Introduction
Evergreen Marine (UK) Limited Company is a subsidiary corporation of the renowned Evergreen Group. The firm began its official operation in 1979 under the UK flag container having its headquarters located in London. It offers shipping, leisure, and aviation services across different destinations with approximately 600 employees. The report will focus on the analysis of the enclosed financial statement of the firm over 5 years to evaluate how it performs in the shipping industry. A proper strategic plan will be developed after examining the organization using the SWOT analysis framework to enable it to have a sustained market share and revenue.
Assessment of the Financial Statement for Five Year Period
The report will examine the performance of Evergreen Marine UK company’s financial health by focusing on key financial ratios such as debt ratios, liquidity ratios, and profitability ratios. These financial metrics are essential in providing insight into how the business organization uses its available resources to generate income for the shareholders. Furthermore, they indicate the company’s operation efficiency, making it easier for the management to identify possible areas for investments.
Profitability Ratios
Return on Assets (ROA) = Net Income / Total Assets
2020 = (-43,725,000 / 1,600,999,000) * 100 = -2.73%
2019 = (-133,755,200 / 1,627,817,100) * 100 = -8.22%
2018 = (-39,505,400 / 1,705,534,500) * 100 = -2.32%
2017 = (34,151,700 / 1,724,722,800) * 100 = 1.98%
2016 = (-64,123,400 /1,543,062,200) * 100 = -4.16%
Return on Equity (ROE) = Net Income / Shareholder’s Equity
2020 = (-43,725,000 / 41,117,000) * 100 = -106.3%
2019 = (-133,755,200 / 85,276,400) * 100 = -156.8%
2018 = (-39,505,400 / 119,067,100) * 100 = -33.2%
2017 = (34,151,700 / 159,536,300) * 100 = 21.4%
2016 = (-64,123,400 / 94,292,800) * 100 = -68%
Evergreen Marine UK has had a negative ROA and ROE for the last three consecutive years. This implies that the business organization has been making consistent losses over the years (Pham, 2020). This may be a result of poor management of the available resources. When equities are not utilized effectively, they might fail to generate adequate income for the firm’s shareholders leading low income for the organization.
Operating Margin = Operating Income / Revenue
2020 = (-14,141,000 / 1,780,741,000) * 100 = -0.79%
2019 = (-114,162,700 / 1,394,238,000) * 100 = -8.2%
2018 = (-20,076,800 / 1,521,533,200) * 100 = -1.3%
2017 = (52,086,300 / 1,807,819,000) * 100 = 2.9%
2016 = (-37,897,100 / 1,467,847,000) * 100 = -2.6%
Operating margin is essential for the business because it enables it to compensate stakeholders. According to the analysis of Evergreen Marine UK’s operating margin, the business organization is not able to pay using the revenues because it has a negative percentage (Oladimeji and Aladejebi, 2020). In other words, the corporation is not making enough profits to cover such costs (Whetman, 2018). Based on the situation, the managers are not managing the costs efficiently.
Debt Ratios
Debt-to-Asset ratio = Total debt / total assets
2020 = (1,559,882,000 / 1,600,999,000) = 0.97
2019 = (1,542,540,600 / 1,627,817,100) = 0.95
2018 = (1,586,467,500 / 1,705,534,500) = 0.93
2017 = (1,565,186,600 / 1,724,722,800) = 0.91
2016 = (1,448,769,900 /1,543,062,200) = 0.94
Debt-to-Equity Ratio = Total Debt / Total Equity
2020 = (1,559,882,000 / 41,117,000 = 37.9
2019 = (1,542,540,600 / 85,276,400) = 18.1
2018 = (1,586,467,500 / 119,067,100) = 13.3
2017 = (1,565,186,600 / 159,536,300) = 9.8
2016 = (1,448,769,900 / 94,292,800) = 15.4
From the analysis above, the debt-to-asset ratio of the company is an average of 0.94. The proportion indicates that the business finance most of its assets using debts. The company, therefore, spends a considerable amount of cash on financing the debt interest hence making it less profitable (Robinson, 2020). Similarly, based on the debt-to-equity ratio, financial analysis indicates that Evergreen Marine UK is funding its operations with more money from lenders than the ones provided by shareholders.
Evergreen Marine UK Limited Company SWOT Analysis
SWOT analysis is an essential framework useful in enabling the management of Evergreen Marine UK Company to strategize its operations by focusing on the strengths, weaknesses, opportunities, and threats the firm is likely to encounter. The objective is to evaluate and enhance the situational analysis of the business organization (Cheng and Ouyang, 2021). By critically analyzing the SWOT tool, Evergreen Marine UK will be able to identify strategic areas that require intervention to improve its performance in the shipping industry.
