lOMoARcPSD|39096013

Globetelecominc Financial Statement Analysis

Financial Management (Misamis University)

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FINANCIAL STATEMENT ANALYSIS

OF

GLOBE TELECOM, INC.

____________________________

Presented to the

Faculty of Business and Accountancy Department

La Salle University

Ozamiz City, Philippines

_____________________________________

Submitted to:
Sir Nemar Jay Capitania

___________________________

Submitted by:

Ellysa Fernandez
Herald Sotto
Gerael Jane Tik-ing
Princess Nyisha Tual

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TABLE OF CONTENTS

Page

Cover Page 1

Table of Contents 2

Background.of the Company 3

Horizontal Analysis

Statement of Financial Position 4

Statement of Comprehensive Income 7

Vertical Analysis

Statement of Financial Position 10

Statement of Comprehensive Income 13

Ratio Analysis 16

Findings and interpretations 22

Conclusion 23

Recommendations 24

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Company Background

Globe Telecom, Inc (GLO) was originally incorporated on January 16, 1935 as Globe

Wireless Limited with a franchise to operate wireless long distance message services in the

Philippines. The company eventually changed its name to the present one in 1992, and welcomed

Singapore Telecom, Inc. as a new foreign partner the following year.

GLOBE is a telecommunications company that provides digital wireless communication

services nationwide under the "Globe Postpaid", "Globe Prepaid", and "TM" brands using a fully

digital network. The Company also offers domestic and international long distance

communication services or carrier services. GLO currently has 86.8 million mobile subscribers

(including fully mobile broadband), 3.7 million Home Broadband customers, and 1.3 million

landline subscribers.

Among the ownerships and subsidiaries of GLOBE are GCASH, Mynth, Innove

Communications, Inc.; GTI Business Holdings, Inc.; Kickstart Ventures, Inc.; Asticom

Technology, Inc.; Globe Capital Venture Holdings, Inc.; Bayan Telecommunications, Inc.;

TaoDharma Inc.; GTowers Inc.; Yondu, Inc.; and Electronic Commerce Payments, Inc

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Horizontal Analysis
Globe Telecom, Inc.
Statement of Financial Position
As of the year 2020-2021
(Amounts In Thousands)

Amount Percentage
Assets 2021 2020 Change Change
Current Assets
Cash and cash equivalents 24,239,195 19,508,114 4,731,081 24.25%
Trade Receivables - net 16,696,542 20,145,484 -3,448,942 -17.12%
Contract assets and deferred contract costs - net 8,646,147 6,956,159 1,689,988 24.29%
Inventories and supplies - net 4,045,049 5,988,899 -1,943,850 -32.46%
Derivative assets - current 262,805 2,014 260,791 1294949%
Prepayments and other current assets 13,956,867 11,497,195 2,459,672 21.39%
Total Current Assets 67,846,605 64,097,865 3,748,740 5.85%
Noncurrent Assets
Property and equipment - net 270,747,147 190,292,393 80,454,754 42.28%
Intangible assets and goodwill - net 20,761,388 17,052,913 3,708,475 21.75%
Right of use assets - net 19,687,012 4,300,835 15,386,177 3.58%
Investment in associates and joint ventures 42,569,217 35,706,460 6,862,757 19.22%
Deferred income tax assets - net 2,033,968 2,556,059 -522,091 -20.43%
Derivative assets - net of current portion 2,769,472 56,510 2,712,962 48.01%
Deferred contract costs - net of current portion 695,522 356,657 338,865 95.01%

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Other noncurrent assets 31,349,516 25,360,145 5,989,371 23.62%

Total Noncurrent Assets 390,613,242 275,681,972 114,931,270 41.69%
Total Assets 458,459,847 339,779,837 118,680,010 34.93%

