FACULTY OF BUSINESS AND MANAGEMENT BBPW...

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FACULTY OF BUSINESS AND MANAGEMENT

BBPW 3103

FINANCIAL MANAGEMENT 1

SEMESTER MAY 2012


TABLE OF CONTENT

NO. DESCRIPTION

1.0 INTRODUCTION OF THE TWO COMPANIES – PADINI

HOLDINGS BERHAD – COMPANY 1 AND MALAYAN FLOUR

MILLS BERHAD – COMPANY 2

2.0 COMPUTATION OF ASSET MANAGEMENT AND

PROFITABILITY RATIOS – COMPANY 1

PADINI HOLDINGS BERHAD

3.0 COMPUTATION OF ASSET MANAGEMENT AND

PROFITABILITY RATIOS – COMPANY 2

MALAYAN FLOUR MILLS BERHAD

4.0 ANALYSIS AND INTERPRETATION OF ASSET

MANAGEMENT AND PROFITABILITY RATIOS OF TWO

COMPANIES

5.0 CONCLUSION


Introduction of the two companies

COMPANY 1 : PADINI HOLDINGS BERHAD

Introduction of company 1

Companies name, business activities and business development

Vision

-to be the best fashion company ever

Mission

-to exceed customers’ expectation and our brands’ promise

Core value

-PADINI (wing from the heart)

Principal activities of company

Padini Holdings Berhad is investment holding companies. The have subsidiary companies.

All subsidiary companies were incorporated in Malaysia except for Padini International

Limited which was incorporated in Hong Kong Special Administrative Region of the

People’s Republic of China (“Hong Kong”).

Details of the subsidiary companies are as follows:-

Subsidiary companies of the Company Principal activities

Vincci Ladies’ Specialties Dealers of ladies’ shoes and accessories.

Centre Sdn. Bhd. (“Vincci”)

Padini Corporation Sdn. Bhd. Dealers of garments.

(“Padini Corporation”)

Seed Corporation Sdn. Bhd. (“Seed”) Dealers of garments and ancillary products.

Yee Fong Hung (Malaysia) Dealers of garments and ancillary products.

Sendirian Berhad (“Yee Fong Hung”)

Mikihouse Children’s Wear Dealers of children’s garments, maternity

Sdn. Bhd. (“Mikihouse”) wear and accessories.

Vincci Holdings Sdn. Bhd. Dormant.

(“Vincci Holdings”)

Padini Dot Com Sdn. Bhd. Provision of management services.

(“Padini Dot Com”)


The New World Garment Dormant.

Manufacturers Sdn. Bhd.

(“The New World Garment”)

Padini International Limited * Dealers of garments.

Director information

CHAIRMAN

Datuk Dr. Abdullah bin Abdul Rahman

MANAGING DIRECTOR

Yong Pang Chaun

DIRECTORS

Dato’ Zulkifli bin Abdul Rahman

Yong Lai Wah

Chong Chin Lin

Chan Kwai Heng

Sahid bin Mohamed Yasin

Cheong Chung Yet

COMPANY SECRETARIES Ho Mun Yee (MAICSA 0877877)

Liew Khoon Wan (MACS 00103)

AUDITORS Peter Chong & Co.

(formerly known as BKR Peter Chong)

Chartered Accountants

PRINCIPAL BANKERS

Standard Chartered Bank Malaysia Berhad

The Bank of Nova Scotia Berhad

REGISTERED OFFICE

3rd Floor

No. 17, Jalan Ipoh Kecil

50350 Kuala Lumpur

Tel : 03 - 40443235

Fax : 03 - 40413959

PRINCIPAL PLACE OF BUSINESS

No. 19, Lot 115, Jalan U1/20

Hicom Glenmarie Industrial Park

40150 Shah Alam

Selangor Darul Ehsan

Tel : 03 - 51233633

Fax : 03 - 78051066


SHARE REGISTRAR PFA Registration Services Sdn. Bhd.

Level 17, The Gardens

North Tower

Mid Valley City Lingkaran Syed Putra

59200 Kuala Lumpur

Tel : 03 - 22643883

Fax : 03 - 22821886

STOCK EXCHANGE LISTING Main Board of

Bursa Malaysia Securities Berhad

Corporate Structure for Padini Holdings Berhad

Corporate StructurBERHAD50202-A)

100%

MIKIHOUSE CHILDREN’S WEAR SDN. BHD. (164485-U)

100%

PADINI CORPORATION SDN. BHD. (22159-H)

100%

SEED CORPORATION SD

N. BHD. (194391-K)

100%

YEE FONG HUNG (MALAYSIA) SENDIRIAN BERHAD (15011-U)

100%

PADINI DOT COM SDN. BHD. (510558-H)

100%

VINCCI LADIES’ SPECIALTIES CENTRE SDN. BHD. (73404-H)

100%

VINCCI HOLDINGS SDN. BHD. (97644-K)

100%

THE NEW WORLD GARMENT MANUFACTURERS SDN. BHD. (80490-U)

100%

PADINI INTERNATIONAL LIMITED, HONG KONG (896012)

BUSINESS REVIEW – YEAR 2008 UNTIL YEAR 2010

The Group’s domestic operations had continued to be the main driver of its revenues and

profits, and garments, shoes, fashion accessories made up the bulk of the products offered for

sale. In the domestic market, our products are sold through the numerous retail stores and

consignment counters that the Group manages. There are also several Vincci franchise stores

in the smaller towns of Malaysia. In markets abroad, the products are sold mostly through

retail stores and counters managed by licensees and dealers.

The Group’s products are carried under the following brand names; Vincci, VNC, Vincci+,

Padini Authentics, PDI,Padini, Seed, Miki, and P&Co, all of which are owned by the Group.


