed that net loss
reported by former was significantly higher in the previous year compared to Carimin. The
other years did generate higher values for Coastal. Therefore, in the current year, the
improvement in the net profit margin is attributable to the writing off the inventories of
vessels. For Carimin, the figures depict an improvement in the net profitability position as the
company recovered from the loss for the period of two financial years (Carimin.com 2020).
This increase has been due to generation of higher level of revenues in the current financial
year.
In the next section, evaluation of efficiency position of the companies have been done
by identifying the financial figures of total assets turnover and inventory turnover ratios.
These ratios helps in assessing the ability of the organization in effectively utilizing their
assets for income generation. The table below depicts the comparison between the financial
figures of the ratios computed for Coastal and its competitor.
Total assets turnover
Year 2019 2018 2017 2016
Coastal
contracts
0.09 0.08 0.17 0.86
Carimin
petroleum
limited
0.91 0.38 0.29 0.28
Table 3:
The figures suggest that the total asset turnover of Carimin Petroleum is higher than
that of Coastal contracts. It is inferred that the former is able to effectively utilize their assets
for income generation as against later that is comparatively less efficient. When comparing

FINANCIAL ANALYSIS AND MANAGEMENT
the individual figures, it is observed that the efficiency of Coastal has reduced year on year in
generating sales by utilizing their assets. On other hand, for Carimin Petroleum, the financial
figures computed for the turnover has been increasing on a consistent basis and this implies
that the company has been able to successfully convert their assets into sales or income.
Inventory turnover
Year 2019 2018 2017 2016
Coastal contracts 0.28 0.18 0.22 1.10
Carimin petroleum
limited
0.00 0.00 0.00 0.00
Table 4:
The above table depicts the figures of inventory turnover ratio for both the
organizations and it has been ascertained from the computed figures that the coastal contracts
has been effectively controlling their merchandise. On other hand, Carimin petroleum does
not have inventory turnover as they do not possess any inventories. Management of inventory
by Coastal contract is done effectively as the inventories sold are converted into cash on a
faster basis.
The liquidity position of the companies is analysed by assessing the ratios such as
current and quick ratio which is depicted in the table.
Current ratio

FINANCIAL ANALYSIS AND MANAGEMENT
Year 2019 2018 2017 2016
Coastal contracts 3.96 4.22 6.14 3.32
Carimin petroleum
limited
1.48 2.16 2.96 4.01
Table 5:
The table depicts the computed figures of current ratio for both the organization. It is
suggested by the computed figures that the current ratio of Coastal contracts is quite higher
than that of figures reported for Carimin petroleum limited. It is desirable to have higher
current ratio, but a considerably higher value becomes a concern for the company. Current
ratio for Coastal contracts is falling over the years, despite the fall in value, the current assets
are adequate to pay off the obligations. For, Carimin, there has been decline in ratio
consistently from 2.96 to 2.16 in year 2017 and 2018 and further to 1.48. This implies that
both the companies are capable of meeting their short term debt obligations using their
current assets. The overall fall in the liquidity position of Coastal is mainly because of the
reclassification of certain inventories to the plant, property and equipment.
Quick ratio
Year 2019 2018 2017 2016
Coastal contracts 2.90 2.74 3.14 1.56
Carimin petroleum
limited
1.48 2.16 2.96 4.01
Table 6:

FINANCIAL ANALYSIS AND MANAGEMENT
Quick ratio for Coastal is higher than that of Carimin with figures computed at 2.90 in
year 2019 compared to 1.48 for the later. Figures of quick ratio remained quite fluctuating as
the value increased in the initial years from 1.56 in year 2016 to 3.14 in year 2017 and again
reducing to 2.74 in year 2018 and increasing to 2.90. On other hand, for Carimin, quick ratio
declined to 1.48 in year 2019 compared to 2.16 and 2.96 in year 2018 and 2017 respectively.
It is suggested by the figures that Coastal have more quick assets for meeting the present
obligations than Carimin. Quick ratio of Coastal improved due to the improvement in the
collections from the customers.
The ability of the companies to generate return to the investors and create value for
the shareholders have been assessed by computing of ratios such as dividend payout ratio and
price to earnings ratio (Enekwe et al. 2014). It is observed from the figures that in the current
year, Carimin has made the dividend payment compared to Coastal which has not. Figures
suggests that both the companies does not have well to do trend of payouts and this is
alarming for the investors.
Dividend payout ratio
Year 2019 2018 2017 2016
Coastal contract 0.00 -0.01 0.22 0.16
Carimin petroleum
Berhad
0.12 0.00 0.00 0.00
Table 7:
The price earnings ratio of both the companies are not favourable enough as the figure
remained negative in the last few years. It is in the current year that companies generated a
positive price earnings ratio. In the current year, price earnings ratio for Coastal is recorded at
0.41 compared to 0.11. Strong performance of Carimin is not anticipated by the investors

FINANCIAL ANALYSIS AND MANAGEMENT
compared to Coastal for which the investors anticipates an improved performance (Ehiedu
2014).
Price earnings ratio
Year 2019 2018 2017 2016
Coastal contract 0.41 -0.01 0.15 0.04
Carimin petroleum
Berhad
0.11 -0.05 -0.23 0.22
Table 8:
The structure of capital is evaluated by computing ratios such as debt ratio and equity
ratio that helps in assessing the composition of the capital structure of the companies. The
figure suggest an improvement in the financial leverage of both the companies and the
leverage being lower for Coastal contract compared to Carimin. Debt ratio increased over the
years from 0.14 in 2016 to 0.17 in 2018 and it lowered to 0.14 in 2019 and this implies fall in
level of debt in the capital. For Carimin, debt ratio increased in the recent year from 0.24 in
2017 to 0.38 in year 2018 and declined to 0.24 in 2019.
Debt ratio
Year 2019 2018 2017 2016
Coastal contract 0.14 0.17 0.15 0.14
Carimin petroleum
berhad
0.24 0.38 0.24 0.29
Table 9:
Equity ratio increased in the current year to 0.72 for Coastal and the figures fluctuated
over the years. There was a fall in ratio to 0.44 for Carimin as against 0.60 and 0.56 in year
2017 and 2018. It has the implication that coastal contract has increased their equity

FINANCIAL ANALYSIS AND MANAGEMENT
investment compared to Carimin for which the equity investment in their total capital
declined.
Equity ratio
Year 2019 2018 2017 2016
Coastal contract 0.72 0.68 0.74 0.64
Carimin petroleum
berhad
0.44 0.56 0.60 0.59
Table 10:
Critically evaluating the cash flow statement of the group for a period of four years:
The cash flow statement of Coastal contracts reveals that the cash at the end of years
has reduced on a consistent basis over the period of four years. The net cash flow used in the
investing activities has increased over the years and the net cash used in the investing
activities also reduced considerably over the years. On other hand, net cash flow from
operating activities has increased year on year marking an increased cash flow generated
from operating activities.
Activities Impact of the changing environment
Cash flow from operations The tightening of the financial market
would have an impact on the purchasing of
the new vessels. This would create an
impact the flow of cash generated from the
operating activities.
Cash flow from investing Improvement in the oil and gas market is
likely to positively impact the cash flow