Appraisal of the Financial Performance of Distil PLC & Recommendations on How the Performance Can be Enhanced

Appraisal of the Financial Performance of Distil PLC & Recommendations on How the Performance Can be Enhanced
[By:]
[Presented To:]
[Name of Institution:]
[Date
Task 1: Evaluation of the performance of the company across all categories of ratios
(£ 000)

2018

2019

2020

Liquidity Ratios

£ 000

£ 000

£ 000

Current Ratio
=Current AssetsCurrent Liabiliities

1603235
= 6.8

158798
= 16.2

1750126
= 13.8

Quick Ratio
=Current Assets-InventoriesCurrent Liabilities

1603-177235
= 6.07

1587-31298
= 13.01

1750-349126
=11.12

Inventory Days
=InventoryCost of Sales(Purchases)×365

177842×365
= 76.7days

312972×365
= 117.2 days

349×365995
= 128 days

Receivable Days
=Trade ReceivableSales and Other Operating Revenue×365

3952014×365
= 71.6days

2072401×365
= 31.5 days

543×3652441
= 81.2 days

Payable Days
=Trade PayablesCost of Sales(Purchases)×365

235842×365
= 101.9 days

98972×365
= 36.8 days

126×365995
= 46.2 days

Solvency Ratio




Gearing
= Long Term and Short Term BorrowingEuity×100%

235+03014
= 7.8%

98+03174
= 3.09%

126+03430
= 3.7%

Profitability Ratios




Operating Profit Margin
=Operating ProfitRevenue×100%

1572014
= 7.8%

1602401
= 6.7%

1822441
= 7.5%

ROA (Return on Asset)
=Net IncomeTotal Asset

1573249
= 0.04832

1603272
= 0.04889

1823556
= 0.05118

ROE (Return on Equity)
=Net IncomeShareholders Equity

1571292
= 0.1215

1601292
= 0.1238

1821292
= 0.1409

Efficiency Ratios




Asset Turnover Ratio
= Total RevenueTotal Asset

20143249
= 0.6199

24013272
= 0.7338

24413556
= 0.6864

Revenue Per Employee
= Total RevenueThe Number of Employees

20147
= 287.7

24016
= 400.2

24417
= 348.7

Performance Ratios








Diluted/Diluted EPS (From Income Statement)(pence per share)

0.03

0.03

0.05





ROCE
=Profit Before Interest and TaxEquity+Long Term Borrowing

1573014+0
= 0.0521

1603174+0
= 0.0504

1823430+0
= 0.0531





Liquidity Ratio analysis
Liquidity ratios help to determine if the company is able to take care of itsshort-term debts efficiently. The current ratio for Distil Plc has consistently increased with a margin of 9.4 in 2019 compared to 2018 and slightly dropped to 13.8 in 2020.Generally the liquidity ratio of Distil PLC has progressively increased in all aspects. Quick ratio, inventory days and receivable days have continuously increased from 2018 to 2020. Quick ratio in 2020 is at 11.12 from 6.07 in 2018.Increase in quick ratio shows that Distil Plc can be able to pay its debts without requiring any external financing. Decrease of payable days by 55.7 days in 2020 from 2018 shows that Distil Plc is able to pay its suppliers on time and efficiently indicating that Distil Plc financial position is positive.
Solvency Ratios
There is sharp decrease of the gearing ratio from 7.8% in 2018 to3.09% and 3.09 in 2019 and 2020, respectively. The decrease of the gearing shows that the company has a small debt proportion. Distill Plc has no long-term debts, which saves the company from paying the interest to the lenders. A good and healthy solvency ratio, as shown by Distill plc, gives confidence to investors who may be willing to invest in the company.
Profitability Ratios
From the ratio analysis, it can be seen that profitability ratios that have risen are operating profit margin, return on equity, and return on asset. From 2018 to 2020, Distil plc ROE and ROA significantly increased by nearly 0.02 and 0.002, respectively. As strongly demonstrated by the Distil annual report(2020), the sales have increased by 15% in 2020 compared to 2019. The higher ROA shows that Distil Plc and better asset utilization indicate that Distil plc has achieved promising and impressive results in terms of saving money and increasing the revenue. Consistent growth of ROE by the companies as witnessed in distil plc are the companies worthy of investors to invest in long-term investments since effective ROE promotes the growth of the dividend and stocks. Operating profit margin too has grown from 6.7% to 7.5% in 2020 from 2019.Increase in operating profit shows that Distil plc is able to control the sales and manufacturing costs while maintaining their prices. The company control and cost measures have greatly improved due to the substantial growth in the operating profit.
Efficiency Ratios
The asset turnover rate is the multiple of the total income of the company relative to the total assets.The main role of the asset turnover analysis is to indicate the utilization efficiency and evaluation of the Distil plc asset management. The total assets of Distil plc have progressively increased by a margin of £23,000 and £284,000 in 2019 and 2020.Increase in total assets shows that the company operation capacity is due to increase in future. The company creditors accesses the asset turnover ratio to determine if the company is able to efficiently manage its assets. Fewer assets owned by Distil plc indicates that the company demands less debt and equity to manage its assets. On the other hand revenue per employee has increased from £28,770 to £40,002 and £34,870 in the year 2018, 2019 and 2020.Increase in revenue per employees shows that the operating costs are efficiently controlled and employees are effectively working to bring more profits to Distil plc. The growth in employee’s revenue can also be attributed to good corporate management policies and improvement of the management abilities (López et al. pp 12749-12753).
Performance ratio analysis
Distil plc diluted earnings per share rose from 0.03 pence per share to 0.05.Increase in earnings per share shows that profitability has increased relatively to the capital invested. Increase in earnings per share increases the growth of stock market. Investors when investing in projects clearly analyses the company earnings per share to determine if their investments will gr...