Analysis Of Pan African Resources PLC From An Investor’s Perspective

1. Corporate governance status and challenges

The overall assessment aims in detecting the current financial performance of Pan Africa Resources PLC for the financial year of 2016 and 2017. The financial ratios have been taken into consideration, which helps in depicting the level of progress that has been made by the organisation over the fiscal years. In addition, the corporate governance status of the company is also evaluated to understand the current operations that have been conducted by the company over the period. Further evaluation has been conducted regarding the current capital investments, which has been conducted by the organisation over the fiscal years. Moreover, the source of Pan Africa Resources PLC is also evaluated, which has been used by the management in smoothly conducting their operations. The share price performance and evaluation is also conducted with the help of technical analysis tool such as moving averages, which help in detecting the investment opportunity within Pan Africa Resources PLC.

Pan Africa resources has a relatively been one of the compliant organization, which utilizes the UK Companies Act coding and provide the listing of corporate governance activity that has been conducted by the management over the financial years (Panafricanresources.com, 2018). The business of the organization is relatively conducted with integrity and in accordance with the highest standards that needs to be practiced by the management. The practice that has been conducted by the management has relatively allowed organization to increase the trust of the stakeholders. The management of the organization practices the best principle based on the indication that it will support the company and uplift its image in the eyes of the stakeholders. Management takes the help of non-executive director, which bring in the experience that is needed by the organization to improve its growth structure. Furthermore, the guidance published by The Institute of Chartered Accountants in England and Wales has been used by the organization for their internal control requirements. The organization has setup an adequate remuneration committee comprising of non-executive directors, which relatively helps to determining the remunerations of executive, and directors working for the interest of the shareholders. The remuneration committee also decides the bonus payment and the grants that are provided to the employees (Panafricanresources.com, 2018). The organization also has an Audit committee, which takes responsibility for the financial performance, and evaluation that is conducted on their current operations. The objective of the audit committee is to review the financial report and the internal controls of the organization, which helps in depicting the accurate financial position to their shareholders.

The above figure relatively indicates the capital investment, which has been conducted by the organization during the fiscal year of 2017. The company has been adequately conducting invest in land, mineral rights, mining property, and Exploration assets for improving the current financial position and generating high revenues (Panafricanresources.com, 2018). The above figure relatively provides a list of relevant capital investments, which has been conducted by the organization over the fiscal years. The company has been adequately acquired additional property, which can eventually in the capital investment that has been conducted by the organization to secure its operational capability. The acquisition of adequate companies has been conducted by your organization for improving is mineral rights and mining property, which is essential for increasing their production capability. Uechi et al., (2015) indicated that the level of improvements in the current capital structure of the organization could be conducted for increasing their performance in the long-run.

Particulars	2017 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2016	2015
Interest expense	2,815,223.00	1,448,248.00	2,458,287.00
Shareholders’ equity	216,581,075.00	150,975,202.00	147,167,487.00
Total liabilities	94,143,816.00	101,716,771.00	90,200,713.00

2. Evaluating the company’s capital investment

The above figure relatively indicates the sources of finance, which has been conducted by the organization during the past fiscal years. The shareholders equity, total liabilities, and interest expense of the organization is relatively depicted in the above table. The combination of the above finances has allowed the organization to continue its operations. The interest expense of the organization has relatively increased from the fiscal year of 2015 to 2017, which indicates the increment in debt accumulation of the organization to supported operations (Panafricanresources.com, 2018). This improvement relatively indicates the level of loans, which are used by the organization to support its operation. Therefore, it could be understood that with the help of shareholders equity and debt the organization is able to support its operations. Furthermore, the equity combination of the organization has increased events during the past fiscal years, which indicate that the operations of the organization are adequately supported by the shareholders’ equity. The total liabilities of the organization have increased adequately in comparison to the interest expense, which relatively indicates that the company uses both debt and equity to support its operations. Scarborough (2016) mentioned that with the adequate source of finance organizations are able to comply with all the relevant responses, which can increase their competitiveness in the market.

PROFITABILITY RATIOS	Formula	2017	2016
Net Profit Margin	Net profit / sales	23.16%	14.70%
Gross Profit Margin	Gross profit / sales	13.72%	30.92%
Interest cost as a percentage of sales	Interest expense / sales	1.66%	0.90%
Asset turnover	Sales / Average total assets	0.60	0.66
Return on assets	Net profit / Average total assets	0.14	0.10
Return on ordinary shareholders equity	Net profit / Average ordinary share holder equity	0.21	0.16

Table 1: Depicting the profitability ratios of Pan Africa Resources PLC

(Source: As created by the author)

The above table indicates the profitability ratio of Pan Africa Resources PLC from the financial year of 2016 to 2017. This increment in the overall financial ratios of the organisation is mainly witnessed in the above table. However, increment in the current financial performance of the organisation is detected in the above table analysing the overall net income of the organisation. The calculation has mainly witnessed a relevant increment in the net profit margin of the organisation, while decline in the gross profit margin is detected (Vogel, 2014). This is mainly possible due to the increase in income of the company from other incomes, which has been obtained during the financial year of 2017 as compared to 2016. The company’s operations have relevantly incurred high level of expenses during the financial year of 2017, as compared to 2016. The increment in the realisation cost and gold cost of production has been seen during the financial year of 2014, as compared to the 2015, who has forced the overall gross profit to decline by 50% in value (Panafricanresources.com, 2018).