Liabilities and Equity

Liabilities
Current Liabilities
Trade payables and accrued expenses 84,576,156 56,377,186 28,198,970 50.02%
Contract liabilities and deferred revenues - current 8,410,954 9,033,697 -622,743 -6.89%
Loans Payable - current 16,018,505 8,521,424 7,497,081 87.98%
Derivative liabilities - current 1,114,610 1,056,816 57,794 5.47%
Lease liabilities - current 3,664,344 999,200 2,665,144 266.73%
Provisions 2,768,719 2,784,521 -15,802 -0.57%
Income tax payable 973,719 1,502,194 -528,475 -35.18%
Total Current Liabilities 117,527,007 80,275,038 37,251,969 46.41%

Noncurrent Liabilities
Loans payable - net of current portion 194,035,062 156,270,726 37,764,336 24.17%
Contract liabilities - net of current portion 73,503 227,923 -154,420 -67.75%
Deferred income tax liabilities - net 6,062,606 5,056,340 1,006,266 19.90%
Derivative liabilities - net of current portion 111,909 1,882,967 -1,771,058 -94.06
Lease liabilities - non current 16,215,004 3,525,472 12,689,532 359.94%
Pension liability 5,043,691 5,647,387 -603,696 -10.69%
Other long-term liabilities 4,995,199 4,089,514 905,685 22.15%

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Total Noncurrent Liabilities 226,536,974 176,700,329 49,836,645 28.20%

Total Liabilities 344,063,981 256,975,367 87,088,614 33.89%

Equity
Capital Stock 8,473,535 8,464,211 9,324 0.11%
Additional paid in capital 37,226,626 37,001,626 225,000 0.61%
Cost of share-based payments 843,826 638,323 205,503 32.19%
Capital Securities 29,977,845 - 29,977,845 0.00%
Other Revenues -2,195,128 -4,219,590 2,024,462 -47.98%
Treasury shares -10,000,000 - -10,000,000 0.00%
Retained earnings 49,775,474 40,682,494 9,092,980 22.35%
Equity attribute to equity holders of the Parent 114,102,178 82,567,064 31,535,114 38.19%
Non-controlling interest 293,688 237,406 56,282 23.71%
Total Equity 114,395,866 82,804,470 31,591,396 38.15%
Total Liabilities and Equity 458,459,847 339,779,837 118,689,010 34.93%

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Globe Telecom, Inc.

Statement of Comprehensive Income
For the year 2020-2021
(Amounts In Thousands)

Revenues
Service revenues 151,513,592 146,388,134 5,125,458 3.50%
Non Service Revenues 16,233,625 14,131,408 2,102,217 14.88%
Total Revenues 167,747,217 160,519,542 7,227,675 4.50%

Income (Losses)
Equity Share in Net Income (losses) of Associates and Joint Ventures 881,535 (2,367,440) 3,248,975 (137.24%)
Interest Income 149,508 194,938 -45,430 -23.30%
Gain on Disposal of Property and Equipment - Net 152,565 33,244 119,321 358.92%
Other Income - net 4,656,647 3,817,211 839,436 21.99%
Total Income (Losses) 5,840,255 1,677,953 4,162,302 248.06%
Costs and Expenses
General, Selling and Administrative Expenses 69,852,068 64,913,355 4,938,713 7.61%
Depreciation and Amortization 41,132,992 35,412,038 5,720,954 16.16%
Cost ofI Inventories Sold 18,072,557 16,406,196 1,666,361 10.16%
Interconnect Costs 1,182,381 1,007,234 175,147 17.39%
Financing Costs 8,740,763 7,111,410 1,629,353 22.91%
Impairment and other Losses 5,566,939 10,207,599 -4,640,660 -45.46%
Total Costs and Expenses 144,547,700 135,057,832 9,489,868 7.03%

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Income Before Income Tax 29,039,772 27,139,663 1,900,109 7.00%

