analysis kakuzi report final 2013

8/13/2019 ANALYSIS Kakuzi Report Final 2013

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Kakuzi Limited Analytical Report

ANALYSIS OF THE FINANCIAL HEALTH OF KAKUZI LIMITED

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Table of Contents

1.0INTRODUCTION........................................................................................................... 4

1.1Company Profile......................................................................................................... 4

1.2Vision And Srae!y....................................................................................................4

1."Core Val#es................................................................................................................ $

1.4Company Sr#%#re.....................................................................................................$

1.$Corporae So%ial Responsi&iliy.................................................................................. '

2.0S(OT ANA)*SIS......................................................................................................... +

2.1Sren!,s.................................................................................................................... +

2.2(ea-ness...................................................................................................................

2."Oppor#niies..............................................................................................................

2.4T/RATS...................................................................................................................10

".0A)ANCD SCOR CARD.......................................................................................... 11

".1A)ANCD SCORCARD OR PROR3ANC 3ASUR3NT..................................12

".2T/ A)ANCD SCOR CARD DO3STICATD TO AU5I )TD................................1$

"."T,e inan%ial perspe%i6e.........................................................................................1$

".4T,e %#somer perspe%i6e........................................................................................ 1$

".$Inernal #siness Pro%esses......................................................................................1'

".')earnin! and 7ro8,................................................................................................ 1'

4.0ASSSS3NT O INANCIA) /A)T/ O AU5I......................................................1+

4.1Profia&iliy...............................................................................................................1+

4.2)i9#idiy.................................................................................................................... 1:

4."ffi%ien%y ................................................................................................................. 1

4.4)e6era!e................................................................................................................... 20

4.$In6esor Con%erns .................................................................................................... 21

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4.'CAPITA) STRUCTUR................................................................................................ 22

4.+COST O ;UIT*.......................................................................................................2"

4.:NO3INA) COST O DT.......................................................................................... 24

4.CTIV COST O DT........................................................................................ 24

4.10(I7/TD AVRA7 COST O CAPITA).................................................................2$

4.11VA)U O T/ CO3PAN*........................................................................................2'

4.125 SCORS< D(ARD A)T3AN=S 3OD)..................................................................2+

$.0INDIN7S AND OSRVATIONS ............................................................................... 2

'.0RCO33NDATIONS AND CONC)USIONS................................................................."0

'.1Re%ommendaions.................................................................................................... "0

'.2Con%l#sions..............................................................................................................."1

REFERENCES... !

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1. INT!ODUCTION

1.1 Co"#an$ %&of'le

Kakuzi Limited i" a li"ted company trading on #ot$ t$e Nairo#i and t$e London Stock E%c$ange.

&$e company engage" in t$e culti'ation( manufacture and marketing of tea( gro)ing and marketing

of a'ocado"( li'e"tock farming( and a *oint pineapple operation )it$ +el ,onte( macadamia and

fore"try de'elopment. Kakuzi i" t$e large"t producer of A'ocado in Ea"t Africa and e%port"

appro%imately -/ of t$e total 'olume from Kenya. Kakuzi i" al"o focu"ed on t$e de'elopment of

out gro)er and Small$older A'ocado gro)er".

Kakuzi limited0" parent company i" Camellia Plc( a 1K #a"ed corporate( )it$ a 2.3/ "$are$olding.Kakuzi Limited0" "u#"idiarie" include E"tate" Ser'ice" Limited( Siret &ea Company Limited( and

Kaguru 4EP56 Limited. Kakuzi Limited $a" a *oint 'enture agreement )it$ +el ,onte Kenya

Limited( for t$e gro)ing of pineapple".

Kakuzi Limited operate" in t)o "eparate location" in Kenya( t$e main operation and 7ead 8ffice i"

#a"ed at ,akuyu a#out 9 Km Nort$ Ea"t of Nairo#i and t$e ot$er operation mainly &ea( i" "ituated

in Nandi 7ill" a#out 2 Km Nort$ :e"t of Nairo#i.

;t" plantation" compri"e - $ectare" for fore"try and 32 fi%ed term contract "taff dependent on

t$e "ea"onality of acti'itie" 4Kakuzi( >2!6.

1.2 ('s'on An) St&ate*$

Vision

Similar to all Camellia Plc. #u"ine""e"( Kakuzi?" 'i"ion e"ta#li"$e" t$e long@term direction for t$e

company )$ic$ i" #a"ed on a num#er of guiding principle".

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&$e de'elopment of a )orld)ide group of #u"ine""e" reuiring management to take a long

term 'ie).

&$e ac$ie'ement of long@term "$are$older return" t$roug$ "u"tained in'e"tment.

;n'e"ting in t$e "u"taina#ility( en'ironment and t$e communitie" in )$ic$ )e do #u"ine"".

En"uring t$at t$e uality and "afety of our product" meet t$e $ig$e"t international "tandard".

&$e continuou" refinement and impro'ement of t$e company0" e%i"ting #u"ine""e" u"ing our

internal e%perti"e and financial "trengt$.

Strategy

Kakuzi "trategy i" to continue focu"ing on a mi%ed agricultural portfolio to mitigate t$e profit cycle

ri"k to )$ic$ agriculture $a" $i"torically #een "u#*ect to. ;t" core #u"ine"" acti'itie" are tea(

a'ocado"( fore"try and macadamia nut production.

