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.
- 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.
- 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).
- 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