Provisions For Income Tax
Current 4,903,568 8,139,602 -3,236,034 -39.76%
Deferred 412,347 377,016 35,331 9.37%
Total Provisions For Income Tax 5,315,915 8,516,618 -3,200,703 -37.58%
Net Income 23,723,857 18,623,045 5,100,812 27.39%
Other Comprehensive Income (Loss)
Items that will be reclassified into profit or loss in subsequent periods:
Transactions on cash flows hedges - net 1,188,210 -725,684 1,913,894 -2.64%
Exchange differences arising from translations of foreign investments 31,416 -3,385 34,801 -10
1,219,626 -729,069 1,948,695 -267%
Items that will not be reclassified into the profit or loss in subsequent
periods:
Changes in fair value of Financial Assets at fair value through other
Comprehensive Income 378,610 1,362 377,248 27698%
Remeasurement gain (loss)bon defined benefit plan 600,124 -1,817,274 2,417,398 -133%
978,734 -1,815,912 2,794,646 -154%
Total Other Comprehensive Income (Loss) 2,198,360 -2,544,981 4,743,341 -186%
Total Comprehensive Income 25,922,217 16,078,064 9,844,153 61.23%
Total net income attributable to:
Equity holders of the Parent 23,652,811 18,578,322 5,074,489 27.30%
Non-controlling interest 71,046 44,723 26,323 58.86%
23,723,857 18,623,045 5,100,812 27.39%
Total comprehensive income attributable to:

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Equity holders of the Parent 25,853,338 16,033,341 9,819,997 61.25%

Non-controlling interest 68,879 44,723 24,156 54.01%
25,922,217 16,078,064 9,844,153 61.23%
Earnings Per Share
Basic 173.18 135.04 38.14 28.24%
Diluted 172.25 134.4 37.85 28.16%
Cash dividends declared per common share 108 107.99 0.01 93%

Vertical Analysis
Globe Telecom, Inc.
Statement of Financial Position
As of the year 2020-2021
(Amounts In Thousands)

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Absolute Amount % of Total of the Balance Sheet

Assets 2021 2020 2021 2020

Current Assets
Cash and cash equivalents 24,239,195 19,508,114 5.29% 5.74%
Trade Receivables - net 16,696,542 20,145,484 3.64% 5.93%
Contract assets and deferred contract costs - net 8,646,147 6,956,159 1.89% 2.05%
Inventories and supplies - net 4,045,049 5,988,899 0.88% 1.76%
Derivative assets - current 262,805 2,014 0.05% 0
Prepayments and other current assets 13,956,867 11,497,195 3.04% 3.38%
Total Current Assets 67,846,605 64,097,86 14. 80% 18.86%
Noncurrent Assets
Property and equipment - net 270,747,147 190,292,393 59.06% 56%
Intangible assets and goodwill - net 20,761,388 17,052,913 4.53% 5.02%
Right of use assets - net 19,687,012 4,300,835 4.29% 1.27%
Investment in associates and joint ventures 42,569,217 35,706,460 9.29% 10.51%
Deferred income tax assets - net 2,033,968 2,556,059 0.44% 0.08%
Derivative assets - net of current portion 2,769,472 56,510 0.60% 0.02%
Deferred contract costs - net of current portion 695,522 356,657 0.15% 0.10%
Other noncurrent assets 31,349,516 25,681,972 5,989,371 23.62%
Total Noncurrent Assets 390,613,242 275,681,972 85.20% 81.14%
Total Assets 458,459,847 339,779,837 100% 100%

Liabilities

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Current Liabilities
Trade payables and accrued expenses 84,576,156 56,377,186 18.45% 16.59%
Contract liabilities and deferred revenues - current 8,410,954 9,033,697 1.83% 2.67%
Loans Payable - current 16,018,505 8,521,424 3.49% 2.51%
Derivative liabilities - current 1,114,610 1,056,816 0.02% 0.31%
Lease liabilities - current 3,664,344 999,200 0.80% 0.29%
Provisions 2,768,719 2,784,521 0.60% 0.82%
Income tax payable 973,719 1,502,194 2.21% 0.44%
Total Current Liabilities 117,527,007 80,275,038 25.64% 23.63%

Noncurrent Liabilities
Loans payable – net of current portion 194,035,062 156,270,726 42.32% 39.09%
Contract liabilities – net of current portion 73,503 227,923 0.02% 0.07%
Deferred income tax liabilities – net 6,062,606 5,056,340 1.32% 1.49%
Derivative liabilities – net of current portion 111,909 1,882,967 0.02% 0.47%
Lease liabilities – non current 16,215,004 3,525,472 3.54% 0.88%
Pension liability 5,043,691 5,647,387 1.10% 1.41%
Other long-term liabilities 4,995,199 4,089,514 1.09% 1.02%
Total Noncurrent Liabilities 226,536,974 176,700,329 49.41% 52%
Total Liabilities 344,063,981 256,975,367 75.04% 75.63%