Kakuzi key "trategic t$ru"t i" de'eloping macadamia nut production )$ic$ )ill add "cale and

cu"tomer "er'ice to parent company?" e%i"ting operation" in ,ala)i and Sout$ Africa 4Kakuzi(

>2!6.

1.3 Co&e (al,es

&$e "ummary code of conduct i" toB

1nder"tand and comply )it$ all legal reuirement"

e $one"t( open and co@operati'e )it$ all regulator"

Pro$i#it #ri#ery in any form

Compete independently and not enter into any anti@competiti'e agreement"

Properly record( report and re'ie) financial and ta% information

1.+ Co"#an$ St&,-t,&e

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&$e Kakuzi oard con"i"t" of t$e C$airman( )$o $a" non@e%ecuti'e re"pon"i#ilitie"( four ot$er non@

e%ecuti'e director" and t)o e%ecuti'e director". &$e oard meet" uarterly and i" re"pon"i#le for

e"ta#li"$ing t$e corporate go'ernance pillar"( "etting t$e "trategic direction( re'ie)ing #u"ine""

performance and "uper'i"ion of t$e management of Kakuzi operation". &$e director" $a'e t$e

kno)ledge( e%perience( autonomy and "kill" ena#ling t$em to carry out t$eir oard re"pon"i#ilitie"

4Kakuzi( Annual Report"( >2!6.

,r. Kennet$ &arplee C$airman

,r. C$ri"top$er Ame" +irector

,r. Ric$ard Kemoli +irector 41pto 3t$Augu"t >2!>6

,r. Nic$ola" Nganga +irector

,r. Step$en :aru$iu +irector 4Appointed on >=t$No'em#er >2!>6

,r. +aniel Ndonye +irector 4Appointed on >=t$No'em#er >2!>6

E/e-,t'0e D'&e-to&s,r. Dra$am ,clean ,anaging +irector

,r. Ketan S$a$ Finance +irector

Co"#an$ Se-&eta&$

,r. .L.D ,aonga

1. Coo&ate So-'al !es#ons'b'l't$

Kakuzi Company continue" to dedicate a part of it" profit to "ocial re"pon"i#ility acti'itie" aimed at

en$ancing t$e li'ing "tandard" of t$o"e li'ing clo"e to it" in"tallation". Kakuzi #u"ine""e" $a'e t$e

potential to impact t$e communitie" in )$ic$ t$ey operate. Kakuzi continue to make a po"iti'e

contri#ution to t$e"e communitie" )$ere'er po""i#le in t$e pa""ionate #elief t$at t$e )ell@#eing of

t$e community $a" a po"iti'e impact on t$eir operation".

The companys CSR mandated is to:

Con"ult t$e local communitie" affected #y our #u"ine""e" and en"ure t$at all comment" are

re"ponded to and( )$ere appropriate( acted upon

1nder"tand $o) our #u"ine""e" can mo"t effecti'ely "upport t$e need" of t$eir local

communitie" and contri#ute to local program" and initiati'e"

En"ure t$e "ocial effect" of ma*or in'e"tment" are a""e""ed and monitored at t$e planning

"tage.

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;na addition to t$eir CSR acti'itie" t$e company al"o en"ure" t$e pro'i"ion of #a"ic "er'ice" to

employee" and t$eir dependent". &$i" may include

Acce"" to running( pota#le fre"$ )ater and food"tuff"

Acce"" to primary $ealt$ care for employee" and t$eir dependent"

En"uring t$at re"ident c$ildren of employee" of primary "c$ool age are in "c$ool

Acce"" to company $ou"ing t$at meet" or e%ceed" local norm" or "tatutory reuirement.

2. SOT ANALYSIS

&$e S:8& analy"i" i" #eneficial to companie" in t$at it $elp" in analy"ing t$e o'erall "trategic

po"ition of a #u"ine""( it" re"ource"( and it" en'ironment.

2.1 St&en*ts

%&o),-t )'0e&s'f'-at'on &$e proce"" of e%panding #u"ine"" opportunitie" t$roug$ additional

market potential of an e%i"ting product. +i'er"ification may #e ac$ie'ed #y entering into

additional market" andGor pricing "trategie". Kakuzi $a" di'er"ified #y entering into t$e dairy

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product" market( fore"try( li'e"tock rearing( macadamia nut production( fre"$ pineapple

production( a'ocado of )$ic$ it i" t$e large"t e%porter( among ot$er".

CS! an) En0'&on"ental In't'at'0es5 Kakuzi $a" gi'en "trong emp$a"i" to t$i" "ignificant

operational area. :e $a'e en"ured t$at all )ater "upply "ource" )it$in out control are

protected t$roug$ planting and de'elopment of indigenou" tree "pecie". 8ur tea factory i"

"elf@"u"taina#le in fire )ood "upplie" and ourproduction factorie" for tea and a'ocado $a'e

attained top le'el international certification"( "uc$ a" ;S8 >>222( Dlo#al DAP and Rain

Fore"t Alliance. 8ur community outreac$programme" $a'e #een "ucce""ful and )e )ill

continue to gi'e a "trong emp$a"i" to t$i"'ery important area of our operation. :e $a'e !>/

of our total land area co'ered #yfore"try 4Kakuzi( Annual Report"( >2!6

&$e company operate" in t$e agricultural( food and #e'erage" indu"try and produce" 'alua#le

agricultural product" t$at are on con"tant demand in t$e e%port market and locally. &$e

company0" recent entry into a'ocado production $a" "een remarka#le "ucce"" dri'ing profit"

for >2!! and >2!>. ;t" $ig$@performing Fuerte" and 7a"" a'ocado crop 'arietie" e"pecially at

it" ,akuyu operation $a'e $ad increa"ing 'alue e"pecially in t$e European e%port market.

