BBA ISLAMIC FINANCE

EIB 11503 (MANAGERIAL FINANCE)

TITLE:

PROJECT PAPER ANALYSIS ANNUAL REPORT PADINIS BERHAD

GROUP:
IF 31

PREPARED BY:

HATTA BIN KHARTANI (62289113658)
MOHAMMAD FAZLAN BIN AHMAD FAUZI (62289113548)
MUHAMMAD ASYROAF BIN ABDUL WAHAB (62289113727)
MOHAMMAD ZUBIR BIN AWANG NGAH (62289113530)
MUHAMAD AZRUL AZWAN BIN ABDULLAH (62289113529)

PREPARED FOR:
Sir. CHOUDHARY WAJAHAT NAEEM AZMI



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ACKNOWLEDGEMENT
In performing our assignment, it's a successful one we had to take the help and
guideline of some respected persons.
First of all we are grateful to Allah who gives us sound mind and sound health to
accomplish our assignment.
Next, we would like to express the deepest appreciation to our Managerial
Finances lecturer, Sir Wajahat who has continually gives support and guide regard to
this assignment. Without his supervision and constant help this assignment would not
have been done.
Special thanks to our friends for supporting us for everything, and especially we cant
thank you enough for helping us throughout this assignment.
Finally, thanks also to our group members which has been working hard to complete
this assignment.












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HISTORY
Padini began operations as Hwayo Garments Manufacturers Company in 1971, it was
affiliated in garment manufacturing and wholesaling. It entered the retail industry in
1975 with flagship brand Padini. VINCCI was established to market ladies shoes, bags,
belts and other accessories in 1986. Many brands including MIKI, SEED, ROP, P &
Co. and PADINI AUTHENTICS labels were launched in the following decades.
In 1991, Home Stores Sdn Bhd was launched to hold all the companies involved in the
Group's retail, wholesale and manufacturing businesses. It was subsequently renamed
to the present Padini Holdings a year later. In 1995, Padini Holdings Sdn Bhd was
converted to a public company limited by shares and adopted the name, Padini
Holdings Berhad and soon listed on the Second Board of the then Kuala Lumpur Stock
Exchange.
The year 2000 witnessed the establishment of Padini Dot Com Sdn Bhd to provide
electronic business services and solutions for the group. Padini Holdings was
transferred to the Main Board of the KLCI Bursa Malaysia in 2005.

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MARKET STREGHT
For the year under review, domestic operations accounted for 93.2% or nearly
RM736.3 million of the Groups consolidated revenues. For the previous year, the
domestic portion was at RM666.8 million, which was approximately 91.8% of that years
total revenues. In absolute value terms, exports fell by about 9.9% or RM5.9 million
from that recorded in the 2012 financial year to RM53.4 million for the year under
review. In the domestic sector, we have 14 Vincci stores and 1 PDI store that are
operated and run by franchisees. Of the 14 Vincci franchise stores, 10 are located in
Peninsular Malaysia, while Miri, Kota Kinabalu, Sibu and Tawau have 1 each.
The sole PDI franchise store is located in Langkawi. As for the 91 retail stores
operated by the Group, all are located in the Peninsula except for 3 of the Padini
Concept Stores and 3 of the Brands Outlets which are located in Sabah and Sarawak.
As far as retail stores expansion was concerned, the 2013 financial year was
considerably quiet. While an additional Brands Outlet store and two stores for our new
Tizio label were opened, we also closed a Padini Concept Store in Kota Kinabalu
together with four other single-brand stores in the Peninsula.
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COMMON SIZE STATEMENT
Firstly, the total asset of Padini Holding has decrease From RM 415,771,000 in 2011 to RM
329,872,000 in 2012 and RM 351,633,000 in 2013. From 2011 to 2012 there has been 5.25%
decrease in total assets. From 2012 to 2013 there also have decrease of 7.9% in total assets.
Padini Holding also decreases its total liabilities from RM 25,169,000 in 2011 to RM 13,709,000
in 2012 but it increased to RM 47,371,000 in 2013.
Looking at Statement of Financial Position, Padini does not have any growth rate and the total
assets have been declining from year to year.


Financial Ratio Analysis
The financial ratio is a ratio of selected values from the firms financial statements. These ratios
are used to evaluate the overall financial condition of a corporation to determine the strength
and weaknesses.

Liquidity ratios measure the company's ability to meet short-term obligations. This ratio is
important to short-term creditors and bondholders. To the lender, the higher the ratio, the more
secure is their investment in the business. However, if the ratio is higher than normal, it may
indicate that resources are not used effectively. This may be due to inventory levels are too
high, the excess cash sitting in the bank to be invested in long-term or used to pay down
liabilities and probably accounts receivable collection problems. Three common liquidity ratios
are the current ratio, quick ratio and operating profit margin.

