Q Assignment focuses on the CSR activities and financial performance of company in order to evaluate CSR activities Home, - PAN AFRICAN RESOURCES Introduction This report focuses on the CSR activities and financial performance of company. It is analyzed that in order to evaluate the CSR activities, sustainability reporting and corporate governance structure, researchers could use the sustainability reporting of company. It is considered that company might face several challenges and threats while complying with the applicable laws and regulations. This report emphasises upon how Pan African Resources Company has performed throughout the time and how it has maintained CSR activities and ethical governance throughout the time. This company has faced high complexity in its legal and ethical compliance program. The financial performance of company is also very highly fluctuating which negatively impact the business growth and sustainability of Organizaiton in might long run. This report will be helpful for the stakeholders to determine the financial risk, viability of the business and sustainability of company in long run. Pan African resources Plc is the listed United Kingdom Company. There are several gold and mining stones and products are offered by company to its clients. There are several subsidiaries of company which is offering its gold and mining products in other countries as well such as PAR Gold properties limited and Par mining and others. Currently, share price of company has been down by 8.99% since last three month. This is the negative indicator for the sustainability of company (Pan Africa Resources, (2017). Vision It has vision to engage in the exploration of precious metals around the globe. It wants to become the biggest producer of the precious metal. Mission IT has mission to spread its business web around the globe and create strong core competency in offering its gold and mining products. Corporate Governance status and challenges Pan Africa is committed to give its highest standards of governance. It strives towards sound corporate governance processes and practices throughout the group. The board of directors conduct its business with the highest standards of corporate governance practices. They ensures business of enterprise with integrity and with best practices because board thinks that sound governing practices are fundamental for earning trust of stakeholders. Director’s previous record on managing public companies demonstrate that they are taking good care of the interest of shareholders (Melzer, 2011). The Enlarged groups are regularly managing and reviewing key business risk and financial risk which company is facing in its business operation. The Enlarged committee established remuneration committee which was comprising of three non- executive directors, it reviews their performances and determines remuneration of executive directors on their service and interest of shareholders (Robinson, & Robinson, 2018). It also determines payment of bonus, grants of options to the employees. It also establishes Audit committee which is responsible for financial performance and prospect of the company. The main purpose of its corporate governance committee is to raise awareness for economic development in Africa. It learns from the global policy on corporate governance in the context of African environment. They are recommending proper further training for their lending officers to understand corporate governance behaviour of their borrowers. They promote shareholders activism for developing corporate governance standards and practices (Visser, & Tolhurst, 2017). Pan Africa faced operational challenges in its mines at the time of underground production. This production was impacted because of delay in developing high grade platforms and 11 days loss of production days due to industrial action by employees. This protest was directed by the community pressure groups. As a result of this gold fell to 40611 oz. they were encountering unexpected fraction which was resulting into reduced gold production (Enoch et al, 2015). Company’s capital investment; existing or projected Pan Africa produced 160koz in the financial year 2018cf prior guidance of 157-160koz with the exclusive performance of underground operations at Evander. For the year 2019 management guided for 170koz which is materially above to its prior expectation as a construction is in progress at Elikhulu ahead of schedule. It is entering in its commission phase with its first gold expected in August and the full production two months later. It will add 52koz pa to its production profile. In its additional new opportunities it includes Egoli project, the Fairview sub-vertical shaft project and the Royal Sheba project. Its updated all0in valuation of Pan Africa is 17.53p plus the value of c 20.1, underground water srand ounces. This will add 0.17-4.15p/share, which depends on market conditions (Asiedu, Dzigbede, & Nti-Addae, 2015). It recently signed wage agreements at the Barberton Mines with the United Association of South Africa and National Union of Mines workers. Pan Africa’s profit steep fall in profit labour disruptions at Bremerton mines in South Africa. In January 2018, it came into exclusive negotiations with the joint administration of ASA resources group. To acquire its assets. Its loan accounts in Phoenix platinum to Sylvania Platinum have now completed. Its resources announced its annual results of June 30 and shows revenue drop of 15.5% year to year. The development of Elikhulu should increase output to 181koz in the next two financial year. It will replace production lost from Evander underground at much higher margin which will underpin our long term cash flow and earnings expectations. It has a $42.2 million net debt at the end of financial year 2017 after the payment of $8.1 million dividend in the late December (Love, & Roper, 2015). Company’s sources of finance used until the end of the year by the Pan African Resources Company Company’s capital investment is appropriate for the support of company’s growth. It has a good operating and financial capacity to borrow quickly. Its debt value is relatively low with 