Apex Footwear Limited is the leading manufacturer and exporter of leather footwear in Bangladesh. In 2015, the company earned $145 million in revenue. The document provides an analysis of Apex's financial performance over the past 5 years based on its annual reports. It includes a horizontal analysis comparing revenue, expenses, assets and liabilities from 2015 to 2014. It shows revenue declined 1% while costs rose, leading to a decrease in net profit of 74%. The document also outlines the company's production capacity and utilization rates.

1. 5/7/2016 Financial Analysis
of Apex Footwear
Horizontal, Vertical & Ratio Analysis
Section – B, Group – 7, Batch - 7th (Spring)
JAGANNATH UNIVERSITY
Prepared for:
Kawser Ahmed Shiblu
Lecturer
Department of Finance
Jagannath University

2. Page | 1
Industry Outlook
Tannery or leather industry of Bangladesh is one of the oldest industry in Bangladesh. This is an
agro-based by-product industry with locally available indigenous raw materials. Bangladeshi
leather is widely known around the world for its high qualities of fine grain, uniform fiber structure,
smooth feel and natural texture.
The government of Bangladesh has identified the leather sector as one with the considerable
growth and investment potentials industry. Currently tannery sector is the fifth in the export
earning sector in Bangladesh. Bangladesh mainly export cow and buffalo; sheep and goat skins.
The contribution of the leather industry to the Bangladesh economy was about US$500 million,
accounting for the 3% of the total countries export. However, the entire leather sector meets only
0.5% of the world’s leather trade worth US$75 billion. In Bangladesh there are about 113 tanneries
that produce 180 million square feet of hides and skins per year. There are about 100 small-to-
medium leather goods manufacturer, 30 modern shoe manufacturing plants with over 2500 smaller
footwear manufacturer, there are 5 listed footwear and tannery is listed in Bangladesh capital
market, this sector currently employees more than 5,58,000 people.
The current export performance can be anticipated to increase in the next 5 years with at least 12-
15% growth in turnover per year. In the next two years the existing footwear factories are likely
to export more shoes in global market. At present there are 18 shoe and leather goods factories
listed in Export Processing Zone (EPB) thought Bangladesh and 7 large factories are under
construction.

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Company outlook
Apex Footwear Limited (AFL) is the leading manufacturer and exporter of leather footwear from
Bangladesh to major shoe retailers in Western Europe, North America and Japan. The company
earned revenues of USD 145 million in 2015. AFL pioneered the export of value added finished
products export in the leather sector of Bangladesh and is also involved in the local footwear retail
business with the second largest shoe retail network in the country. Public listed and traded since
1993, AFL is professionally managed, currently employs over 9,000 persons and is in full
compliance with Corporate Governance Compliance Report under Section 2CC of the Securities
Exchange Commission Notification Order.
Apex is the local manufacturing and retail wing of Apex Footwear Limited. While AFL has
predominantly earned both critical and commercial fame through export of high quality leather
footwear in the international arena, Apex has sought to adeptly make use of that expertise to
provide high quality, fashionable footwear to the Bangladeshi consumers. With over 191 own retail
outlets and 380 authorized resellers, Apex ensures nationwide coverage of its diverse range of
footwear for its consumers. Through its nine in-house brands, namely Venturini, Apex, Sprint,
Maverick, Moochie, Nino Rossi, Sandra Rosa, Twinkler and SchoolSmart and one international
brand i.e. Dr. Mauch - Apex carries a huge selection of shoes, sandals and non-footwear items,
ensuring that each of our valued customer finds the product that is just right for them.

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Management Profile

5. Page | 4
Recognitions and Awards

6. Page | 5
Associate Companies
Financial Snapshot
A current financial snapshot is given in the next page according to the last five years’ financial
performance of Apex Footwear.

7. Page | 6
11348.85
11463.9
10940.04
9748.37
9499.25
1902.37
1817.12
1715.3
1546.61
1359.66
52.34
203.09
265.63
258.85
261.01
2015 2014 2013 2012 2011
FIVE YEAR PERFORMANCE
Sales Gross Profit Net Profit After Tax
Tk.inMillion
23.2 23.01
23.61
18.05
4.65
2011 2012 2013 2014 2015
Apex Footwear Yearly EPS
295.57
231.25
416.24
443.49
347.03
305
2010 2011 2012 2013 2014 2015 2016 2017
Apex Footwear Price
Figure-1: Financial performance of Apex Footwear over the
year.

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Production Capacity Utilization
At present the Company is running 2 shifts and the actul capacity utilized is as under:
Year Pairs/Pcs Utilization
%Machine
Capacity
Attainable Capacity Utilized
2015 14005340 13305360 12464154 89.00
2014 13537240 12105890 11308389 83.54
Figure-2: Capacity Utilization of Apex Footwear.

