COMPARATIVE FINANCIAL ANALYSIS OF ABS-CBN AND GMA

*Excerpts from 2021 Audited Financial Statements filed with SEC

INCOME STATEMENT ANALYSIS

ABS-CBN GMA
2021 2021 2021 2021
2021 2020 2019 Vertical Horizontal 2021 2020 2019 Vertical Horizontal
(Amounts in Thousands) Analysis Analysis Analysis Analysis
Revenues 17,825,204 21,419,757 42,834,842 100% -17% 22,450,323 19,335,895 16,493,452 100% 16%
Production Costs (7,152,642) (10,310,826) (13,135,798) 40% 31% (4,876,549) (3,452,138) (6,435,153) 22% 41%
Cost of Sales (7,930,844) (9,421,282) (13,147,606) 44% 16% (418,141) (479,417) 0 2% -13%
Gross Profit 2,741,718 1,687,649 16,551,438 15% 62% 17,155,633 15,404,340 10,058,299 76% 11%

General and Administrative

Expenses (7,450,527) (13,815,768) (16,113,809) 42% 46% (7,260,929) (6,847,818) (6,325,456) 32% -6%
Other Income (Expenses) (2,216,366) (337,223) (15,763,931) 12% -557% 52,492 35,230 33,605 0.2% 49%
Income Before Taxes (5,234,161) (13,478,545) (349,878) 29% 61% 9,947,195 8,591,752 3,766,446 44% 16%

Provision for Income Tax (436,222) (52,271) (2,295,269) 2% -735% (2,378,049) (2,584,417) (1,127,170) 11% 8%
Net Income (5,670,383) (13,530,816) (2,645,147) -32% 58% 7,569,146 6,007,334 2,639,276 34% 26%

VERTICAL AND HORIZONTAL ANALYSIS OBSERVATIONS:

 Using Horizontal Analysis, we can observe that the Revenue of ABS-CBN is declining, from Php42 billion in 2019 to only Php17 billion in 2021. A
significant decrease of 17% in revenue in 2021 from 2020. After the denial of its franchise in 2019, the Company is in survival mode, this means
cutting the cost of its Production/COS from Php26 billion in 2019 to Php14 billion in 2021, the same story with General and Administrative
Expenses from Php16 billion in 2019 to merely Php7 billion in 2021. Nevertheless, after various cost-cutting measures, its bottom line continued to
decline from a loss of Php2 billion in 2019 to a Php6 billion loss in 2021. This is due to insufficient revenues to offset the cost and expenses
incurred for the business operations. On the other hand, GMA reported a surging revenue from Php16 billion in 2019 to Php22 billion in 2021, this
contributed to a significant increase in net income bottom line from Php3 billion in 2019 to Php8 billion in 2021.

Using Vertical Analysis, we can observe that the Production Costs/COS of ABS-CBN in 2021 accounted for 84% while 42% for General and
Administrative Expenses, this is unusually high compared to its rival GMA which accounted for Production Costs/COS in 2021 for only 24% while
32% for General and Administrative Expenses. Due to the avalanche of expenses incurred by ABS-CBN with no stable revenue, it reported a
negative net income of 32%, while GMA with a surging revenue and controlled costs/expenses reported a positive net income of 34%.
RATIO ANALYSIS OBSERVATION:

ABS-CBN GMA

2021 2020 2021 2020

Return on Equity (46.90%) (78.70%) 52% 47%

Return on Asset (10.80%) (23.00%) 31% 25%
Gross Profit Margin 15.40% 7.90% 76% 80%
Net Income Margin (31.80%) (63.20%) 34% 31%
Earnings Per Share (6.86) (16.36) 1.54 1.23

1. Return on Equity - This ratio expresses the rate of return on equity capital employed and measures the ability of a company's management to
realize an adequate return on the capital invested by the owners in a company. A higher number is preferred for this commonly analyzed ratio.

The percent rate of return on equity for ABS-CBN is negative 47% and 79% for years 2021 and 2020, respectively, compared to GMA which tallied
positive 52% and 47% for years 2021 and 2020, respectively; this indicates that ABS-CBN management may not be effectively managing the
profits earned based on the owners’ investment in the company.

2. Return on Assets - This ratio measures how effectively a company's assets are being used to generate profits. It is one of the most important
ratios when evaluating the success of a business. A higher number reflects a well-managed company with a healthy return on assets.

The percent rate of return on assets for ABS-CBN is negative 11% and 23% for years 2021 and 2020, respectively, compared to GMA which
obtained positive 31% and 25% for years 2021 and 2020, respectively; this indicates that ABS-CBN needs improvement in utilizing its assets to
generate profits to ensure the company can remain competitive and continue to operate successfully.

3. Gross Profit Margin - This ratio measures the gross profit earned on revenues and reports how much of each sales peso is available to cover
operating expenses and contribute to profits.

The percent gross profit for ABS-CBN is very poor at 15% compared to its competitor GMA which recorded 76% in 2021, this is an indication that
ABS-CBN is in poor financial health, it has only 15% left to cover general and administrative expenses that accounted for 42%.
 4. Net Income Margin - It measures the amount of net income a company obtains per peso of revenue gained and how well a company could
potentially deal with higher costs or lower sales in the future.

The percent net income margin for ABS-CBN is negative 32%, which compared to GMA of positive 34% indicates revenues are significantly
contributing to the company's bottom line. This means that ABS-CBN has a shaky source of revenue and was unable to control its costs/expenses.

5. Earnings Per Share - are calculated by dividing the net income (loss) of the Company for the period attributable to common shareholders by the
weighted average number of common shares outstanding (net of treasury shares and PDRs) during the period. This indicates the company’s
profitability by showing how much money a business makes for each share of its stock.