The aforementioned brands are widely known by Malaysian consumers and are widely

available in the major urban shopping malls of Malaysia.

In addition to those, the Group also utilizes a great number of lesser known brands to market

the value-for-money merchandise that it produces

for sale in its Brands Outlet stores.

Group Financial Highlights

All in RM(,000)

2006 2007 2008 2009 2010

Revenue 286,107 316,866 383,306 475,477 520,880

Profit before taxation 39,519 44,007 57,659 67,610 86,280

Profit attributable to equity

holders of the Company 27,691 31,403 41,715 49,533 60,974

Basic earnings per share

(sen) based on

profit attributable to

equity shareholders* 22.02 24.24 31.71 37.64 46.34

Diluted earnings

per share (sen)* 21.84 24.21 NA NA NA

NA denotes not applicable as the ESOS expired on 2 October 2007.

Net assets 118,846 142,341 169,478 204,043 234,332

Net assets per share (sen) * 93.5 108.5 128.8 155.1 178.1

Dividend per share (sen) ^ 10sen 12.5sen 15sen 14sen 22.5sen

* Based on ordinary shares of RM0.50 each.


FINANCIAL RESULTS – YEAR 2008

For the financial year under review, the Group achieved a consolidated revenue of RM383.3

million, a growth of 21% over the previous year’s amount of RM316.9 million. Gross profits

rose in tandem by 24.7% over the same period, while profit before taxation grew by 31%,

from RM44 million achieved in the previous year to RM57.7 million in the current financial

year. Profit after taxation attributable to equity holders rose 32.8% to RM41.7 million when

compared to the amount of RM31.4 million achieved during the previous financial year.


For the financial year under review, the Group achieved consolidated revenues of RM475.5

million, a growth of 24% over the previous year’s amount of RM383.3 million. Gross profits

rose in tandem by 22.3% over the same period, while profit before taxation grew by 17.2%,

from RM57.7 million achieved in the previous year to RM67.6 million in the current

financial year. Profit after taxation attributable to equity holders rose 18.7% to RM49.5

million when compared to the amount of RM41.7 million achieved during the previous

financial year.


For the financial year under review, the Group achieved consolidated revenues of RM520.9

million, a growth of 9.5% over the previous year’s amount of RM475.5 million. Gross profits

rose in tandem by 11.9% over the same period, while profit before taxation grew by 27.7%,

from RM67.6 million achieved in the previous year to RM86.3 million in the current

financial year. Profit after taxation attributable to equity holders rose 23.2% to RM61 million

when compared to the amount of RM49.5 million achieved during the previous financial

year.


COMPANY 2 : MALAYA FLOUR MILLS BERHAD

Vision

-we aspire to be a leading food manufacturing interprise in the region

Mission

-we are the preferred provider and strategic partner in the industry. We drive operational

excellence by embracing a culture of continuous improvement. We add value to our

stakeholders by growing economy of scale.

Corporate Information

CHAIRMAN

Tan Sri Datuk Arshad bin Ayub

P.S.M., S.P.S.K., D.P.M.P., D.P.M.J., D.S.A.P.,

D.P.M.T., P.G.D.K., J.M.N.

MANAGING DIRECTOR

Teh Wee Chye

DIRECTORS

Lee Soon Lee,

Dato’ Hj Shaharuddin bin Hj Haron

Geh Cheng Hooi

Quah Ban Lee

Datuk Oh Chong Peng

AUDIT COMMITTEE

Dato’ Hj Shaharuddin bin Hj Haron

(Chairman and Independent Non-Executive Director)

Lee Soon Lee

(Non-Independent Non-Executive Director)

Geh Cheng Hooi

(Independent Non-Executive Director)

Tan Sri Datuk Arshad bin Ayub


Datuk Oh Chong Peng


SECRETARY

Mah Wai Mun (MAICSA 7009729)


REGISTERED OFFICE &

HEAD OFFICE

22nd Floor, Wisma MCA

Jalan Ampang, 50450 Kuala Lumpur

Tel. No: 03-2170 0999

Fax No: 03-2170 0888

Website: www.mfm.com.my

REGISTRARS

Symphony Share Registrars Sdn Bhd

Level 26, Menara Multi Purpose, Capital Square

No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur

Tel. No: 03-2721 2222

Fax No: 03-2721 2530

FACTORIES

Jalan David Sung, Batu Undan

32200 Lumut

Perak Darul Ridzuan

Lot 133, Jalan Pukal

Pasir Gudang Industrial Estate

81700 Pasir Gudang

Johor Darul Takzim

BRANCHES

• FEDERAL TERRITORY

Lot 40, Jalan E 1/4

Taman Ehsan Industrial Park

Kepong, 52100 Kuala Lumpur

MALAYAN FLOUR MILLS BERHAD (4260-M)

BRANCHES

• PENANG

4557, Jalan Heng Choon Thian

12000 Butterworth, Pulau Pinang

• PERAK

No. 2, Laluan Perusahaan 10

Kawasan Perusahaan Menglembu

31450 Ipoh

Perak Darul Ridzuan

• MALACCA

No. 1, Jalan PM3

Taman Perindustrian Merdeka

75350 Batu Berendam, Melaka


• JOHOR

Lot 133, Jalan Pukal

Pasir Gudang Industrial Estate

81700 Pasir Gudang

Johor Darul Takzim

• KELANTAN

Lot 1763, Kampong Dusun Raja

Jalan Cherang Chempaka Panji

16100 Kota Bharu, Kelantan Darul Naim

• PAHANG

B-5 Lorong Padang Lalang

14, Jalan Tanjung Api

25050 Kuantan

Pahang Darul Makmur

SUBSIDIARIES

• Vimaflour Ltd

• MFM International Ltd

• Mekong Flour Mills Ltd

• Dindings Soya & Multifeeds Sdn Berhad

(34884-U)

