1.
OXFORD BROOKES UNIVERSITY
BSC IN APPLIED ACCOUNTING
RESEARCH AND ANALYSIS PROJECT (RAP)
RESEARCH REPORT PRESENTATION
AN ANALYSIS AND EVALUATION OF THE BUSINESS AND
FINANCIAL PERFORMANCE OF GUINNESS NIGERIA PLC
BETWEEN 1 JULY 2009 AND 30 JUNE 2012 (Topic 8)
“GUINNESS NIGERIA PLC”
PRESENTED BY: OLADIMEJI IWALESIN
ACCA REGISTRATION NUMBER: 1518609
PROJECT MENTOR: CLARE FLETCHER
2. Guinness Nigeria Plc.
incorporated on April 29,
1950
A brewing company
subsidiary of Diageo
Group
Listed on Nigerian Stock
Exchange in November
1965
Head Office located in
Lagos Nigeria
3. Guinness Foreign Extra
Stout
Guinness Extra Smooth
Malta Guinness
Harp Lager beer
Gordon’s Spark
Smirnoff Ice
Armstrong Dark Ale
Satzenbrau Pilsner
Top Malt
Harp Lime
Dubic Extra Lager
4. What are the impacts that the business environment
in which Guinness Nigeria Plc. operates have on the
performance and survival of the company?
How has Guinness Nigeria Plc. performed during the
three year assessment period in meeting the needs
and interests of different stakeholder groups?
How had Guinness Nigeria Plc.’s performances
measured against those of a similar organisation
within the industry?
5. Accounting ratios used are:
Profitability ratios
Return on Capital Employed (ROCE)
Operating Profit Margin
Net Asset Turnover
Liquidity ratios
Current Ratio
Quick or Acid Test Ratio
Investors Ratios
Dividend Yield
Price Earnings Ratio
Earnings Per Share
6. Sources of information are:
Guinness Nigeria Plc.’s Annual Reports
Nigerian National Bureau of Statistics
Nigerian Breweries Plc.’s Annual Reports
Central Bank of Nigeria
Trading Economics
Vanguard Newspapers
The Punch Newspapers
This Day Live
Financial Times
Invest Advocate
7. Political factors: taxation policy, government
stability, foreign trade regulations and state of
infrastructure.
Economic factors: interest rates, inflation, exchange
rates, unemployment rates and business cycles.
Social factors: population demographics, income
distribution, social mobility, lifestyle changes and
levels of education.
Technological factors: technology capital
intensiveness, speed of technological transfer and
rates of obsolescence.
8. Strengths
Substantial market share and taste for products by large customers
International supervision with support from parent company
Strong capital base with low gearing
Good brand image
Weakness
High dependence on foreign exchange
Rising operating cost with declining profit margins
Opportunities
Enhanced revenue opportunities from expansion
Central Bank of Nigeria’s (CBN) lending supports for manufacturing firms
Availability of raw materials locally
Threats
Strong competition in the industry
Deteriorating infrastructures
Reducing purchasing power in the economy
Rising finance costs
10. 0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
2012 2011 2010
EBITDA vs PBT 2010 - 2012
Earnings
Before Interest,
Tax,
Depreciation &
Amortization(E
BITDA)
Profit Before
Taxation
N'000
Profit Before Tax and
Earnings Before
Interest, Tax,
Depreciation and
Amortisation increased
between 2010 and
2011, but declined
between 2011 and 2012
as a result of abnormal
operating costs caused
by unfavourable
environmental factors.
11. 0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2012
2011
2010
Quick ratio and current ratio
Quick
Ratio (x)
Current
Ratio (x)
0.96x
1.21x 1.22x
0.40x 0.74x
0.76x
x
Liquidity ratios were
relatively healthy in years
2010 and 2011, but a drop
in the ratios in 2012
indicated that Guinness
Nigeria would not be able
to meet existing liabilities
if they all fell due at once.
12. Net cash and cash
equivalents were
better in 2010 than
in the following two
years. This was due
to lower cash
inflows from
operating activities
and huge capital
expenditures
incurred in those
two years.
Cash flows(Appendix 2c, Table9)
2012 2011 2010 CAGR
Cash flows from operating
activities 21,224,240 19,530,773 27,633,777 -12.36
Cash used in investing
activities 12,143,523 9,887,540 2,644,664 114.28
Cash used in financing
activities 17,318,069 14,267,829 18,104,921 -2.20
Net (decrease)/increase in
cash and cash equivalents -8,237,352 -4,624,596 6,884,192
Cash and cash equivalents,
beginning of year 8,080,590 12,705,186 5,820,994
Cash and cash equivalents,
end of year -156,762 8,080,590 12,705,186
14. Comparative analysis (Appendix 2d)
Company
GUINNES
S NB
Gross Profit Margin (%) 44.50 45.78
PBT Margin (%) 16.69 20.90
ROE (%) 36.36 26.67
ROCE (%) 35.98 44.48
Operating Profit Margin (%) 18.10 23.67
Net Asset Turnover (x) 1.99 1.88
Current Ratio (x) 0.96 0.44
Quick Ratio (x) 0.40 0.30
Interest Cover(x) 10.92 10.87
EPS (N) 4.97 2.56
Net Asset Per Share(N) 13.68 9.61
PE Ratio (x) 22.92 39.51
Guinness Nigeria and
Nigerian Breweries were
virtually at par in their
fundamentals as they
both measured up to
each other in
performance. Nigeria
Breweries performed
slightly better in
profitability while
Guinness Nigeria was
more attractive in
liquidity and investor
ratios.
15. Guinness Nigeria should use its strengths to take
advantage of the opportunities in its environment.
Guinness Nigeria should capitalize on all
opportunities and formulate strategies to improve on
its weaknesses.
Guinness Nigeria should use its strengths to
overcome or reduce the impacts of the threats that
exist in its environment.
A weak organization facing threats will do best by
exiting the business or allow itself to be taken over by
a stronger firm.
16. The environmental factors in Nigeria had produced
negative impacts on the performance of Guinness Nigeria
Plc.
Nevertheless, the company has proved to be a sustainable
business in spite of the harsh environmental conditions.
Guinness Nigeria has performed tremendously well as its
fundamentals had remained very strong over the period.
The company was consistently creating value for different
stakeholder groups.
Guinness Nigeria Plc. has compared well in fundamentals
with its peer in the industry, Nigerian Breweries Plc.