Po"iti'e ca"$ return" from cattle rearing 'enture.

6oo) e/#o&t "a&7et #&esen-e &$e Company en*oy" a "trong pre"ence in t$e e%port market

and acce"" to t$e European market t$roug$ it" parent company( Camellia Plc.

&o meet t$e international tea "tandard" one mu"t $a'e top notc$ product input"( t$u" for

Kakuzi $a'ing top of t$e range tea input produce" uality output" )$ic$ are "oug$t after in

many foreign countrie"( Kakuzi e%port" only t$e fine"t uality tea.

:ell de'eloped and recognized #rand.

Strong financial foundation.

&$e location of it" main #u"ine""e" )it$in t$e Nairo#i metropolitan( )it$ t$e main

e"ta#li"$ment #eing at ,akuyu fa'or" t$e company in term" of a""et 'alue and in operation"

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t$roug$ ea"y acce"" to t$e local market in t$e capital city and pro%imity to t$e international

airport.

&$e company $a" large o)ner"$ip of land a""et" including an agro fore"try farm in &$ika( tea

farm in Nandi 7ill"( )$ic$ pro'ide a "trong a""et #a"e for t$e company.

2.2 ea7ness

&$e company i" part of t$e #ig 9 tea producing companie" of t$e country( making t$e tea

market a 'ery competiti'e "u# "ector.

Poor and infreuent communication of t$eir product to t$e target market( little to no

ad'erti"ing i" done to create a)arene"" of t$eir product" locally i" a ma*or $indrance to t$eir

o'erall profita#ility.

&$e $ig$ fluctuation of price" for agricultural produce locally and internationally cau"ed #y

c$ange" in )eat$er affecting o'erall production affect" t$e e%pected re'enue and "ale" 'alue

for t$e company 4K7RC( >22>6.

2.3 O##o&t,n't'es

Kakuzi $a" t$e potential to furt$er di'er"ify t$eir portfolio #eyond t$o"e product" t$ey

currently $a'e.

Large market" from t$e a'ocado and macadamia nut 'enture" t$e company $a" recently

di'er"ified into.

&$e current $ig$ 'alue of tea and fre"$ a'ocado e"pecially in t$e international market

continue" to #ol"ter t$e company0" financial po"ition. &$e e%pected entry into t$e lucrati'e

macadamia and proce""ed agricultural fruit market( and it" long@term approac$ for agro

fore"try are e%pected to #ring "u"taina#le #u"ine"" for t$e company in coming year"

4Dikun*u( >2236

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&$e "trategic alliance" )it$ t$e parent firm( t$e company0" local "u#"idiarie" and ot$er agro

proce""ing companie" nota#ly +el ,onte 4K6 Ltd pre"ent )ider #u"ine"" opportunitie" for

t$e company and it" product".

Kakuzi0 " entry into marketing of a'ocado fruit internationally pre"ent" a ne) market

opportunity )it$ $ig$ potential and 'ery lo) competition from ot$er ma*or producer" in t$e

region. Currently Kakuzi i" t$e large"t a'ocado e%porter

;ncrea"ing t$eir fre"$ pineapple e%port" from / to a $ig$er 'alue.

2.+ TH!EATS

Fo&e'*n E/-an*e !ate (olat'l't$ &$e group operate" internationally and i" e%po"ed to

foreign e%c$ange ri"k ari"ing from 'ariou" currency e%po"ure"( primarily )it$ re"pect to t$e

1S dollar and Euro. Foreign e%c$ange ri"k ari"e" from future commercial tran"action"( and

recognized a""et" and lia#ilitie". &$i" i" a ri"k faced #y t$e company on a yearly #a"i" and

could re"ult to ad'er"e lo""e" for t$e company.

At ! +ecem#er >2!>( if t$e S$illing )a" )eaker G "tronger #y / again"t t$e 1S dollar )it$

all ot$er 'aria#le" $eld con"tant( t$e con"olidated po"t ta% profit )ould $a'e #een S$".

=2(92 4>2!! -(3(2226 $ig$erGlo)er mainly a" a re"ult of 1S dollar trade recei'a#le"4Kakuzi( Annual Report"( >2!6.

Cas Flo: Inte&est !ate !'s7 &$e Droup $a" #orro)ing" and #ank o'erdraft facilitie" at

'aria#le rate"( )$ic$ e%po"e" t$e Droup to ca"$ flo) intere"t rate ri"k. &$e group regularly

monitor" financing option" a'aila#le to en"ure optimum intere"t rate" are o#tained 4K7RC(

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&$e company face" litigation "urrounding it" *oint 'enture )it$ +el ,onte Ltd affecting t$e

company0" marketing acti'ity for it" pineapple produce. &$e company lack" proce""ing plant

for pineapple fruit and *eopardy "urrounding it" #u"ine"" relation"$ip )it$ +el ,onte could

potentially lead to lo) return" and lo"" of "ignificant market for t$e produce.

