PAGE TABLE OF CONTENT 1. INTRODUCTION 1.1 SIZE OF THE COMPANY 3 2.0 FINANCIAL REPORT 2.1ELEMENTS OF FINANCIAL REPORT 2.

2 ACCOUNTING SYSTEM 2.3 CONCEPT AND CONVENTION 2.4 CORPORATE GOVERNANCE 3.0 4.0 REPORTS AND SIGNIFICANT RATIO ANALYSIS 4.1 CLASSIFICATION OF RATIOS 4.2.0 PROFITABAILITY RATIOS 4.2.1 NET PROFIT MARGIN 4.2.2 GROSS PROFIT MARGIN 4.2.3 RETURN TO SHARE HOLDERS EQUITY 4.2.4 RETURN ON CAPITAL EMPLOYED 4.2.5 RETURN ON INVESTMENT 5.0 CASH AND WORKING CAPITAL MANAGEMENT 6.0 PERFORMANCE EVALUATION 6.1 PROFITABILITY 7.0 QUALITATIVE MEASURE 8.0 CONCLUSION AND RECOMMENDATION 9.0 REFERENCE 3 3 3-4 4 5 6 6 6 6 7 7 7 7 8-9 2 2

10 10-11 12 13

10.0 APPENDICES 10.1 APPENDIX 1 10.2 APPENDIX 2 10.3 APPENDIX 3

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15 16-17

1.0 INTRODUCTION Scomi Group Berhad is a Malaysian Company. Its a largely diversified, developing and progressive corporation. It specializes in offering a wide range of products and services in various and diversified areas such as Oilfield Services, Transport Solutions, Energy logistics, and also production enhancement. Scomi Group is most notable in the field of in the oil and gas industry even though there are other public companies which have been listed as operating under the auspices of Scomi Group Berhad being Scomi Engineering Berhad and Scomi Marine Berhad, which have also been listed in Bursa Malaysia. Electronic Source: <www.scomigroup.com.my> 25th October 2010 1.1 SIZE OF THE COMPANY Scomi operates in over 29 countries with 60 locations spread across, with a workforce of over 5,000 employees. Capitalizing on Scomis technical strength, along with its innovative solution, customers and shareholders are assured innovative and competitive products and services that help them grow their business. Electronic Source: <www.scomigroup.com.my> 25thOctober 2010

2.0 FINANCIAL REPORT 2.1 ELEMENTS OF THE FINANCIAL REPORT These are elements governing the preparation of Scomis financial reports. There are basically four aspects which include; The cover: this shows the company design which reflects the image and logo of the company. This image can be of their transportation services like monorail and busses, their oilfield services, and so on. The statements: this includes the performance of Scomi Group in areas like products, stock analysis etc. Financial statements: Scomi adhere to generally accepted accounting principles (GAAP). This helps in simplifying the presentation of their statements worldwide. Financial statements record the activities of a business. Appendices and references: These are documents outside the financial analysis. Electronic source: http://www.desktoppub.about.com/od/annualreports 2.2 ACCOUNTING SYSTEM 2.3 CONCEPT AND CONVENTION (A) The concepts and conventions are relatively just different and various sets of methods rules and regulations which guard and help forge ahead the company in the right direction in order

to achieve the desired goal. When it comes to the type of accounting concept which is being used in the preparation of the annual report of Scomi Group Berhad, the prudence concept is being used. Regarding the convention, the historical cost method is being applied in the preparation of Scomis annual report. Electronic Source: http://tutor2u.net/business/accounts/accounting_conventions_concepts.htm

2.4 CORPORATE GOVERNANCE A statement on corporate governance communicates to stakeholders the philosophy, the policies, the practices and the operating culture in order to pursuit its goals. The company is led and controlled by an effective board consisting of the chairman and eight (8) directors. The board meets a minimum of six (6) times a year. The role of the chairman of the board is hes responsible for ensuring the boards effectiveness, whilst the group chief executive officer (GCEO) has the overall responsibility for the operational and business unit . It is required that employees display the highest levels of professionalism in all aspects of their work and comply with this Code of Conduct (the Code) and all applicable laws, regulations and other policies applicable within the Scomi Group. Electronic source: http://www.scomi.com.my

3.0 REPORTS AND SIGNIFICANT There are three reports under the review being Chairmans, Director and Auditors reports. The content which mostly makes up the Directors report, auditors report and chairmans statement are as we are all aware of, for the good of the company. They usually make mention of very important things pertaining to that company. Directors report includes the declarations of the directors that the recorded information is of good faith. The information disclosed about stakeholders and share holders Chairmans report; the chairmans statement in most cases of annual reports is usually the prologue of that report. It usually presents information like the companys overview. These are things that concern the companys position in all aspects; socially, economically and financially. Auditors report Things like the rate of the companys level of development throughout its entire life-span and also how they plan to forge ahead in the companys interest in the future. These reports helps the management a great deal in voicing-out and reaching to the public, therefore, it also acts as a kind of medium for communication between the management and the general public.

