TABLE OF CONTENTS

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PART A
1.0 INTRODUCTION .......................................................................................................................... 2

2.0 HORIZONTAL ANALYSIS .............................................................................................................. 3

3.0 VERTICAL ANALYSIS .................................................................................................................... 4

4.0 RATIO ANALYSIS ......................................................................................................................... 6

4.1 PROFITABILITY ............................................................................................................................. 6
4.2 LIQUIDITY ................................................................................................................................... 7
4.3 FINANCIAL STABILITY .................................................................................................................... 8

5.0 CONCLUSION AND RECOMMENDATION ................................................................................. 10

6.0 REFERENCES .............................................................................................................................. 11

1.0 INTRODUCTION

The South Pacific Stock Exchange consists of nineteen publicly listed companies and is the
only organisation in Fiji that deals with stock exchange. This report contains an in-depth
evaluation of RB Patel Group Limited’s financial reports to assist in indicating prospects for
future investment.

The RB Patel Group Limited began as a supermarket in the 1930’s and continued its expansion
throughout the years and was listed on the South Pacific Stock Exchange in 2001. The
company engages in wholesaling and retailing general merchandise to various parts of Fiji, as
well as manage property and other investments. In the Annual General Meeting in 2017, the
Chairman of RB Patel Group Limited, mentioned that “the company in overall is striving to
achieve greater heights in the market with its new investment plans put forth” (Sharma,
2017).
This report aims to aid any potential investor to evaluate the overall performance of the
company in order to ensure that investment opportunities are worth pursuing and will also
outline the reasons behind it. Critical and detailed information on the organisation’s financial
performance and position was extracted and analysed in order to justify the decisions made.

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2.0 HORIZONTAL ANALYSIS

“An analysis of the change from year to year in individual statement items is called horizontal
analysis” (Hogget, et al., 2015).

“RB Patel Group Limited

Comparative Statements of Profit and Loss and Other Comprehensive Income
Horizontal Change
Year Ended 30th June
During Year
Dollar
2017 2016 Percent
Amount
Revenue 119,761,900 114,815,886 4,946,014 4.31%
Cost of sales 96,056,854 92,717,947 3,338,907 3.60%
Gross profit 23,705,046 22,097,939 1,607,107 7.27%
Other income 3,093,419 2,856,476 236,943 8.29%
26,798,465 24,954,415 1,844,050 7.39%
Operating expenses 16,403,926 15,586,372 817,554 5.25%
Selling and marketing expenses 415,712 353,616 62,096 17.56%
Finance (cost) / income - net 824,140 804,794 19,346 2.40%
Profit from operations 9,154,687 8,209,633 945,054 11.51%
Change in fair value of investment properties 284,500 - 284,500
Profit before income tax 9,439,187 8,209,633 1,229,554 14.98%
Income tax expense 957,354 858,479 98,875 11.52%
Profit for the year 8,481,833 7,351,154 1,130,679 15.38%
Other comprehensive income - - -
Total comprehensive income for the year 8,481,833 7,351,154 1,130,679 15.38%

(Source: (RB Patel Group Limited, 2018))

The horizontal analysis was carried out on RB Patel’s Income Statement for two consecutive
years, 2016 and 2017. Relevant information of the organisation was extracted, examined and
presented in the Appendix under Figure 1. Within the one-year period, it was observed that
revenue and expenses had an overall percentage increase which resulted in a 15.28℅ profit
increase at the end of the financial period.

The cost of sales had 3.6% increase which may seem like a concern for the business, however,
the revenue increased by a greater proportion thus offsetting the cost and finally resulting to
a 7.27% increase in gross profit. Approximately 95% of the value of other income is composed
of rental revenue.
In summary, the RB Patel Group has had positive percentage changes which would be
appealing to any interested stakeholders desiring to invest.