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Accounting Standards and Auditors Report
The auditor of the financial report is “Huda Vasi Chowdhuri & Co. According to their audit report
Apex Footwear provides a true and fair data to prepare the financial report according to the
Accounting Standards.
According to the auditor, “In our opinion, the financial statements prepared in accordance with the
Bangladesh Financial Reporting Standards (BFRSs), give a true and fair view of the financial
position of Apex Footwear Limited as at 31 December 2015 and the result of its financial
performance and its cash flows for the year than ended and comply with the Companies Act 1994,
the Securities and Exchange Rules 1987 and other applicable laws and regulations”.

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Horizontal Analysis
A horizontal analysis is a procedure in fundamental analysis in which an analyst compares ratios
or line items in a company's financial statements over a certain period of time. The analyst will
use his or her discretion when choosing a particular timeline; however, the decision is often based
on the investing time horizon under consideration.
Horizontal analysis of the balance sheet or income statement is usually in a two-year format, with
a variance showing the difference between the two years for each line item. An alternative format
is to add as many years as will fit on the page, without showing a variance, so that you can see
general changes by account over multiple years.
A horizontal analysis of Apex Footwear’s Balance Sheet and Income Statement as of year 2015
and 2014 is shown below:

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Horizontal Analysis of the Balance Sheet of Apex Footwear:
Figure-3: Horizontal analysis of Balance Sheet of Apex Footwear.
2015 2014
ASSETS Varience %
Non-Current Asets 2724331602 2411991520 312340082 12.95%
Property, Plant and Equipment 2413983453 2346668818 67314635 2.87%
Capital Work-in-Progress 308778699 63753252 245025447 384.33%
Investment in CDBL 1569450 1569450 0 0.00%
Current Assets 10150053972 9975628871 174425101 1.75%
Inventories 6835049107 6271221533 563827574 8.99%
Account Receivable & Others 1411780886 1461362630 -49581744 -3.39%
Advances, Deposits & Prepayments 1799682373 2050160116 -250477743 -12.22%
Cash & Cash Equivalents 103541606 192884592 -89342986 -46.32%
Total Assets 12874385574 12387620391 486765183 3.93%
Equity and Liabilities
Shareholders' Equity 2627799481 2637333840 -9534359 -0.36%
Share Capital 112500000 112500000 0 0.00%
Share Premium 68804919 68804919 0 0.00%
Dividend Equalization Fund 22500000 33750000 -11250000 -33.33%
Revaluation Surplus 1091423710 1091423710 0 0.00%
Retained Earnings 1332570852 1330855211 1715641 0.13%
Non-Current Liabilities 825677387 1171491336 -345813949 -29.52%
Long Term Borrowings- Net off Current Maturity 562974607 940305381 -377330774 -40.13%
Retirement Benefit Obligations - Gratuity 262702780 231185955 31516825 13.63%
Current Liabilities and Provisions 9420908706 8578795215 842113491 9.82%
Short Term Borrowings 7412869956 6183390404 1229479552 19.88%
Long Term Borrowings - Current Maturity 278070255 343667673 -65597418 -19.09%
Creditor for Goods 374387168 601484274 -227097106 -37.76%
Creditor for Services 679309740 902339359 -223029619 -24.72%
Accured Expenses 239956055 171865655 68090400 39.62%
Interest Payables 5195456 3632149 1563307 43.04%
Provision for Taxation 418297572 360810764 57486808 15.93%
Unclaimed Dividend 12822504 11604937 1217567 10.49%
Total Liability 10246586093 9750286551 496299542 5.09%
Total Equity and Liabilities 12874385574 12387620391 486765183 3.93%
Apex Footwear Limited
Statement of Financial Position
As at 31 December 2015

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Horizontal Analysis of the Income Statement of Apex Footwear:
Figure – 4: Horizontal analysis of Income Statement of Apex Footwear.
2015 2014 Varience %
Revenue (Net) 11348848158 11463903330 -115055172 -1.00%
Cost of Goods Sold -9446476343 -9646779450 -200303107 -2.08%
Gross Profit 1902371815 1817123880 85247935 4.69%
Operating Expenses -1185577193 -956978895 -228598298 23.89%
Administration -159460644 -133641059 -25819585 19.32%
Marketing, Selling and Distribution -1024100453 -521823186 -502277267 96.25%
Audit Fee -350000 -350000 0 0.00%
Other Professional Fees -1666096 -1164650 -501446 43.06%
Profit from Operations 716794622 860144985 -143350363 -16.67%
Other Income 2584442 2462876 121566 4.94%
Finance cost -564595223 -543869291 -20725932 3.81%
Profit before WPPF & Tax 154783841 318738570 -163954729 -51.44%
Contribution to WPPF -7370659 -15178027 -7807368 -51.44%
Profit before Tax 147413182 303560543 -156147361 -51.44%
Income Tax Expense for current year -73876187 -100465807 -26589620 -26.47%
Income Tax Expense for previous year -21196354 -
-95072541 -100465807 -5393266 -5.37%
Net profit after Tax-Transferred to Changes in Equity 52340642 203094737 -150754095 -74.23%
EPS 4.65 18.05 -13.4 -74.24%
Apex Footwear Limited
Statement of Profit or Loss and Other Comprehensive Income
As at 31 December 2015