• MFM Feedmill Sdn Bhd (172615-X)

• Dindings Poultry Processing Sdn Bhd

(144808-P)

• Dindings Broiler Breeder Farm Sdn Bhd

(172600-T)

• Dindings Poultry Development Centre

Sdn Bhd (180044-A)

• Semakin Dinamik Sdn Bhd (185533-V)

• Syarikat Pengangkutan Lumut Sdn Bhd

(51336-M)

• Muda Fibre Manufacturing Sdn Bhd (48785-V)

• Dindings Grand Parent Farm Sdn Bhd

(144962-W)

• MFM Property Sdn Bhd (176691-P)

• Dindings Trading Sdn Bhd (754079-T)

• MFM Ltd

PRINCIPAL BANKERS

• Malayan Banking Berhad (3813-K)

• HSBC Bank Malaysia Berhad (127776-V)

• Alliance Bank Malaysia Bhd (88103-W)

• Deutsche Bank (Malaysia) Bhd (312552-W)

• OCBC Bank (Malaysia) Bhd (29548-W)

• Bank Islam Malaysia Berhad (98127-X)


STOCK EXCHANGE LISTING

Bursa Malaysia Securities Berhad

- Main Board (Consumer Products Sector)

Stock Code: 3662

SOLICITORS

Isharidah, Ho, Chong & Menon

Skrine

AUDITORS

KPMG

Principal of company activities

The Company is principally engaged in the business of milling and selling wheat flour and

trading in grains and other allied products, whilst the principal activities of the subsidiaries

are as stated as follows: -

Name of subsidiary Principal activities interest

2010 2009

% %

MFM Property Sdn. Bhd. Dormant

Dindings Grand Parent Farm Dormant

Sdn. Bhd.

MFM Ltd. Dormant

Premier Grain Sdn. Bhd. Trading in corn, soyabean meal and other feed

ingredients. The Company commenced its operations

on 1 April 2010.

Subsidiary of MFM International

Ltd.

Mekong Flour Mills Ltd. Milling and selling wheat fl our

(incorporated in Vietnam) together with its allied products


Computation of asset management and profitability ratios COMPANY 1 AND

COMPANY 2

Below is the asset management and profitability ratios explanation.

Asset management ratio is for measure the efficiency of the management in using the assets

and specific accounts to generate sales or cash.

Can be divided into 6 ratio:-

1. Account receivable turnover

Account receivables turnover measures the ability of company to collect debts from

customers. It provides the total of account receivables collected through the year. The higher

of ratio, that mean, company better in the following matters:-

- The company can collect debts from customers quickly

- The company has low bad debts

- The company can use the funds/money for next investment

Calculation of account receivables is net credit sales revenue if unavailable, use the total sales

of company divided by account receivables or average account receivables. Account

receivables is mean the receivable will company received such trade receivable and other

receivables which related to the business and trade in nature. The deposits and prepayment

will deduct from the account receivables due to the money we need to put for run business

such as deposit. For prepayment is advance payment to our expenses such insurance, road tax

and etc. Because of that, we need to minus the deposits and prepayment.

Formula : Credit sales

Account receivables

2. Average collection period

Show the average days taken by company to collect the account receivables. The comparison

the efficiency of the company in collecting debts from its customers.

Formula : 360 days

Account receivables turnover

Or Account receivables

Yearly sales/360


3. Inventory turnover

Measures the efficiency of inventory management. It shows the number of times inventory

can be sold in a year. The higher the inventory turnover, that mean company shows is able to

sell its inventory very fast and quick.

Formula : Cost of goods sold/cost of sales

Inventory

4. Average inventory sales period

Average inventory sales period shows number of days taken to make one round of inventory

sales. The higher of average inventory sales period is not good for the company. The average

inventory is less days which is very goods and better.

Formula : 360 days

Inventory turnover

Or Inventory

Cost of goods sold/cost of sales/360

5. Fixed Asset Turnover

Shows the efficiency of the company in using its fixed assets to generate sales. The higher

ratio, is better because its shows efficient of asset management.

Formula : Sales

Net Fixed Assets

6. Total Asset Turnover

Shows the efficiency of company using all its assets to generate sales. The higher ratios is

much better because show company efficient in use of assets. It is also show overall

efficiency of company operation.

Formula : Sales

Totals Assets


Profitability Ratios is for measures the effectiveness of the company in generate returns from

investment and sales. Its is important to investors. It also for determine the business

efficiency and effectiveness in achieve its profit objective.

Profitability Ratios divided to 6 ratios which as follows :-

1. Gross profit margin

Measures the profit for each ringgit of sales that can be used to pay sales and administration

expenses. The higher the gross profit margin it much better because it show the lower

expenditure or costs in implementing sales activities.

Formula : Gross profit x 100%

Sales

2. Net profit margin

Measures the ability of company generate net profit from each ringgi of sale after deduct all

expenses including the cost of goods sold, sales expenses, general and administration

expenses. The higher of ratios, it shows company efficient in purchase with low purchasing

costs.

Formula : Profit after tax x 100%

Sales

3. Operating profit margin

Measures the efficiency of operations in reducing costs and increase returns before interest

and tax. Efficient if the ratios is higher because show company operate efficiently.

Formula : Operating Profit x 100%

Sales


4. Return on assets

Measures the effectiveness of the company in using assets to generate profit. The higher ratio

is good because show company efficiency in using its assets to generate profit.


