Table of Contents

Introduction.................................................................................................................................................1
Performance Analysis..................................................................................................................................1
Profitability..............................................................................................................................................1
Liquidity Ratios.......................................................................................................................................3
Solvency Ratios.......................................................................................................................................4
Activity Ratio..........................................................................................................................................5
Conclusion and Recommendations..............................................................................................................6
Corporate Reporting....................................................................................................................................7
References.................................................................................................................................................10
Appendix...................................................................................................................................................11

Introduction
The study aims to evaluate and check that will the investor invest in the United Development
Company’s (UDC) stock. For evaluation of the financial performance of the UDC, the ratio
analysis is being used to check the profitability, liquidity, activity, and leverage of the company.
It is a public shareholding company in Qatar that has leadership in the construction industry. It is
engaged in different sectors of the industry and has different subsidiaries operating in the
segments of infrastructure and utilities, leisure and hospitality, energy and hydrocarbon, and
construction and real-estate development (UDC, 2021).
It reports the revenue of QAR 1175.69 million in 2020 and is registered in the Qatar Stock
Exchange and has the ticker of UDCD. As of April 27, 2021, in Qatar stock, the stock of the
UDC closes on QAR 1.619. in April, the stock shows a 5.88% change. In the year 2020, they got
honored with Best Residential Property Award, Best New Hotel Construction & Design Award,
and Best Mixed-Use Architecture Award from Arabian Property Awards. Despite this, they also
got different certificates. In their business model, they focused on synergistic growth and a
diversified business portfolio for getting sustainable earnings. The main competitors of the UDC
are Ezdan Holdings, Msheireb Properties, and Qatari Diar. For the comparison of the financial
performance of the UDC, we used Ezdan Holdings (UDC, 2021).

Performance Analysis
Profitability
The main function of the business is to capture the customers for earning the value for business
and without the customer, there is no business. And form customer’s business earns revenue and
profits and without profit, there is no further investment and innovations. 2020 was a heavier
year for the business around the globe as it records economic recession, and it brings all the
economic activities down for each business. Whether the business is small or has a huge market
share and strong reserves each business faces massive cuts in its revenues. The economic
conditions put a lot of load on the revenue of the UDC. The revenue from UDC records cut by
around 33.20%.

Revenue
UDC Ezdan
20.00%

10.00% 8.14%

-0.36%
0.00%
2020 2019 2018
-10.18%
-10.00%
-15.91%
-19.91%
-20.00%

-30.00% -33.20%

-40.00%

Figure 1 Revenue
UDC was suffering enough revenue decline since 2018 due to the trade cut of the four Arab
countries Egypt, Bahrain, United Arab Emirates, and Saudi Arabia in June 2017. This brings the
continued impact on 2018 when UDC get a 19.91% cut in its growth after that it got growth in
2019. On the other hand, Ezdan shows steady growth before COVID and in COVID-19 it gets a
lesser cut in its growth.
No. Profitability 2020 2019 2018
1 Revenue  
  UDC -33.20% 8.14% -19.91%
  Ezdan -10.18% -0.36% -15.91%
2 Operating Profit  
  UDC -44.00% 2.32% -27.26%
  Ezdan -20.48% 40.47% -19.13%
3 Net Profit  
  UDC -46.60% -15.48% -6.98%
  Ezdan 12.50% -28.69% -74.38%
Table 1 Profitability
As in 2018 for UDC the revenue got a higher cut than the expenses that gives us the resultant
decline of 27.26% in firms operating profit, but in 2019 some of the structural changes in the
business along with the optimization brings the rise of operating profit to 8.14%. For Ezdan with
the help of extraordinary gross profit of 94.72% got less decline of 15.91 in 2018 as gross profit
rose to 96.6% in 2019 Ezdan record gross profit margin double than the UDC’s gross profit
margin of 46%. All the data shows that Ezdan shows higher performance than UDC.
Liquidity Ratios

Current Ratio
UDC Ezdan
2.00
1.77
1.80
1.60 1.50
1.38
1.40
1.20 1.07
1.00
0.80
0.60
0.40
0.20 0.17 0.15
0.08 0.05
0.00
2020 2019 2018 2017

Figure 2 Current Ratio

The liquidity ratio of the UDC shown stability for the company and it indicates that the company
can pay off its short-term obligations in time. The current ratio of the company has a declining
trend till 2019 as it reaches from 1.77 to 1.07 but in 2020 it got further up and reaches 1.50, the
industry records 1.37 in 2020. But on the other hand, Ezdan faces more liquidity issues
throughout the span it is under the industry benchmark score and it shows a slighter increasing
trend.

