question
Findings:
-Affecting operations
-Affecting sales revenue
-Affecting profit margin
Case study: ABC Limited is an established manufacturer of a line of electric fans targeting both the household and industrial markets. It has experienced sales growth over the last 7 years. The company has implemented several automated systems in its assembly plant and has a team of professional managers heading the following functions: sales, production, quality control, technical engineering, procurement, cost and others. However, during early 2020, ABC Limited experienced a major dislocation of its operations due to Covid-19 pandemic across the globe. Throughout the Covid-19 lockdown period, the company suffered major issues such as production disruption, decline in sales and profit margin. You have been engaged by the company as a business consultant to provide advice on how to overcome this difficult period and to transform the company if necessary to better manage its operation post Covid-19. Below are the Income Statement, Balance Sheet and some trend information of ABC Limited: : ABC LIMITED CONSOLIDATED INCOME STATEMENT For the year ended 31 March 2020 2020 USS'000 2019 US$'000 Sales Cost of goods sold Gross profit 3,070,485 (2.398.222) 672,263 3,280,381 12.528.925 751,446 Other income and expenses) Selling and administrative expenses 120,967 1452.634) 78.940 1486.140) Operating profit 340,596 344,246 Impairment of goodwill and other intangible assets Share of profit of associate Finance income Finance costs (795,505) 41 2,779 (19614) 124 1,907 (18,362) Loss) / Profit before income tax Income tax expense (471,703) (15.168) 327,915 28.256) (Loss) / Profit for the year (486.87 289.659 ABC LIMITED CONSOLIDATED BALANCE SHEET As of 31 March 2020 2020 USS'000 2019 US$'000 Non-current assets Property, plant and equipment Investment property Intangible assets Investment in associate Other financial assets Financial assets at fair value through profit and loss Defined benefit pension plan assets Deferred income tax assets Other non-current assets 1,372,002 32,985 246, 117 2,129 186,400 53,678 23,130 1,239,935 111.431 1,109,708 2,742 150,119 29,735 19,808 44,135 45,090 53,67 29,700 1.999,283 2.752.703 Current assets Inventories Trade and other receivables Other financial assets Financial assets at fair value through profit and loss Income tax recoverable 413,885 593,208 56,238 2,103 10,764 397,890 707,480 72,272 350 7,321 2020 USS'000 2019 USS'000 Cash and cash equivalents 384,369 339,986 1.460.567 1.525.299 Current liabilities Trade payables Other payables and deferred income Current income tax liabilities Other financial liabilities Borrowings Retirement benefit obligations Lease liabilities Provisions and other liabilities 350,178 284,318 29,444 45,027 12,236 552 21,985 23,924 351,716 286,263 36,511 20,384 211,084 568 23,639 767,664 930,165 Net current assets 692,903 595 134 Total assets less current liabilities 2.692.691 3.347837 37,251 78,211 Non-current liabilities Other payables and deferred income Other financial liabilities Financial liabilities at fair value through profit and loss Borrowings Deferred income tax liabilities Put option written to a non-controlling interest Retirement benefit obligations Lease liabilities Provisions and other liabilities 403,229 84,203 69,680 66,325 38,204 13,872 33,253 27,259 318 474,597 107,865 74,245 58,905 12,918 790.975 789,360 NET ASSETS 1.901.716 2.558.477 Equity Share capital - Ordinary shares (at par value) Shares held for incentive share schemes (at purchase cost) Share premium Reserves 5,822 (36,114) 41,796 1.816.705 1,828,209 73,507 5,709 (44,427) 13,265 2.512.652 2,487,199 71,278 Non-controlling interests TOTAL EQUITY 1.901,716 2.558.477 Some trend information USD million 2020 2019 2018 2017 2016 2015 2014 2013 Sales 3070 3280 3237 2776 2236 2136 2098 2051 24.1 23.4 21.4 Basic earnings per share(55.8) 32.5 30.6 27.7 20.1 (US cents) Capital expenditures (CAPEX) 282.1 391.4 240.2 186.2 119.9 92.2 82.6 91.3 Total Equity 1902 2558 2366 2025 1885 1901 1766 1599