Total assets

5. Return on equity

Measures efficiency of company in generate profit for its ordinary shareholders. The higher

ratios is shows company able to generate high profit for its owners.


Shareholders equity

6. Earning per share

Calculate the net profit that is generate from each ordinary share. This information is often

given priority by the management and investors which is very important indication of

company success. Bigger value of ratios is show better status for the shareholders.

Formula : Profit available to ordinary shareholders

Number of ordinary shares issued


Computation of asset management and profitability ratios for Company 1 – Padini Holdings

Berhad

Asset management – Padini Holdings Berhad in year 2008, 2009 and 2010

Ratio Formula Year 2008

(RM)

Year 2009

(RM)

Year 2010

(RM)

Account Receivables Turnover

Credit sales or total sales

Account receivable

380,850,000

12,319,000

= 30.91 times

471,697,000

11,307,000

= 41.71 times

516,664,000

16,119,000

= 32.05 times

Average Collection Period

360 days

______________________

Account receivable turnover

360 days

30.91 times

= 11.64 days

360 days

41.71 times

= 8.63 days

360 days

32.05 times

= 11.23 days

Inventory Turnover

Cost of good sold/cost of sales

Inventory

192,353,000

116,113,000

= 1.65 times

241,958,000

91,878,000

= 2.63 times

259,547,000

76,554,000

= 3.39 times

Average Inventory Sales

Period

360 days

______________________

Inventory turnover

360 days

1.65 times

= 218.18 days

360 days

2.63 times

= 136.88 days

360 days

3.39 times

= 106.19 days

Fixed Assets Turnover

Sales

Net Fixed Assets

380,850,000

73,274,000

= 5.19 times

471,697,000

78,481,000

= 6.01 times

516,664,000

82,623,000

= 6.25 times

Total Asset Turnover

Sales

Total assets

380,850,000

264,314,000

= 1.44 times

471,697,000

290,720,000

= 1.62 times

516,664,000

356,582,000

= 1.44 times


Profitability ratio – Padini Holdings Berhad in year 2008, 2009 and 2010


(RM)

Year 2009

(RM)

Year 2010

(RM)

Gross profit margin

Gross profit x 100%

Sales

190,953,000 x100%

380,850,000

= 50.13%

233,519,000 x100%

471,697,000

= 49.50%

261,333,000x100%

516,664,000

= 50.58%

Net profit margin

Profit after tax x 100%

Sales

41,750,000 x100%

380,850,000

= 10.96%

49,533,000 x100%

471,697,000

= 10.50%

60,974,000 x100%

516,664,000

= 11.80%

Operating profit margin

Operating profit x 100%

Sales

58,428,000 x100%

380,850,000

= 15.34%

69,135,000 x100%

471,697,000

= 14.65%

87,374,000 x100%

516,664,000

= 16.91%

Return on assets


Total assets

41,750,000 x100%

264,314,000

= 15.79%

49,533,000 x100%

290,720,000

= 17.03%

60,974,000 x100%

356,582,000

= 17.09%

Return on equity


Shareholders equity

41,750,000 x100%

169,478,000

= 24.63%

190,953,000 x100%

380,850,000

= 17.03%

60,974,000 x100%

234,332,000

= 26.02%

Earnings per share

Profit available to ordinary shareholders


RM31.71

RM37.64

RM46.34


Computation of asset management and profitability ratios for Company 1 – Malaya Flour

Mills Berhad

Asset management – Malayan Flour Mills Berhad in year 2008, 2009 and 2010


(RM)

Year 2009

(RM)

Year 2010

(RM)

Account Receivables Turnover

Credit sales or total sales

Account receivable

1,198,778,000

195,239,000

= 6.14 times

1,201,053,000

187,364,000

= 6.41 times

1,555,091,000

217,628,000

= 7.14 times

Average Collection Period

360 days

______________________


360 days

6.14 times

= 58.63 days

360 days

6.41 times

= 56.16 days

360 days

7.14 times

= 50.42 days

Inventory Turnover

Cost of good sold/cost of sales

Inventory

1,017,888,000

282,000,000

= 3.60 times

1,010,891,000

249,184,000

= 4.05 times

1,317,134,000

324,940,000

= 4.05 times

Average Inventory Sales

Period

360 days

______________________

Inventory turnover

360 days

3.60 times

= 100 days

360 days

4.05 times

= 88.88 days

360 days

4.05 times

= 88.88 days

Fixed Assets Turnover

Sales

Net Fixed Assets

1,198,778,000

203,032,000

= 5.90 times

1,201,053,000

203,714,000

= 5.89 times

1,555,091,000

229,784,000

= 6.76 times

Total Asset Turnover

Sales

Total assets

1,198,778,000

797,585,000

= 1.50 times

1,201,053,000

796,338,000

= 1.50 times

1,555,091,000

1,015,712,000

= 1.53 times


Profitability ratio – Malayan Flour Mills Berhad in year 2008, 2009 and 2010


(RM)

Year 2009

(RM)

Year 2010

(RM)

Gross profit margin

Gross profit x 100%

Sales

180,890,000 x100%

1,198,778,000

= 15.08%

190,162,000 x100%

1,201,053,000

= 15.83%

237,957,000x100%

1,555,091,000

= 15.30%

Net profit margin


Sales

61,911,000 x100%

1,198,778,000

= 5.16%

72,281,000 x100%

1,201,053,000

= 6.01%

100,326,000 x100%

1,555,091,000

= 6.45%


Operating profit x 100%

Sales

81,227,000 x100%

1,198,778,000

= 6.77%

92,210,000 x100%

1,201,053,000

=8.23 %

128,036,000 x100%

1,555,091,000

= 7.67%

Return on assets


Total assets

61,911,000 x100%

797,585,000

= 7.76%

72,281,000 x100%

796,338,000

= 9.07%

100,326,000 x100%

1,015,712,000

= 9.87%

Return on equity


Shareholders equity

61,911,000 x100%

388,686,000

= 15.93%

72,281,000 x100%

425,435,000

= 16.98%

100,326,000 x100%

469,073,000

= 21.38%

Earnings per share

Profit available to ordinary shareholders


RM53.85

RM58.41

RM78.80


Analysis and interpretation of asset management and profitability ratios of the two

companies.

