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GN43080_Revised/GN43080/GN43080_Revised.docx
FINANCIAL PERFORMANCE ANALYSIS
A CASE STUDY OF PENDAL
Executive Summary
The report provides a brief analysis about the financial health of the Pendal and followed by the evaluation of non-financial measures that may have impact on the overall performance of the firm. Finally, the researcher wraps up the discussion by way of concluding note.
Table of Contents
1.0 Introduction    4
2.0 Ratio Analysis    5
2.1 Profitability    5
2.2 Liquidity    5
2.3 Solvency    6
2.4 Efficiency    6
2.5 Market Performance    7
3.0 Non-Financial Measures    8
3.1 Human Resources    8
3.2 Technologies    8
3.3 Management and Leadership    8
4.0 Recommendation    10
5.0 Conclusion    11
References    12
Appendices    13
1.0 Introduction
The analysis of the financial statements and deriving conclusion as to the financial performance and health of the business may be construed to be one of the most critical and significantly important aspects of the financial studies. The process of such evaluation and assessment may take into consideration several factors that are both internal and external to the business. The internal elements primarily pertain to the capital structure, financing policy, inventory management etc, whereas, the external parameters may encompass the revenue and customers, vendor management, contracts and obligations etc.
The instant report delves into such evaluation of the financial performance of Pendal Group Limited (hereinafter may be referred to as "Pendal", or the company, or the business, as the case may be). Such analysis has been based on the financial data of the business as may be extracted from the last two year's annual reports, 2017 and 2018.
At the very outset of the study, the researcher provided a brief introduction to the topic followed by the discussion on the background and premises of the analytical framework as undertaken herein. In the subsequent sections of the paper, the researcher has presented ratio analysis in order to evaluate the financial health of the business from the viewpoint of profitability, liquidity, solvency, efficiency and market performance. In addition, the report also highlights the impact of various non financial factors such as human resources, leadership and corporate governance on the overall performance of the business. Finally, the researcher presents a recommendation for the management based on the findings and analysis and thereby wraps up the discussion through a concluding note.
2.0 Ratio Analysis
For the assessment of the financial health of the business, the last two year’s annual reports have been taken into consideration. The relevant financial data has been extracted there form and five types of a financial ratio, as shown below, have been computed.
2.1 Profitability
The profitability ratios show that the business has been running well by the management with a higher operating margin. However, the ROA shows marginal return depicting a huge asset base of the business that may be construed to be lying underutilized.
Figure 1: Profitability Ratios
(Source: Annual-report-2018.pendalgroup.com, 2019)
2.2 Liquidity
The liquidity position of the business has been extremely strong as may be established from the average current ratio of 1.5. However, the high volume of working capital in the given industry may also be conceived to be detrimental to the growth in the long-run as a larger volume of receivable is being consumed within the operations as a result, the liquid cash position may at times not be sufficient to cover up the instant payment obligations.
Figure 2: Liquidity Ratios
(Source: Annual-report-2018.pendalgroup.com, 2019)
2.3 Solvency
The business does not seem to have any debt in its capital structure and hence the D/E of the firm is nil! In other words, the business is “trading on equity” which means that the net asset position of the firm is extremely strong which will be a long-term benefit for the business as a whole.
Figure 3: Solvency Ratios
(Source: Annual-report-2018.pendalgroup.com, 2019)
2.4 Efficiency
As stated earlier, the asset utilization position of the firm may be considered to be fairly downward as may be evident from the average assets turnover ratio of 52%. The receivable collection period is averaged at around 46 days, whereas, the payable payment period is 48 days on an average for the last two years. The same shows that the management may need to focus on collection management and paying to the corporate houses on time.
Figure 4: Efficiency Ratios
(Source: Annual-report-2018.pendalgroup.com, 2019)
2.5 Market Performance
The stock of the business has been attractive to the investors because of its high dividend payout ratio. The average payout of almost 80% shows that the management believes in shareholder management through dividend distribution and its high P/E shows the same (Finance.yahoo.com, 2019).
Figure 5: Market Performance Ratios
(Source: Annual-report-2018.pendalgroup.com, 2019)
3.0 Non-Financial Measures
Ratio analysis has been devoid of an analysis of non-financial measures of the business. The primary limitation of financial ratio is that the same does not capture the market data and fully based on the historical figures as a result, the latest customers needs, market computations and even the inflation and recession may not be captured through financial ratios. As a result, it becomes crucial for the researcher to identify certain non-financial parameters as well which may have a significant impact on the business in terms of its financial health.
3.1 Human Resources
The management philosophy largely revolves around the benefit of staffs and employees including the Board members and executives for their overall development in conjunction with the firm (Annual-report-2018.pendalgroup.com, 2019).
3.2 Technologies
The business has been able to employ the latest technologies to embed the same in the risk framework of the business. The cyber and fraud risk has been a pertinent question of concerns for the management and hence, it has been one of the key parameters for the management to imbibe the benefit of the anti-virus, IT security and related regulatory measures in order to strengthen the sustainability of the operations.
3.3 Management and Leadership
Emilio Gonzalez has been performing his role as Group CEO and his academic qualification and professional experience has enabled him to strategize the business activities in most optimum manner. It may be stated that the Board of the company, under his supervision and monitoring has been able to enforce a strong working culture and sense of ownership which has further enabled the management to function, control and deliver best possible quality through innovation and value creation. Under the leadership of the present CEO, the firm has been able to achieve significant growth as may be reflected from the increasing top-line of the business for last two years under review.
4.0 Recommendation
The analysis shows that the firm has been performing well; however, few recommendations are forwarded by the researchers in the given context. These recommendations are briefly listed below:
· The management should consider using the asset base of the business more wisely. Presently, most of the assets are under-utilized and hence, the revenue growth may also be conceived to be lower than expected.
· The management should revise its collection and payment policy so that the interest payment and collection may be performed in a timely manner and thereby achieve the operational efficiency in a more prominent way (Marozzi, 2016).
· The cost structure of the business may need to be revised in order to eliminate the redundancy costs and thereby...