Financial Decision Making (FINM036) : Student Name: Melvin NG Chu Kong Student ID: 20416185

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Financial Decision Making (FINM036)

Student Name: Melvin Ng Chu Kong
Student ID: 20416185
Module Leader: Mr. Arvind Harris
Assignment Title: Good Energy Group Plc –

Evaluation Performance
Word count: 2562
Page 0 of 22
FINM036 – Good Energy Group Plc Report – Ng Chu Kong Melvin - 20416185
Executive summary
This report details a critical evaluation of the financial performance of Good Energy Plc, a UK based
company listed on the AIM London Stock Exchange under the EPIC “GOOD”. The evaluation and
the analysis a variety of factors such as profitability, stability and liquidity. The aim of this report is to
determine the company’s financial trends and any prospect for external profitability investment. In
order to achieve this analysis, evaluation and interpretation, data are collected from its financial
statements including its income statement and balance sheet. Financial ratios are calculated, compared
and used to advise potential investors within the same industry. Moreover, the performance of its
competitors; EQTEC Plc and PV Crystalox Solar Plc having the same index and industry.
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Table of Contents
Executive summary...............................................................................................................................1
Introduction...........................................................................................................................................3
Financial ratios Analysis.......................................................................................................................3
Profitability Ratio Analysis...................................................................................................................3
OPERATING MARGIN RATIO......................................................................................................4
RETURN ON EQUITY RATIO CALCULATION...........................................................................5
RETURN ON CAPITAL EMPLOYED (ROCE)..............................................................................6
Performance Indicators..........................................................................................................................7
PE Ratio.............................................................................................................................................7
Net Gearing.......................................................................................................................................8
Liquidity Ratio Analysis........................................................................................................................9
Current Ratio.....................................................................................................................................9
Quick Ratio......................................................................................................................................10
Critical Reflection on Good Energy Group PLC.................................................................................10
Evaluation of Corporate Governance...................................................................................................11
Assessment of the investment suitability based on its Asset Value per share and current share price. 12
Asset Value per share......................................................................................................................12
Current Share Price..........................................................................................................................12
Conclusion...........................................................................................................................................13
Reference List......................................................................................................................................13
Appendix.............................................................................................................................................14
The role and duties of the Board of Good Energy Plc......................................................................16
Board of Directors of Good Energy Plc Experience and Qualification............................................17
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Introduction
Good Energy Plc is a utilities company specialises in renewable energy founded in 1999
(Group.goodenergy.co.uk, 2020). With the issue of climate change, Good Energy Plc wants the
people to have the choice of choosing renewable energy from their homes and businesses. Good
Energy Plc’s project has become a blueprint for the Government. In 2012, Good Energy Plc has been
accepted on to the London Stock Exchange’s AIM Market and raised £4million in equity to support
the business. Moreover, it has a market capitalisation of £35.95million (Tools.morningstar.co.uk,
2020). Over the years, it has diversified its green energy from wind to solar and has achieved more
than 200,000 customers in UK. Recently, Good Energy Plc provides best value for money for owners’
electric vehicles. Over the period from 2015 – 2019, the turnover of the company has doubled from
£64.28million to £124.26million, having 278 employees and produces electricity from over 1600
locations across UK (Tools.morningstar.co.uk, 2020). Good Energy Plc’s main competitors in the
renewable energy industry are PV Crystalox Solar PLC and EQTEC (FinSMEs, 2020).
Financial ratios Analysis

Key financial ratios have been used to evaluate and analyse the financial performance of Good Energy
Plc over 5 years (2015 - 2019) such as profitability ratios (Operating Margin, Return on Equity and
return on capital employed), liquidity ratios (current ratio and quick ratio), investment returns and
performance indicators. These key factors are important to understand the financial position of a
company.
Profitability Ratio Analysis

The profitability ratios are important factors to understand the ability of the company to generate
profits as a return to its expenditure (Abdul, 2017). With the profitability ratios, the profitability of the
business is assessed and evaluate its performance and financial position to make investment decision
making in Good Energy Plc.
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OPERATING MARGIN RATIO
The Operating margin ration indicates how a company’s operation contribution towards its
profitability. This ratio shows how efficiently a company is controlling its cost. This indicator
determines the profit generated of the company after interest and tax obligation. Investors use this
indicator for financial risk or opportunity.
Good Energy Group PLC