Company 1 : Padini Holdings Berhad

Account receivable turnover is for measure ability for the company to collect debts from their

customers. It is show how the company can collect debts from customer which company can

and able to reinvestment back the money in the their business to generate more profit.

For Padini, for the year 2008, the account receivable turnover is 30.91 times. For the year

2009 increase by 1.14 times which is 41.71, for the year 2010 is reduced by 9.66 which is

32.05 times. This show company can collect debts from customers very fast in year 2008

which is 30.91 times. In year 2009, increase very high which is 41.71 times. However, in year

2010, the account receivable is reduced. It is show company unable to collect debts from

customers like in year 2009. The company sales also is increased year by year from 2008,

2009 and 2010.

In year 2008 and 2009, the account receivable turnover can see company has low bad debts

and the can use money for the next investment. In year 2010, it could be company face with

inefficiency in their collection department to call and ask for the payment.

Average collection period

Company able to collect payment with customers approximately 360 days in one year. This

average collection period can show how company able to collect the payment for account

receivable of the company. In year 2008, company average collection period is 11.64 days,

year 2009 is very efficient which is 8.63 only days. However, in year 2010, the average for

the collection is 11.23 days. The overall of the average collection period is very good for each

year if compare to Malaya Flour Mills Berhad or compare to other company, the average of

Padini is very good.This is because industry trading like clothes is different compare to

industry manufacturing such as Malayan Flour Mills Berhad. Company activity for

manufacturing company and trading is very different due to the process of the business.

Industry average is 44.3 days., Padini has much better average collection period which is less

than 30 days. It is because trading company and their also have own brand and outlets. We

can say Padini has practical collection period which can collect payment from customers

within period specific by Padini. This is show satisfactory.

Inventory turnover

Is measure efficiency of company to monitor inventory or inventory management. It show

how many times the inventory can be sold in every year. The higher of inventory turnover, it

show company level each year able to sell the inventories very fast and efficiency in monitor

company inventory to avoid the obsolete stocks. In year 2008, company can sold their

inventory 1.65 times only, in year 2009 is 2.63 times and in year 2010 is 3.39 times. We can


see the improvement of management of inventory of Padini. However, if compare to industry

average which is 6.6 times, the padini has very low inventory turnover.

Average inventory sales period

It measure number days taken to make one round of inventory sales. If less the days which is

not high average consider very good because show company not takes longer times to sell the

inventory. Padini show very unsatisfactory. In year 2008, padini takes 218.18 days to make

one round inventory sales. In year 2009, is 136.88 days and year 2010 is 106.19 days. If

compare to every year, Padini has improvement on the number of days taken to make one

round of inventory sales but compare to industry average is unsatisfactory. Industry average

is 55.30 days. The average inventory also can shows company takes shorter time to sell its

inventory. However, Padini has unsatisfactory on the sell its inventory.

Fixed asset turnover

It shows efficiency company use fixed assets to generate sales. The higher ratio is very good

because efficient in asset management. Padini show fixed assets turnover in year 2008 is 5.19

times, year 2009 is 6.01 times and in year 2010 is 6.25 times. Padini show efficiency in use

fixed asset including properties to generate sales.

Total asset turnover

It shows efficiency company using all assets to generate sales. Higher is show very good and

high efficiency/more efficient. Padini, in year 2008 show 1.44 times, year 2009 is 1.62 times,

year 2010 is 1.44 times. From 2008 and 2009, Padini show satisfactory, it is mean Padini

efficient on usage of the all the assets.

Analysis and interpretation of profitability ratios for Padini Holdings Berhad.

Profitability ration measures the effectiveness of company in generating returns from

investment and sales. It show business efficient and efficiency to achieve company profit.

Gross profit margin

Year 2008, padini show 50.13%, year 2009 is 49.50%, year 2010 is 50.58%. From 2008 to

2009 is reduced and increased back in year 2010. It show satisfactory. It show profit each

ringgit of sales can be used to pay sales and administration expenses. Padini show lower

expenses or costs involved in implementing sales activity. Industry average is 30%. Padini

show satisfactory on gross profit margin compare industry average.

Net profit margin

Year 2008,Padini show 10.96%, year 2009 show 10.50%, year 2010 is 11.80%. Industry

average is 6.4%.Padini show ability of company generate net profit from each ringgit of sale


after deducting all expenses. The higher of net profit margin show efficient on purchase

management with low purchasing costs. Year 2008 to 2009 is reduced however year 2010 is

was increased. Padini also generate 10.96 sen in year 2008, 10.50 sen in year 2009 and 11.80

sen in year 2010 is higher compare to industry average 6.4 sen. Overall in net profit margin,

padini show satisfactory.


It show efficiency of operation in reducing costs and increase returns before tax and

interest.Padini show in year 2008 is 15.34%, year 2009 is 14.65%, year 2010 is 16.91%.

From 2008 to 2009 is reduced but from 2009 to 2010 is increase. Padini show able to operate

efficiency in order to achieve low cost but high returns. Industry average is 10%. Padini show

satisfactory.

