Firstly, to introduce Solar Century Holdings Limited (Solarcentury) they are one of the UK’s leading solar solution companies with a reputation for innovative residential, industrial, and commercial-scale installations.
This essay will encompass who Solarcentury are and what they do as a firm. It will also include a discussion and analysis into their performance and how they operate within their specific division of the construction sector.
Founded in 1998, the private limited company has grown into an international utility-scale solar developer providing utilities, energy, and solar solutions to a global market in a sustainable manner.
Solar century operates in an oligopoly market…
In 2010 the firm launched a global expansion into Europe, the America’s, and parts of Africa, now operating offices in seven countries, in addition to the UK Headquarters.
The firm has developed over 10GW, constructed 3GW and financed more than 2GW of renewable assets.
In 2016 Solarcentury was named the top EPC company in the UK “by some margin.”
In the UK, Solarcentury has a 96% success rate in terms of constructing large-scale projects entering the challenging UK Local Authority planning process.
This near perfect domestic record is now being replicated throughout international markets.
“Solarcentury is in business for a purpose: to make a meaningful difference in the fight against climate change through the widespread adoption of solar power.
Construction is a large, dynamic, and complex industry sector, and is one of the largest sectors of the UK economy. It contributes almost £90 billion to the UK economy (or 6.7%) in value added, comprises over 280,000 businesses covering around 2.93 million jobs, which is equivalent to about 10% of total UK employment.
The construction sector Is divided into divisions or sub-sectors with a vast range covering from the building of roads, houses, and workplaces and repair and maintain our nation’s physical infrastructure.
Construction work can involve building of new structures, which may include activities involved with subdividing land for sale as building sites or preparation of sites for new construction. Construction work also includes renovations involving additions, alterations, or maintenance and repair of buildings or engineering projects such as highways or utility systems.
Solarcentury finds itself in the midst of these industries. Financing, developing, constructing, owning, and operating its own large-scale projects, it provides infrastructure for its own renewable energy solutions, whilst specialising in solar solutions for residential, industrial commercial properties.
• Provide a discussion of the firm’s operating performance in the context of its specific sector; including as a minimum an analysis of its profitability using financial ratios explored in the module
To analyse a firms operating performance a scope of financial ratios can be used to recognise its profitability, solvency, and efficiency. This can be done by observing the financial accounts submitted to (companies house).
The profitability of a firm is a combination of profit margin and return on capital employed.
Year Profit margin (%) ROCE (%)
2017 2.298 3.354
2016 2.122 4.384
The profit margin is a direct comparison between profit and costs at any given sales level, and the Return on capital employed (ROCE) measures the profitability of a company by expressing its operating profit as a percentage of its capital employed.
A higher value of return on capital employed is favourable indicating that the company generates more earnings per (pound) of capital employed.
ROCE is also known as the primary efficiency ratio and is a key indicator of a company’s performance. In order to make the venture a worthwhile use of capital, the return should be greater than that which can fixed interest bonds be achieved through investments that carry less risk, such as putting the money on deposit, or investing in
Solarcentury shows a positive percentage of profitability seen in the figures above, indicating the firm’s ability to pay its expenses and whilst continuing to operate.
The firms Profit margin for the year 2017 was 0.002%, a very low profit percentage, further examining into their financial records showed 2016 profit margin was 0.949. 2 previous years must sometimes be considered to give a better comparison, as profit margins can vary with particular large-scale developments as clients can pay in credit over a period of time.
The figures depict that the profit margin increases from the year 2016 to 2017, however the return of capital employed has decreased, this could suggest….
Benchmarking is a popular approach for evaluating comparative organisational performance.
The Clancy Group PLC is a company operating in the same oligopoly division of the construction sector.
Solvency refers to the long-term financial stability of a company and its ability to cover its long-term obligations. In other words, it’s the ability of a company to meet short and long-term debts as they become due.
Year Acid Test Ratio (%) Current ratio (%)
2017 1.417 1.780
2016 1.366 1.632
The acid test ratio is a financial indicator to whether a firm has sufficient short-term assets it cover its immediate liabilities.
Solarcentury acid test ratio calculates at 1.417%. This ratio concludes the company has enough assets to pay their current liabilities. This ratio has increased by 0.051% – a slight increase is healthy. If, however it continues to grow and becomes substantially higher then It could indicate that cash has accumulated and is idle, rather than being reinvested, returned to shareholders, or otherwise put to productive use
To offer a benchmark comparison with another company, The Clancy Group PLC reached a acid test ratio of 1.12. This figure is slightly more favourable than that of Solarcentury’s 1.417% but both are reasonable in for their industry.
To get a stronger picture of the precise solvency of the firm the current ration should also be examined.
The current ratio is the number of times the business’s short-term assets cover its short term liabilities. In a company, the ratio of current assets to current liabilities. It is a general indication of the solvency of a company, the adequacy of its working capital, and its ability to meet day-to-day calls upon it.
The current ratio of 1.780 (2017) and 1.63% (2016) indicates the firm is capable of meeting its day to day commitments.
Further reading suggests figures should be in the region of around 1.5%.
if the ratio falls below 1.1 then the business is illiquid. The higher the ratio, the more liquid the company. Prospective lenders expect a positive current ratio, often of at least 1.5. However, too high a ratio is cause for alarm, because it indicates declining receivables and/or inventory—signs that portend declining liquidity..
It is important to recognise that solvency ratios vary between industries but by providing a benchmark comparison ensures the ratio is expected for that specific industry.
The comparison of a competing firm The Clancy Group PLC shows that they have a current ratio of 1.31. This figure (0.47% decrease), suggests Solarcentury has healthy ratio is relates to the industry standard.
Year Efficiency Ratio (%)
Explanation of ratio
measure of relationship between income and overhead expenses a way of measuring the proportion of operating revenues or fee income spent on overhead expenses.
The efficiency ratio demonstrations a significant increase from 2016-2017, indicating a huge decrease in efficiency. To further analyse these statistics it must be noted that the 2016 figures are extremely low, moreover the 2017 figures are abnormally high than what should be expected.
Further reading suggest figure should be in the region of 0.50%. A high ratio suggests that a company is using its suppliers’ funds as a source of cheap financing because it is not operating efficiently enough to generate its own funds.
The Clancy group PLC has na efficiency ratio of ….
This concludes that Solarcentury’s ratios should really be more stable than they are, and the company should consider investigating its expenditure (and).