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Vertical Analysis
Vertical analysis is the proportional analysis of a financial statement, where each line item on a
financial statement is listed as a percentage of another item. Typically, this means that every line
item on an income statement is stated as a percentage of gross sales, while every line item on a
balance sheet is stated as a percentage of total assets.
The most common use of vertical analysis is within a financial statement for a single time period,
so that one can see the relative proportions of account balances. Vertical analysis is also useful for
timeline analysis, to see relative changes in accounts over time, such as on a comparative basis
over a five-year period. For example, if the cost of goods sold has a history of being 40% of sales
in each of the past four years, then a new percentage of 48% would be a cause for alarm.
A vertical analysis of Apex Footwear’s Balance Sheet and Income Statement as of year 2015 is
shown below:

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Vertical Analysis of the Balance Sheet of Apex Footwear:
Figure - 5: Vertical analysis of Balance Sheet of Apex Footwear.
2015
ASSETS Vertical Analysis
Non-Current Asets 2724331602 21.16%
Property, Plant and Equipment 2413983453 18.75%
Capital Work-in-Progress 308778699 2.40%
Investment in CDBL 1569450 0.01%
Current Assets 10150053972 78.84%
Inventories 6835049107 53.09%
Account Receivable & Others 1411780886 10.97%
Advances, Deposits & Prepayments 1799682373 13.98%
Cash & Cash Equivalents 103541606 0.80%
Total Assets 12874385574 100.00%
Equity and Liabilities
Shareholders' Equity 2627799481 20.41%
Share Capital 112500000 0.87%
Share Premium 68804919 0.53%
Dividend Equalization Fund 22500000 0.17%
Revaluation Surplus 1091423710 8.48%
Retained Earnings 1332570852 10.35%
Non-Current Liabilities 825677387 6.41%
Long Term Borrowings- Net off Current Maturity 562974607 4.37%
Retirement Benefit Obligations - Gratuity 262702780 2.04%
Current Liabilities and Provisions 9420908706 73.18%
Short Term Borrowings 7412869956 57.58%
Long Term Borrowings - Current Maturity 278070255 2.16%
Creditor for Goods 374387168 2.91%
Creditor for Services 679309740 5.28%
Accured Expenses 239956055 1.86%
Interest Payables 5195456 0.04%
Provision for Taxation 418297572 3.25%
Unclaimed Dividend 12822504 0.10%
Total Liability 10246586093 79.59%
Total Equity and Liabilities 12874385574 100.00%
Apex Footwear Limited
Statement of Financial Position
As at 31 December 2015

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Vertical Analysis of the Income Statement of Apex Footwear:
Figure – 6: Vertical analysis of Income Statement of Apex Footwear.
2015 Vertical Analysis
Revenue (Net) 11348848158 100%
Cost of Goods Sold -9446476343 -83.24%
Gross Profit 1902371815 16.76%
Operating Expenses -1185577193 -10.45%
Administration -159460644 -1.41%
Marketing, Selling and Distribution -1024100453 -9.02%
Audit Fee -350000 0.00%
Other Professional Fees -1666096 -0.01%
Profit from Operations 716794622 6.32%
Other Income 2584442 0.02%
Finance cost -564595223 -4.97%
Profit before WPPF & Tax 154783841 1.36%
Contribution to WPPF -7370659 -0.06%
Profit before Tax 147413182 1.30%
Income Tax Expense for current year -73876187 -0.65%
Income Tax Expense for previous year -21196354 -0.19%
-95072541 -0.84%
Net profit after Tax-Transferred to Changes in Equity 52340642 0.46%
EPS 4.65
Apex Footwear Limited
Statement of Profit or Loss and Other Comprehensive Income
As at 31 December 2015