Return on assets

Padini show in year 2008 is 15.79%, year 2009 is 17.03 % and year 2010 is 17.09%. It show

increased year by year. It show satisfactory compare to industry average of 4.8%. Padini

show effectiveness in using its assets to generate profit. Management of padini efficiency in

use all assets to generate company profit.

Return on equity

Padini show in year 2008 is 24.63%, year 2009 is 17.03% and year 2010 is 26.02%. The

ratios is reduce from 2008 to 2009 but increase back in year 2010. The higher of the ratio

show company efficiency in generate profit for shareholders which refer to shareholder hold

ordinary shares. Padini is more satisfactory in generating profit for company shareholders.

Industry average is 8%. This show the management of Padini more efficient compared to the

industry average.

Earnings Per Share

It show the net profit that is generated from each ordinary share. It is given priority to the

management and investors because show company success and performances. The higher

value, is good benefit to ordinary shareholders. Padini shows RM31.71 in year 2008, year

2009 is RM37.64 and year 2010 is RM46.34. We can see the earnings per shares increase

every year and show more and good satisfactory compare to industry average. Industry

average RM0.26. Padini obtained RM31.71 for each unit of shares issued in year 2008,

RM37.64 in year 2009 and RM46.34 in year 2010. Overall the earnings per share is very

satisfactory.


Analysis and interpretation of asset management and profitability ratios of Malayan

Flour Mills Berhad


For Malayan Flour Mills, for the year 2008, the account receivable turnover is 6.14 times. For

the year 2009 is 6.41 times and for the year 2010 is 7.14 times. It show increase every year.

Industry average is 8.24 times. The account receivables turnover unsatisfactory compared to

industry average. This is could be inefficiency collection department to collect debts from

customers.

Average collection period

In year 2008, company average collection period is 58.63 days, year 2009 is 56.16 days, in

year 2010, is 50.42 days. The overall of the average collection period is good because more

less days is show efficiency of the company but is not satisfactory industry average. Industry

average is 44.3 days. It show company us unsatisfactory compare to industry average. It is

show company less efficient in collecting debts from customers. It is could be less follow up

with customers on the outstanding payments. If this company credit period is 30 days that

mean the average of collection of period is unsatisfactory. However, if company credit period

is 60 days, the average collection period is less than 60 days it show practical collection

period.

Inventory turnover

In year 2008, company can sold their inventory 3.60 times only, in year 2009 is 4.05 times

and in year 2010 is same 4.05 times. We can see the improvement of management of

inventory of company. However, if compare to industry average which is 6.6 times, the

company has very low inventory turnover. It show company unable to sell its inventory

quickly. It could be company keep surplus inventory and does provide any return. That mean

company will incurred transportation and holding costs of the inventory and might be

company risks on damage or obsolete. Average, company show unsatisfactory compare to

industry average.

Average inventory sales period

It measure number days taken to make one round of inventory sales. If less the days which is

not high average consider very good because show company not takes longer times to sell the

inventory. Company show very unsatisfactory. In year 2008, takes 100 days to make one

round inventory sales. In year 2009, is 88.88 days and year 2010 is 88.88 days. No changes in

the year 2009 and 2010.


Industry average is 55.30 days. Company show unsatisfactory on average compare to

industry average of 55.30 days. It is show company unable to sell the inventory on specific

period and need to take longer time to sell it. The company average inventory sales period

show company takes mor times to sell its inventory compared to the other companies in the

industry.

Fixed asset turnover

It shows efficiency company use fixed assets to generate sales. The higher ratio is very good

because efficient in asset management. Company show fixed assets turnover in year 2008 is

5.90 times, year 2009 is 5.89 times and in year 2010 is 6.76 times. Company show efficiency

in use fixed asset including properties to generate sales. Industry average is 1.35 times. It

show good satisfactory compare to industry average. The turnover show company manage to

handle and maximum used of all the fixed assets on the generating sales for the company.

Total asset turnover

It shows efficiency company using all assets to generate sales. Higher is show very good and

high efficiency/more efficient. In year 2008 show 1.50 times, year 2009 is 1.50 times, year

2010 is 1.53 times. Industry average is 0.75 times. Company shows high total asset turnover

compare to industry average due to company maximum used of all the assets in generating

company sales.This ratios show company overall efficiency of the company operation. This is

show very and good satisfactory compare to industry average.


Analysis and interpretation of profitability ratios for Malayan Flour Mills Berhad

Gross profit margin

Year 2008, company show 15.08%, year 2009 is 15.83%, year 2010 is 15.30%. From 2008 to

2009 is increase and reduce in year 2010. It show unsatisfactory. Industry average is 30%.

This show purchase management is less efficient and unable to handle cost of company. The

gross profit margin less than industry average compare to other companies in the industry.

Company not satisfactory on the achieve lower expenses or cost of company.

Net profit margin

Year 2008,Company show 5.16%, year 2009 show 6.01%, year 2010 is 6.45%. Industry

average is 6.4%. Company show unsatisfactory in year 2008 and 2009 because below

industry average. In year 2010, show moderate satisfactory because above industry average

which is more 0.05 % compare with industry average. We can see company generate only

5.16 sen in year 2008, 6.01 sen in year 2009 and 6.45 sen in year 2010. Overall in net profit

margin, company show unsatisfactory. From the ratios, we can see company unable to

achieve better purchasing costs.


It show efficiency of operation in reducing costs and increase returns before tax and

interest.Company show in year 2008 is 6.77%, year 2009 is 8.23%, year 2010 is 7.67%. From

2008 to 2009 is increase but from 2009 to 2010 is decrease. Company show very

unsatisfactory operating profit margin ratios compare to industry average 10%. This means

company unable to achieve better margin and show is not operate efficiently. Company not

efficient in its operation and control its operating expenditures to generate higher earnings

before interest and tax.

