Zaini Zain (BAF2009012) Adv. Fin. Acc Group Assignment (UPDATED)

YPC International College
BSc (Hons) Accounting and Finance
Report on Financial Performance Analysis

Group Assignment
Advanced Financial Accounting

6000AFYPC
Liew Wenn Hing
Prepared by:
Student Name YPC ID LJMU ID
MOHAMAD ZAINI BIN MOHD ZAIN BAF2009012 935879
MUHAMMAD ADAM AIMAN BIN MAHFUD BAF2009046 937284
AZIZUL BIN ADNAN BAF2009057 937282
GURDEEP SINGH HARJINDER BAF2009034 935868
Table of Contents
1 Introduction
1.1 Background of Company
1.2 F&NHB Corporate Information
1.3 F&NHB Business Group
2 Financial Statement Analysis
2.1 Performance Section
2.2 Position Section
3 Non-Financial Statement Analysis
3.1 Sustainability Report
3.1.1 Environmental Performance
3.1.2 Employee Relations
3.1.3 Supply Chain Management
3.2 Corporate Governance Report
4 Conclusion and Recommendations
References
5 Appendices
5.1 COMPUTATION
6000AFYPC Advanced Financial Accounting
1 Introduction
1.1 Background of Company
Fraser & Neave Holdings Berhad (F&N) is a Malaysian-based company with a rich
history that dates to the 19th century. The company was originally founded in 1883 by
John Fraser and David Neave, who established the Singapore and Straits Aerated
Water Company to produce carbonated beverages.
Over the years, the company expanded its operations and diversified its product range,
including beer, dairy products, and publishing. In 1931, F&N acquired the Tiger Beer
brand, which remains one of its most well-known products to this day.
In the 1990s, F&N underwent a series of significant changes, including the divestment
of its publishing business and the acquisition of the food and beverage businesses of
Nestle Malaysia. In 2013, the company was acquired by TCC Assets, a Thai company
owned by billionaire Charoen Sirivadhanabhakdi (Danubrata & Azhar, 2013).
Today, F&N is a leading player in the food and beverage industry in Malaysia and
Singapore, with a diverse portfolio of brands that includes F&N, 100Plus, Magnolia,
Farmhouse, and Seasons. The company also has operations in Thailand, Vietnam, and
Myanmar, and continues to expand its presence in the region.
Page 1 of 21
1.2 F&NHB Corporate Information
(Bursa, 2022)
Page 2 of 21
1.3 F&NHB Business Group
(Bursa, 2022)
Page 3 of 21
2 Financial Statement Analysis

These analyses were divided into two (2) sections which is performance and position.
Performance Section
This looks at the statement of profit or loss and associated ratios.
Performance Ratios 2022 2021

Gross Profit Margin 26% 29%
Operating Profit Margin 10% 11%
Cost of Sales 73% 71%
Return On Capital Employed 13% 16%
Commentary
Based on the above results, the company has experienced a decline in profitability.
Specifically, the gross profit margin decreased from 29% in FY2021 to 26% in
FY2022. This suggests that the company is experiencing an increase in the cost of
goods sold or a decrease in pricing power.
Moreover, the operating profit margin declined from 11% in FY2021 to 10% in
FY2022. This indicates that the company’s operating expenses have increased, which
may be due to higher labour costs or rising overheads.
However, the company’s return on capital employed (ROCE) remains strong at 13%
in FY2022, despite it having decreased from 16% in FY2021. This indicates that the
company is generating healthy returns on its invested capital.
In conclusion, while the company's profitability has declined, its ROCE remains strong.
Potential investors should conduct further analysis to determine if this is a temporary
setback or a long-term trend. It is also recommended to investigate the reasons behind
the decline in profitability and to assess the company's management team and their
plans to address the issues.
Page 4 of 21
2.1 Position Section

This looks at the statement of financial position and associated ratios
Liquidity Ratios 2022 2021