&$reat of "u#"titute product" e.g. $er#al tea.

+ifficult dealing" )it$ t$e la#or union o'er employee condition"( )$ic$ i" common in mo"t

$orticultural and ot$er plantation firm" in Kenya( $a" affected it" dealing" )it$ )orker".

1nruly #e$a'ior among"t rioting )orker" $a" put #u"ine"" operation"( per"onnel and property

at ri"k at t$e company0" ,akuyu operation( denting t$e company0" image and creating

unnece""ary co"t" t$roug$ ar"on and de"truction of crop" 4:ere( >22


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:$ile t$ere are difference" in de'elopment and implementation of "corecard "y"tem" for pri'ate(

pu#lic and nonprofit organization"( t$e di"ciplined proce"" of "trategic di"co'ery u"ed to de'elop

"corecard "y"tem" $a" more "imilaritie" t$an difference"( "o t$e frame)ork )e )ill de"cri#e applie"

eually )ell to different type" of organization".

3.1 ;ALANCED SCO!ECA!D FO! %E!FO!MANCE MEASU!EMENT

T&anslat'n* ('s'on an) St&ate*$5 Fo,& %e&s#e-t'0es

&$e #alanced "core card con"i"t" of t$e follo)ing element" "trategic management frame)ork(

mea"urement "y"tem( and communication tool. &$e #alanced "corecard "ugge"t" t$at )e 'ie) t$e

organization from four per"pecti'e"( and to de'elop metric"( collect data and analyze it relati'e to

eac$ of t$e"e per"pecti'e"

&$e Financial per"pecti'e

&$e Cu"tomer per"pecti'e

;nternal u"ine"" Proce""

Learning and Dro)t$

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6,')e to te ;alan-e) S-o&e Ca&)

ENTE!%!ISE SCO!E CA!DS SOU!CE OF ENTE!%!ISE SYNE!6IES

F;NANC;AL SHNERDH I7o) can )e increa"e t$e

"$are$older 'alue of our PortfolioJ I&o "ucceed

financially $o) "$ould )e appear to our

"$are$older"J :$at are t$e o#*ecti'e"( mea"ure"(

target" and initiati'e"J

!. ;nternal Capital ,anagement Create "ynergy

t$roug$ effecti'e management of internal capital

M la#or market".

>. Corporate rand ;ntegrate a di'er"e "et of

#u"ine""e" around a "ingle #rand( promoting

common 'alue" or t$eme".

. Producti'ity "trategy@Lead" to ;mpro'ed Co"t

Structure( ;ncrea"ed A""et 1tilization(

-. Dro)t$ "trategy @ E%pand Re'enue

8pportunitie" S$are$older alue( M E%pand

Cu"tomer alue

C1S&8,ER SHNERDH 7o) can )e "$are t$e

cu"tomer ;nterface to increa"e total cu"tomer

'alueJ I&o ac$ie'e our 'i"ion( $o) "$ould )e

appear to our cu"tomer"J

!. Cro""@Selling Create 'alue #y cro""@"elling a

#road range of product"G"er'ice" from "e'eral

#u"ine"" unit".

>. Common alue Propo"ition Create a

con"i"tent #uying e%perience( conforming to

corporate "tandard" at multiple outlet"

. Product G "er'ice attri#ute" Cu"tomer

Per"pecti'e( Cu"tomer alue Propo"ition Price(

Ouality M A'aila#ility Selection Functionality

-. Relation"$ip @ Ser'ice( rand( Partner"$ip

!. S$ared Ser'ice" Create economie" of "cale #y

"$aring t$e "y"tem"( facilitie" and per"onnel in

critical "upport proce""e".

>. alue C$ain ;ntegration Create 'alue #y

integrating continuou" proce""e" in t$e indu"try

'alue c$ain.

. 8peration" ,anagement Proce""e"

Supply(Produce(+i"tri#ute(,anage Ri"k.

-. Cu"tomer ,anagement Proce""e" Select

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;N&ERNAL 1S;NESS PR8CESSI7o) can )e

manage proce""e" to ac$ie'e economie" of

"cale or 'alue c$ain integrationJ0 I&o "ati"fy our

"$are$older" and cu"tomer"( )$at #u"ine"" proce""e"

mu"t )e e%cel atJ

Cu"tomer"(Acuire Ne) Cu"tomer" Retain

E%i"ting Cu"tomer"(Dro) u"ine"" )it$

Cu"tomer".

. Regulatory M Social Proce""e"

9. En'ironment(Safety M 7ealt$(Employment

3. Community


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performance from t$i" per"pecti'e i" t$u" a leading indicator of future decline( e'en t$oug$ t$e

current financial picture may look good. &$u" a" per t$e "core card a#o'e( "er'ice e%cellence i" of

utmo"t importance for t$e longe'ity of t$e company. Kakuzi0" attention to uality production

continue" to recei'e international recognition 4Paul( >226.

3.5 Internal Business Processes

Reduction of t$e ca"$ con'er"ion cycleG impro'ed efficiency i" al"o of importance a" a longer CCC

)ill impact on t$e profita#ility of t$e company and lead" t$e company into #ad de#t". &$u" reduced

paya#le" day" of $olding "$ould #e con"idered.