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 3.0 VERTICAL ANALYSIS

2017 % 2016 % 2015 %

CURRENT ASSETS
Cash on hand and at bank 173,474 0.25% 162,184 0.25% 283,421 0.51%
Trade and other receivables 4,555,118 6.51% 4,094,668 6.19% 2,314,492 4.18%
Inventories 14,511,814 20.74% 14,842,643 22.45% 12,538,555 22.65%
Held-to-maturity investments 209,423 0.30% 200,000 0.30% 100,000 0.18%
Current tax Asset - 0.00% - 0.00% 35,262 0.06%
Total current assets 19,449,829 27.80% 19,299,495 29.20% 15,271,730 27.59%
NON-CURRENT ASSETS
Available-for–sale financial assets 505,000 0.72% 505,000 0.76% 235,000 0.42%
Property, plant and equipment 23,477,156 33.56% 27,089,915 40.98% 27,874,947 50.35%
Investment properties 25,934,485 37.07% 18,614,558 28.16% 11,633,520 21.01%
Deferred tax assets 8,293 0.01% 10,300 0.02% 8,946 0.02%
Advances 585,000 0.84% 585,000 0.88% 335,000 0.61%
Total non-current assets 50,509,934 72.20% 46,804,773 70.80% 40,087,413 72.41%
TOTAL ASSETS 69,959,763 100.00% 66,104,268 100.00% 55,359,143 100.00%
CURRENT LIABILITIES
Trade and other payables 9,243,058 29.27% 9,784,423 31.15% 7,241,298 25.44%
Interest bearing borrowings 12,403,650 39.27% 11,607,700 36.96% 11,034,756 38.77%
Current tax liability 29,933 0.09% 181,449 0.58% - 0.00%
Provisions 33,246 0.11% 33,246 0.11% 18,396 0.06%
Total current liabilities 21,709,887 68.74% 21,606,818 68.79% 18,294,450 64.28%
NON-CURRENT LIABILITIES
Interest bearing borrowings 7,106,415 22.50% 7,361,000 23.43% 8,435,215 29.64%
Deposits 275,092 0.87% 169,410 0.54% 154,596 0.54%
Deferred tax liabilities 2,492,558 7.89% 2,273,062 7.24% 1,577,923 5.54%
Total non-current liabilities 9,874,065 31.26% 9,803,472 31.21% 10,167,734 35.72%
TOTAL LIABILITIES 31,583,952 100.00% 31,410,290 100.00% 28,462,184 100.00%
NET ASSETS 38,375,811 34,693,978 26,896,959
SHAREHOLDERS’ EQUITY
Share capital 15,000,000 39.09% 15,000,000 43.24% 15,000,000 55.77%
Investment revaluation reserve 51,230 0.13% 51,230 0.15% 51,230 0.19%
Retained earnings 20,024,581 52.18% 16,342,748 47.11% 8,845,729 32.89%
Proposed dividends 3,300,000 8.60% 3,300,000 9.51% 3,000,000 11.15%
TOTAL SHAREHOLDERS’ EQUITY 38,375,811 100.00% 34,693,978 100.00% 26,896,959 100.00%
(Source: (RB Patel Group Limited, 2018))

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Since R.B Patel Group Limited “operates through two segments, Supermarket and Rental”
(Company Overview of RB Patel Group Limited, n.d.), the Vertical Analysis shows Inventories,
Investment Properties and Property, Plant and Equipment as large contributing items to the
overall asset figure of the company for the three consecutive years. The inventory value is
associated with the retail segment whereas investment properties deals with the rental
segment of the company. Additionally, Property, Plant and Equipment is involved in both
activities highlighted above.