No. Liquidity Ratios 2020 2019 2018 2017

1 Current Ratio Current Assets/Current Liabilities
  UDC 1.50 1.07 1.38 1.77
  Ezdan 0.17 0.08 0.05 0.15
2 Quick Ratio C.A - inv - pre exp / C.L
  UDC 0.77 0.67 0.73 1.03
  Ezdan 0.16 0.07 0.04 0.12
3 Cash Ratio Cash + M.S / C. L
  UDC 0.37 0.25 0.33 0.52
  Ezdan 0.13 0.0021 0.0024 0.09
Table 2 Liquidity Ratio
The dominance of the UDC over Ezdan is shown by the results of the current ratio, quick ratio,
and cash ratio. The results also indicate that UDC held a lot of inventory in their stock and Ezdan
held a very little amount of the inventory in their stock, which brings the same results of quick
and current ratios for Ezdan. Both companies have dominance of debt in their capital structure
but the difference comes from the number of cash holdings where Ezdan holds 12% of cash
equivalents of total assets and UDC holds almost 7% of the cash holdings which indicates that
Ezdan held more of the highly liquidate able items as compared to UDC.
Solvency Ratios
No. Solvency Ratios 2020 2019 2018 2017
1 Debt Ratio Total Liabilities/Total Assets
  UDC 0.44 0.40 0.41 0.40
  Ezdan 0.35 0.34 0.37 0.39
2 Debt to Equity Ratio Total Debt/Total Equity
  UDC 0.30 0.14 0.23 0.33
  Ezdan 0.39 0.38 0.45 0.44
3 Times interest Earned EBIT/Interest expense
  UDC 11.21 6.77 -27.21 6.32
  Ezdan 1.49 1.27 1.16 -2.71
Table 3 Solvency Ratios
The gearing (solvency) ratio is critically used for the analysis of the long-term business
sustainability of the business (Borad, 2020). For creditors, these ratios are considered critical as
they tell that whether the business can meet its long-term debt obligations (Maverick, 2012). For
UDC debt ratio indicates that it has around 42% of its total assets are financed with the help of
debt and for Ezdan it is 37%. With the industry benchmark of 0.97, both firms have control over
the debt ratio but UDC has little more exposure to the debt risk than Ezdan. With the fluctuations
in the payment of the interest rate, UDC has more payment of the debt than the Ezdan because of
its less leverage ratio.
 Debt to Equity Ratio
UDC Ezdan
0.50
0.45 0.45 0.44
0.40 0.39
0.38
0.35
0.33
0.30 0.30
0.25
0.23
0.20
0.15 0.14
0.10
0.05
0.00
2020 2019 2018 2017

Figure 3 Debt-to-Equity Ratio

As UDC has more debt as compared to its asset than Ezdan but when it comes to the capital
structure of the company the results indicate that Ezdan has taken more debt as compared to the
UDC for financing its capital structure.
Activity Ratio
For checking and analyzing the efficiency and effectiveness of business operations activity ratios
are used.
No
. Activity Ratios 2020 2019 2018 2017
1 A/R turnover Net sales/average A/R

  UDC 0.78 1.13 1.21 1.47

  Ezdan 6.47 6.76 10.57 12.49

2 A/R collection period 360/A/R turnover

  UDC 461.80 317.36 297.41 245.40

  Ezdan 55.64 53.28 34.05 28.83

3 Inventory turnover Cost of goods sold/Average inventory

  UDC 0.26 0.61 0.55 0.71

  Ezdan 2.80 1.85 2.98 4.22

The average age of
4 inventory 360/Inventory turnover
   UDC 1,400.67 586.27 652.59 509.90

  Ezdan 128.79 194.71 120.66 85.24

5 Total Assets Turnover Net Sales/Avg. total assets

  UDC 0.06 0.10 0.09 0.11

  Ezdan 0.03 0.03 0.03 0.04

Table 4 Activity Ratios
With good billing and credit terms, Ezdan has a good collection period of 43 days on average but
UDC indicates the average collection period of 330 days which indicates the bad nature of
billing and credit terms both showing an increase in the days of collection. The reason behind the
slow collection is the recent economic recession. UDC has an average of six to eight times more
age of inventory than Ezdan.