For efficiency and effecti'ene"" of operation" Kakuzi $a" #een a#le to in'e"t in internal capacity and

to modernize it" operation" in order to en$ance it" efficiency a" )ell a" in'e"t in inno'ation in all it"

#u"ine"" "p$ere" a" "een from t$e di'er"ification of t$eir portfolio.

3.6 Learning and Growth

Alignment of per"onal goal" to t$e company0" goal" )ill en"ure all employee" are )orking to a

common goal. &$e feeling of #elonging )ill $elp increa"e t$eir morale )$ic$ impro'e" producti'ity.

&$i" in turn $a" po"iti'e impact" on t$e o'erall producti'ity of t$e company.

Kakuzi encourage" t$e profe""ional and $ig$er learning a" )ell a" continuou" de'elopment(

continuou" de'elopmentG learning i" nece""ary to keep a#rea"t of all t$e c$ange" in t$e #u"ine""

en'ironment. ;n addition to continuou" de'elopment and general profe""ional training t$e company

"$ould en"ure t$at t$ey $ire t$e key tec$nical talent to en"ure proce""e" are performed accordingly.

7a'ing $ig$ly trained profe""ional "taff al"o re"onate" )ell )it$ t$e con"umer" a" t$ey kno) t$at

t$ey can get 'alue for t$eir money 4Paul( >226.

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+. ASSESSMENT OF FINANCIAL HEALTH OF KAKUZI

-.! Profita#ility

5 !"# "$"L%I% &''( &'') &'*' &'**

i+ Pro,ita-ilit

a+ Gross Pro,it /argin0mar1 up 2 Gross pro,it *''

Turnover

7ross Profi '+">'4$.00 :+'>++:.00 $4>12.00 1>1'+>41:.00 +"">22

T#rno6er 1>'1">21'.00 2>00:>1$+.00 2>11">++4.00 2>"+'>:'2.00 1>$'4>+

4*.6 43.66 45.*4 4).*& 46

-+ $et pro,t as a percentage o, sales 2$et pro,it *''

%ales

$et Pro,it 2:2>1: "0>2$ ":$>"+ '44>"+ 40:

Turnover 1>'1">21' 2>00:>1$+ 2>11">++4 2>"+'>:'2 1>$'4

? *.54 *).44 *(.&3 &.** &6

c+ #eturn on Investment 2 $et Pro,it *''

Total "ssets

$et Pro,it 2:2>1: "0>2$ ":$>"+ '44>"+ 40:

Total "ssets 2>2:">:" 2>"4">1 2>'14>:: ">:1+>"20 ">$+1

? *&.3) *6.66 *4.4 *6.(( **

d+ #eturn on !uit 2$et pro,it *''!uit

$et Pro,it 2:2>1: "0>2$ ":$>"+ '44>"+ 40:

Turnover 1>'1">21' 2>00:>1$+ 2>11">++4 2>"+'>:'2 1>$'4

Total "ssets 2>2:">:" 2>"4">1 2>'14>:: ">:1+>"20 ">$+1

!uit 1>"'>141 1>+0+>4$" 1>::2>'04 2>+$'>+'$ 2>:01

$et pro,it0TurnoverTurnover0Total "ssets ?

Total assets0!uit

$et pro,it0Turnover

Turnover0Total "ssets

Total assets0!uit

? &'.&6 &&.(6 &'.4 &3.3( *4

T7! 89/P"$ 7"%7IG7 P#9FIT /"#GI$%:7I87 :ILL B! B!$!FI8I"LF9#

F;T;#! 9P!#"TI9$%

T7! 9


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-.> Liuidity

ii+ Liuidit

Focus on liuidit as it is normall the main cause o, compan down,all

a+ 8urrent #atio 28urrent "ssets

8urrent lia-ilities

8urrent "ssets 22>4++ 2+$>21+ 4"2>:00 1>1+4>'4$ 1>2"+>4+

8urrent Lia-ilities "12>"22 1"4>224 222>"4 "$1>1$+ 14'>02

? '.3 &.'5 *.)5 3.35 (.

-+ >uic1 #atio 2?8urrent assets @ Inventor+

8urrent lia-ilities

8urrent "ssets 22>4++ 2+$>21+ 4"2>:00 1>1+4>'4$ 1>2"+>4+


Inventories "4>10" 4:>+ 41>$': 1+>:"0 '$>42

? '.63 *.6) *.6 &.(3 (.

c+ "cid test ratio 28ash and euivalents

8urrent Lia-ilities

8ash and !uivalents '>01 :$>4'4 21+>:'' :+>""2 :+>$4


? '.'& '.64 '.)( &.56 6.