The portion of inventories to total assets over the years have remained consistent between
20% and 25%.Furthermore, the value of Property, Plant and Equipment reduced by almost
10% each year from 2015 to 2017 and the core reason for this reduction is the disposal of idle
assets that were incurring unnecessary costs rather than generating revenue for the
company.
The aggregate of interest bearing borrowings, that is, both under Current and Non-Current
Liabilities, contribute to an approximate average of 60% of the total liabilities of the company.
The reason for this, is the financing for various construction projects for example, the Cinema
Multiplex, the Carpark and Retailing complex at Jet Point Complex and many more. Ongoing
constructions led to the fluctuations in interest bearing borrowings percentage as shown in
Figure 2. The percentage of trade and other payable in relation to total Current Liabilities has
fluctuated over the years and this was depicted by the 5.71% increase from 2015 to 2016 and
a 1.8% decrease from 2016 to 2017

Throughout the three-year period, the value of Retained Earnings approached to almost half
of the Total Shareholder’s Equity and was reported to be 52.18%. This percentage was
considered to be the highest of the three periods thus becoming an eye catcher to potential
investors.
Interest bearing borrowings may show liquidity problems however these funds have been
utilised efficiently through investments and hence would result in a fruitful outcome for the
organisation. The comparative vertical analysis of the company's balance sheets has
effectively achieved its purpose in showing key relationships between the various items.

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4.0 RATIO ANALYSIS

Ratio analysis is another one of the prime strategies for analysing financial statements for
useful decision making. “A ratio can be calculated using any two or more figures, but, for the
ratio to be useful, it must have meaning” (Maynard, 2013). A ratio analysis of RB Patel Group
Limited was carried out where two appropriate ratios from the three categories; profitability,
liquidity and financial stability, were utilised.

4.1 PROFITABILITY
Profitability analysis is vital for management as well as shareholders of the organisation as it
shows relevant relationships between profit influencing items. An in-depth analysis of the
earnings yield ratio and the dividends yield ratio for three consecutive years had been carried
out.
Earnings Yield
Earnings Per Ordinary Share
Earnings Yield =
Market Price Per Ordinary Shares

2017 2016 2015

Earnings per Ordinary Share $0.28 $0.25 $0.20
Market Price per Ordinary share $3.29 $3.10 $2.99
Percentage Yield 8.51% 8.06% 6.69%

Dividends Yield

Annual Dividend per Ordinary Share

Dividends Yield =
Market Price per Ordinary shares

2017 2016 2015

Annual Dividend per Ordinary Share $0.16 $0.15 $0.14
Market Price per Ordinary share $3.29 $3.10 $2.99
Percentage Yield 4.86% 4.84% 4.68%

The earnings ratio is useful in measuring the average value return for a prospective investor
if the share was purchased at the standard market price. As tabulated the earnings and
market price per ordinary share continued to increase in value in each year, hence, the
percentage yield showed positive change.
“Dividend yield measures the quantum of earnings by way of total dividends that investors
make by investing in that company” (Definition of 'Dividend Yield', n.d.). The consistent
increase in profit margin is clearly represented by the increase in dividend yield for each year
for the three consecutive and hence showing the increasing ability of the company to pay-out

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dividends from its profits. The percentage yield for investors in 2016 was 0.16% greater than
the yield received in 2015. This significant increase in percentage yield was not consistent
because there was only a 0.02% increase in percentage yield in 2017. However, the company
still shows it is optimistic of great achievements.

The study of these two profitability ratios, is essential for any investor seeking to invest as this
provides an insight of management’s earnings and dividend policies.

4.2 LIQUIDITY
Information related to the business’s ability to settle its debts is key for creditors as well as
potential investors as it makes it clear to analyse the capability of the company in managing
its resources. The Quick asset ratio and the inventory turnover for three consecutive years of
RB Patel Group Ltd would be discussed in this section.
Quick Ratio / Acid-test Ratio

Cash Assets + Receivables

Quick / Acid Ratio =
Current Liabilities

2017 2016 2015

Cash Assets 173,474 162,184 283,421
Receivables 4,555,118 4,094,668 2,314,492
Current Liabilities 21,709,887 21,606,818 18,294,450
Ratio 0.22 : 1 0.20 : 1 0.14 : 1