Return on assets

Company show in year 2008 is 7.76%, year 2009 is 9.07 % and year 2010 is 9.87%. It show

increased year by year. It show very satisfactory compare to industry average of 4.8%.

Company show effectiveness in using its assets to generate profit. Management of Company

efficiency in use all assets to generate company profit.


Return on equity

Company show in year 2008 is 15.93%, year 2009 is 16.98% and year 2010 is 21.38%. The

ratios is increase from 2008 to 2010. The higher of the ratio show company efficiency in

generate profit for shareholders which refer to shareholder hold ordinary shares. Company is

more satisfactory in generating profit for company shareholders. Industry average is 8%. This

show the management of company more efficient compared to the industry average.

Earnings Per Share

It show the net profit that is generated from each ordinary share. It is given priority to the

management and investors because show company success and performances. The higher

value, is good benefit to ordinary shareholders. Company shows RM53.85 in year 2008, year

2009 is RM58.41 and year 2010 is RM78.80. We can see the earnings per shares increase

every year and show more and good satisfactory compare to industry average. Industry

average RM0.26. Company obtained RM53.85 for each unit of shares issued in year 2008,

RM58.41 in year 2009 and RM78.80 in year 2010. Overall the earnings per share is very

satisfactory.


Conclusion

For Padini Holdings Berhad, overall for the asset management t is very good because account

receivables turnover, average collection period is good turnover. However, only the inventory

turnover and average inventory sales period is not satisfactory to the company. The inventory

management company need to do something to achieve good turnover in management of

inventory. If we see the sales of company, from year 2008 to 2010 is was increased only and

not decreased. For fixed assets turnover and total assets turnover, all the turnover is show

very good to the company. From above calculation which is involved 6 calculation of ratios,

it measures company efficiency in using the assets and specific accounts to generate

sales/cash

For profitability ratios, Padini show overall is satisfactory because ratios is show very goods

if compare to Company 2. Padini show goods in lower expenditure involved in implementing

sales activities. They also has good purchase management and cost to get lower expenditure,

and also good in collection on debts from customers. Padini also show good operation which

can achieved the efficiency of company operation. The operating profit margin is satisfactory

to the industry average. From assets scope, Padini achieve maximum used of their assets to

generate the sales to the company. They manage to use all the assets in order to generate good

profit to the company. This is performance can see in ratios return on assets and return on

equity. It is show satisfactory overall. Padini also can generate good earnings per share from

year 2008 until 2010.

Conclusion and summary for padini, this company overall is satisfactory.Only Padini need to

do improvement in inventory scope. They need to increase the inventory turnover and

average inventory sales period to achieve good management in inventory company. If they

can improve this two ratio in asset management, that mean Padini can get good performance

company and will achieve good profit and achieve company objective.

For Company 2, Malayan Flour Mills Berhad, we can see every year the sales is increased

like Padini but for this company most of asset management is not satisfactory to the

company. For account receivables turnover, average collection period, inventory turnover,

average inventory sales period is show unsatisfactory if compare to industry average. It show

this company less productive on generated sales and profit to the company. It also do not

have good management on the inventory of company. Fixed assets turnover and total assets

turnover only show satisfactory if compare to the industry average. Overall for asset

management for Malayan Flour Mills Berhad show unsatisfactory. That mean this company

inefficiency in using the assets and specific accounts to generate sales or cash.

For profitability ratios, this company show unsatisfactory in gross profit margin, net profit

margin, operating profit margin. It show satisfactory in return on assets, return on equity and

earnings per share. It mean this company not effectiveness in generating returns from

investments and sales. It also can show how company efficiency and effectiveness in

achieving its profit objective. Only 3 ratios which are return on assets, return on equity and


earnings per shares show above industry average and show satisfactory to the company. It is

mean company manage to use all the asset to generate profit to the company. It consider

maximum use of all company assets.

Conclusion and summary for Malayan Flour Mills Berhad, overall this company show

unsatisfactory in asset management and profitability ratios. This company need improvement

in a lot of area in management which is how to collect debts from customers, how to manage

inventory efficiency, how to get lower expenditure and cost, how purchase management

achieve low purchasing costs for the company, how company to operate efficiently. From

usage of company assets, this company able to achieve above industry average. That mean

this company efficiency in use company assets to generate sales to the company. However,

overall this company need so much improvement to achieve company objective in future.


6.0 References

1. Assoc Prof Dr Yusnidah Ibrahim, Faudziah Zainal Abidin, Norlida Abd Manab, Rusmawati

Ismail, Zaemah Zainuddin, (2011). Financial Management 1 Open University Malaysia.

2. Padini Holdings Berhad. (2012). The Company Annual Report. [ONLINE]. Available:

http://announcements.bursamalaysia.com/PADINI-AnnualReport2010.pdf



3. Malayan Flour Mills Berhad. (2012). The Company Annual Report. [ONLINE]. Available:

http://announcements.bursamalaysia.com /MALAYAN-AnnualReport2010.pdf




ATTACHMENT INCOME STATEMENT AND BALANCE SHEET FOR PADINI

HOLDINGS BERHAD FOR THE YEAR 2008, 2009, 2010

2008

(RM)’000

2009

(RM)’000

2010

RM’000

Revenue 383,306 475,477 520,880

Cost of sales (192,353) (241,958) (259,547)

Gross profit 190,953 233,519 261,333

Other operating income 4,628 4,938 5,789

Selling and distribution

costs

(106,113) (128,126) (135,177)

Administration expenses (31,040) (41,196) (44,571)

Profit from operations 58,428 69,135 87,374

Finance costs (769) (1,525) (1,094)

Profit before taxation 57,659 67,610 86,280

Taxation (15,909) (18,077) (25,306)

Profit for the financial year 41,750 49,533 60,974

Attributable to:

Equity holders of the

company

41,715 49,533 60,974

Minority interest 35

Earnings per share of

RM0.50 each (sen)

31.71 37.64 46.34

Note 21 for the revenue – Group

Revenue 2008

RM’000

2009

RM’000

2010

RM’000

Commission income 2,428 3,780 4,216

Dividend income 28 - -

Sale of goods 380,850 471,697 516,664

Total sales or sales is refer to sale of goods.


