• Financial ratios of the transport and logistics industry

Financial ratios of the transport and logistics industry

28 januari 2019

BDO has been appointed by UPTR (Union Professionnelle du Transport et de la Logistique) to perform a financial analysis of the transport industry in Belgium. In this respect, BDO analyzed the financial statements of 6.000 companies over a period of 8 years, from 2010 till 2017.

The aim of this analysis is to assess the financial health of the transport industry on a yearly basis through the computation of 5 financial metrics providing insights about the sector’s liquidity, solvency and profitability.

  1. Liquidity is assessed by using the current ratio. It is calculated by dividing the company’s total current assets (inventories, receivables and cash) by its total current liabilities (debt due within 1 year). A decrease of the sector’s liquidity was  observed in 2017, mainly due to a decrease in cash induced by the combined effect of an extension of customers’ payment terms and the shortening of suppliers’ payment terms.
  2. Solvency is measured through the degree of financial independence. The solvency of the transport & logistics industry reached its highest historical level in 2017 (increase from 29% in 2010 to 36% in 2017).
  3. Contrarily to solvency, the profitability of the sector decreased in 2017 after a 4-year period of annual increase. Profitability was proxied by 3 well-known ratios being (i) the EBITDA margin (9,7% in 2017 versus 10,0% in 2016), (ii)  the return on equity (9% in 2017 versus 11% in 2016) and (iii) the added value per FTE (increasing steadily since 2010 and stabilizing at €71k/FTE in 2017).

Finally, it should be highlighted that the calculation of financial ratios is not an end in itself. Financial ratios can be a useful management tool provided i) they are well understood, and ii) if appropriate corrective actions are implemented by management based on predefined objectives