0.1
0.09
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2015 2016 2017 2018 2019
Analysis:
Based on the above table and figures, Good Energy Group Plc over the last 5 years, the operating
margin had been stable between 0.09 – 0.05. This indicates that for every pound of income, 0.05 -
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0.09 pence are received. Although, its gross income is increasing years over years, its operational
expenses increase exponentially. Its competitors, EQTEC Plc over the last 5 years had a negative
operating income. However, between 2018 and 2019, it had been able to minimise its lost to stable
around -1.3. PV Crystalox Solar on the other side, in year 2019 had a drastic lost in its income
resulting to -3.97 pence for every pound of income.
RETURN ON EQUITY RATIO CALCULATION

The return on Capital indicates how much shareholders can expect as a return from the capital
invested (Nirajini and Priya, 2013). From this metric is important to investors and shareholders to
know how their money is being used to reach profitability.

10
0
2015 2016 2017 2018 2019
-5
-10
-15
-20
Analysis:
From the above table, it can be noted that during the year 2015 and 2017, the ROE for Good Energy
Plc has fell to -1.12 and -13.97 respectively which indicates they were unable to generate return on
equity. During these years, it can be noted that the company had made a negative profit for the
financial year. However, Good Energy Plc had been able to regain a positive ROE of 4.88 and 1.35
for 2 consecutive years in 2018 and 2019 respectively with a positive net profit and a stable equity
fund between £18.09 – £18.83. This was due to an increase in revenue (12%) and a decrease in
expenditure. Comparing with its competitor EQTEC over the last 5 years had a negative ROE due to a
negative net profit and for PV Crystalox Solar had been able to have a positive ROE for the years
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2016 – 2018. But it can be noted in year 2019, it had not been able to have more income to generate a
positive net profit.
RETURN ON CAPITAL EMPLOYED (ROCE)

The return on Capital Employed (ROCE) provides information how well a company’s money is being
used to generate returns (Burja Camelia, 2013). Moreover, it describes how much the company’s
profit has earned after tax deduction compared to the equity capital invested by shareholders and
investors. This metric helps investors and shareholders to understand their return based on capital
invested to the net profit.

12
10
0
2015 2016 2017 2018 2019
Analysis:
The above table and figures represent the Return on Capital Employed (ROCE) from the three
companies. Throughout the last 5 years, Good Energy Group Plc had been able to have positive
ROCE varying between 5.35 to 9.83. Its biggest peak in ROCE was in year 2016 and gradually
decreased over years but a slight boost in 2018. However, during the years 2017 and 2019, there was a
slight decrease showing that the company was having difficult to generate returns as there was an
increase in operation cost. Good Energy Group Plc is most likely the most attractive company
compared to its competitors where for example EQTEC Plc throughout its 5 last years had a negative
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ROCE and PV Crystalox Solar Plc which was not constant in its ROCE over the 5 years. Therefore,
this indicated that the ROCE from Group Energy Group Plc’s competitors are ineffective.
Performance Indicators
PE Ratio
The PE Ratio is an indicator to measure a company’s current share price to its per-share earnings.
Investors used this indicator to analyse the value of the company’s shares against other companies and
to understand the ratio risk.
PE Ratio
35
30
25
20
15
10
5
0
2015 2016 2017 2018 2019

EQTEC PLC (Competitor)
PV Crystalox Solar PLC (Competitor)
Analysis:
Based on the table, it can be noted that Good Energy Group Plc has a high P/E ratio meaning a higher
risk and a volatile investment. This can be due to an increase in the earnings but also an increase in
market price. Compare its competitors, they are constant in their P/E ratio. Therefore, it can be
concluded that in this industry, Good Energy Group has a more volatile and risky stocks in this
industry.
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Net Gearing
The net gearing ratio measures the owner’s equity to the fund borrowed. This indicator helps investors
to understand how geared the equity of a company is. The lower is the gear, the beneficial will be for
the investors as the interest of common stockholder is guaranteed. The higher is the gear, the higher
will be the vulnerability of the company in economy recession (Elzahar and Hussainey, 2012).
Net Bearing
400%
200%
0%
2015 2016 2017 2018 2019
-200%
-400%
-600%
-800%
Good Energy Group PLC EQTEC PLC (Competitor)