Equity
Capital Stock 8,473,535 8,464,211 1.85% 2.12%
Additional paid in capital 37,226,626 37,001,626 8.12% 9.26%

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Cost of share-based payments 843,826 638,323 0.18% 0.16%

Capital Securities 29,977,845 - 6.54% -
Other Revenues (2,195,128) (4,219,590) (0.49%) (1.24%)
Treasury shares (10,000,000) - (2.18%) -
Retained earnings 49,775,474 40,682,494 10.86% 10.18%
Equity attribute to equity holders of the Parent 114,102,178 82,567,064 24.89% 20.65%
Non-controlling interest 293,688 237,406 0.06% 0.06%
Total Equity 114,395,866 82,804,470 24.95% 20.71%
Total Liabilities and Equity 458,459,847 339,779,837 100% 100%

Globe Telecom, Inc.

Statement of Comprehensive Income
For the year 2020-2021
(Amounts In Thousands)

Revenues
Service revenues 151,513,592 146,388,134 90.32% 91.20%
Non Service Revenues 16,233,625 14,131,408 9.68% 8.80%
Total Revenues 167,747,217 160,519,542 100% 100%

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Income (Losses)
Equity Share in Net Income (losses) of Associates and Joint Ventures 881,535 (2,367,440) 0.53% (1.47%)
Interest Income 149,508 194,938 0.09% 0.12%
Gain on Disposal of Property and Equipment - Net 152,565 33,244 0.09% 0.02%
Other Income - net 4,656,647 3,817,211 2.76% 2.38%
Total Income (Losses) 5,840,255 1,677,953 3.48% 1.05%

Costs and Expenses

General, Selling and Administrative Expenses 69,852,068 64,913,355 41.64% 40.44%
Depreciation and Amortization 41,132,992 35,412,038 24.52% 22.06%
Cost ofI Inventories Sold 18,072,557 16,406,196 10.77% 10.22%
Interconnect Costs 1,182,381 1,007,234 0.70% 0.63%
Financing Costs 8,740,763 7,111,410 5.21% 4.43%
Impairment and other Losses 5,566,939 10,207,599 3.32% 6.36%
Total Costs and Expenses 144,547,700 135,057,832 86.17% 84.14%
Income Before Income Tax 29,039,772 27,139,663 17.31% 16.91%

Provisions For Income Tax

Current 4,903,568 8,139,602 2.92% 5.07%
Deferred 412,347 377,016 0.25% 0.23%
Total Provisions For Income Tax 5,315,915 8,516,618 3.17% 5.31%
Net Income 23,723,857 18,623,045 14.14% 11.60%

Other Comprehensive Income (Loss)

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Items that will be reclassified into profit or loss in subsequent

periods:
Transactions on cash flows hedges - net 1,188,210 (725,684) 0.71% (0.45%)
Exchange differences arising from translations of foreign investments 31,416 (3,385) 0.02% (0.002%)
1,219,626 -729,069 0.73% 0.45%
Items that will not be reclassified into the profit or loss in
subsequent periods:
Changes in fair value of Financial Assets at fair value through other
Comprehensive Income 378,610 1,362 0.23% 0.001%
Remeasurement gain (loss)bon defined benefit plan 600,124 (1,817,274) 0.36% (1.13%)
978,734 (1,815,912) 0.58% (1.13%)
Total Other Comprehensive Income (Loss) 2,198,360 (2,544,981) 1.31% (1.59%)
Total Comprehensive Income 25,922,217 16,078,064 15.45% 10.02%
Total net income attributable to:
Equity holders of the Parent 23,652,811 18,578,322 14.10% 11.57%
Non-controlling interest 71,046 44,723 0.04% 0.029%
23,723,857 18,623,045 14.14% 11.60%
Total comprehensive income attributable to:
Equity holders of the Parent 25,853,338 16,033,341 15.41% 9.99%
Non-controlling interest 68,879 44,723 0.04% 0.03%
25,922,217 16,078,064 15.45% 10.02%
Earnings Per Share
Basic 173.18 135.04 0.0001% 0.0001%
Diluted 172.25 134.4 0.0001% 0.0001%