Asset Turnover Ratio

UDC Ezdan
0.12
0.11

0.10 0.10
0.09

0.08
0.06
0.06

0.04 0.04
0.03 0.03 0.03

0.02

-
1 2 3 4

Figure 4 Asset Turnover Ratio

Conclusion and Recommendations

It is concluded that the company is in a good financial position shown in the ratio analysis of the
company and the company has the potential to grow in the future. company is better than its rival
in some respects but in other aspects, rial takes the game.
It is recommended that the company must upgrade its credit contracts and billing process to
reduce the collection period. The company must keep low inventory in its stock and sells more to
increase the inventory turnover. With FIFA coming in 2022 the company must focus on getting
more of the contracts to improve its profitability.
Corporate Reporting
For identifying the extent of use of impression management theory by the management we are
going to analyze the Report of the Chairman in this section. We are going to use the ratio
analysis for the comparison of the management direction.
Costumers are the key to any business, and it plays a vital role in business success. The main
objective of the business is to capture the value for the customer. Customer engagement is
helpful in profitability and business marketing (Adam, 2020). Business uses the financial
statements for positioning its customers and expressing its corporate strategy. For making the
firm competitive and efficient the business uses other approaches as well. These approaches help
in the surety of the delivery of the approaches and key principles to its clients (Aruwa, 2010)
Organizational culture is the one important practice of the business that is being used for
decades. It is considered important to the business success and value chain of the business
(PWC, 2007). Different promotional practices of corporate culture are being used in different
organizations. Out of all these promotional practices employee’s motivation is the one that is
being used by the business for a long time. Management practice uses new ways for inspiration,
promotion, and preparation of the employee’s success. Good motivation helps in the
achievement of profitability for the firm and brings superior values in long-term employee
management relationships (gpcanada, 2021).
For stockholders and shareholders business reporting is significantly important because it helps
them in the evaluation of the provided information of a business. This is the encouraging factor
for the manager to avoid the weaknesses of the business and focusing on the business success.
Chairman's report is one of the most important parts of the financial statement. In this report, the
chairman presents the quantitative evaluation of the facts and figures of the company and it also
discusses that how decisions of the management and economic conditions have impacted the
business and how management is going to react in the future. We are going to analyze the UDC
Chairman Report from the annual report 2020. The chairman emphasis on the economic
condition of the world and tells that how it affects the revenue and profitability of the business
due to COVID-19. The chairman explains that how they helped the businesses during this
pandemic by giving investors 3 months exemptions from rental and cooling charges against
shops. The report further discusses the future development plans of the company and how they
are going to help the business achieve profitability in coming years. The chairman discussed that
COVID-19 has a higher impact on the profitability of the company as compared to the previous
year 2019. The financial statement indicates that the company has revenue of QR1,759,934,000
in 2019 which with a decline of 33.20% reaches QR 1,175,692,000 in 2020. As there is less
revenue there is less profit and net profit was QR 458,105,000 in 2019 which after a 46.60%
decline becomes QR264,924,000 in the year 2020. The further chairman reports that their
company’s earnings per share also got decline and they also paid the dividend to the
shareholders. The financial statement indicates that the company has QR0.12 earnings per share
in 2019 which after decline reaches 0.064 in the year 2020. As of the dividend the company paid
QR345,086,000 of dividend in the year 2020. The chairman also claims that they had paid 200
million of the loan in 2020 which reduce the financing cost by 25%. The financial statement
indicates that the company has paid the loan installment as the amount of borrowing was
recorded QR1,851,584,000 in the year 2019 which decreases to and reaches QR624,180,000 in
the year 2020. The chairman has mentioned all of the external factors that affect the performance
of the business, but he does not include some of the major internal factors of the company that
leads towards operational inefficiencies of the company. The analysis shows that in 2018 the
company also has a negative growth in revenue and profit of the company. They said that this
was due to a trade cutoff with four of the major Arab countries. Through this, the business is
trying to gain the confidence of the consumer and investors to boost their business and earn
revenues.
It is concluded that the UDC uses the optimist approach for the disclosure of their financial
statement and they are continuing to do so. They will put all the blame of business drawbacks on
the external factors like economic recession, and COVID-19 and all the successive things like
market capturing are going to be the impact of the internal factors.
References
Adam, J. (2020, February 6). How Does Value Creation Lead to Business Success? CFO

Perspective. https://cfoperspective.com/how-does-value-creation-lead-to-business-

success

Aruwa, S. A. (2010). Survey on biodiversity and corporate reporting analysis. International

Journal of Sustainability in Higher Education, 11(4).

https://doi.org/10.1108/ijshe.2010.24911dag.001

Borad, S. B. (2019, February 9). Capital Structure and its Theories. EFinanceManagement.com.

https://efinancemanagement.com/financial-leverage/capital-structure-and-its-theories

gpcanada. (2021). Corporate Reporting | Annual Corporate Report. Gpcanada.org.

https://gpcanada.org/corporate-reporting

Maverick, J. B. (2019). What Debt-to-Equity Ratio Is Common for a Bank? Investopedia.

https://www.investopedia.com/ask/answers/052515/what-debt-equity-ratio-common-

bank.asp#:~:text=The%20D%2FE%20ratio%20is

PWC. (2007). Corporate reporting -a time for reflection A survey of the Fortune Global 500

companies’ narrative reporting Pwc. https://www.pwc.com/gx/en/corporate-reporting-

services/pdf/reflection.pdf

UDC. (2020). Annual Report.

https://doi.org/https://www.udcqatar.com/-/media/26B96D05155141078E64937D45086F

53.ashx
Appendix