EXECUTIVE SUMMARY

Guinness Nigeria Plc is one of the largest Nigeria is in a strong position and has the
food companies in Africa. With staff lowest tendency for bankruptcy.
strength of over 2,200 direct employees, 3
manufacturing sites, 7 branch offices and a
head office located in Lagos, the company
produces and markets several iconic
brands. It began trading operations in
Nigeria in 1961 and was listed on the
Nigerian Stock Exchange on April 20, 1979.

A 3-year financial report of the company

was analysed from 2017-2019 to ascertain
its growth level in respect to liquidity,
solvency, efficiency and profitability with
investment ratios including its industrial
competitiveness with Nigerian Breweries
Nigeria.

The revenue had increased over the years

(N284b:2019,N266b:2018;2017:N244b)
showing 7% and 9% growth level.

The innovative and diversification strategy

of introducing new products in the existing
markets and capturing more consumers
especially in the northern part of the
country was one of the contributing factor
to the company’s success (Guinness 2019)

From the analysis with intercompany

comparison, Guinness Nigeria has
tremendously improved and poised to
become an attractive company to investors
from the point of Profit available for
shareholders and consequent dividend pay-
out, market share price, Interest coverage
with the exception of quick ratio which
reflects too much held inventory as against
the industry average even as the total assets
could match with total liabilities. Guinness
OBJECTIVES

The objective of this report is to statistically

The ratio analysis calculations were
measure Guinness Nigeria’s financial
prepared with Microsoft Excel while the
performance for three consecutive years in
Microsoft Word and Picture were used for
comparison with its main competitor,
the compilation of the report.
Nigerian Breweries while numerical
calculations and investigation using ratio
Year ended financial (annual reports) dates
analysis would be computed after obtaining
data from their financial reports. Data
Year Guinness NB Plc
presentation using tables, charts and
graphs, highlighting problem areas using 2017 June December
the results obtained from the analysis
would also be in place. 2018 June December

2019 June December

METHODOLOGY

Ratio analysis will be employed to

recognize and appraise Guinness Nigeria’s
strengths and weaknesses in the industry.
Data are to be derived from the financial
reports while the stock market schedule and
analysis are also included for the two
entities; with recommendations to match.
RATIO ANALYSIS
A financial ratio is a relationship between
two financial variables. It helps to ascertain
the condition of a firm or company.
LIQUIDITY RATIOS

Liquidity ratios measure the firm’s ability to

It is imperative to know that ratio analysis meet short-term (within a year) obligations
is never a substitute for strategic thinking and are calculated by establishing
and resolution. Caution needs to be applied relationships between current assets and
while interpreting ratios as they are current liabilities.
calculated from accounting numbers which
may likely suffer from policy changes, CURRENT RATIO
arbitrary allocation of procedures and This is a measure of a firm’s short-term
inflation (I.M Pandey 2010). solvency. This indicated the availability of of
current assets in currency for every
Statistics for analysis has been collated currency of current liability.
from latest Annual Reports (Guinness
Nigeria,2017 to 2019;Nigerian Breweries, From figure 1, Guinness Plc insignificantly
2017 to 2019); market share price history of fell below its Industry benchmark but
these two companies were obtained from the Nigerian Breweries has a little edge over
website:www.investing.com. Guinness in ensuring that Current liabilities
are covered by its corresponding current
assets.
 of Gross Profit Margin over its 3-year
financial performance while edging out its
competitor.

FIGURE 1

QUICK RATIO (ACID TEST) FIGURE 3

The quick or acid test ratio is used to
measure the degree of company’s short term
liquidly with the exception of inventory from
the current assets against liabilities.
In Figure 2, Guinness showed the least
performing result (2019) with the highest
safety margin maintained by Nigerian
Breweries in the same year 2019.
NET PROFIT MARGIN
Profit After tax has been derived after all
deductions have been made to determine
the extent of ratio to its revenue.
Guinness has been able to manage its Net
Finance Cost (Figure 4) as opposed to
Nigerian Breweries which is struggling to
have its margin intact.

FIGURE 2

PROFITABILITY RATIOS FIGURE 4

This ratio helps to measure the
sustainability of companies in respect to RETURN ON CAPITAL EMPLOYED
progressive profit overtime. This also takes This seeks measure the degree of its Profit
in account the effectiveness before Interest and Tax (PBIT) over the
of the company in generating profit combination of the company's Equity and
Long-term Liabilities.
GROSS PROFIT MARGIN From Figure 5, Guinness has been very
The Chart figure 3 examines how the profit efficient with the sources of fund to record
margin shows the cost saving and pricing the desirable profit for all stakeholders while
policy of the two competing companies. Nigerian Breweries needs more assets to
Guinness has recorded an remarkable run thrive.