Inventory Turnover

Cost of Sales
Inventory Turnover =
Average Inventory balance

2017 2016 2015

Cost of sales 96,056,854 92,717,947 85,368,219
Total Inventory 14,511,814 14,842,643 12,538,555
Number of Times 6.54 6.77 6.60
Number of Days 55.81 days 53.91 days 55.30 days
Inventory for 2014 was $13,347,786

In order to show the company’s short term financial stability effectively, the acid test ratio
was chosen over the current ratio. The most liquid assets that were cash at bank and on hand
and accounts receivable were taken into account while performing the interpretation. After
analysing the calculations, it could be inferred that the quick ratio has been improving by a
little amount, however it is still highly unsatisfactory. The state of the company in 2017 was
that the entity had 22 cents worth of immediate cash to cover for every dollar of its immediate
liabilities which shows that if there was an unexpected event, the business would not be able
to meet its most current obligations. The ratio increased by 6 cents from 2015 to 2016 and

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improved by 2 cents from 2016 to 2017. These increases are not very encouraging. A possible
reason for this unpleasant ratio would be the business is engaging into excessive debts and
doing a great amount of credit buying. Since the business is expanding and investing, the high
amounts of liabilities are justified, however the business must still work to establish itself to
a safe position as the liquidity of the company is not too appealing.
The quick ratio would not be the only and the best method of making decisions about the
organisation’s liquidity. For a retail business like RB Patel, inventory is a crucial part and serves
various purposes and hence to support the results from the current and quick ratio, the ratio
analysis of the company’s inventory turnover is key. Above lists the cost of sales and the total
ending inventory for the three years beginning from 2015. The cost of sales has been
significantly increasing each year while the inventory balances fluctuated. The 2017 turnover
ratio indicates that the average inventory was sold 6.54 times during the year compared with
6.77 times in 2016 and 6.60 times in 2015. The business has maintained its turnover at an
average of approximately 6.6 times. In terms of the number of days the inventory took to be
completely sold, the inventory in 2016 was sold a few days faster than 2017 and 2015, as in
2016. Due to Cyclone Winston, more goods were purchased in the form of rations. The
inventory turnover seems satisfactory, however for a retail business it could be made better
and hence the business must strive to improve turnover

The liquidity position is not very satisfactory and would be a worrying sign for the
management as well as potential investors.

4.3 FINANCIAL STABILITY

The calculation of ratios under this category will indicate the company’s ability to meet its
long term financial obligations and continue its operations in the long run. Information related
to external parties of the company and information related to the productivity of assets can
be displayed upon the calculation of the debt ratio and the asset turnover ratio.
Debt Ratio

Total Liabilities
Debt Ratio =
Total Assets

2017 2016 2015

Total Liabilities 31,583,952 31,410,290 28,462,184
Total Assets 69,959,763 66,104,268 55,359,143
Percentage 45.15% 47.52% 51.51%

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Asset Turnover Ratio

Revenues
Asset Turnover Ratio =
Average Total Assets

2017 2016 2015

Revenue 119,761,900 114,815,886 104,944,604
Total Assets 69,959,763 66,104,268 55,359,143
Number of Times 1.76 1.89 1.93
Total Assets for 2014 was $53,326,517
The debt ratio for the company shows the creditors claim on the business assets as they would
be prioritised in the event of liquidation and hence becomes a significant piece of data for
long term investors to base their decisions on. The percentage of debt in 2015 was at its peak,
that is, 51.51% or 0.51:1. After 2015 the ratio has decreased by 4.36% and had further
decreased to 45.15% or 0.45:1, which is a positive sign for the business. Each year the business
has tried to improve its debt ratio and is performing well. This represents a positive sign for
potential investors as in times of liquidation the owners would have a higher claim on the
business assets. It also gives potential investors an indication of risk management levels.
Through comparison, the company has the potential to further improve this ratio however it
must keep it at equilibrium so that overcapitalisation does not occur.
For a competitive market like the retail industry, a high asset turnover ratio in comparison to
its competitors would show the company’s efficiency. In comparing the 2015 and 2016 asset
turnover ratios, there was a slight decrease. However, this ratio had an accelerated decrease
in the following year, from 1.89 to 1.76. The decrease from year to year must stop and the
company must keep it consistent. All in all, the organisation is performing well in terms of the
assets ability to generate revenue. This is another eye-catching feature that would show
potential investors the company’s abilities to make efficient and productive use of its assets.
Also, it reflects the long-term financial stability of the entity.