Strengths
Its diversification in service provision is an important area that enables the company to receive income. For instance, offering container storage, shipping, cargo, and aviation provides increased sources of revenue. This approach is effective and can easily make it obtain synergy, especially when it comes to marketing and costs of administration (D’agostini Nam, and Kang 2019). Moreover, the business organization is more likely to experience economies of scale following its wide operations.
Similarly, the company is present internationally, giving it the opportunity to operate effectively. It has a large fleet that transports containers and other products across the globe. Evergreen Marine UK has nearly 200 vessels and approximately 250 offices worldwide (Zhou, Wang, and Yuen, 2021). This enables it to conduct business in different markets, thus increasing its income. Moreover, Evergreen Marine UK has a strong financial background that facilitates its operations. Based on the financial statements report, the business organization has a large number of assets and shareholders’ equity. In addition, the firm can acquire debt to finance its business activities (Christiana, Purnama, and Ardila, 2020). When the management properly utilizes the available resources, Evergreen Marine will be able to achieve sustainable performance.
Weaknesses
Evergreen Marine UK has poor financial management, which lowers the revenues generated. The amount of debt and equities available for operations do not create enough return making the company make significant losses. The human resource department should formulate effective ways of investing the funds to maximize their use (Supriyanto and Darmawan, 2018). Efficient business activities will enable the firm to have proper financial health hence attracting more investors (Andrikopoulos et al., 2019). From the financial ratio analysis, both the ROA and ROE are negative, indicating insignificant gains.
Similarly, the company is experiencing leadership issues whereby the people responsible for managing various sectors are underperforming. Headship is crucial for effective and efficient company operations (Hasanspahić et al., 2021). Most workers are not proper engaged, leaving them less productive in their specific areas of work. Such a condition has led to a reduction in the overall productivity of the firm in the shipping industry in the past years. Poor leadership style is making the business organization to underutilize the potential of its staff members to generate income.
Opportunities
Evergreen Company should invest in digital route management to ensure it shortens the period taken for shipment. Most of the ships use pre-determined routes, which sometimes make them face intense and harsh weather conditions (Jabbar and Bjørn, 2018). Adopting the system of studying the trends and other oceanic factors has the potential of providing an accurate path that will take less time to reach the destination. Using real-time data will save the firm from uncertainties that might interfere with cargo delivery. In addition, the business organization should consider integrating artificial intelligence to enhance autonomous control (Agatić and Kolanović, 2020). This practice will give crew members enough time and improve course accuracy.
Threats
Human error is a common threat to business organizations. Generally, the operations of the vessels depend on human effort and commitment. Assuming the professionals do not follow the required procedures, they are more likely to make the cargo stuck hence consuming the delivery time (Nguyen and Wang, 2018). Similarly, the incident of lost goods is a risk that might force the management to spend a significant amount of money to compensate the owners.
Strategic Plan for Sustainable Profitability
From the findings in the Evergreen Marine UK SWOT analysis, the company has financial performance issues that make it incur massive losses. The five-year business plan will focus on how the management can improve the sustainability of its human resource through extensive training (Barbosa, Castañeda-Ayarza, and Ferreira, 2020). Since the company has stable financial sources, the strategy will enable the management to train and develop a group of competent workers to enhance the productivity of the company.
Year 1
The goal will be to ensure employees in every department are subjected to extensive and relevant training to enhance their knowledge and skills in various sectors of operations.
Year 2
The management team, including all departmental managers, will undertake educational programs. This advances their understanding of the emerging trends in the shipping industry (Zeba, 2021). The project will be conducted on monthly basis to ensure they obtain the relevant skills, including leadership competencies.
Year 3
This period will involve extensive training on the emerging technology trends in the shipping industry. Crews will be educated on how to apply artificial intelligence knowledge to enhance efficiency in their operations (Popkova and Zmiyak, 2019). Similarly, the research and development will be trained on how to use big data analysis to enable the firm to identify market gaps to invest the available capital.
Year 4
Training leaders on specific leadership skills to enhance their human resource management. Good headship qualities will ensure they increase the productivity of workers (Huikku, Karjalainen, and Seppälä, 2018). Moreover, the approach will enable employees to develop their careers hence increasing sustainability in the firm.
Year 5
The focus will be on creating and improving brand loyalty by offering effective and reliable customer services. Employees will be trained on matters concerning consumers satisfaction and the role they play as workers to ensure clients are served accordingly (Balci, Caliskan, and Yuen, 2019). Proper teamwork culture will be cultivated to enable staff members to manage various queries and cases involving customers properly (Ahn, Shamim, and Park, 2021). The approach will allow the company to have a good image in the market, thus increasing its market share.
Conclusion
Evergreen Marine UK Company is one of the most renowned shipping companies in the world. It operates a large fleet and has a significant number of offices across the world. Based on the analysis of its financial statement, the business organization has had unhealthy financial performance over the past five years. Its strong financial background provides it with the strength to enhance its operations. Adopting the current technological system will enable the firm to increase its efficiency and performance in the industry.
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