Long-term solvency
Gearing ratio 11.1% 5.3%
Interest cover 77 times 149 times
Short-term liquidity
Current ratio 2.68: 1 2.69: 1
Quick ratio 1.60: 1 1.68: 1
Efficiency Ratios 2022 2021
Trade receivables collection period 43 days 37 days
Trade payable payment period 35 days 33 days
Inventory days 100 days 82 days
Commentary
Based on the above results, the company’s financial position has experienced some
changes. The company’s gearing ratio has increased from 5.3% in FY2021 to 11.1% in
FY2022. This indicates that the company has increased its reliance on debt financing,
which may increase the financial risk.
However, the interest cover ratio remains high at 77 times in FY2022, indicating that
the company is generating sufficient earnings to cover its interest expenses. It has
decreased significantly from 149 times in FY2021, suggesting that the company’s
interest expenses have increased or its earnings have declined.
The current ratio has remained relatively stable at 2.69: 1 in FY2021 and 2.68: 1 in
FY2022. This indicates that the company has sufficient current assets to cover its
current liabilities. The quick ratio has declined from 1.68: 1 in FY2021 to 1.60: 1 in
FY2022, which suggests that the company’s ability to cover its short-term obligations
has decreased.
The trade receivables period has increased from 37 days in FY 2021 to 43 days in FY
2022, indicating that the company is taking longer to collect its accounts receivable. The
Page 5 of 21
trade payables period has increased slightly from 33 days in FY 2021 to 35 days in FY
2022, which suggests that the company is taking longer to pay its suppliers. The
inventory days have increased significantly from 82 days in FY 2021 to 100 days in FY
2022, indicating that the company is holding onto inventory for a longer period, which
may result in higher storage and obsolescence costs.
In conclusion, while the company's gearing ratio has increased and its quick ratio has
declined, the company is generating sufficient earnings to cover its interest expenses.
Potential investors should conduct further analysis to determine the reasons behind the
changes in the company's financial position and assess the potential impact on its future
performance.
3 Non-Financial Statement Analysis

Potential investors also look upon the non-financial indicator about the company as well.
At first glance, non-financial information is more subjective, unlike financial information
which is more objective in nature as numbers. However, the growing interest in recent
years regarding non-financial information is partly reflected by an increase in
expectations and demands from society to companies to tackle environment and social
issues amid global efforts to build a sustainable society (PwC, 2021). Thus, investors
place more emphasis on non-financial information from the perspective of corporate
value, as evidenced by the expansion of ESG (environmental, social and governance)
investment. For investors, it is important to see whether the investee company is
responding towards society, and whether it can sustainably grow in response to
changes in the natural and social environment.
In 2018, reporting non-financial information will become mandatory in the European

Union if the business has more than 500 employees (Bizfluent, 2019). Most non-
financial information can be obtained in the company’s annual report or even
sustainability report. Sustainability reports provide information about a company’s ESG
performance, including its efforts to reduce its environmental impact, improve social and
labour practices and ensure good corporate governance.
Page 6 of 21
3.1 Sustainability Report
3.1.1 Environmental Performance

By assessing a company’s environmental performance through factors such as energy
consumption, water usage, or waste management, it can determine whether an
investor's company follows the expectations and demands of the society. Thus, the
Environmental Performance Index (EPI) indicator is used to determine the
environmental performance of a company. The EPI framework organizes 40 indicators
into 11 issues and three policy objectives, with weights shown at each level as a
percentage of the total score (Refer Figure 3). According to 2022 EPI (EPI, n.d.), from
the figure shown, waste management contributes 2% out of 20% of the environmental
health objective, in which 1% of it is solid waste, 0.5% is recycling and the remaining is
ocean plastics.
For F&N, one of the highlights a fore mentioned in the Sustainability Report 2022 is that
two out of its eight plants have achieved zero waste to landfill, which is Kota Kinabalu
Plant in Sabah and Rojana Plant in Thailand (Bursa, 2022). At the Rojana plant, all
waste products are sent to a waste-to-energy plant to be converted into a fuel source.
Meanwhile, at the other remaining 6 plants, over 70% of the waste has been recycled.
With the recent progress, the company’s 2025 target which is to reduce the solid waste
sent to landfill by 30% from a 2020 baseline can be achieved.
3.1.2 Employee Relations

The next non-financial information to look upon is the employee relations. Employee
relations refers to the relationship between employer and its employees where it
concerns building positive relationships and interactions among employers and
employees, and at a broader level, it helps foster a sense of community within an
organisation. This could entail initiating transparent workplace communication or
supporting the emotional, physical, and psychological health of employees. Ultimately,
the goal is to create a positive relationship between employers and employees that
leads to an increase in employee retention, happiness, and productivity (Forbes
Advisor, 2023).
Page 7 of 21
For F&N, the employees are the most valuable assets, and the company is doing its
best to nurture their talents in a safe and healthy environment. One of the issues that
F&N has tackled is the employees’ safety, health & well-being where employees might
be exposed to the COVID-19 virus during the working hours and frequently meet the
clients at their departments as the standard operating procedures are getting looser.
The company mitigates this issue by complying with Public Health Regulations on
COVID-19 measures such as face masks and hand sanitisers. The company also
launches a vaccination programme for employees and tracks down the employee’s
vaccination progress (Bursa, 2022).
F&N also has tackled employee discrimination which can affect the psychological health
of its employees. An example is when an employee felt uncomfortable to report a case
of verbal harassment and thus resign from the company. F&N mitigates this issue by
informing employees on various measures available to raise discrimination issues such
as mental health online. F&N also implemented additional training for supervisors on
preventing discrimination and harassment to employees (Bursa, 2022).
3.1.3 Supply Chain Management