PV Crystalox Solar PLC (Competitor)
Analysis:
From the above graph, Good Energy Group has a higher net bearing over the last 5 years and
conclude that it has a high debt compared to its equity over 200%. Over the last 5 years, it had
borrowed money over £45million yearly for its investment and most of their due dates are over 2-5
years. Compared to EQTEC Plc, during the year 2015 – 2016, the company has more equity and its
debt but afterwards, its bearing position has improved resulting by taking shot and long-term loans
and bank overdraft. However, PV Crystalox Solar had no bearing throughout its last 5 years.
Therefore, Good Energy Group should consider to its high financial leverage and aim to lower it
down as during times of low profits, the company will be more prone to loan default and bankruptcy.
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Liquidity Ratio Analysis
The liquidity ratio analysis is important to determine the ability of Good Energy Group Plc to pay its
current debt obligations without raising any external funds. Moreover, this provides its margin of
safety through various metrics such as current ratio and quick ratio.
Current Ratio
The current ratio provides investors to know the profitability and the capability of the company to pay
back its short-term debts using its current assets (Saleem and Rehman, 2011). Moreover, it will be
risky for investors to have a company which are not able to recover from its liability. Hence, this ratio
analyses the current assets of a company over its current liabilities .

1.6
1.4
1.2
0.8
0.6
0.4
0.2
0
2015 2016 2017 2018 2019
Analysis:
The current ratio for Good Energy Group Plc is stable, standing between 0.92 and 1.39 over the 5
years as its current assets increased compare to its current liabilities decreased. This demonstrate that
it has the ability towards its obligations. Although its competitor PV Crystalox Solar Plc has more
that 12 times of its current ratio (Years 2015 – 2018), this indicates that current assets are not fully
utilised. However, during the year 2019, PV Crystalox Solar Plc had shown 4 times decreased
indicating current assets have used efficiently. Regarding EQTEC Plc, its current ratio is stable to 0.5
over its last 4 years. Therefore, this shows that Good Energy Group Plc has a good resource
management and a healthy financial.
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Quick Ratio
The quick ratio helps investors to understand the capability of a company to settle its short-term
obligations without selling any inventories (Saleem and Rehman, 2011).
Quick Ratio (Acid Test) = (Current Assets – stock) ÷ Current Liabilities

1.2
0.8
0.6
0.4
0.2
0
2015 2016 2017 2018 2019
Analysis:
From the above table, it can be noted that Good Energy Group Plc over its last 5 years, it had an
increasing trend in its quick ratio and has been able to stabilise on the standard benchmark of 1.1 due
to an increase in its debtors and cash securities compared to its current liabilities. For EQTEC Plc, its
quick ratio is well below, indicating its current assets is more or less its current liabilities. Hence, it
will more likely to struggle to pay its short-term debt. However, for PV Crystalox Solar Plc between
2016 and 2018, the quick ratio had increased drastically indicating a better liquidity. In 2019, it had
been able to lower its quick ratio to 5.46 which indicates they are paying their short-term loans.
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Critical Reflection on Good Energy Group Plc in news
The performance of Good Energy Group Plc based on media coverage varies on factors of strategic
investment, earning release, performance forecast and debt. In the latest announcement of annual
profit, Group Energy Plc announced a rise in the revenue by 12% and dividend paid
(Sharesmagazine.co.uk, 2019). Moreover, the increase in customer number and satisfaction
demonstrated that people are being more conscious about climate change and are willing to move
towards renewable energy (Sharesmagazine.co.uk, 2019). This shown that the company’s profitability
and reassured its shareholders on the growth of the company in the future.
The company’s strategic investment in electric car app (next green car) with an initial 12.9% stake
with an option to raise to 50.1% had demonstrated its objectives towards diversify its growth towards
renewable energy and its application (Stockmarketwire.com, 2019). Moreover, the company had
offered electric vehicle charging product for UK businesses as a pilot to expand this facility nationwide
(telegraph.co.uk, 2019). From this strategic move, Good Energy Group Plc shown its engagement
electric vehicles and energy sharing market.
Selling of 2 solar farms with additional cash with any development as phase II in one of the solar
firm.
Issues bonds for development
Page 12 of 22
Evaluation of Corporate Governance
Good Energy Group Plc is governed by 6 members of the Board of Directors which have adopted the
Quoted Companies Alliance’s (“QCA”) code of corporate governance which is the requirements of
the London Stock Exchange’s AIM Rules. From this QCA code, Good Energy Group Plc is provided
a governance framework to support the business and to achieve success in the long term. Each
executive director of the board has been selected according to their skills, qualifications and
experiences so that to have the right balance of skills and capabilities to the growth of the company
(see Appendix). Moreover, the Board is constituted of a faire Gender Equality (Good Energy Group
PLC, 2020). From this, the Board of Directors is responsible to establish strategies and business
models to ensure the value of shareholders based on their needs and expectations. Moreover, the
Board and its Committees take external advices to have best information and can contribute to the
growth of the company at the expense of the company (Good Energy Group PLC, 2020). Every
director is fully aware of the decisions and activities of the company. Each year, the Board evaluates
and reviews its composition and assesses each director performance and contributions to remain
effective. Therefore, if they desire to retain their position, they need to earn it.
Moreover, to support in its long-term success, the company is engaged in social responsibility towards
its customers, employees, suppliers, environment and local communities. The main objective of the
company is to source all electricity from certified renewables such as solar, wind and hydroelectric
power and biofuels (Good Energy Group PLC, 2020). Good Energy Group Plc promotes a corporate
culture based on ethical values and behaviour.
The existing governance structure complies with the UK Corporate Governance Code (Combine
Code) where the Board has put in place measures to develop strategies and models for the interest of
stakeholders at Good Energy Plc. Different compliance areas have been noted such as leadership,
accountability, risk assessment and the interest of shareholders is protected.
Board Member at Good Energy Plc Position