6.53% compared to overall benchmark and a good interest coverage level of 27.27x because of this it can borrow quickly. Company has maintained its quick and able profile from the previous year ending. Pan Africa is still in the rank among mid-tier producers by which they are paying dividend for its full financial year. Pan African has a target pay-out for the payment of dividends with the ration of 40% or net cash generated by operating activities. Pan African’s major capital requirement is related to the development of the Elikhuli project. Its maximum funding requirement of $90.3 million in financial year 2019 estimated by Edison at prevailing forex tax or contemporary gearing of 42% and leverage of 29.6%. Its debt is financed through ZAR 1bn credit facility plus a banking facility (Taylor, & Smits, 2018). For ensuring adequate working capital and continuation of funds for growth and operation projects, Pan Africa is finalising an additional standby facility which is approximately ZAR 100m. It also has Rand Merchant Bank which is providing PAF with all the necessary approvals for ZAR 1bn for five year debt facility for Elikhulu. They are predicting that PAF will break in its net debt EBITDA and the interest covenants. However the contingency is already been pre-empted by the providers of RCF and management. They have agreed to waive temporarily the net debt. After allowing the cash flow of sustainable capital and contractual debt repayments its net flow is generating by 40%. In financial year 2017 the board took its view that sale of Uitkomst will contribute to the dividend pay-out on the grounds of viable return to shareholders on the original price paid for the investment. They created an assumption that PAF is now pass its financial year 2018 dividend within the global context and in its expectation of financial year 2019, PAF will continue to have sixth highest dividend yield of its 62 ostensible metals companies who are paying dividends to its shareholders. By financial year 2020 they expect Elikhulu to be operating in its full capacity (Krzemien et al., 2016). There are several sources of finance used by Pan African Resources Company while raising the capital for its business. It is analyzed that company has increased its overall funding by mostly creating charge on its assets. There are several funding sources which have been used by Pan African Resources Company and shown in its annual report (Pan Africa Resources, (2017). Share issue- It is analyzed that Pan African Resources Company has increased its shareholding in its business by issue of its shares to the institutional investors. There are several major shareholders such as Investec emerging company, River and Mercantile UK, Alianz UK growth and AST Goldman Sachs multi Assets company. These all companies have invested their capital in the business of Pan African Resources Company. These are the biggest promoters who have been investing their capital in this company on timely basis. Pan African Resources Company has focused on raising capital from other sources instead of issue of shares. The increased share capital in business has also increased the cost of capital of company. Alliances with the other companies- It is the best method to raise capital from the market. It is analyzed that company may enter into the strategic alliance with the other organizations and for the same it might take some values and consideration. The alliance with the Investec emerging company, River and Mercantile UK, Alianz UK growth and AST Goldman Sachs multi Assets company has provided Pan African Resources Company to raise € 202 million for its business expansion. These investors have also undertaken their stakes in the businessexpansion plans of the company. The return asked by these investors is very high and it may result to higher cost of capital. Company should have gone for these sources of finance when it was unable to raise funds from the available source of funding (Pan Africa Resources, (2017). Retained earnings- Pan African Resources Company has also used its retained earning capital while expanding its business. IN 2015, it used its retained earnings in its business expansion. This was done by plugging back of its available funds in its business. it does not only provide the easy availability of the funds but also result to lower cost of capital. Company used € 94 million from its retained earning while expanding its business. It does not only increase the overall business outcomes but also provide company to expand its business with the easy availability of funding. Pan African Resources Company has been issue of providing the return to its investors due to the lack of its profit earning capacity in long run (Pan Africa Resources, (2017). Bank loan and overdraft- Pan African Resources Company has also raised € 114 million from the banks and financial institutions. It is determined that company was having strong brand image and due to this it was able to raise more funds from the banks and financial institutions. The cost of capital for raising funds from the banks was less costly for company as it was available at less than the cost of equity capital for company (Pan Africa Resources, (2017). Therefore, the crux of this gathered information is that company maintained strong sustainability and also raised possible capital from the different sources of finance. In future, if company wants to raise more funds then it could do so by issue of more debts capital. Due to the good profitability it would be easier for company to bear higher financial risk in its business. Furthermore, it is also reviewing its cost base and "strategic merits" of its portfolio to make its business more strong (Pan Africa Resources, (2017). Financial performance of - Pan African Resources Company In order to evaluate and analysis the financial performance of Pan African Resources Company, we could use ratio analysis, capital budgeting tool, cash flow analysis and top down analysis. In this case, we could use ratio analysis to determine the profitability, efficiency, solvency and market based outcomes of company. Liquidity ratio This ratio is used to evaluate financial