Supply chain management (SCM) is also another non-financial information that helps
potential investors to invest in a company. First, a supply chain is the network of
individuals, companies, resources, activities, and technologies used to make and sell a
product or service. A supply chain starts with the delivery of raw materials from a
supplier to a manufacturer and ends with the delivery of the finished product or service
to the end consumer. Hence, SCM can be considered as the centralised management
of the flow of goods and services and includes all processes that transform raw
materials into final products. It involves the active streamlining of a business's supply-
side activities to maximise customer value and gain a competitive advantage in the
market (Investopedia, 2022).
SCM oversees each touchpoint of a company's product or service, and with so many
places along the supply chain that can add value through efficiencies or lose value
through increased expenses, proper management of supply chain can increase
revenues, decrease costs, and impact a company's bottom line as whole to deliver the
Page 8 of 21
products to the consumer faster and more efficiently. In addition to this, a good SCM
keeps companies out of the headlines and away from expensive recalls and lawsuits.
By examining a company’s supply chain practices, such as responsible sourcing, labour
standards, and supplier diversity, it can provide investors enough information about the
conditions and the ways a company operates its business (Investopedia, 2022).
For F&N Company, as mentioned in the highlights (Bursa, 2022), it has a very strong
ESG Performance. In the Edge ESG Awards 2022, the company has achieved the Top
3 Performers in ASEAN, alongside with Bermaz Auto Bhd, and Malaysian Pacific
Industries Bhd (The Edge Markets, 2022). The company also has a rating of 4.4 out of 5
by FTSE4GOOD Bursa Malaysia and is considered as the top 3 percent in the Global
Food & Beverage Supersector.
Besides that, the company’s 2025 Target which is to have a 100% active key supplier
accept and comply with the F&N’s Supplier Code of Practice (SCOP) can be a reality as
with the recent progress, 99% of the active key suppliers have accepted and complied
with the SCOP, of which all the direct suppliers have accepted the practice (Bursa,
2022).
Page 9 of 21
4 Conclusion and Recommendations

In conclusion, the type of investor who sees long-term growth is very suitable to invest
in this company. This is because the company has strengthened its development in
terms of waste management, energy consumption, and water usage. Although the
company experienced a decrease in profitability ratio, this decrease did not affect the
financial stability of the company. This company also shows the ability to utilise the cost
even in the face of inflation in the price of raw materials and labour costs.
Investors who look at short-term profits are not suitable to invest in this company. This
is because this company experienced a decrease in gross profit margin due to supply
chain companies being retailers which are usually medium-profit organisations. The
decline in the company's ROCE also causes less satisfactory returns to investors
making this company unsuitable for them. The current consensus among polled
investment analysts is to hold stock in F&NHB.
Page 10 of 21
1. References
Bizfluent, 2019. Nonfinancial Vs. Financial Information. [En ligne]
Available at: https://bizfluent.com/info-7758431-nonfinancial-vs-financial-information.html
[Accès le 7 April 2023].
Bursa, 2022. FNHB Annual Report 2022 (Part 1). [En ligne]
Available at: https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?
id=221676&name=EA_DS_ATTACHMENTS
Bursa, 2022. FNHB Annual Report 2022 (Part 2). [En ligne]
Bursa, 2022. FNHB Sustainability Report 2022 (Part 1). [En ligne]
Bursa, 2022. FNHB Sustainability Report 2022 (Part 2). [En ligne]
Danubrata, E. & Azhar, S., 2013. Thai tycoon raises F&N offer, tops Overseas Union group's bid, London:
Reuters.
EPI, n.d.. Environmental Performance Index (2022). [En ligne]

Available at: https://epi.yale.edu/
Forbes Advisor, 2023. What Is Employee Relations?. [En ligne]

Available at: https://www.forbes.com/advisor/business/what-is-employee-relations/
Investopedia, 2022. Supply Chain Management (SCM): How It Works and Why It Is Important. [En ligne]
Available at: https://www.investopedia.com/terms/s/scm.asp
PwC, 2021. Management of non-financial information: Corporate value creation insights from advanced
case studies. [En ligne]
Available at: https://www.pwc.com/jp/en/knowledge/thoughtleadership/assets/pdf/non-financial-
information-management.pdf
Page 11 of 21
The Edge Markets, 2022. The Edge ESG Awards 2022: Full Report. [En ligne]
Available at: https://fullreport.theedgemalaysia.com/esg/ESG-Awards-2022.pdf
Page 12 of 21
5 Appendices
Figure 1: Statements of Profit or Loss for the

financial year ended 30 September 2022 (Bursa, 2022)
Page 13 of 21
Figure 2: Statements of Other Comprehensive Income