Further increment in the net income of the organisation has mainly obtained from the rising values of foreign currency translation differences. This has mainly allowed the organisation to obtain abnormal gains, which boosted net income of the organisation and increased its net profit margin from 14.7% to 23.16%. The rise in interest cost as per the sales has relevantly declined due to the high increment in the sales of the organisation. The percentage has mainly increased from the levels of 0.90% to 1.66%, which indicates the increment in financial performance of the company (Panafricanresources.com, 2018). The further evaluation of the financial ratios has mainly allowed in detecting the decline in asset turnover ratio of the organisation, which has reduced from the levels of 0.66 to 0.60. This decline was only possible when the overall increment in total assets was higher than the sales of the organisation. Miller-Nobles et al., (2016) indicated that investors with the use of financial ratios are able to detect the accurate financial position of the organisation and make adequate investment decision on the data.

3. Company’s sources of finance

The financial performance of the organisation is further evaluated from the return on assets and return on equity of Pan Africa Resources PLC from 2016 to 2017. The increment in the financial performance of the organisation is mainly detected from the rising values of return on assets from 0.10 in 2016 to 2014 in 2017. This increment in return is mainly achieved due to the rising net income of the company, which has been achieved during the financial year of 2017. The further increment in the return on equity is witnessed, where the values have increased from the levels of 0.16 in 2016 to 0.21 in 2017 (Panafricanresources.com, 2018). This increment is mainly conducted due to the rising levels of net income, which has been generated by the company over the period. Almamy, Aston & Ngwa (2016) argued that the financial ratios mainly lose its friction, as it does not allow investor in detecting the accurate level of growth, which can be achieved in near future.

EFFICIENCY RATIOS	Formula	2017	2016
Accounts receivable turnover	Revenue / Average accounts receivable	12.21	13.67
Average days sales uncollected	days in a year / Accounts receivable turnover	30	27
Inventory turnover	Cost of goods sold / Average inventory	30.98	28.21
Inventory turnover in days	days in a year / Inventory turnover	12	13

Table 2: Depicting the efficiency ratios of Pan Africa Resources PLC

(Source: As created by the author)

The efficiency ratio of Pan Africa Resources PLC is mainly detected from the above table, which directly indicate that the performance of the management has remained stagnant. The calculations that has been conducted in the above able indicated that the overall performance of the company has increased and decreased at the same time. This mainly detected from the rising value of inventory turnover ratio and declining values of accounts receivable turnover. Enekwe (2015) mentioned that with the efficiency ratio investors are able to detect the management performance in making adequate decision for increasing growth of the organisation in future. The overall values of accounts receivables has mainly declined from the level of 13.67 in 2016 to 12.21 in 2017, which has directly indicted the low efficiency of the organisation in acquiring the required level of payments from its creditors (Panafricanresources.com, 2018). This decline in accounts receivable value has mainly increased the average day’s sales uncollected from 27 days to 30 days.

The efficiency ratio that has been calculated in the above table is the inventory turnover ratio, which is a relatively improved over the fiscal year. The values have relatively increased from the levels of 28.21 in 2016 to 30.98 in 2017. This increment has relatively depicted the efficiency of the management in clearing of the inventory that has been produced over the period of one year. This improvement in the inventory turnover ratio as a relatively decline the inventory turnover in days from 13 days in 2016 to 12 days in 2017 (Panafricanresources.com, 2018). This is a major achievement by the management, where control over the blockage in the inventory system has been conducted by an organization.

SHORT-TERM SOLVENCY RATIOS	Formula	2017	2016
Current ratio	Current Assets / Current Liabilities	0.94	0.68
Quick ratio	Quick Assets / Current Liabilities	0.78	0.54

Table 3: Depicting the short-term solvency ratios of Pan Africa Resources PLC

(Source: As created by the author)

The short-term solvency ratio has been relatively conducted in the above table, which directly evaluates the financial performance of the organization during the past two fiscal years. The short-term solvency condition of the organization has a relatively improved, as both the current ratio and quick ratio values has increased from previous fiscal year. The improvements in the value of short-term solvency position have increased due to the rise in the current assets of the organization, while current liabilities declined during the period of one fiscal year (Panafricanresources.com, 2018). This improvement has mainly allowed the organization to support its short-term obligations and reduce the chance of closing down the business after paying its short-term debts. The difference between the quick and current ratio inclined from 2016 to 2017, which indicates the high level of inventory that has been accumulated by the organization for supporting its operations. Zainudin & Hashim (2016) argued that investors using the short-term solvency ratios does not gauge into the future operational capability of the organization, as it only indicates the current position.