Liquidity Ratio
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The current ratio is the number of times current assets cover current liabilities. It is a measure of
a company's solvency or ability to meet current liabilities as they should.
Current assets are assets that can be converted into cash within a year. It includes cash,
marketable securities, accounts receivable, prepaid expenses and inventories. Current liabilities
are debts or liabilities of the company to be paid, usually within one year. Current liabilities
include accounts payable, current maturities of long-term debt and accrued income taxes. The
formula for current ratio is as follows:






Years 2011 2012 2013
Current Ratio = 2.81 25.70 1.34

The current ratio of the Padini is unstable from the year 2011 to year 2013. This been proved
from year 2011 the amount of current ratio are 2.82 after next year increase to 25.70. In year
2013 are dramatically decreased by 25.70 from the year 2012 to amount 1.34. This shows that
the Padini cannot cover its current liabilities.



Current Ratio
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The current ratio may be refined further by removing inventories from the equation, which is the
least liquid of current assets. This ratio is known as the quick ratio or simple acid test ratio.





Years 2011 2012 2013
Quick Ratio = 2.81 25.70 1.34

In year 2011 to year 2013. This been proved from year 2011 the amount of current ratio are
2.82 after next year increase to 25.70. In year 2013 are dramatically decreased by 25.70 from
the year 2012 to amount 1.34. This shows that the Padini cannot cover its current liabilities. This
shows that Padinis quick ration is not in a good position.










Quick Ratio
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Inventory Turnover ratio shows how many times a companys inventory is sold and replaced
over a period (usually one year). Generally, its calculated as:

This ratio should be compared against industry averages. A low turnover implies poor sales and
therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High
inventory levels are unhealthy because they represent an investment with a rate of return of
zero. It also exposed the company to the risk of drop in prices.
Inventory Ratio Years Industry Average
2011 2012 2013 Best Worst Average
Inventory Turnover =
Sales / Inventories
3.33 3.78 5.49
Days sales in inventory
=365/inventory turnover
109.61 95.56 66.48

Padini initially has low inventory turnover in the beginning (3.33 in 2011), but it has since
increased and become stable. In 2013, Padini cycle through its inventory 5.49 times which is on
average, once every 66.48days. By having a high turnover ratio, they are in a good position to
negotiate with their suppliers and also debtors for longer and higher credit terms.



Inventory turnover
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Receivables turnover ratio is an accounting measure used to measure a firms effectiveness in
extending credits as well as reducing outstanding accounts. It measures how efficiently a firm
uses its assets via below formula:





Due to difficulty in differentiating cash sales and credit sales, we assume all Top Gloves sales
are credits. This is a relatively safe assumption since their volumes are so large and its unlikely
much of the sales are in cash.
Receivable Ratio Years Industry Average
2011 2012 2013 Best Worst Average
Receivable Turnover
=Sales/Accts Rec
14.42 15.92 15.2
Days sales in receivables
=365/rec turnover
25.31 22.93 24.01

Their receivable turnover is at least at par with the industry. Padini outstanding account
averages about 24.01 days in year 2013. The increasing trend from 22.93 days in 2011 to 24.01
in 2013 is a very encouraging signs. On average, they have improved the collection of
payments from their customers earlier. A higher receivable turnover will further allow Padini in
better position to reduce its account payables.



Receivable Ratio
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Total Asset Turnover is used to determine how much revenue a company generates from its
investment in assets using below formula.

Activity Ratio Years Industry Average
2011 2012 2013 Best Worst Average
Total Asset Turnover
= Sales / Total Asset
1.9 2.2 1.28

In 2013, Padinis utilized $415,771,000 of assets. It generates $789,765,000 of sales revenue.
This shows that Padini is earning $1.28 cents for every $1 invested in the company. The drop
here could probably be due to Padinis recent expansion. Hence, it still requires some time to
improve its efficiency in utilizing its new assets.


These ratios give insight of the companys overall debt load as well as its mix of equity and debt.
Debt ratio can be used to determine the overall level of financial risk a company and its
shareholders face. In general, the greater the amount of debt held by a firm, the greater the
financial risk of bankruptcy.



Total asset turnover ratio
Debt Management
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This ratio indicates what proportion of debt a company has compared to its assets. This ratio
shows the leverage of the company along with the potential risks the company faces in terms of
its debt burden.




Leverage Ratio Years Industry Average
2011 2012 2013 Best Worst Average
Total debt ratio
= Total Debt / Total Assets
0.27 0.30 0.37
Debt-Equity Ratio
= Total Debt/Total Equity
0.38 0.43 0.58
Times Interest Earned
= EBIT/Int Expense
3.65 3.77 3.58

Increasing in total debt ratio (0.27% in 2011 to 0.30% in 2012) indicates that long-term debt,
high and increase in total debt (0.30% in 2012 to 0.37% in 2013) shows that financing activities
more further.

Padini debt equity ratio increasing 0.38 in 2011 to 0.43 in 2012. This is mainly due to increase
of equity from 2010 to 2012. TIE has been increase in from 3.65 in 2011 to 3.77 in 2012. This
continuation decrease is a little troubling. The company has been reducing its reliance in debt,
yet the TIE is decreasing.