for the financial year ended 30 September 2022 (Bursa, 2022)
Page 14 of 21
Figure 3: Statements of Financial Position as at 30 September 2022 (Bursa, 2022)
Page 15 of 21
Figure 3 (continue): Statements of Financial Position as at 30 September 2022 (Bursa, 2022)
Page 16 of 21
Figure 4: 2022 EPI Framework (EPI, n.d.)
Page 17 of 21
5.1 COMPUTATION
1,174,092
Gross Profit Margin 2022= × 100=26.3 %
4,470,163
1,194,158
Gross Profit Margin 2021= × 100=28.9 %
4,130,872
(3,296,071−2,936,714)
Cost of Sales= ×100=12 %
2,936,714
Based on computation above, the gross profit margin dropped by 2.64% from the
previous year, which was caused by an increase in the cost of sales that was 12% more
than the revenue. It might be driven on by rising purchase costs or the allocation of
additional expenses to COGS. Low margins may indicate weak performance, or a
decline in profit from prior years may be caused by expansion costs or new product
launches.
447,941
Operating Profit Margin 2022= × 100=10.02 %
4,470,163
472,286
Operating Profit Margin 2021= × 100=11.43 %
4,130,872
Calculations show a 1.41% decrease in the gross profit margin over the prior year. This
demonstrates that the administrative process seems to be less efficient than in the prior
year, which reduces the profitability of the company. This is because distribution and
administrative costs have increased, but marketing costs have decreased. Due to this,
the product might not be able to properly penetrate its current market.
447,941
ROCE 2022= × 100=13.34 %
(4,190,630−833,344)
472,286
ROCE 2021= ×100=15.87 %
(3,631,746−655,878)
According to calculations, the gross profit margin dropped by 2.53% from the previous
year. A decline in ROCE can also be a sign that the business is not managing its
investments and assets as effectively as it could be. This could be the result of poor
management decisions, loss of competitive advantage or inefficient financial allocation.
Page 18 of 21
372,897
Gearing 2022= ×100=11.1%
( 372,897+2,984,389)
157,098
Gearing 2021= × 100=5.3 %
( 157,098+ 2,818,770)
Based on the calculation, gearing ratio has increased significantly compared to its prior
year. It is because of increase of debts. This also leads to increase the financial risks to
the business where due to tight payback requirements and the possibility of insolvency
proceedings, external debt is seen as riskier.
447,941
Interest Cover 2022= =77× pa
5,803
472,286
Interest Cover 2021= =149× pa
3,179
The interest cover decreased dramatically from its prior year, according to the
computation above. This is due to an increase in long-term debt, which will result in an
increase in interest costs that must be paid back. As a result, the company will have
lower profits, which will affect how it finances its debts.
2,229,721
Current Ratio2022= :1=2.68 :1
833,344
1,764,827
Current Ratio2021= :1=2.68 :1
655,878
(2,229,721−901,377)
Quick Ratio2022= :1=1.60 :1
833,344
( 2,229,721−655,878)
Quick Ratio2021= :1=1.68 :1
833,344
901,377
Inventory Turnover ( days ) 2022= ×365 days=100 days
3,296,071
659,745
Inventory Turnover ( days ) 2021= × 365 days=82 days
2,936,714
Page 19 of 21
523,075
Trade Receivable Collection Period 2022= ×365 days=43 days
4,470,163
415,392
Trade Receivable Collection Period 2021= ×365 days=37 days
4,130,872
320,335
Trade Payable Payment Period 2022= ×365 days=35 days
3,296,071
267,445
Trade Payable Payment Period 2021= × 365 days=33 days
2,936,714
Page 20 of 21

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YPC International College

BSc (Hons) Accounting and Finance

Report on Financial Performance Analysis

Advanced Financial Accounting

1.2 F&NHB Corporate Information

1.3 F&NHB Business Group

2 Financial Statement Analysis

This looks at the statement of profit or loss and associated ratios.

Performance Ratios 2022 2021

2.1 Position Section

Liquidity Ratios 2022 2021

3 Non-Financial Statement Analysis

In 2018, reporting non-financial information will become mandatory in the European

3.1 Sustainability Report

3.1.1 Environmental Performance

3.1.2 Employee Relations

3.1.3 Supply Chain Management

4 Conclusion and Recommendations

EPI, n.d.. Environmental Performance Index (2022). [En ligne]

Forbes Advisor, 2023. What Is Employee Relations?. [En ligne]

Figure 1: Statements of Profit or Loss for the

Figure 2: Statements of Other Comprehensive Income

Figure 3: Statements of Financial Position as at 30 September 2022 (Bursa, 2022)

Figure 3 (continue): Statements of Financial Position as at 30 September 2022 (Bursa, 2022)

Figure 4: 2022 EPI Framework (EPI, n.d.)

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