ABS-CBN reported negative 6.86 and 16.36 for years 2021 and 2020, respectively, compared to GMA which recorded positive 1.54 and 1.23 for
years 2021 and 2020, respectively; this indicates that ABS-CBN is unable to produce profit per share due to its poor financial performance.

CONCLUSION

Based on the above-mentioned observations of the Income Statement, I can conclude that GMA is doing better than ABS-CBN. All Financial Statements
Analysis Techniques and Ratios supported this as discussed above.

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FINANCIAL POSITION ANALYSIS

ABS-CBN GMA
2021 2021 2021 2021
2021 2020 Vertical Horizontal 2021 2020 Vertical Horizontal
(Amounts in Thousands) Analysis Analysis Analysis Analysis
Assets
Quick Assets 7,702,521 12,004,536 15% -36% 13,342,707 14,432,092 55% -8%
Other Current Assets 5,227,086 6,678,351 10% -22% 2,995,164 2,014,314 12% 49%
Total Current Assets 13,103,097 18,682,887 25% -30% 16,337,871 16,446,406 68% -1%

Non-Current Assets 39,460,691 40,243,290 75% -2% 7,737,853 7,492,862 32% 3%

Total Assets 52,563,788 58,926,177 100% -11% 24,075,724 23,939,268 100% 1%

Liabilities
Current Liabilities 14,009,513 28,399,335 27% 51% 4,782,043 5,681,682 20% 16%
Non-Current Liabilities 26,460,208 13,327,991 50% -99% 4,722,681 5,376,172 20% 12%
Total Liabilities 40,469,721 41,727,326 77% 3% 9,504,724 11,057,854 39% 14%

Equity
Capital 3,402,308 3,404,208 6% 0% 6,348,390 5,627,650 26% 13%
Retained Earnings 8,691,759 13,794,643 17% -37% 8,222,610 7,253,764 34% 13%
Total Equity 12,094,067 17,198,851 23% -30% 14,571,000 12,881,414 61% 13%

Total Liabilities and Equity 52,563,788 58,926,177 100% 11% 24,075,724 23,939,268 100% 1%

VERTICAL AND HORIZONTAL ANALYSIS OBSERVATIONS:

 Using Vertical Analysis, we can observe that ABS-CBN is heavily indebted which total liabilities accounted for 77% which is comparable to its non-
current assets of 75%, this means that ABS-CBN has only 15% quick assets available to pay its debts, raising liquidity issues of the company. On
the other hand, GMA incurred 39% of total liabilities, which is equivalent to its non-current assets of 32%, surprisingly it has 55% quick assets to
pay its debts. This is a direct result of investor behavior after the denial of ABS-CBN franchise, in which a sudden decrease in total equity was
noted to merely 23%, while GMA is very attractive to investors, its total equity accounted for 61%.
 Using Horizontal Analysis, we can observe that ABS-CBN increased its long-term debt by 99% from Php13 billion to Php26 billion in order to
finance its operations, this is because it has no stable revenue to offset the costs and expenses. Consequently, there was a sudden decrease in its
quick assets of 36% from Php12 billion to only Php8 billion. This is seriously raising a going concern and liquidity issue, if this cannot be mitigated
ABS-CBN will cease to exist in the next 5 years unless it will be sold to another owner in order to apply and secure the approval for its new
franchise. On the other hand, GMA is very consistent in its financial position, with minimal changes from period to period. This reflects its stability
as a Company.

RATIO ANALYSIS OBSERVATION:

ABS-CBN GMA

2021 2020 2021 2020

Quick Ratio 0.55 0.42 2.79 2.54

Current Ratio 0.94 0.66 3.42 2.89
Net Debt-to-equity ratio 1.46 0.88 0.32 0.42
Asset-to-equity ratio 4.35 3.43 1.65 1.86

1. Quick Ratio - This ratio, also known as the acid test ratio, measures immediate liquidity - the number of times cash, accounts receivable, and
marketable securities cover short-term obligations. A higher number is preferred because it suggests a company has a strong ability to service
short-term obligations.

The quick ratio for ABS-CBN is 0.55 compared to 2.79 for GMA in 2021, this indicates that GMA has a strong ability to service short-term
obligations.

2. Current Ratio - This ratio reflects the number of times short-term assets cover short-term liabilities and is a fairly accurate indication of a
company's ability to service its current obligations.

The current ratio for ABS-CBN is 0.94, which compared to GMA of 3.42 in 2021 indicates that GMA's ability to service short-term obligations is
satisfactory. However, the value of the quick ratio will provide a clearer indication of the company's success in this area.
 3. Net Debt-to-equity Ratio - This ratio measures the financial leverage of a company by indicating what proportion of debt and equity a company is
using to finance its assets. A lower number suggests there is both a lower risk involved for creditors and strong, long-term, financial security for a
company.

The debt-to-equity ratio for ABS-CBN is 1.46, which compared to GMA of 0.32 in 2021, indicates a solid performance of GMA in this area.

4. Asset-to-Equity Ratio - This ratio measures the extent to which a company uses debt to finance its assets. The higher the number is, the more a
company is relying on debt to finance its assets.

The asset-to-equity ratio for ABS-CBN is 4.35, which compared to GMA of 1.65 indicates a reasonable portion of the ABS-CBN's assets is financed
by creditors rather than owned.

CONCLUSION

Based on the above-mentioned observations of the Financial Position, I can conclude that GMA is more stable than ABS-CBN. All Financial Statements
Analysis Techniques and Ratios supported this as discussed above.