LONG-TERM SOLVENCY RATIOS	Formula	2017	2016
Debt to equity	Total liabilities / total shareholders’ equity	0.43	0.67
Debt to total assets	Total liabilities / total assets	0.30	0.40
Leverage ratio	Total assets / total shareholders’ equity	1.44	1.67
Interest coverage	(Net profit + Income + interest) / Interest	14.95	17.37

4. Financial ratios of the organisation

Table 4: Depicting the long-term solvency ratios of Pan Africa Resources PLC

(Source: As created by the author)

The long-term solvency condition of the organisation is mainly detected with the help of above table, where adequate calculations have been conducted to understand the current position of Pan Africa Resources PLC. The evaluation has mainly allowed the organisation for indicating the level of progress, which has been made by the company for generating high level of income from investment. The calculation of debt to equity has mainly declined from the levels of 0.67 in 2016 to 0.43 in 2017, due to the drastic increment in equity capital and decline in total liabilities of the firm. This decline has mainly allowed the organisation to reduce the chances of insolvency, which might occur due to the excessive accumulation of high interest debt. The improvement in the solvency position of the organisation can also be detected from the debt to total assets of the organisation, which has declined from the levels of 0.40 in 2016 to 0.30 in 2017 (Panafricanresources.com, 2018). The reduction in debt accumulation of the organisation has extended to the demise in total asset purchase from the debt capital. This is mainly securing the organisations overall capability to improve its growth prospects and reduce the occurrence of insolvency in future.

The leverage ratio of the company has also been calculated, which indicates a decline in the values, as the company has not being expensively using debt to support its asset purchases. The leverage values has declined from 1.67 in 2016 to 1.44 in 2017, which indicates that the accumulation of equity is relevantly higher than the purchase of assets conducted by Pan Africa Resources PLC. In addition, the decline in interest coverage ratio has been calculated from the levels of 17.37 in 2016 to 14.95 in 2017, which indicates that the company’s high debt has been eroding their profits (Panafricanresources.com, 2018). Therefore, the increment in equity position has mainly allowed the organisation to strengthen its activities and reduce the lingering problems of debt. However, no further debt needs to be accumulated by the company, as it will raises the level of interest payments, which is already eroding profits of the organisation (Greco, Figueira & Ehrgott, 2016).

The above figure mainly helps in depicting the level of share price, which Pan Africa Resources PLC has accumulated over the period of five-fiscal year. The share price movement is relevantly evaluated with the help of moving averages, which has been used for detecting the investment opportunity present without the price movement of Pan Africa Resources PLC. Moreover, drastic alteration in the current share price of Pan Africa Resources PLC is witnessed during the previous five fiscal years. The share values of the organisation have mainly increased from the levels of 6.30 to the height of 24.50, which indicates a wide price range that has been witnessed by Pan Africa Resources PLC. The share price of the organisation mainly started to rise from July 2015 until the end of July 2016, after which the overall share price started to decline again. This decline in the overall share price has mainly indicated during the fiscal year of 2017 until date.

The share price movement of the organisation has mainly been evaluated with the help of 30-day moving average and 10-day moving average, which has helped in understand the investment scope present within the organisation. The 10-day moving average is relevantly higher than the 30-day moving average, which indicates the presence of a predictive rising trend, which could eventually increase in future. Through the help of share price performance, the overall increment in future years can be detected, which can eventually generate high returns from investment. Ibn-Homaid & Tijani (2015) mentioned that with the help of technical analysis investors are able to detect the level of short-term trend present within the share price of an organisation.

Conclusion:

The assessment has relatively evaluating the current financial position of Pan Africa Resources PLC for the financial years of 2016 and 2017. The corporate governance status of your organization is relatively adequate allowed the company to support its operations. The further evaluation has been conducted on the financial ratios of the organization, which indicate a positive attribute of the company’s financial position and future performance. This improvement in the growth level of organization directly indicates a positive trend, which can be utilized by investors to maximize the level of returns from investment. The share price performance of the organization is also positive, which directly leads to the future growth that can be obtained by the company.

The positive financial ratio of Pan Africa Resources PLC, which has been calculated in the above assessment directly indicate a positive by for the organization. The financial ratios directly indicate the improvements in the current position of the organization, which would eventually allow the investors to benefit from its growth prospects. The valuation of share price movement with the help of technical analysis directly indicates a positive trend change, which could eventually increase the level of returns that could be generated from the investment. Therefore, as an investor buying in Pan Africa Resource PLC would eventually benefit from the future prospects that has been anticipated for the organization.

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