d+ Free cash ,lows

2$et pro,it A0@ change in ,ied assets A0@ change in :or1ingcapital

8hange 8hange 8hange 8hange 8han

8hange in Fied assets *C')) *4C46 **4C**6 46'C5 @3'(C4

8hange in :or1ing8apital @&&5C3) @*3&C35( *36C&) ('C6'( @*4&C3

$et Pro,it

? 4)*C&*6 5'(C* *34C534 @6(6C(( (5)C4

The companDs liuidit ratio does not meet the reuired &E* ratioC thus in

some ears e.g&''(C &'*' its -arel a-le and sa,e to meet maturing

o-ligationsC when the ,all due

e8een 200: @ 2010> ,e 9#i%- raio is lo8> indi%ain! ,e

%ompany doesn= -eep eA%ess %as, in ,and> and relies oo

m#%, on in6enory o pay is s,or erm lia&ilies> 8,ile in

2011B12 ,e opposie is r#e

Page 18of 32


19/32


-. Efficiency

iii+ !,,iciencInventories "4>10" 4:>+ 41>$': 1+>:"0 '

#eceiva-les 1$4>'$+ 140>++4 1+">"'' +>4:" 2

Paa-les 110>42 0>'04 210>:0+ 2:">2$2 12

8ost o, Goods %old 1>121>010 1>1$>41 1>2:4>41 1>42'>:'' :

Turnover 1>'1">21' 2>00:>1$+ 2>11">++4 2>"+'>:'2 1>$'

a+Inventor das o, holding 2 Inventor 365

8ost o, goods sold

I=97 ? ** *5 *& 46

11 Days 1$ Days 12 Days 4' Days 2

-+ #eceiva-le das o, holding 2 #eceiva-les 365

Turnover

#=97 2 35 &6 3' *5

c+ Paa-le das o, holding 2 Paa-les 365

8ost o, goods sold

P=97 ? 36 &( 6' &

36 =as &( =as 6' =as & =as 5

d+ 8ash conversion ccle

2Inventor das o, holding A#eceiva-le das o, holding @ Paa-le das o, holding

? *' *3 @*( @**

T,e lon!er ,e %as, %on6ersion %y%le ,e !reaer ,e a&iliy o eperien%e &ad

de&s > ,e lesser ,e effi%ein%y of ,e %ompany> a-#i is 9#ie effi%ien as

,e CCC is ,ro#!, ,e years is si!nifi%anly lo8.

RDO/ ,i!,er ,an $0 may indi%ae %olle%ion pro&lems and press#re on %as,

flo8s> ,#s in 2012 ,e RDO/ 8as ,i!,er ,an $0 si!nifyin! %olle%ion

pro&lems

Page 19of 32


20/32


-.- Le'erage

iv+ Leverage ?Gearing+

a+ Long term de-t!uit

Long Term de-t ':$>+.00 '04>$1$.00 '24>40:.00 +0>":.00 '24>4$2

!uit 1>$'+>'"" 1>'4>'0 2>210>$04 2>+$'>+'$ 2>:01>2

? 43.6 3'. &(.&5 &5.3 &&.&

-+ Long term de-tA8urrent lia-ilities

!uit

Long Term de-t ':$>+.00 '04>$1$.00 '24>40:.00 +0>":.00 '24>4$2

!uit 1>$'+>'"" 1>'4>'0 2>210>$04 2>+$'>+'$ 2>:01>2


63.6( 3.6' 3(.3* 3(.4 &.5

% 9#iy 3#liplier ? Toal Asses

!uit

!uit 1>$'+>'"" 1>'4>'0 2>210>$04 2>+$'>+'$ 2>:01>2

Total "ssets 2>2:">:" 2>"4">1 2>'14>:: ">:1+>"20 ">$+1>+

? *.5 *.& *.& *.4

d T.I.! 2!uit Be,ore Interest and Taes ?!BIT+

T.I. ? 9#iy efore Ineres and Taes "0>1: $$:>:0 $$">"4 20>0" 4+>2

inan%ial %oss $1>" 1>4+" 414 0

( &) *C33( '

Financial costs

T,e %apial raio ,as s#rpassed ,e pres%ri&ed amo#ns and s,o#ld &e

ree6al#aed as ,is %o#ld pro6e derimenal o ,e %ompany

T,e e9#iy m#liplier is &elo8 ,e pres%ri&ed le6els> ,#s ,e n#m&er of

imes e9#iy %an &e deri6ed from asses is also lo8.

T,e more imes yo#r T.I. ,e &eer > if ,e T.I. is lo8 ,is means ,e%ompany ,as a lo8er %apa%iy o pay de&s> ,#s in 2011 @ 2012> ,e %ompany

,as no %apa%iy o pay de&s

Page 2of 32


21/32


-. ;n'e"tor Concern"

v+ Investor

1.00 2.$0 2.$0 ".+$ "

2".00 "1.+$ :1.$0 '.$0!arnings Per %hare 1".12 1+."4 1$.:+ 2:.0' 1

a+ #eturn o, shares E !P%eild 2 !arnings per share *'

/ar1et price

? 5.'4 54.6* *).4 4'.3 4(.3

-+ =ividend eild 2 =ividend per share *''

/ar1et price

? 4.35 .( 3.' 5.4' ).3

=ividend Polic 2 =ividend per share

!arnings per share

.6& *4.4& *5.5 *3.36 *).3

#etention )&.3( (5.5( (4.&5 (6.64 ('

c+ Price earnings ratio 2 /ar1et price

!arnings per share

? *.53'4(( *.(3 5.*4 &.4( &

T,e %ompany ,as a !ood ,i!, reenion raio 8,i%, is an indi%aor of a !ood

!ro8,. T,e %ompany also seems o 6ary is iss#in! of di6idends in ea%, year

PS is si!nifyin! !ood re#rns for a-#Ci

T,is s,o8s ,a ,e %ompanyEs s,ares are no sa&le and fl#%#ae yearly> ,e

iss#in! of di6idends 6aries yearly as 8ell.

