Portfolio Element 2: Essay

Practice based project- 60% weighting

Details

 Utilizing the ratio analysis therein , analyze and comment on the financial trends of the
Barloworld Group over the six-year period from 2015 to 2020
 Analysis of the financial performance and position (encompassing profitability, liquidity,
efficiency, gearing and investment) of the Barloworld Group. Your discussion should include
an analysis of the segmental information provided in the annual report.
 Performance per ordinary share (10 Marks: ~250 words)
 Profitability and Asset Management (20 Marks: 350-500 words)
 Liquidity and Leverage (10 Marks: ~250 words)
 Value added (10 Marks: ~250 words)
 Ordinary Share performance (10 Marks: ~250 words)
 Your assignment should be no longer than 1500 words in total 
 Excluding calculations and references (shown as appendix)
Approach

 Use the ratios shown in consolidated seven-year summary

 You don’t need to go through every ratios stated in consolidated seven-year summary, i.e. choose
the ratios that help your analysis
 You can compute other ratios on your own for analysis if appropriate (optional)
 Show your calculations in appendix part
 Interpret the relationship of different ratios under same categories (or even across different
categories)
 Incorporate your analysis with the qualitative information included in the financial
statement, such as Directors’ review on business and notes to the accounts, as well as
information in the integrated report if appropriate
 Suggest possible ways to improve the ratios and/or operating performance if appropriate
(optional)
Approach

 Focus on long-term trend of the financial performance

 Not to overcast the change between 2019 and 2020 as 2020 was an exceptional year for trend analysis
 Possible conclusions:
 The xxx ratio/performance is improving over the period between 2015 to 2019, but worsened significantly due to
COVID, OR
 The xxx ratio/performance is worsening over the period, and effect on COVID made it even worse, OR
 The xxx ratio/performance maintain stable level over the period, and COVID improve/deteriorate the performance
 Detailed explanations to support your conclusion

 Comparison with targets

 Analysis based on product/service lines on the top of overall performance?
 Given Sufficient data for meaningful analysis
Performance per ordinary share

 Which earnings per shares is/are used?

 Overall performance? Or by line of business?
 Profit after deducting all types of expenses? Core operating profit?
 How to deal with once-off or occasional expense such as goodwill impairment, discontinued
operation and B-BBEE charge?
 Net asset value (Interests of shareholders)
 = Assets – Liabilities = Equity shown in accounting book
 = money invested by shareholders + accumulated profit retained in the business (after deducting
dividend paid)
Profitability and Asset Management

 Can separate into two sub-sections: (1) Profitability and (2) Asset Management
 You need to classify the type of ratios given in the financial statement
 You can include Efficiency ratio as an analysis on Asset Management of the company
 Select appropriate ratios, supported by calculations
 You just need to quote the ratio figures in the analysis (main text)
 All calculation steps and formula should be shown in appendix (not count on word limit)

 You can examine the relationship of ratios within these two categories, e.g. how
profitability affects by asset management and efficiency
Liquidity and leverage

 Again, you can separate the analysis into two sub-sections: (1) Liquidity and (2) Leverage
 You need to classify the type of ratios given in the financial statement
 You can examine the relationship of ratios within these two categories, e.g. will liquidity
affect leverage? Will extra financing be needed?
Value added

 Data in financial statement

 No. of employees
 Revenue per employee
 Value created per employee: Value added statement can be found in integrated report
 Employment cost per employee
 Can provide some suggestions on how to improve valued added performance of the
company, i.e. employees’ productivity
Ordinary Share performance

 Focus on P/E ratio, dividend yield

 Trend over time and versus market index
 Compare its performance over time and with the market
 Premium over/(under) interest of shareholders of the company (or P/B ratio)
 Interest of shareholders: Equity value shown in Statement of Financial positions
 Higher premium represents the company is creating value, vice versa
 Are P/E ratio and P/B ratio in line with the business performance?
 Market valuation reflects market expectation on company’s performance
Concluding paragraph

 You can prepare a concluding paragraph (~100 words) for rounding up the overall
performance of the company over time and highlight the key comments/ suggestions on the
company operations