Leverage Ratio
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The operating profit margin (operating margin) compares a companys operating income
(earnings before interest and taxes, or EBIT) to sales. It indicates how successful management
has been in generating income from operating the business. The ratio calculation is as follows:





Years 2011 2012 2013
Operating Margin 0.36 0.38 0.32

The operating profit margin in 2012 its higher percent of 0.38% but it declined in the subsequent
2013. Although the percentage are decreases but it is only in small amounts. Show that Padinis
are still able to meet their income from business operations.







Operating Margin
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Profibility Measures 2011 2012 2013
Operating Profit Margin = Profit before Tax/Gross
Profit
0.36 0.38 0.32
Gross Profit Margin = Gross Profit/Sales 0.51 0.48 0.48
Net Profit Margin = Net Profit/Sales 0.13 0.13 0.1
Ret on Assets (ROA) = Net Profit/Total Assets 0.17 0.20 0.17
Ret on Equity (ROE) = Net Profit / Total Equity 0.27 0.28 0.23

The firms profitability shows a constant of gross profit margin 0.48 from 2012 until 2013 tehre
start decrease profit margin after in year 2011 at 0.51 to 0.48 in 2012 and 2013. We believe this
may be due to a sharp surge in latex price in commodity market which may result in margin
squeeze. The appreciating RM against the US$ maybe also contribute. Even with an average
increase of selling price, the gross profit margin has not improved much. Here, we can see that
the margin is being squeezed every year due to the increasing cost of goods sold, hence the
reduction of gross profit margin.
Although Padinis net profit margin is hovering, the market has been rather tight... Hence, we
can start to see the rationale behind the company's "preparation" of high liquidity. This allow the
company ample rooms to maneuver.

Reasonable ROA shows that the firm is able to convert the money it has invested into net
income. High and increasing ROE from 0.27% in 2011 to 0.28% in 2012 implies that the
company generates a healthy profit for the money invested by the shareholders. However, in
2013, the influx of equity has distorted this ratio.


Profibility Ratio
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ANALYSIS BEHIND THE TRENDS

For the financial year under review, the Group achieved consolidated revenues of RM789.8
million, a growth of 8.8% over the previous years amount of RM726.1 million.


While gross profits rose in tandem by 5% over the same period, profit before taxation had
declined by 9.3%, from RM129.7 million achieved in the previous year to RM117.7 million in the
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2011 2012 2013
Revenue (RM '000)
Revenue (RM '000)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2011 2012 2013
Profit before tax (RM '000)
Profit before tax (RM
'000)
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current financial year. This decline was caused primarily by increases in selling and distribution
costs incurred by 10 new stores added over the 2012 financial year.

Total comprehensive income for the financial year attributable to the owners of the Company
also fell 11.2% to RM85.4 million when compared to the amount of RM96.2 million achieved
during the previous financial year.











0
20,000
40,000
60,000
80,000
100,000
2011 2012 2013
Profit fot her financial year
attributable to owners of the parent
(RM '000)
Profit fot her financial
year attributable to
owners of the parent (RM
'000)
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For the financial year under review, the Group achieved consolidated revenues of RM568.5
million, a growth of 9.6% over the previous years amount of RM518.8 million (restated). Gross
profits rose in tandem by 12.2% over the same period, while profit before taxation grew by
21.8%, from RM86.3 million achieved in the previous year to RM105.1 million in the current
financial year. Total comprehensive income for the financial year attributable to the owners of
the Company rose 24.7% to RM74.7 million when compared to the amount of RM59.9 million
achieved during the previous financial year.
For the financial year under review, the Group achieved consolidated revenues of RM723.4
million, a growth of 27.2% over the previous years amount of RM568.5 million. Gross profits
rose in tandem by 19.9% over the same period, while profit before taxation grew by 24.4%, from
RM105.1 million achieved in the previous year to RM130.6 million in the current financial year.
Total comprehensive income for the financial year attributable to the owners of the Company
rose 29.7% to RM96.9 million when compared to the amount of RM74.7 million achieved during
the previous financial year.
For the financial year under review, the Group achieved consolidated revenues of RM789.8
million, a growth of 8.8% over the previous years amount of RM726.1 million. While gross
profits rose in tandem by 5% over the same period, profit before taxation had declined by 9.3%,
from RM129.7 million achieved in the previous year to RM117.7 million in the current financial
year. This decline was caused primarily by increases in selling and distribution costs incurred by
10 new stores added over the 2012 financial year. Total comprehensive income for the financial
year attributable to the owners of the Company also fell 11.2%.
Conclusion
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The growth was mainly attributed to the continued increase in customer base globally, higher
volume of sales contributed by the increased capacity, as well as, to our continued ability to
pass on the increase in operating cost.
As a public listed company, Padinis Berhad (including its subsidiaries and collectively
referred to as the Company) is committed to conducting its business fairly, impartially and in
full compliance with all laws and regulations. Honesty and integrity is upheld at all times in the
course of the Companys daily dealings between its Directors, employees and its customers,
vendors, contractors, suppliers and the business community generally. Directors and employees
are prohibited from engaging in business practices that affect and impair the companys
integrity, image and reputation.











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APPENDIX