Financial ratios

Profitability

The profitability ratios for 2014 showed varied year-on-year dynamics.

Gross margin rose by 2.8pp, as growth of gross profit (up 20.9%) was stronger than increase in revenue (up 0.8%). Higher EBIT and EBITDA margins are attributable to the improvement in operating profit (up 67.2%) and a simultaneous 0.8% increase in revenue.

The dynamics of changes of net margin was different. Lower net margin is attributable to lower net profit, as the previous year’s profit included a gain on bargain purchase of companies.

The return on assets followed a similar pattern: lower net profit to assets ratio resulted in a lower ROA.

This also had a direct impact on ROE.

In the reporting period, return on capital employed grew, mainly as a result of EBIT growing much faster than the capital employed, which increased only slightly.

Profitability ratios

Source: Company data.

Ratio formulas:

• Gross margin = gross profit (loss) / revenue (statement of comprehensive income by function)
• EBIT margin = EBIT / revenue
• EBITDA margin = EBITDA / net revenue
• Net profit margin = net profit (loss) / revenue
• Return on assets = net profit (loss) / total assets
• Return on capital employed (ROCE) = EBIT / total assets less current liabilities (TALCL), that is EBIT / total assets less current liabilities
• ROE (return on equity) = net profit (loss) / equity
• Return on non-current assets = net profit (loss) / non-current assets

Liquidity

As at the end of 2014, the Group recorded a slight decrease in all its liquidity ratios.

Lower ratios result from a decrease in current assets, cash and other financial assets, with concurrent decrease in current liabilities.   

Liquidity ratios

Source: Company data.
Ratio formulas:
Current ratio = current assets / current liabilities
Quick ratio = (current assets - inventory - current prepayments and accrued income) / current liabilities
Cash ratio = (cash + other financial assets) / current liabilities 

As a result of the movements in current assets and liabilities, as at December 31st 2014 working capital was positive at PLN 902,896 thousand.

Changes in working capital

GRAFICO 

Source: Company data.

Operating efficiency

Inventory turnover increased, primarily due to an increase in inventory. The average collection period was shorter, at 51 days. At the same time, the average payment period, which lengthened following the decline in cost of sales, led to the cash conversion cycle of 48 days, which is also reflected in the liquidity ratios.

Operating efficiency ratios

Source: Company data.

Ratio formulas:
Inventory turnover = inventory * 360 / cost of sales
Average collection period = trade and other receivables * 360 / revenue
Average payment period = trade and other payables * 360 / cost of sales
Cash conversion cycle = inventory turnover + average collection period - average payment period

Debt

During the reporting period, the main source of financing of the Company’s assets and operations was equity. Stable leverage was maintained throughout the period, which was financially effective and safe in terms of the financing risk. Throughout the period, the interest cover ratio remained at a level ensuring the Group’s good credit standing and full ability to service debt. 

Debt ratios

Source: Company data

Ratio formulas:
Total debt ratio = total liabilities / total assets
Long-term debt ratio = non-current liabilities / total assets
Short-term debt ratio = current liabilities / total assets
Equity-to-debt ratio = equity / current and non-current liabilities
Interest cover ratio = [profit before tax + interest expense] / interest expense