The Emirates Integrated Telecommunications Company - DU-Profile - Research Paper Example

FINANCE College The Emirates Integrated Telecommunications Company- DU- Profile Emirates Integrated Telecommunications Company, generally known as DU, is a public company listed on Dubai Financial Market since 2006. The company operates within the telecommunications service industry and it focuses mainly on integrated telecommunication services. The company has been established in December 2005, and since then, it has been providing voice, data, video and content services over fixed and mobile networks to both end-users and business customers (Gulfbase.com, 2015). The company focused on three major customer segments, consumers, businesses and carriers. Consumer segment focuses on people and households who are provided with mobile as well as fixed voice calling, apart from internet and related data services and television services. The business segment focuses on small scale as well as large scale businesses and corporations and government agencies. The company provides them with integrated fixed and mobile business solutions such as voice, contents, data and mobile or otherwise applications. Carrier segment focuses on providing carrier and international data networks as well as wholesale services to international companies and multinational corporations (Gulfbase.com, 2015). Emirates Integrated Telecommunications Company is ranked as first in the telecommunication sector, and is ranked as fourth in the service market. The company holds 11.37 percent of the share in the telecommunication sector, and 7.56 percent of the market share in the service industry (Gulfbase.com, 2015). It employs 2000 workers throughout UAE and ensures a great working environment for both its home and expatriate staff. The company was late entrant to the telecommunication sector in the GCC, but it successfully competed against great players in the market such as Etisalat and managed to achieve 8.5 million prepaid mobile and data subscribers (Oracle.com, 2015). As depicted in the diagram below, the company has been achieving constant growth in its net profit. It achieved $2 billion as net profit in 2013, which was nearly 20 percent of the total revenues. Income Statement Fiscal year is January-December. All values AED millions. 2010 2011 2012 2013 2014 Sales/Revenue 7.07B 8.85B 9.84B 10.8B 12.24B Cost of Goods Sold (COGS) incl. D&A 4B 3.96B 4.12B 4.78B 5.43B COGS excluding D&A 3.28B 2.95B 2.94B 3.55B 4.13B Depreciation & Amortization Expense 717.63M 1.01B 1.17B 1.23B 1.3B Depreciation 567.46M 813.79M 983.93M 1.08B 1.15B Amortization of Intangibles 150.17M 191.43M 188.24M 149.84M 152.05M Gross Income 3.07B 4.9B 5.73B 6.02B 6.81B   2010 2011 2012 2013 2014 SG&A Expense 1.77B 2.98B 2.9B 2.99B 3.08B Other SG&A 1.77B 2.98B 2.9B 2.99B 3.08B Unusual Expense 6.05M 60.16M 7.25M - 16.42M EBIT after Unusual Expense (6.05M) (60.16M) (7.25M) - (16.42M) Non Operating Income/Expense 58.13M (696.92M) (824.76M) (1.02B) (1.59B) Non-Operating Interest Income 50.86M 61.07M 49.14M 54.97M 93.1M Interest Expense 92.34M 117.69M 66.98M 84.71M 105.09M Gross Interest Expense 146.05M 117.69M 66.98M 84.71M 105.09M Interest Capitalized 53.71M 0 0 0 0 Pretax Income 1.31B 1.1B 1.98B 1.99B 2.11B Equity in Affiliates 0 0 0 -313,000 -968,000 Consolidated Net Income 1.31B 1.1B 1.98B 1.99B 2.11B Net Income 1.31B 1.1B 1.98B 1.99B 2.11B Net Income After Extra-ordinaries 1.31B 1.1B 1.98B 1.99B 2.11B Net Income Available to Common 1.31B 1.1B 1.98B 1.99B 2.11B EPS (Basic) 0.31 0.24 0.43 0.43 0.46 Basic Shares Outstanding 4.29B 4.57B 4.57B 4.57B 4.57B EPS (Diluted) - - 0.43 0.43 0.46 Diluted Shares Outstanding - - 4.57B 4.57B 4.57B EBITDA 2.02B 2.92B 4B 4.26B 5.02B (Source: Gulfbase.com, 2015) Balance Sheet of DU Assets                       Fiscal year is January-December. All values AED millions. 2010 2011 2012 2013 2014 Cash & Short Term Investments 2.79B 2.38B 3.32B 4.88B 6.02 B Cash Only 2.79B 2.38B 2.69B 393.78M 180.7 M Short-Term Investments - 0 630M 4.49B 5.84 B Total Accounts Receivable 1.23B 1.09B 1.31B 1.65B 1.76 B Accounts Receivables, Net 1.12B 881.6M 1.11B 830.23M 1.23B Accounts Receivables, Gross 1.34B 1.19B 1.46B 1.25B 1.65B Bad Debt/Doubtful Accounts (219.68M) (308.2M) (355.01M) (420.4M) (423.39M) Other Receivables 107.26M 209.56M 195.15M 814.79M 533.73M Inventories 442.89M 298.99M 334.56M 341.39M 333.7M Progress Payments & Other 442.89M - - - 333.7M Other Current Assets 213.75M 212.16M 211.96M 203.92M 242.87M Miscellaneous Current Assets 9.86M 0 0 84,000 12.04M Total Current Assets 4.67B 3.98B 5.17B 7.07B 8.36B   2010 2011 2012 2013 2014 Net Property, Plant & Equipment 6.69B 6.9B 7.59B 7.87B 8.2B Property, Plant & Equipment - Gross 8.26B 9.31B 10.97B 12.29B 13.77B Buildings 47.21M 47.21M 47.21M 47.21M 47.21M Other Property, Plant & Equipment 196.01M 233.67M 237.35M 230.11M 238.02M Accumulated Depreciation 1.57B 2.41B 3.38B 4.41B 5.57B Total Investments