Juliet Davenport Chief Executive Officer
Rupert Sanderson Chief Financial Officer
William Whitehorn Chairman
Emma Tinker Non-Executive Director (Independent)
Timothy (Tim) Jones Non-Executive Director (Independent)
Nemone Wynn-Evans Non-Executive Director (Independent)
Figure 5: Board of Directors at Good Energy Plc.
Source: https://group.goodenergy.co.uk , (2020)
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Assessment of the investment suitability based on its Asset Value per
share and current share price
Asset Value per share
This ratio measures the total value of the fund’s investments relative to its number of shares
outstanding.
Figure 6: 5 years of Net Asset Value per Share trends for Good Energy Group Plc
Source: (Londonstockexchange.com, 2020)
Over the past 5 years, it can be seen that the Net Asset Value per share is positive but not stable. It
varies between 91.02p to 104.61p. Its highest peak was in 2016 and its lowest in 2019. This is due to
an increase in its liabilities by 2017. Although its Net Asset Value per share is not constant, it is still a
reliable investment in the long-term.
Current Share Price
Figure 7: 5 years of Share Price of Good Energy Group Plc as at July 12, 2020
Source: (Londonstockexchange.com, 2020)
Based from the above graph, it can be noted that the Share price of Good Energy Group Plc had been
negatively impacted in 2018. However, by year 2019, its share price had gradually increased but a
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drop in March 2020 and regain its value afterwards. The attractiveness of Good Energy Plc will be in
the long term when becomes more profitable. Hence, if investors are not looking for long-term
investment, they are advised to look for alternative companies. The company will become more
desirable in the future when more people will be conscious about climate change and will turn to
renewable energy.
Conclusion
Reference List
Group.goodenergy.co.uk, 2020. Good Energy Group PLC - About Us - Our Story. [online]
Group.goodenergy.co.uk. Available at: <https://group.goodenergy.co.uk/about-us/our-
story/default.aspx> [Accessed 6 July 2020].
Abdul, A.A.A., 2017. The Relationship between Solvency Ratios and Profitability Ratios: Analytical
Study in Food Industrial Companies listed in Amman Bursa. International Journal of Economics and
Financial Issues, 7(2), p.86.
FinSMEs, 2020. Renewable Energy Companies In The UK Stock Market | Finsmes. [online]
FinSMEs. Available at: <http://www.finsmes.com/2019/10/renewable-energy-companies-in-the-uk-
stock-market.html> [Accessed 7 July 2020].
Nirajini, A. and Priya, K.B., 2013. Impact of capital structure on financial performance of the listed
trading companies in Sri Lanka. International Journal of Scientific and Research Publications, 3(5),
pp.1-9.
Burja Camelia, 2013. ANALYSIS MODEL FOR RETURN ON CAPITAL EMPLOYED. Analele
Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie, 1(1), pp.82–87.
Elzahar, H., & Hussainey, K. (2012). Determinants of narrative risk disclosures in UK interim
reports. The Journal of Risk Finance.
Tools.morningstar.co.uk, 2020. Good Energy Group PLC | GOOD - Morningstar. [online]
Tools.morningstar.co.uk. Available at: <https://tools.morningstar.co.uk/uk/stockreport/default.aspx?