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Cash dividends declared per common share 108 107.99 0.0001% 0.0001%

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Ratio Analysis
(In Thousands)

1. Liquidity Ratio

a) Current Ratio =

2021 2020

= 0.58 = 0.80

In the year 2021, the entity has a current ratio of 0.58 and for the year 2020, it has a current ratio
of 0.80. This means that the company doesn't have enough reserves/ resources and is unable to
pay its current liabilities.

b) Acid Test Ratio =

2021 2020

= 0.35 = 0.49

The entity has a quick ratio of below 1 in both given periods. Therefore, the company lacks of
sufficient liquid assets that could somehow cover its short-term liabilities.

c) Cash Ratio =

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2021 2020

= 0.21 = 0.24

Globe Telecom has a cash ratio of 0.21 and 0.24 in the year period 2021 and 2020 respectively.
This indicates that the company has insufficient cash and cash equivalents that could cover its
short-term and current obligations.

d) Net Working Capital Ratio =

2021 2020

= - 49,680, 402 = - 16, 177, 173

The net working capital of the entity is low, which points to an unhealthy financial position and
has very poor capacity to repay its short-term liabilities with short-term assets.Hence Globe
Telecom, Inc. is not solvent and liquid enough.

2. Assets Management Ratios

a) Total Assets Turnover Ratio =

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2021 2020

= 0.37 = 0.47
Globe Telecom, Inc. has a Total Assets Turnover ratio of 0.37 in the year 2021 and 0.47 in the
year 2020. This reveals the lesser efficiency of Globe Telecom, Inc. in generating more/ enough
revenue from its assets.

b) Asset Turnover =

2021 2020

= 0.62 = 0.84

c) Net Working Capital Turnover =

2021 2020

= 3.38 = -9.92

d) Inventory Turnover =

2021 2020

= 41.47 =26.80

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e) Days in Inventory =

2021 2020

= 8.80 days =13.61 days

f) Receivable Turnover =

2021 2020

= 10. 05 = 7.97

g) Days Sales Outstanding =

2021 2020

= 2, 728, 193.137 = 3, 0437, 795. 904

3. Financial Leverage

a) Debts Ratio =

2021 2020

= 0.75 = 0.76

The company has a debt ratio of 0. 75 in the year 2021 and 0.76 in the year 2020. This means
that in both years, Globe Telecom, Inc. owns more assets rather than liabilities.

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b) Equity Ratio =

2021 2020

= 0.25 = 0.24

The entity has an Equity ratio of 0.25 in the year 2021 and 0.24 in the year 2020. This indicates
that the majority of the company's assets for the year 2020-2021 were funded primarily through
debts rather than equities and owned fundings.

c) Debt Equity Ratio =

2021 2020

= 3% = 3.10%

Globe Telecom, Inc.has a Debt equity ratio of 3% for the year 2021 and a debt equity ratio of
3.10 as of the year 2020. This means that in the said period, the company has been leveraged.

d) Total Interest Earned =

2021 2020

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= 0.04 = 0.11

The entity’s Total Interest earned in the year 2021 is 0.04 and 0.11 for the year 2020. This means
that the company will less likely fulfill its obligation and may can be also displayed to investors
and creditors as an entity with high risk in terms of solvency levels.

