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    Comments Aspen Group Assignment 2023

    Uploaded by

    Mukuna Gachie
    commentary on Apsen financials

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    Comments Aspen Group Assignment 2023

    Uploaded by

    Mukuna Gachie
    4 views2 pages
    commentary on Apsen financials

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    © © All Rights Reserved

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    commentary on Apsen financials

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    4 views2 pages

    Comments Aspen Group Assignment 2023

    Uploaded by

    Mukuna Gachie
    commentary on Apsen financials

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    MBA MODULAR 2023

    Comments on the Aspen Group Assignment

    There was an overall improvement in quality of the submissions for this assignment – well
    done!

    Remember that in your individual assignment, you will need to perform an analysis like this
    one, but at a slightly higher standard – could you do that?

    Once again many of the comments that I have made on some hand-ins relate to issues that I
    flagged after the Clicks case, which have not been addressed. Before you start your individual
    assignment please go back and read carefully all the points that I have made previously.

    Specific issues
     Different groups used different values to calculate ratios. Remember that the onus is on
    you to show the reader how you have arrived at the output of your calculations – the
    marker will not be hunting for amounts or reconciling on your behalf. This does not mean
    you need to provide the formula for, for example, gross margin. However, where there are
    specific decisions that were made in arriving at a ratio result, then you must indicate how
    you did so.
    A good example is the calculation of Debtors’ collection period. Have you used only
    Revenue on the face of the SOCI? Or Sale of goods per the note? Continuing or
    discontinuing amounts? Similarly, have you used Accounts Receivable on the face of the
    SOFP, or Trade and other Receivables per the note?
     For DuPont profitability, certain groups used Profit after tax from continuing operations,
    with an equity denominator that included the impact of discontinued operations
     Operating profit from continuing operations in 2020 is higher than 2019 because there was
    a lower impairment expense in 2020 – see note 23. In other words, the 2019 numbers have
    been substantially affected by this impairment. Make sure that you understand how to
    interpret an impairment. See page 148 of the text.
     The currency translation gain of R10 282 million in OCI is slightly relevant. It has boosted TCI
    and assets – see page 114 for an explanation of these exchange differences. It does
    represent a real increase in the rand value of the assets and therefore it is quite appropriate
    to evaluate the sales and profit against an asset and equity value that includes this gain – it
    is real in rand terms.
     An important point is that there is no dividend paid during 2020 per the SCF. Remember
    what appears in the SCF – it is the cash in and out of the bank account during the year. In
    most cases companies pay an interim dividend at the half year and a final dividend after the
    year end (once the year end has been finalised). Aspen has a policy to account for dividends
    when paid (Note 31 of the AFS). So, the nil dividends paid in 2020 means that Aspen did not
    pay a final 2019 dividend (early in the 2020 year) nor an interim dividend in 2020. Any 2020
    final dividend would not appear in the 2020 cash flow – it might be mentioned in a note. It
    would appear in the 2021 cash flow.
     Few groups commented on the substantial carrying value increase in intangible assets and
    goodwill.
     Many groups missed the shift to IFRS 16, and the fact that the right-of-use assets and
    liabilities were not all included in the comparatives, along with finance costs and
    depreciation associated with those right of use assets
     Onerous contracts are a large value on the B/S, very few groups addressed
     The quality of profits is excellent – operating profit of R7 060 million was converted into
    cash flows from operating activities of R11 302. This is very important, and many groups
    missed the opportunity to comment on this element. Also, note that we compare apples
    with apples e.g. pre-interest and tax value for profits to a pre-interest and tax value for cash
    flow.
     It is worthwhile to mention the healthy 18% increase in cash flows from operating
    activities from the prior year (R9 540 million to R11 302 million), or the increase in cash
    generated from operating activities
     Many groups when discussing cash flows dealt with cash flows from operating activities,
    and completing ignored a discussion on repayment of borrowings
     The main asset on the SFP was intangible assets. How about an Intangible Asset Turnover
    ratio rather than a Fixed Asset Turnover ratio or both?
     Whilst inventory turnover days did decrease – the fact that it is so high should have been
    highlighted / commented upon. Some groups provided reasons for why 300 days may be
    acceptable, but few groups test-checked their assumptions by looking at impairment losses
    on inventories (R1bn, a significant value in relation to the level of finished goods
    inventories).
     Not all debt is the same – some debt is riskier than others. Aspen’s debt is the risky kind and
    is high. The interest cover of 4.4 is quite low in the current environment.

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