It is vital for potential investors to keep in mind the nature of the business and set
expectations from analysing industry averages. This is clearly illustrated in the high asset
turnover ratio in comparison to that of an industry that is capital intensive.

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5.0 CONCLUSION AND RECOMMENDATION

Despite being in a very competitive and low margin industry, RB Patel Group Limited
continues to grow through investments and making sound economic decisions. The
company’s growth throughout the years has been encouraging and convincing and this has
been clearly highlighted in the report. It would be appropriate to recommend this company
to a potential investor wanting to invest his life savings.
When analysing the income statement through the concept of horizontal analysis, areas of
growth were pointed out between the two years. In terms of total profit, the company is
profitable. A vertical analysis of the company’s balance sheet made key variables clear and
allowed the reader to effectively understand the current position of the entity.

After carrying out the ratio analysis, it could be confirmed that this company is profitable as
of the increasing percentages of dividends and earnings yield. These two ratios showed
profitability from a potential investors point of view and conveyed to the readers the
prospects of increases in profitability in the coming years. The liquidity position was not very
satisfactory when the quick ratio was calculated. This unsatisfactory ratio was justified by the
reasons for increase in liability that was the cost of investment. It must be noted that liabilities
are an essential component of any business organisation and an appropriate mix and level of
liabilities will help the business achieve higher growth rates in the future. The inventory
turnover ratio had fluctuated over the three-year period and the possible cause for it would
be changes in economic policies and laws and the impact of cyclone Winston. Furthermore,
the business proved its financial stability by displaying movement at a favourable pace of the
debt ratio and the asset turnover ratio which experienced slight decreases but maintained its
rule of thumb.
The company remains optimistic about its future and tries its level best each year to achieve
the best and provide its investors with the best. The company is still at a stage of developing
and will probably reap its rewards after a period of time hence attracting long term investors
in making this a smart and profitable investment.

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6.0 REFERENCES

Company Overview of RB Patel Group Limited. (n.d.). Retrieved April 13, 2018, from Bloomberg:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=22372426

Definition of 'Dividend Yield'. (n.d.). Retrieved April 14, 2018, from The Economic Times:
https://economictimes.indiatimes.com/definition/dividend-yield

Hogget, J., Edwards, L., Medlin, J., Chalmers, K., Hellmann, A., Beattie, C., & Maxfield, J. (2015).
Accounting (9th ed.). Milton, Queensland, Australia: John Wiley & Sons.

Maynard, J. (2013). Financial Accounting, Reporting & Analysis. Oxford University Press.

R.B. Patel Group Limited. (2016). R.B. Patel Group Limited Annual Report 2015.

R.B. Patel Group Limited. (2017). R.B. Patel Group Limited Annual Report 2016.

RB Patel Group Limited. (2018). RB Patel Group Limited Annual Report 2017. Retrieved from
https://announcements.spse.com.fj/ftp/news/021726472.PDF

RB Patel Group Limited. (n.d.). RB Patel Group Limited Annual Report.

Sharma, P. (2017, September 26). RB Patel Ltd Records $8.5 Million Profit. Retrieved April 14, 2018,
from http://fijisun.com.fj/2017/09/26/rb-patel-ltd-records-8-5-million-profit/

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