tab=0&vw=sum&SecurityToken=0P0000WKBO%5D3%5D0%5DE0WWE
%24%24ALL&Id=0P0000WKBO&ClientFund=0&CurrencyId=BAS> [Accessed 9 July 2020].
Saleem, Q. and Rehman, R.U., 2011. Impacts of liquidity ratios on profitability. Interdisciplinary
journal of research in business, 1(7), pp.95-98.
Sharesmagazine.co.uk, 2019. Good Energy Acquires Stake In Electric Car App Owner Next Green
Car, 5 Mar 2019 14:21 | Shares Magazine. [online] Sharesmagazine.co.uk. Available at:
<https://www.sharesmagazine.co.uk/news/market/6335823/Good-Energy-acquires-stake-in-electric-
car-app-owner-Next-Green-Car> [Accessed 11 July 2020].
Good Energy Group PLC, 2020. Good Energy Group PLC - Good Governance Reflected In Our Core
Values. [online] Group.goodenergy.co.uk. Available at: <https://group.goodenergy.co.uk/corporate-
governance/corporate-governance-code/default.aspx> [Accessed 11 July 2020].
Londonstockexchange.com, 2020. GOOD ENERGY GROUP PLC GOOD Fundamentals - Stock |
London Stock Exchange. [online] Londonstockexchange.com. Available at:
<https://www.londonstockexchange.com/stock/GOOD/good-energy-group-plc/fundamentals>
[Accessed 12 July 2020].
Sharesmagazine.co.uk, 2017. Good Energy Revenues Up 41%, 21 Mar 2017 08:21 | Shares
Magazine. [online] Sharesmagazine.co.uk. Available at:
Page 15 of 22
<https://www.sharesmagazine.co.uk/news/market/5516316/Good-Energy-revenues-up-41pct>
[Accessed 15 July 2020].
Sharesmagazine.co.uk, 2019. Good Energy Annual Profit Rises On Higher Volumes, Prices, 20 Mar
2019 14:22 | Shares Magazine. [online] Sharesmagazine.co.uk. Available at:
<https://www.sharesmagazine.co.uk/news/market/6355061/Good-Energy-annual-profit-rises-on-
higher-volumes-prices> [Accessed 15 July 2020].
Stockmarketwire.com, 2019. Good Energy Acquires Stake In Electric Car App Owner Next Green Car |
5 March 2019 | Stock Market Wire. [online] Stockmarketwire.com. Available at:
<https://www.stockmarketwire.com/article/6335823/Good-Energy-acquires-stake-in-electric-car-
app-owner-Next-Green-Car.html> [Accessed 15 July 2020].
telegraph.co.uk, 2019. Markets Hub - Live Financial Updates From The Telegraph. [online] Markets
Hub - Live financial updates from The Telegraph. Available at:
<https://www.telegraph.co.uk/markets-hub/share/S1378/GOOD/GoodEnergy> [Accessed 15 July
2020].
Appendix
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The role and duties of the Board of Good Energy Plc
The role and duties of each director of Good Energy Group Plc
Source: https://group.goodenergy.co.uk/corporate-governance/corporate-governance-code/ (2020)
Page 18 of 22
Board of Directors of Good Energy Plc Experience and Qualification
Page 19 of 22
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Financial Decision Making (FINM036)

Module Leader: Mr. Arvind Harris

Assignment Title: Good Energy Group Plc –

Word count: 2562

Financial ratios Analysis

Profitability Ratio Analysis

Good Energy Group PLC

RETURN ON EQUITY RATIO CALCULATION

Good Energy Group PLC

RETURN ON CAPITAL EMPLOYED (ROCE)

Good Energy Group PLC

Good Energy Group PLC

Good Energy Group PLC EQTEC PLC (Competitor)

Good Energy Group PLC

Quick Ratio (Acid Test) = (Current Assets – stock) ÷ Current Liabilities

Good Energy Group PLC

Board Member at Good Energy Plc Position

Current Share Price

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