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The financial analysis

As at 31 December 2016, the balance sheet total increased by 13.1 million PLN, i.e. 1.4%, compared to the amount as at 31 December 2015. The amount of non-current assets increased by 6.5 million PLN, while current assets by 6.6 million PLN. In the non-current assets, the biggest increase was recorded in deferred income tax assets (a growth by 7.8 million PLN) and investment in associates (a growth by 7.7 million PLN). The biggest decrease in value in this group of assets concerned the available-for-sale financial assets (a 6.6 million PLN drop) and property, plant and equipment (a drop by 2.8 million PLN). As far as current assets are concerned, the biggest increase was in cash and cash equivalents (a growth by 30.9 million PLN) and in inventories (growth by 5.2 million PLN). The biggest decrease in this group of assets was in trade and other receivables (a drop by 29.5 million PLN).

On the equity and liabilities side, the decrease in liabilities by 23.4 million PLN was accompanied by the 36.5 million PLN increase in equity. The growth of equity was principally attributed to the 28.2 million PLN increase in supplementary capital. A decrease of 4.6 million PLN was shown in capital from valuation of available-for-sale investments. The decrease in value of liabilities concerned current trade payables for supplies and services and other liabilities (a drop by 68.8 million PLN), amounts due to customers for construction contract works (a drop by 25.5 million PLN), and loans and borrowings (a drop by 10.9 million PLN). The increase in liabilities was attributed mainly to long-term provisions for other liabilities and other charges (a growth by 38.9 million PLN), short-term provisions for other liabilities and other charges (a growth by 22.5 million PLN) and other non-financial liabilities (a growth by 17.8 million PLN).

Selected indicators describing the financial position of the Group 2016 2015 2014 
Profitability ratios      
Net profit margin 5,7% 4,0% 2,4%
Gross profit margin 7,1% 5,1% 3,0%
Operating profit margin 6,4% 5,1% 3,2%
Return on equity (ROE) 13,6% 13,8% 8,1%
Return on assets (ROA) 6,1% 5,5% 3,2%
Liquidity ratios      
Current ratio 1,5 1,4 1,3
Quick ratio 1,4 1,3 1,2
Turnover ratios      
Receivables turnover ratio (days) 110 89 85
Accounts payable turnover ratio (days) 55 59 69
Inventory turnover ratio (days) 21 15 18
Assets turnover 1,1 1,4 1,3
Debt ratios      
Debt-equity ratio 53,5% 56,9% 62,9%

File in XLSX formatSelected indicators describing the financial position of the Group file .xlsx6 kB

The presented ratios reflect the level of effectiveness of managing the Group, which is assessed as good.
In 2016 the net profit margin was 5.7%. It increased 1.7 percentage point and 3.3 percentage point compared to 2015 and 2014, respectively. Gross profit margin in 2016 was 7.1%. Compared to the level of the ratio for the same periods of 2015 and 2014, it rose by 2.0 percentage point and by 4.1 percentage point, respectively. The analysis of the sales profitability ratios shows a period-to-period improvement of profit margins.
Return on assets ratio (ROA), which indicates the ability of all assets used by a company to generate net earnings, was 6.1% in the reporting period. It was 0.6 percentage point and 2.9 percentage point higher than in 2015 and 2014, respectively. The level of ROA suggests that the assets employed were used effectively in the comparative periods.
Return on equity (ROE) ratio in 2016 was 13.6% and dropped on 2015 by 0.2 percentage point. The decrease of ROE means that the scale of growth in equity was greater than the scale of growth in profit. Compared to 2014, the ratio rose 5.5 percentage point. The increase of ROE means that the scale of growth in the Group’s net profit was greater than the scale of growth in the equity.
In 2016 current liquidity ratio had the value of 1.5 and rose on the comparative periods by 0.1 percentage point and by 0.2 percentage point, respectively. The quick ratio was 1.4 and rose on the comparative periods by 0.1 percentage point and by 0.2 percentage point, respectively. The ratios maintained similar levels in the compared periods. The level of liquidity ratios indicates good financial credibility of the Group. Liquidity ratios measure a company's ability to pay off its debt obligations with current assets.
In 2016 the average collection period for trade receivables was 110 days. Compared with the analysed periods it and was 21 days and 25 days longer, respectively. According to the data from accounting, trade payables are settled within 55 days. In the reporting period, accounts payable turnover ratio was 4 days shorter compared to 2015 and by 14 days shorter than in2014.
The period in which the Group settled its debt was shorter than the period of collecting the receivables, which indicates that the Group more often credits its customers than is credited by its suppliers. The nature of concluded contracts as well as the present regulations determine the length of turnover cycles for receivables and payables. Inventories turnover period provides information on the length of process of transforming the inventories into finished products sold. In 2016 the inventories turnover period was 21 days long and was by 6 days longer than in 2015 and by 3 days longer than in 2014.
The three ratios described above provide an input for measuring the length of cash conversion cycle in the Group, which was 76 days, 45 days and 34 days in the comparative periods.
The Group’s activity is assessed by the assets turnover ratio. The assets turnover was 1.1 and dropped by 0.3 on 2015 and by 0.2 percentage point on 2014. The ratio informs that each invested 1 zloty of the Group’s assets is generating 1 zloty 10 groszy of revenue.
Debt to equity ratio indicates how much debt an entity is using to finance its assets. In 2016 the debt-equity ratio was 53.5%; it dropped 3.4 percentage point compared to 2015 and 9.4 on 2014. Change in the ratio reflects the change in the share of borrowed capital in financing the Group’s assets.
The levels of liquidity ratios, inventories turnover ratio and assets turnover ratio allow a positive appraisal of the financial situation of the Group and of its financial strategy. The levels of assets and equity indicate its appropriate financial condition and lack of risk to pay liabilities; the analysis shows that the Group is maintaining its sound financial position.
Presented above key parameters and ratios describing the economic, financial and equity position of ELEKTROBUDOWA Group have been measured on the basis of information from the consolidated financial statements prepared under the going concern assumption.

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