=ividend Per %hare

/ar1et price

Page 21of 32


22/32


-.9 CAP;&AL S&R1C&1RE

28 < 29 < 21 < 211 < 212 %&o#o&t'ons A"o,nt=ss> ? %&o#o&t'ons A"o,nt=ss> ? %&o#o&t'onA"o,nt =ss> ? %&o

Euity !(93(9 32/ !(=9-(92= 3-/ >(>!2(2- 3(39(39 (>

99/ 9>-(-2>/ 32=(=2/ 9>-(->

2@23@3 1< 2@9@12+ 1< 2@83+@912 1< 3@+@13 1< 3@+2@44

CA%ITAL ST!UCTU!E

St&,-t,&e

A" a rule of t$um# Euity "$ould ne'er #e #elo) 93/ and Long &erm de#t "$ould ne'er e%ceed / at t$e ma%imum ( t$e figure" a#o'e indicate

t$at Kakuzi i" )it$in t$e pre"cri#ed amount" of euity and long term de#t for t$e fi'e year period.

L&+

Pa!e F 22


23/32


-.3 C8S& 8F EO1;&H

28 29 21 211 212

Cost of E,'t$@ A"o,nt=ss> ? %&o#o&t'ons A"o,nt=ss> ? %&o#o&t'ons A"o,nt=ss> ? %&o#o&t'ons A"o,nt=ss> ? %&o#o&t'ons A"o,nt=ss> ? %&o#o&

+PS !.22 >.2 >.2 .3 .3

>.22 !.3

Ke 2.2--39! 2.23


24/32


-.< N8,;NAL C8S& 8F +E&

28 29 21 211 212

%&o#o&t'ons %&o#o&t'ons %&o#o&t'ons %&o#o&t'ons %&o#o

No"'nal -ost o f Debt@ K)

Finance co"t .!(== !=(-3 -!- @ Long term de#t 9--2< 32=(=-

Corro)ing" 2 2 2 2

Kd 4.+92983+ 3.221218 .3282

K) K) C 4.+9< K) C 3.22< K) C .< K) C < K) C

-.= EFFEC&;E C8S& 8F +E&

Effe-t'0e Cost of Debt@ K' 28 29 21 211 21Kd 3.-=>=>!>922> 2.2992>< 2

!@& 2.3 2.3 2.3 2.3 2

.2++8188 2.2+8821 .++119

K' .2+< 2.2< .< < 2/ !-/ >/ 2.2/ 2/ 2/

.< < 2< +< 8 2.2- 2.2

KoDACC

Pa!e F 2$


26/32


-.!! AL1E 8F &7E C8,PANH

28 29 21 211

A"o,nt =ss>? A"o,nt =ss>? A"o,nt =ss>? A"o,nt =ss>? A"o,nt =ss>

EA& >(=!=(222 2.2-

(al,e @8@3@ 9(2-(=!9(993 !=(>9(222 @3@8

(al,e of Ka7,E'

Pa!e F 2'


27/32


+.12 Z SCO!ES5 EDA!D ALTMANS MODEL

score ,or G"G;I ltd F &''( H &'*&

%core 2*.&" A*.4B A3.3 8 A'.6= A'.)) !

(,ere

" 2:or1ing 8apital 0 Total "ssets

B 2#etained !arnings 0 Total "ssets

8 2!BIT 0 Total "ssets= 2/ar1et 01>4$0 ? 0."0' 0."''+ 1.2 A (CBTA ? :2">4:: ? 0.21' 0.2$:

">$+1>+00 ">:1+>"20

1 RBTA ? 2>+0">22$ ? 0.+$+ 1.0$' 1.4 RBTA ? 2>'$:>+'$ ? 0.'+ 0.+$1

">$+1>+00 ">:1+>"20

" C ITBTA ? 4+>2 ? 0.1"4 0.442: "." C ITBTA ? 20>0" ? 0.241 0.+$4

">$+1>+00 ">:1+>"20

1 D BT) ? 2>:01>22$ ? ".'"' 2.1:14 0.' D BT) ? 2>+$'>+'$ ? 2.$ 1.$$'

++0>4+$ 1>0'0>$$$

1 SBTA ? 1>$'4>+2 ? 0.4": 0.4""+ 0. SBTA ? 2>"+'>:'2 ? 0.'2" 0.'1'4

">$+1>+00 ">:1+>"20

4.4( 4.&*

Pa!e F 2+


28/32


!"# &'*' F @ score !"# &'') F @ score

1 A (CBTA ? +$>$+0 ? 0.24+ 0.2'' 1.2 A (CBTA ? "14>"0+ ? 0.10 0.1"1"

">21:>$1 2>:+">2$$

1 RBTA ? 2>112>$04 ? 0.'$' 0.1: 1.4 RBTA ? 1>:''>'0 ? 0.'$0 0.0$

">21:>$1 2>:+">2$$

" C ITBTA ? $$">"4 ? 0.1+2 0.$'+ "." C ITBTA ? $$:>:0 ? 0.1$ 0.'41

">21:>$1 2>:+">2$$

1 D BT) ? 2>210>$04 ? 2.1" 1."1$+ 0.' D BT) ? 1>'4>'0 ? 2.1'2 1.2+"

1>00:>0:+ 0:>'4'