FIGURE 5
ACTIVITY RATIOS
Activity ratios reflect the firm’s efficiency
with which the firm manages and utilises its
assets
INVENTORY TURNOVER RATIO
Ideally, the higher the inventory turnover,
relative to peer companies or the industry
average, is the better. It may indicate
management was effective in managing
inventory.
FIGURE 6
RECEIVABLES (COLLECTION) DAYS
DSO (Day Sales Outstanding) is inversely
related to the accounts receivable turnover
ratio. Thus, the higher the accounts
receivable turnover ratio, the lower the
DSO, is indicating that the faster a company
can collect receivables from customers. The
Chart from figure 7 has shown that Nigerian
Breweries needs to effectively manage its
receivables as this may affect the company’s
liquidity for treasury operations compared
to Guinness who is better.
FIGURE 7
PAYABLES (PAYMENT) DAYS
Nigerian Breweries has been able to manage
its suppliers better in respect to the results
as shown in figure 8 in comparison with
Guinness which has been able to settle its
suppliers on time. This in another
perspective may means that Guinness can
have a good relationship with its suppliers
by settling obligations as at when due.
FIGURE 8
LEVERAGE RATIOS
To judge the long-term financial position of
a firm, financial leverage or capital structure
ratios are calculated. These ratios indicate
mix of funds provided by owners and
lenders.
GEARING RATIO
This ratio measures how much a company’s
Non-Current Liabilities is relative to its
owners’ equity. In this case as shown in
Figure 9, Guinness relied insignificantly on unstable and may not continue in the
debt in as well as Nigerian Breweries. future.
Guinness has the financial capacity to cover
its cost of loans and borrowings while
Nigerian Breweries is only been passively
risky but none in 2019 which connotes that
Nigerian Breweries may likely depend
heavily on their shareholders fund(See
Figure 11).
FIGURE 9

DEBT TO EQUITY
This ratio measures how much a company’s
Total debt is relative to its equity capital. A
higher ratio indicates a higher financial risk.
Even though it is risky, companies still rely
on debt as their capital because they are FIGURE 11
cheaper than equity.
INVESTORS’ DECISION /MARKET RATIO
In Figure 10, Guinness relied heavily more
The ratios under this class are calculated to
on debt in comparison with Nigerian
measure how attractive the share of a
Breweries and which is understandable as
company is to both existing and prospective
the cost of
investors.

Debt (Interest) can be covered through its

Gross Profit while gaining more possible
market share through expansion plans.
FIGURE 10
EARNINGS PER SHARE
According to I.M Pandey (2010),the earnings
per share calculation is a profitability index,
it gives an insights of how profit is available
to the ordinary shareholders. From the
figure 12, Guinness has more earning
capacity to offer its shareholders even
though its competitor also has progressive
returns (over the 3 years) for its owners.

INTEREST COVERAGE RATIO

It measures a company’s ability to pay loan
interest. To calculate EBIT can vary. Some
exclude other income (or expenses), while
others add it. The reason for discarding
them is that other income (or expenses) are
FIGURE 12
DIVIDEND YIELD
Earnings not distributed are retained in the
business. The retention ratio is 1-Pay-Out
ratio (I.M Pandey).The Figure 13 has shown
the growth of retention by both companies
with the exception of Guinness in 2019
which paid-out more dividends; a good point
to attract potential and existing
FIGURE 14
shareholders.

ALTMAN Z SCORE
Altman’s Z score is a tool to predict the
likelihood of bankruptcy but also has
become widespread investigating credit
risks. It uses five different ratios
calculated with data from annual
reports. It includes profitability,
FIGURE 13.
leverage, liquidity, solvency and activity
ratios. When a score is below 1.8, the
DIVIDENDS PER SHARE organisation is at risk of bankruptcy.
This ratio represents the earnings
distributed to the shareholders based on the
issued outstanding shares (I.M Pandey
2010).In this Figure 14, The DPS in
Guinness, in 2019 was more than what the
company earned in the same year; an
indication that the retained profit prior to
the years were now distributed as Nigerian
Breweries has remained steady and
progressive. FIGURE 15
FINDINGS AND RECOMMENDATION

The analysis has discovered that Nestlé’s profitability and efficiency has increased since 2017
and is better than the competition. Nonetheless, after taking the initial hit of corporate
governance crises, Nigerian Breweries has begun to improve slowly and steadily in the food and
beverage industry.

However, Guinness would still need to take note of some issues:

1. The Inventory would require that effective systems be introduced to avoid too much of
negative working capital and too much of investments held in inventory.

2. The Pay-Out ratio over the 3 years in analyzing Guinness Nigeria had shown the need for
a proper retention of profit to the business.

3. The receivables should be steady in making good of any payments based on credit policy
agreement.

REFERENCES
Financial Ratio: Lists, Formulas, and Interpretations; Available from:
https://penpoin.com/financial-ratio/
I.M Pandey(2010): Financial Management; Tenth Edition, pages 581-608

Guinness Nigeria 2019 Annual report Available from:

http://www.nse.com.ng/Financial_NewsDocs/29230_GUINNESS_NIGERIA_PLC._FINANCIA
L_STATEMENTS_MARCH_2020.pdf

Guinness Nigeria 2018 Annual report Available from:

https://africanfinancials.com/document/ng-Guinness-2018-ar-00/

Guinness Nigeria 2017 Annual report Available from:

https://africanfinancials.com/document/ng-Guinness-2017-ar-00/

Nigerian Breweries Nigeria Plc 2019 Annual report Available from:

https://africanfinancials.com/document/ng-Nigerian Breweries2019-ar-00/

Nigerian Breweries Nigeria Plc 2018 Annual report Available from:

https://africanfinancials.com/document/ng-Nigerian Breweries2018-ar-00/

Nigerian Breweries Nigeria Plc 2017 Annual report;Available from:

https://africanfinancials.com/document/ng-Nigerian Breweries2017-ar-00/

Gill, J.O. (1992) Practical financial analysis. US:Crisp Publications Inc.

Market share price of Guinness Nigeria Plc. Available from:

https:// m.investing.com/equities/Guinness-nig-historical-data

Market share price of Nigerian Breweries Nigeria Plc, Available from:

https:// m.investing.com/equities/Nigerian Breweries-nig-historical-data

Investopedia (no date) Financial Ratios: Compare and Analyze Performance. Available from:
https://www.investopedia.com/financialratios-4689817