capability of company to pay off its short term and long term debts out of available capital. The current ratio of Pan African Resources Company shows that company has reduced its liquidity investment in its current assets which has also resulted to reduced capital cash investment in its current assets. It has been observed that company has reduced its current ratio to 0.79 points in its latest quarter which is .5 points lower as compared to last four year data. (Gong, et al, 2018). Liquidity/Financial Health 2008-06 2009-06 2010-06 2011-06 2012-06 2013-06 2014-06 2015-06 2016-06 2017-06 Latest Qtr Current Ratio 1.33 0.81 2.5 1.77 3.76 1.11 0.98 0.77 0.68 0.94 0.79 Quick Ratio 1.27 0.75 2.34 1.6 2.33 0.69 0.62 0.47 0.44 0.57 0.65 The quick ratio of company was 2.33 in 2013 which was way too high as company was keeping high inventory in its inventory process. It has also negatively impacted the quick ratio by reducing its cash blockage in its quick assets. Profitability ratio The profitability ratio also shows the profit earning capacity of company and how it has changed its profit earning capacity throughout the time. The net profit margin of company has decreased to 6.2. This shows that company has lower down its profit earning capacity due to the reduced earning capacity and deteriorated market condition. It has shown that company need to improve its business performance to grow effectively. The return on equity capital is also decreased to 12 % due to the less earning available to company. Margins % of Sales 2008-06 2009-06 2010-06 2011-06 2012-06 2013-06 2014-06 2015-06 2016-06 2017-06 TTM Operating Margin 29.92 38.9 32.11 32.39 42.16 35.39 20.85 11.42 25.06 8.05 -0.25 Net Int Inc & Other 0.51 -8.12 0.23 0.96 -0.31 5.65 1.15 -0.17 -3.91 5.67 6.29 EBT Margin 30.43 30.78 32.34 33.35 41.85 41.04 22.01 11.26 21.15 13.71 6.05 Solvency ratio The solvency ratio showcases how well company has managed its debt and equity capital in its capital structure. It is analyzed that the interest coverage ratio of company has also gone down due to the increased business issues. Company has lower down its profitability which might impact the financial leverage and may result to destruction of the business if it is not enough to cover its interest expenses. The debt capital of Pan African Resources Company has also gone down which reflects that company has focused on keeping business safe and secure with a view to keep its business more sustainable in long run. The solvency ratio has showcased that company should focus on increasing the profitability if it wants to increase the debt funding in its business (Robinson, & Schwartz, 2017). Efficiency ratio The efficiency ratio also shows company’s ability to engage its capital in the business operating. The creditors turnover ratio has increased to 17 times which shows that company has effectively manage its business to reduce the capital blockage. The inventory turnover ratio has also decreased to 18 times which reveals that company has lower down its capital blockage in its inventory. The efficiency of Pan African Resources Company has increased with the decrease in its capital blockage. If company could lower down its cost of capital by efficiently deploying its funds efficiently then it might increase the overall profitability of company. Market based ratio The market based ratio is also shows that with the decrease in its profitability and efficiency it has faced high downfall in its share price. Company needs to improve its business performance if it wants to increase its overall dividend payment. Pan African Resources Company has followed profit based dividend policy therefore due to the decrease in its profitability it has also reduced its dividend payment to its shareholders. It has reduced its dividend payment to 12% in 2017 which is 7% lower since last three year. Share price movement of Pan African Resources Company The share price movement of Pan African Resources Company has been showing the negative business outcomes. It has been observed that due to the decreased profitability, company has faced high destruction in its share price movement. The share price of Pan African Resources Company has decreased by 8% since last one year which has happened due to the low amount of profitability and high financial leverage of organization. In the starting, 2017, company was having good amount of surge in its share price but after one year it lower down its overall share price. As per the investor’s point of view, Pan African Resources Company has been failing to create value on its investment. It is analyzed that if investors invest their capital in Pan African Resources Company then they will end up having zero capital in their business. It is analyzed that company has lower down their return on investment which might negatively impact the business growth (Ehiedu, 2014). Date Pan African Resources PLC (PAF.L) 31/08/2017 null 30/09/2017 13.318395 01/11/2017 14.771311 01/12/2017 12.834089 01/01/2018 12.76 01/02/2018 7 01/03/2018 7.17 31/03/2018 7.09 30/04/2018 7.4 31/05/2018 7.1 30/06/2018 7.27 31/07/2018 7.34 31/08/2018 7.9 14/09/2018 7.9 The share price movement of company is reflecting the negative outcomes. If investors invest their capital in Pan African Resources Company then they might end up having no value creation in their invested capital (Weygandt, Kimmel,. and Kieso, 2015). Conclusion The crux of the gathered information and analyzed made on the annual report of Pan African Resources Company is based on the investment decision of the investors. It is found that if investors invest their capital in Pan African Resources Company then they might face issue in creating value on the investment. Pan African Resources Company has been bearing the high financial leverage and may also destruct its business if it does not control its profitability and increased solvency ratio. The crux of this report is that investors should not invest their capital in Pan African Resources Company if they want to create value on their investment. However, there is chance that investors might have gain in their invested capital if they are ready to invest their capital in long run.