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Findings and Interpretations

● Horizontal Analysis
The following analysis shown above have reflected the declining performance of Globe
Telecom, Inc. in the year 2020. This suggests an idea, that Globe telecom, Inc may also
have been affected by the profound aftermaths caused by the Covid 19 pandemic.
However, as presented in the data, the said declining performance experienced by the
company has been only seen as transitory, since in the year 2021, perceptible overall
growth in Globe Telecom, Inc’s revenue have been evident . From a revenue amounting
to 160 billion in the year 2020, the said amount has soared to more than 4.50% or 7
billion in the year 2021. Further, Globe Telecom, Inc. has also demonstrated a 118 billion
or 34.93% increase into its total assets. From a total assets in the year 2020 amounting to
339 billion to 458 billion in the year 2021.
However, the large fraction of Globe Telecom, Inc’s assets were dominantly Non Current
Assets. This could mean that Globe Telecom, Inc. has below-average liquidity levels and
this could also manifest signs of inability of a company to promptly cover and meet their
obligations and support their ongoing investments that were on a noncash assets.Also,
Globe Telecom, Inc. total liabilities have also noticeably increased for more than 33.89%
or 87 billion leading them to deal with a liability totalling at 344 billion during the year
2021. Regardless, they have still shown good signs in their net income. Since, as of 2021
their net income has skyrocketed from 18 billion to 23 billion - a 27.39% or 5 billion
growth, a growth that is significant and is also a good indicator of the profitability of
Globe Telecom, Inc, during the year 2021.

● Vertical Analysis
The statement of financial position reveals that the current asset of Globe Telecom has
decreased from 18.86% to 14.80%. The total liabilities decreased by 0.59% between the
current year and the previous year, while the equity increased by 4.24%. The statement of
comprehensive income on the other hand, shows that the income has increased by 2.43%.

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Also, the possible shortcomings of Globe Telecom, inc. and subsidiaries in the year 2020-2021
are the following;

● Globe Telecom is recovering and it might take some time for its mobile business to return
to pre-pandemic levels despite the easing of mobility restrictions, mainly due to changes
in customer behavior.
● The prepaid top-ups decline. Possibly because those who have broadband connections at
home offload their usage to broadband, while those whose incomes are affected by the
lockdowns control their spending.
● Service rendered the service revenue dropped from 91.20% to 90.32% possibly because
the users did not find globe telecom service satisfying enough.

Conclusions

Based on the information drawn above, Globe Telecom can pay its short term obligations and
Globe Telecom's current ratio for the year that ended in 2020 was 0.76 and decreased to 0.75 in
2021. Net profit grew 48% from a year earlier to PHP26. In year 2021 globe telecom’s net
income increased to 23.7 billion from 18.6 billion in 2020.Service revenues were down by 2% to
P146.8 billion for the entire 2020, from 2019’s P149 billion.Globe’s mobile business dragged
revenues, as it slid 7% from P111 billion in 2019 to P103.1 billion in 2020 due to the coronavirus
lockdown. And as for our cash dividends in the year 2020 which is 107.99

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Recommendations

Based on the findings of the study and the interpretations drawn, the following recommendations
made are:

● Globe Telecom, Inc. should also take into consideration the need of translating more of
its funds into current assets in order to best stabilize their solvency and liquidity levels
and so as to keep their company always responsive to the need of supporting their
ongoing investments that were on a noncash assets
● The entity should elicit suggestions and concerns from its consumers in order to best
magnify the areas that are needed to be improved, to take efficient response from its
customers demands and so as to provide excellent levels of satisfaction towards its
customers. And by doing this, they could easily resuscitate their company’s performance
which was affected by the pandemic and preserve its ever persisting growth in terms of
assets and income.
● The company needs to expand its operations and presence. This is to best widen their
reach and easily link their services to more potential customers, generate more profit or
income and to yield a large amount of equity or funds that they could also use to best
finance their operations, initiatives and plans that may be integral for their sustainable
record of growth.
● Globe Telecom Inc. operates the largest mobile network in the Philippines and one of the
largest fixed-line and broadband networks.It is also the country's largest
telecommunications company in terms of market capitalization.Globe continuously
improves its products and services and looks into new ventures and innovations to offer
more than connectivity. It has moved beyond telco and provides fintech, healthtech,
adtech, e-commerce, and other digital solutions that help people cope with social
distancing measures. Globe Telecom Inc can be a profitable investment option. With all
of these in mind, we find investing in the company somehow recommendable to
investors.

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