Group 3 ( BERJAYA BERHAD )

 

Annual Report : Berjaya Berhad 

Part B: Analyzing Problems

Calculate the financial ratios for 2 years (2022 and 2023) and provide an analysis of the significant ratio changes for 2 years. Please calculate the financial ratios in the table below:

 

Financial ratio	2022	2023	Variance
	RM	RM	RM	%
A1       Turnover (credit)
A2       Turnover (cash)	997,762	1,115,966	118,204	11.85%
A         Total turnover (A1 + A2)	997,762	1,115,966	118,204	11.85%
B         Trade purchases	474,432	606,329	131,897	27.80%
C         Gross profit	523,330	509,637	(13,693)	2.62%
D         Net profit	122,665	101,102	(21,563)	17.58%
E     Property, plant and equipment	293,433	332,121	38,688	13.18%
F          Inventories	51,800	59,258	7,458	14.40%
G         Trade Receivables	56,906	32,044	(24,862)	43.69%
H         Cash at bank/ in hand	32,337	40,481	8,144	25.18%
I           Total current assets	177,989	168,622	(9,368)	5.26%
J          Total assets	1,338,334	1,446,143	107,809	8.06%
K         Trade payables	134,874	150,782	15,908	11.79%
L  Bank overdrafts and short–term  borrowings	110,557	185,842	75,285	68.10%
M     Total current liabilities	407,898	504,171	96,273	23.60%
N    Total borrowing (including overdrafts)	110,557	185,842	75,285	68.10%
O  Net assets/shareholders` funds	1,338,334	1,446,143	107,809	8.06%
Gross profit (%)          (C/A X 100)	52.45%	45.67%	(6.78%)
Net Profit (%)             (D/A X 100)	12.29%	9.06%	(3.23%)
Receivables` credit     (G/A1 X 12)
Creditors` settlement (K/B X 12)	3.41	2.98	(0.43)
Inventories turnover   (B/F)	9.16	10.23	1.07
Liquidity current ratio (I/M)	0.44	0.33	(0.11)
Liquidity quick ratio   (I – F/M)	0.31	0.22	(0.09)
Gearing 1                    (N/J)	0.08	0.13	0.05
Gearing 2                    (N/O)	0.08	0.13	0.05

Part C: Finding and Conclusions

Based on the significant changes observed in the financial ratios between 2022 and 2023, you are required to:

 

1. Verify the potential impact of these variations on the company's business risk, going concern status and any relevant issue.

 

1. Financial Fluctuations: Business Risk

-        Variations in financial performance, including cash flow, debt levels, and profitability, directly impact the company's risk profile. A decline in financial health heightens business risk, especially concerning debt servicing.

 

-       Evidence : it shows that as of September 2023 Berjaya Corporation Berhad had RM5.97b of debt, an increase on RM5.38b, over one year. However, it also had RM1.88b in cash, and so its net debt is RM4.09b.

 

-       source from : https://simplywall.st/stocks/my/capital-goods/klse-bjcorp/berjaya-corporation-berhad-shares/news/berjaya-corporation-berhad-klsebjcorp-has-a-somewhat-straine/a

 2. Going Concern Status:

-       Liquidity and Debt : Berjaya Berhad company examines the changes that have an impact on cash flow or debt levels that would jeopardize continuous business operations.

-        Profit Trends : Berjaya Berhad company consistent losses or diminishing profits may be indicators of possible problems with the going concern.

 

-       Evidence : Berjaya Media Bhd’s external auditors have flagged the existence of material uncertainty in its financial statements for the fiscal year ended April 30, 2019 that may cast doubt on the group’s ability to continue as a going concern

 

-       Source from : https://theedgemalaysia.com/article/berjaya-medias-auditor-flags-going-concern-uncertainty

 3. Relevant Issues :

                               I.         Financial Performance: Berjaya Corporation recently reported a significant pre-tax loss for Q4 2024, despite strong performance in some segments. The retail segment, particularly the food retail business, has been struggling due to market sentiment impacted by geopolitical issues, such as the Middle East conflict, and rising operating costs across its businesses. Additionally, while the services and hospitality segments showed some growth, they were not enough to offset the overall losses.

 

- Source from : https://biztechcommunity.com/news/berjaya-corporation-bhd-reports-q4-2024-losses-despite-strong-segment-performance/

 

                             II.         Leadership and Strategic Reorganization: Berjaya Corporation has been undergoing a major strategic reorganization as part of its three-year plan (2021-2024). This reorganization is aimed at transforming Berjaya Corporation into a more focused and efficient organization. The leadership team has been reshuffled to drive this transformation, which involves streamlining operations across its five key business segments: Retail, Food & Beverage, Property, Hospitality, and Services.

 

-       Source from : https://www.businesstoday.com.my/2021/06/16/berjaya-corporation-reorganises-5-business-segments-as-part-of-3-year-strategic-plan/

 

                           III.         Market and Competitive Pressures: Berjaya Corporation food business, under Berjaya Food, is expected to face revenue declines in FY2025 due to increased competition and a consumer boycott. These external pressures are adding to the company's financial difficulties, especially in a challenging economic environment.

 

-       Source from : https://www.freemalaysiatoday.com/category/business/2024/08/28/berjaya-food-revenue-to-drop-in-fy2025-amid-boycott-competit

2.     Prepare the steps would you take to corroborate the information obtained from this analytical procedure with other audit evidence, such as documentation supporting management's assertions and external sources of information.

-       Compare with the claims made by management :

Berjaya Berhad company compares the analytical procedure's findings with the financial statistics or claims made by management and verify the uniformity and look into any inconsistencies.

-       Examine the supporting documentation :

Berjaya Berhad company checks the numbers and patterns found in the analytical process with pertinent supporting documentation (such as contracts and invoices) and also make sure the documentation reflects the conclusions of the analysis.

-       Cross-Verify with External Sources :

Berjaya Berhad company  ensures the accuracy of the information, consult external sources (such as bank statements and third-party confirmations) and verify that the findings of the analytical process are supported by the available external data.

-       Adjust the Important Figures :

Berjaya Berhad company ensure accuracy, recalculate important statistics independently and these recalculations should be compared to the analytical procedure's outcomes.

-       Evaluate Coherence Over Time :

Berjaya Berhad company compares the results of recent analyses with the data from the past and seek out patterns or deviations that might need more research.

3.     Explain additional audit procedures would you recommend to understand the underlying reasons behind these variations.

-       Targeted Inquiries (ISA 315) :

 Engage with management and key personnel to obtain explanations for the anomalies, focusing on any changes in operations, policies, or economic conditions.

 

-       Enhanced Analytical Procedures (ISA 520) :

Conduct more granular analyses, such as ratio analysis or trend examination, to identify patterns or anomalies within specific accounts.

 

-       Document Inspection (ISA 500) :

 Scrutinize relevant documentation like contracts and invoices to validate the legitimacy of transactions and identify any unusual or new activities.

 

-       Recalculation and Reperformance (ISA 500) :

Independently recalculate figures and reperform certain procedures to confirm the accuracy and reliability of the data.

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