4.0 RATIO ANALYSIS Ratios capture critical dimensions of the economic performance of the entity. The purpose of calculating financial ratios is to help in assessing the financial performance and position of a company. A ratio also expresses the relationship between one quantity and another. Financial ratio can be seen as a financial chart of a company or as set of formula which can help financial analyst to interpret the financial reports. Books: Haron, H., (2006) Accounting and Finance: Concepts, principles and Techniques of Decision making, Prentice Hall. 4.1CLASSIFICATION OF RATIOS Financial ratios can be categorized according to certain aspects. They consist of 5 categories, namely; profitability ratio, liquidity ratio, efficiency or activity ratio, leverage ratio, and stock market ratio. 4.2.0 PROFITABAILITY RATIOS Profitability ratio is a type of financial measure that is used to compare an organizational ability to generate earnings as compared to its expenses and other relevant costs incurred for a given period of time. There are several rations which related to profitability that are used to access these performances.

4.2.1 NET PROFIT MARGIN This shows the net profit as a percentage of sales. It measures the percentage return from sales after expanses. The formula is Net profit margin = net profit after tax X 100 sales

4.2.2 GROSS PROFIT MARGIN This shows gross profit as a percentage of sales. The formula for gross profit margin is; Gross profit margin = gross profit X100 sales Gross profit margin can be used to assess the performance the performance of trade and pricing policies. 4.2.3 RETURN TO SHARE HOLDERS EQUITY This refers to the profit that is available to the common shareholders as a percentage of the equity shareholder portion in the business. The ration is Return to shareholder equity =net profit (after tax and preferred dividend) X100 Ordinary shares capital include reserves

4.2.4 RETURN ON CAPITAL EMPLOYED Show the profit which is available to contributors of capital. The amount of profit used in calculation the ration is profit before interest and tax. This is calculated as

Return on capital employed =net profit before interest & tax X100 equity and non-current liabilities 4.2.5 RETURN ON INVESTMENT This shows the net profit (after tax) as a percentage to total assets. The formula is; 5.0 CASH AND WORKING CAPITAL MANAGEMENT Cash flow provides a thorough explanation on the changes that occurred in the firms cash balances during the entire accounting period. The importance of the cash flow statement is, it shows the relationship of net income to changes in cash balances. Cash flow can be calculated using two methods; direct and indirect. Cash flow are grouped into three categories; operating activities, investing activities, financing activities. Here are three formulas use to calculate them: Cash flow from operating activity = cash flow from operating activity Profit after tax Cash flow to sales = cash flow from operating activity Sales

Cash flow to asset = cash flow from operating activity Average total assets

2008 (RM) Cash flow from operating activity 52232 136285 =0.38 Cash flow to sales 52232 2106140 =0.02
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2009 (RM) 149401 25965 =5.75 149401 1971453 =0.08

Cash flow to asset

52232 2817804.5 =0.02

149401 2817804.5 =0.08

Cash flows Analysis Net Cash generated from Operating activities Net Cash used for Investing activities Net Cash generated from Financing Activities Net Change in Cash and Cash Equivalent Cash and Cash Equivalent at the end of the year 2008 (RM000) 52,232 (232496) 124981 (55283) 23387 2009 (RM000) 149,401 (64514) 49536 134423 157121

From the above figures, we can conclude that the company is not managing its cash and equivalents efficiently in Year 2008. There are huge debts found to be written off. The company overtraded in terms of granting credits to push up sales. As such sales are not collectable till the following year. However, in year 2009, these improved as more reserve was made available as reported in the Statement of Cash flows. The cash operating circle is the period of time which elapses between the point at which cash begins to be expended on the production of a product and the collection of cash from purchases. The following is the cash operating cycle for Scomi in 2008 and 2009 2008 The average time taken to clear their inventory (days) The time taken to pay suppliers (days) 77 (76) 2009 78 (68) 108 118

The time taken by customers to pay for the goods (days) 104 105

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Cash operating cycle is the period between the times taken by debtors to pay and creditors to be paid. Electronic source: ACCA, 2009, Financial Accounting 2, BBP Learning Media Ltd, UK