2008

(RM)’000

2009

(RM)’000

2010

RM’000

ASSETS

Non-current assets

Property, plant and equipment 70,748 75,887 79,953

Intangible asset - - 6,991

Investment properties 1,681 1,700 1,870

Prepaid land lease payments 845 894 800

Investment 697 684 684

Deferred tax assets 473 2,047 1,959

Total non-current assets 81,212 92,257

Current assets

Non-current assets held for sale 1,716

Inventories 116,113 91,878 76,554

Receivables 30,199 33,064 32,561

Tax asset 178 - 270

Shirt term investment 19,868 18,945 19,915

Deposit, cash and bank balances 21,796 65,621 135,025

Total current assets 189,870 209,508 264,325

TOTAL ASSETS 264,314 290,720 356,582

EQUITY AND LIABILITIES

Equity attributable to equity holders of

the company

Share capital 65,791 65,791 65,791

Reserves 103,687 138,252 168,541

Total equity 169,478 204,043 234,332

LIABILITIES

Non-current liabilities

Borrowings 3,195 3,210 10,125

Deferred tax liabilities 19 194 774

Total non-current liabilities 3,214 3,404 10,899

Current liabilities

Payables 60,757 44,260 74,676

Borrowings 25,002 28,636 26,128

Tax liabilities 4,796 8,740 6,865

Provision 1,067 1,637 3,682

Total current liabilities 91,622 83,273 111,351

Total liabilities 94,836 86,677 122,250


Account receivables is trade receivables exclude prepayment, other receivable(non

trade), deposit.

TOTAL EQUITY AND LIABILITIES 264,314 290,720 356,582

2008

RM’000

2009

RM’000

2010

RM’000

Trade receivables 12319 11307 16119

Other receivables

and prepayment

4834 7718 1051

Deposit 13046 14039 15391

Total 30199 33064 32561


ATTACHMENT INCOME STATEMENT AND BALANCE SHEET FOR MALAYAN

FLOUR MILLS BERHAD FOR THE YEAR 2008, 2009, 2010

2008

(RM)’000

2009

(RM)’000

2010

RM’000

Revenue 1,198,778 1,201,053 1,555,091

Cost of goods sold (1,017,888) (1,010,891) (1,317,134)

Gross profit 180,890 190,162 237,957

Other income 11,498 6,620 21,153

Distribution and selling

expenses

(61,137) (67,519) (78,750)

Administration expenses (27,265) (25,083) (33,596)

Other expenses (16,290) (7,375) (20,635)

Results from operating

activities

87,696 96,805 126,129

Interest expenses (14,868) (9,870) (8,136)

Interest income 8,399 5,275 10,043

Operating profit 81,227 92,201 128,036

Share of loss of equity

accounted associates, net of

tax

(512) (176) (143)

Profit before tax 80,715 92,034 127,893

Tax expenses (18,804) (19,753) (27,567)

Profit for the year 61,911 72,281 100,326

Profit attributable to:

Owners of the company 57,971 62,879 84,824

Minority interest 3,940 9,402 15,502

Profit for the year 61,911 72,281 100,326

Basic earnings per ordinary

share-sen

53.85 58.41 78.80


2008

(RM)’000

2009

(RM)’000

2010

RM’000

ASSETS

Non-current assets

Property, plant and equipment 197356 198095 224222

Intangible asset 3339 2580 1903

Investment properties 5676 5619 5562

Investment in subsidiaries - - -

Investment in an associate 319 143 -

Other investment 112 94 -

Deferred tax assets 2593 2596 4131

Total non-current assets 209395 209127 235,818

Current assets

Trade and other receivable 201386 193210 229,065

Prepayment and other assets 282000 2544 3825

Inventories 748 249184 324940

Current tax assets 104056 94 90

Cash and cash equivalents 104056 142179 221974

Total current assets 107645 796338 779894

281041

TOTAL ASSETS 388686 796338 1015712

EQUITY

Share capital 107645 107645 107645

Reserves 281041 317790 361428

Total equity attributable to owners of

the company

388686 425435 469073

Minority interests 33571 39340 53762

Total equity 422257 464775 522835

LIABILITIES

Deferred tax liabilities 6889 7200 7100

Total non-current liabilities 6889 7200 7100

Trade and other payables including

derivaties

82206 84895 87407

Loans and Borrowings 279908 229439 385172

Current tax liabilities 2288 5992 13198

Dividend payable 4037 4037 -

Total current liabilities 368439 324363 485777


For account receivable , we take the trade receivables only. Exclude the other receivables –

non trade, deposit and prepayment.

Total liabilities 375328 331563 492877

TOTAL EQUITY AND LIABILITIES 797585 796338 1015712

2008

RM’000

2009

RM’000

2010

RM’000

Trade receivables 195239 187364 217628

Other receivables –

non trade

2725 4582 9782

Deposit 978 1264 1655

Prepayment 2444 2544 -

Total 201386 195754 229065

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