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Ratio Analysis
A ratio analysis is a quantitative analysis of information contained in a company’s financial
statements. Ratio analysis is based on line items in financial statements like the balance sheet,
income statement and cash flow statement; the ratios of one item – or a combination of items - to
another item or combination are then calculated. Ratio analysis is used to evaluate various aspects
of a company’s operating and financial performance such as its efficiency, liquidity, profitability
and solvency.
The trend of these ratios over time is studied to check whether they are improving or deteriorating.
Ratios are also compared across different companies in the same sector to see how they stack up,
and to get an idea of comparative valuations. Ratio analysis is a cornerstone of fundamental
analysis.
Ratio analysis of Apex Footwear for the year of 2013, 2014 and 2015 is given below:
Figure – 7: Ratio Analysis of Apex Footwear for last three years.
2013 2014 2015
Current Ratio 1.19 1.16 1.08
Quick Ratio 0.48 0.43 0.35
Receivables Turnover 11.35 9.45 7.90
Inventory Turnover 2.09 1.81 1.44
Profit Margin 2.43% 1.77% 0.46%
Asset Turnover 1.14 1.04 0.90
Return on Asset 2.77% 1.85% 0.41%
Return on Equity 10.64% 7.91% 1.99%
Earning Per Share 23.61 18.05 4.65
Price-Earning Ratio 17.45 24.57 74.63
Payout Ratio 23.29% 30.47% 107.47%
Debt to Total Asset Ratio 73.93% 78.71% 79.59%
Times Interest Earned 1.84 1.58 1.27
Solvency
Ratio
ProfitabilityRatio
Liquidity
Ratio
Ratio Analysis of Apex Footwear

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Findings of the Analysis
Horizontal Analysis Findings: From the horizontal analysis we found some major fundamental
changes in financial year 2015 compare to 2014, which are:
1. Total asset increased by 3% from the last year.
2. A slight decrease in Shareholders Equity by 0.36%.
3. Since the assets growth is more than its equity growth, the liabilities of the company has
increased.
4. A major change is observed in long term Debt which is decreased around 30% from last
year.
5. Since sales is in declining phase but marketing cost is nearly doubled in 2015 it indicates
company is investing in marketing activities which may generate future sales.
6. Decrease in sales and operating profit is also observed respectably by 1% and 16.67%.
7. The noticeable change is observed in companies Net Profit After Tax which is decreased
by 74% from last year mainly because of increase in operating expenses by 24% and
finance cost by 4% which ultimately leads to a massive change in companies last year EPS
to 4.65 from 18.05.
Vertical Analysis Findings: From the vertical analysis we found some major fundamental
indication about the company during the financial year 2015, which are:
1. 21% of its Total Asset is non-current asset and 79% is current asset.
2. Only 6% of the Total Asset is Long-term debt portion.
3. A noticeable thing is around 20% of total asset is Shareholders Equity.
4. It reflects 83% is cost of goods sold of the total sales.
5. Whereas 10% is operating expense and 6% is operating profit of total sales.
Ratio Analysis Findings: From the different ratio analysis we found,
1. Profit margin is decreasing from 2.43% in 2013 to 0.46% in 2015.
2. ROA and ROE is having a sharp fall during last 3 years respectably by 2.77% to 0.41%
and 10.64% to 1.95%.
3. The Debt to Asset ratio is around 80% in 2015 which poses a high default risk for the
company.
4. The EPS is decreasing in a noticeable 74% in last year from 18.05 to 4.65 and the Price-
Earnings Ratio is also increased 17 to 74 from 2013 to 2015.
This are the findings that come forward during the analysis.

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Recommendations
1. First of all, the company should focus on its top line growth, especially in Sales.
2. Should try to reduce Manufacturing overhead cost by maintaining standard quality of the
products.
3. Reduce the cost of inventory holdings.
4. Increase efficiency in wastage management.
5. Look for standard quality and cheap raw material purchase.
6. More effective selling, marketing and distributing strategy should be taken.
7. Company should invest increase its investment from retained earnings rather than taking
loans.
8. Finally, company should look forward to reduce its interest charge by taking low interest
short term loans provided by commercial banks for its recurring expenses.

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Conclusion
From the above analysis of Horizontal, Vertical and Ratio analysis it is clear that the current
financial condition of Apex Footwear Limited is not in a good position. It has high amount of
debt and sales is also decreasing. But Apex has a good brand value and 2nd
largest sales outlet in
Bangladesh. It is also one of the leading shoe exporter in leather industry of Bangladesh and this
industry has a high growth potential over the next few years. Moreover, we believe that it Apex
Footwear follow those recommendations it will enable them to sustainable distinct competitive
advantages.

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Appendix
Acronyms:
EPB: Export Promotion Bureau
BAS: Bangladesh Accounting Standards
BFRS: Bangladesh Financial Reporting Standards
AFL: Apex Footwear Ltd.
ROA: Return on Asset
ROE: Return on Equity
EPS: Earning Per Share
NAV: Net Asset Value
NPAT: Net Profit After Tax
P/E Ratio: Price-Earnings Ratio
References
1. Annual Report of Apex Footwear Ltd. 2015, 2014, 2013
2. Bangladesh Export Promotion Bureau (EPB)
3. Dhaka Stock Exchange
4. Investopedia:- http://www.investopedia.com/
5. Business Dictionary:- http://www.businessdictionary.com/
6. Research Gate: - https://www.researchgate.net/