6.0 PERFORMANCE EVALUATION 6.1 PROFITABILITY From 2005 to 2006, return on capital employed (ROCE) has decrease from 32.91% to 12.11% (refer to calculations as per Appendix 10.1). It decreases by 20.8%. This also leads to a decrease in its net income from RM172, 875 to RM 99,871. Later in 2007, the ROCE percentage improves significantly to 28.24%. It increases by 16.13% from the year 2006. There has been a fall from 2008 and 2009 in which the percentage reduces from 14.57% to 6.22%. This also decreases its net income from RM140, 213 to RM50, 715 respectively. The importance of the net profit percentage can never be over-emphasized. It is a very vital tool in expatiating, translating and evaluating the performance of a company. Its quite visible and conspicuous that the net profit percentage is at an estimate of 21.5% in the year 2005. It fell to 12.61% in the following year. However, it rose up a bit to 14.65% in the 3rd consecutive year only to 6.66% AND 2.57% in the two following years respectively. This brings up the possibility of an inefficient cost structure or an inaccurate method of cost allocation in the company during the span of those five (5) years 7.0 QUALITATIVE MEASURE When evaluating a company, it is important both quantitative and qualitative measures are taken into consideration. Some of the qualitative measures which Scomi involves in is community
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engagement that includes; society in need. This involves motivational program for students of SMK Air Hangat Langkawi. They held a motivational program to address issues concerning the students. Secondly, charity program with Oku Bentong. They donated money and supplies to the disabled there in Bentong. Thirdly, Scomi also involve in the Alor Star Mak Cik Embun house repair which was carried out in April 2008. On top of that, the product quality is another factor to be considered. As the global provider, Scomi ensures that the products are of good quality meeting the requirements of the customers. These are some of the qualitative measures which Scomi takes and participated in. Electronic source: http://scomi.com.my 8.0 CONCLUSION AND RECOMMENDATION In conclusion, based on things like the performance evaluation, and so many other interpretations of the annual report and financial ratios at hand, we can clearly see that Scomi Group Berhad has not been performing so well, economically. Therefore, it is recommended for them to have a better and more economically profitable performance in the future, we are recommending for Scomi Group Berhad a better utilization of its assets in order to have a more profitable turn-over at the end.

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9.0 REFERENCE 1. www.scomigroup.com.my> 25th October 2010 2. Electronic source: http://www.desktoppub.about.com/od/annualreports viewed 23th October Electronic Source: http://tutor2u.net/business/accounts/accounting_conventions_concepts.htm 4. Books: Haron, H., (2006) Accounting and Finance: Concepts, principles and Techniques of Decision making, Prentice Hall 5. Electronic source: ACCA, 2009, Financial Accounting 2, BBP Learning Media Ltd, UK viewed 30th October 2010
7. Electronic source: http://scomi.com.my viewed 5th November 2010

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10.0 APPENDICES 10.1 APPENDIX 1 2005 1.profitability ratio A. return on capital employed net profit before interest finance cost PBIT Equity non-current liabilities 186812 41854 228675 596129 776357 120722 78207 194290 636998 1175450 286416 87946 374362 948275 970565 140213 75168 215381 1080662 1001819 50715 76404 127119 1237437 821174 2006 2007 2008 2009

ROCE % B.net profit ratio PBIT Sales NPR% C.return on investment net profit after taxation

33.32%

21.51%

39.02%

20.69%

12.35%

228675 1067972 21.41%

194290 1577495 12.36%

374362 1955530 19.14%

215381 2106140 10.33%

127119 1971455 6.45%

172875

99871

282155

136285

25965

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total assets ROI%

1863876 9.28%

2585604 3.86%

2691667 10.48%

2943942 4.63%

3093037 0.84%

10.2 APPENDIX 2

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10.3 APPENDIX 3
year ROCE% 2005 33.32% 2006 21.51% 2007 39.02% 2008 20.69% 2009 12.35%

ROCE%
45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2004 2005 2006 2007 2008 2009 2010 ROCE%

year NPR%

2005 21.41%

2006 12.36%

2007 19.14%

2008 10.23%

2009 6.45%

NPR%
25.00% 20.00%

15.00% NPR% 10.00%

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5.00%

year ROI%

2005 9.28%

2006 3.86%

2007 10.48%

2008 4.63%

2009 0.84%

ROI%
12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2004

ROI%

2005

2006

2007

2008

2009

2010

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