1 SBTA ? 2>11">++4 ? 0.'$+ 0.'$02 0. SBTA ? 2>00:>1$+ ? 0.' 0.'1

">21:>$1 2>:+">2$$

3.45 3.64

!"# &''( F @ score

1 A (CBTA ? "0>4+2 ? 0.011 0.01"+

2>''2>$1

1 RBTA ? 1>4'>'"" ? 0.$$2 0.++2:

2>''2>$1

" C ITBTA ? "0>1: ? 0.14+ 0.4:"'

2>''2>$1

1 D BT) ? 1>$'+>'"" ? 1.4"2 0.:$1

1>04>::'

1 SBTA ? 1>'1">21' ? 0.'0' 0.$:

2>''2>$1

&.43

Pa!e F 2:


29/32


&$e 5 "core for Kakuzi Ltd $a" #een impro'ing o'er t$e year" i.e. from >.3 in >22< to -. in >2!>

Current 5 "core of -. i" an indication t$at t$e firm i" "ol'ent and liuidation i" out of ue"tion.

&$i" can al"o #e demon"trated #y C$ep"$y?" Confidence Le'el a" #elo)

Conf')en-e Le0el 1 B 1Z s,a&e)

! @ !G4-.-22< $ad t$e pre"cri#ed ratio.

Pa!e F 2


30/32


&$e de#t compo"ition i" )it$in t$e pre"cri#ed amount".

et)een >22< M >2!2( t$e uick ratio i" lo)( indicating t$e company doe"n0t keep

e%ce"" ca"$ in $and( and relie" too muc$ on in'entory to pay it" "$ort term lia#ilitie"(

)$ile in >2!!G!> t$e oppo"ite i" true.

R+87 $ig$er t$an 2 may indicate collection pro#lem" and pre""ure on ca"$ flo)"( t$u"

in >2!> t$e R+87 )a" $ig$er t$an 2 "ignifying collection pro#lem".

&$e longer t$e ca"$ con'er"ion cycle t$e greater t$e a#ility to e%perience #ad de#t" ( t$e

le""er t$e efficiency of t$e company( Kakuzi i" uite efficient a" t$e CCC i" t$roug$ t$e

year" i" "ignificantly lo).

8'er t$e period under e'aluation( t$e capital ratio $a" "urpa""ed t$e pre"cri#ed amount"

and "$ould #e ree'aluated a" t$i" could pro'e detrimental to t$e company.

&$e more time" your &.;.E t$e #etter ( if t$e &.;.E i" lo) t$i" mean" t$e company $a" a

lo)er capacity to pay de#t"( t$u" in >2!! M >2!>( t$e company $a" no capacity to pay

de#t".

&$e company $a" a good $ig$ retention ratio )$ic$ i" an indicator of a good gro)t$.

&$e company al"o "eem" to 'ary it" i""uing of di'idend" in eac$ year

. !ECOMMENDATIONS AND CONCLUSIONS

6.* #ecommendations

&$e company $a" greater capacity for di'er"ification( t$u" it "$ould look at ot$er additional area"

'enture into.

Pa!e F "0


31/32


&$e company0" marketing "trategy "$ould #e made more aggre""i'e( t$i" i" in a #id to creat

increa"e a)arene"" of t$e #rand and it" product offering".

6.& 8onclusions

1"ing C$ep"$y0" Confidence le'el0" ,odel( Kakuzi Ltd $a" a#o'e a'erage confidence le'el".

&$e z@"core of Kakuzi Ltd are a#o'e t$e margin ( "ignifying t$at Kakuzi Ltd0" future

can #e accurately predicted.

A confidence le'el of =/ i" 'ery $ig$( $ence t$i" "upport" t$e conclu"ion t$at t$e firm i" n

any)$ere near liuidation.

8'erall profita#ility i" goodB t$i" i" profita#le for t$e company0" future operation".

Pa!e F "1


32/32


!EFE!ENCES

oard@of@+irector"@Kakuzi. 4>2!!6.Kakuzi Limited Annual Report and Financial Statements for

the Year Ended 31 December !11"Nairo#i( Kenya Kakuzi Limited.

Dikun*u( :. 4>223( No'em#er 6. Kenya Ki#aki &ip" Scale" for Kakuzi +irector" in Spat 8'er

&ea Farm.#usiness Dail$.

Kakuzi. 4>2!( No'em#er !=6.About %s"Retrie'ed from $ttpGG))).kakuzi.co.keGa#out@u"

Kakuzi. 4>2!( No'em#er !=6. Annual Reports& !1! and !11" Retrie'ed from

$ttpGG))).kakuzi.co.keGin'e"tor@relation".

Kakuzi Financial Report" >22< @>2!>

K7RC. 4>2222!6. 'orporate Finance 2th Edition ed""Ne) Hork ,cDra) 7ill.

:ere( E. 4>226. Kenya Kakuzi Record" Profit +e"pite Strong S$illing. #usiness

Dail$.
http://www.kakuzi.co.ke/investor-relationshttp://www.kakuzi.co.ke/investor-relations

analysis kakuzi report final 2013

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