and Advances 0 0 0 56.91M 107.89M Intangible Assets 1.16B 1.17B 1.16B 1.18B 1.21B Net Goodwill 549.05M 549.05M 549.05M 549.05M 549.05M Net Other Intangibles 609.58M 623.95M 612.17M 633M 659.9M Other Assets 0 0 0 0 1.25M Total Assets 12.52B 12.06B 13.92B 16.18B 17.88B             Liabilities & Shareholders Equity                         2010 2011 2012 2013 2014 ST Debt & Current Portion LT Debt 3.15B 192.95M 328.61M 1.03B 574.46M Current Portion of Long Term Debt 3.15B 192.95M 328.61M 1.03B 574.46M Accounts Payable 2.47B 1.58B 2.49B 2.05B 2.08B Other Current Liabilities 818.98M 1.88B 1.51B 2.77B 3.25B Accrued Payroll 130.33M 166M 156.47M 178.26M 197.05M Miscellaneous Current Liabilities 688.65M 1.72B 1.35B 2.59B 3.06B Total Current Liabilities 6.44B 3.65B 4.33B 5.85B 5.9B Long-Term Debt 904.74M 2.08B 1.84B 2.94B 3.86B Long-Term Debt excl. Capitalized Leases 904.74M 2.08B 1.84B 2.94B 3.86B Non-Convertible Debt 904.74M 2.08B 1.84B 2.94B 3.86B Provision for Risks & Charges 77.71M 103.33M 218.32M 241.69M 278.68M Total Liabilities 7.42B 5.84B 6.39B 9.04B 10.04B Common Equity (Total) 5.1B 6.22B 7.53B 7.14B 7.84B Common Stock Par/Carry Value 4.57B 4.57B 4.57B 4.57B 4.57B Retained Earnings (73.38M) 228.74M 638.9M 552.37M 1.08B Total Shareholders Equity 5.1B 6.22B 7.53B 7.14B 7.84B Total Equity 5.1B 6.22B 7.53B 7.14B 7.84B Liabilities & Shareholders Equity 12.52B 12.06B 13.92B 16.18B 17.88B (Source: Gulfbase.com, 2015) Liquidity Ratios of DU Liquidity ratios show a firm’s ability to meet or pay its short term obligations. Current Assets : 8.36 billion Current liabilities : 5. 9 billion 1- Current Ratio = Current Assets / Current Liabilities = 8.36/5.9 = 1.416 2- Quick Ratio = Current Assets – Inventories / Current Liabilities 8.36 billion – 333.7 million / 5.9 billion 8.027 billion/ 5.9billion = 1.360 Long term solvency ratios Solvency ratios give a significant metric to measure a company’s ability to meet its debts as well as other financial obligations. This ratio shows whether the cash flow is sufficient for the company to meet its financial liabilities of both short and long terms (investopedai.com, 2015). Long term Solvency ratio = (Net Income or after tax profit + depreciation) / (short term liabilities) = (2.11 billion + 1.15 billion) / (5.9 billion) = 3.26 / 5.9 Solvency ratio = 0.552 Asset Management Ratio 1- Inventory Turnover ratio = Net sales / inventory = 12.24 billion / 333.7 million = 12.24 / .333 = 36. 756 2- Fixed Asset Turnover ratio Sales / Fixed Assets 12.24 billion / 24.43 billion = 0.501 Profitability Ratios Profitability ratios help to measure a company’s financial performance in terms of profitability. Profitability is a firm’s ability to make a profit. 1- Gross Margin = Gross Profit / Net sales X 100 = 6. 81 billion / 12.24 billion X 100 = 55.63 2- Return on Assets = Net Income / Assets X 100 = 2.11 billion / 17.88 billion X 100 = 11.800 Conclusion and recommendation This paper presented a brief company profile of Emirates Integrated Telecommunications Company, which is the leading provider of mobile and telecommunication services in UAE, and has been ranked to be the number one in the sector in UAE. This paper presented the income statement and balance sheet of the company and analyzed various ratios related to short term solvency or liquidity ratios, long term solvency ratios, asset management ratios, profitability ratios. Based on these ratios, this paper puts forward following suggestions to investors. Basically, the company is performing well in the market. As far as current ratio and quick ratio are considered, the company is able to meet its short term debts and to make payment for short term obligations. When a company fails to meet its short term obligations, it would also fail to meet day to day expenses thus leading to the company to become insolvent in future. the above mentioned ratios show the DU is sufficient to meet obligations, and therefore, investors are suggested that it is a better option for them to invest in the company. Based on solvency ratio, it can be concluded that the company is highly solvent in the market, and investors can trust on company’s performance. Profitability ratios showed that company is highly profitable, and similarly, asset management ratios showed the ability of the company in managing its assets. Based on these measures, this paper suggests that investors can trust on company’s performance. References Investopedai.com, 2015, Solvency Ratios, Retrieved from http://www.investopedia.com/terms/s/solvencyratio.asp Gulfbase.com, 2015, Emirates Integrated Telecommunications Co. – DU, http://www.gulfbase.com/profile-summary-emirates-integrated-telecommunications-co-du-560?pageID=39 Oracle.com, 2015, Emirates Integrated Telecommunications Captures 47% Market Share in a Competitive Market, Thanks to 24/7 Availability, Oracle.com, Retrieved from http://www.oracle.com/us/corporate/customers/customersearch/eitc-1-acs-ss-2021310.html Read More