Escolar Documentos
Profissional Documentos
Cultura Documentos
V.GOPINATHAN
Student ID: P079264
CONTENTS
Page 1. 2. 3. 4.1 4,2 4.3 5. 5.1 5.2 5.3 5.4 Introduction The Directors Report The Statement of Accounting Policies The Balance Sheet The Profit and Loss Accounts The Cash Flow Statement The Ratios Liquidity Ratio Profitability Ratio Efficiency Ratio Investent Ratio 3 4 6 7 11 12 13 13 14 15 18
REFERENCES i) WWW.hi-p.com for annual reports. ii) FACS Class Notes By Mr.Anthony Marsh iii) Journal Papers
Q1. I have examined a Contract manufacturing Company Hi-P International Limited Annual Report and Accounts to provide an in depth analysis of the business and its financial performance.
1.Introductions
Hi-P International Limited is globally vertically integrated manufacturer, serving the wireless telecommunication, Consumer electronics, Computing and Automotive Industries. Its Headquarter in Singapore and has manufacturing plants globally. They are in Singapore, China, Mexico, Thailand and Poland. It also has marketing and engineering support centres at USA, Finland and Germany. Its currently employing 11,500 people. It was listed on the main board of the Singapore Exchange on 17th December 2003 .
Hi-Ps VISION Our vision is to become a global integrated contract manufacturing services provider to offer a broader, more diversified and vertically-integrated range of products and turnkey services to our global customers.
Post Module Assignment FACS It is actively seeking ways to lower its breakeven point through strict cost control to compete more effectively and maintain profitability. Also prudent credit management will be exercised for all supplier and customers and will continue to keep a tight control on capital expenditure. However they are pen to strategic investment opportunities. 2.3 Hi-Ps Positive Areas Its strong financial position with a low gross Gearing of 1.0% and Net Cash balance of S$126 mil, will allow navigating through these difficult times. With above mentioned strategies in place and the existing main customers businesses remaining stable, Hi-P has confidence that it will overcome this financial crisis and will emerge stronger. 2.4 Rewarding Loyal Shareholders - Dividend I am pleased to announce that the Board has recommended a first and final exempt one-tier dividend of 2.2 Singapore cents per share, to reward our loyal shareholders in this challenging time. Hi-P rewarding highest dividend of S$0.022 per share despite lowering market price per share. It might be helpful to increase shareholders level of confident thus can increase share price for the upcoming years.
(Reference www.sharesinvestment.com/articles/3188/)
Conclusion
Although market condition is challenging in the coming year, Hi-P strongly believes on its strategies and dedicative management team and staff to over come its obstacle.
Basic of Preparation The consolidated financial reports of the group and balance sheet of the company have been prepared according to Singapore Financial Report Standards (FRS). The financial statements have been presented in Singapore Dollars (S$) and all values are rounded to the nearest thousand ($000) except when otherwise indicated.
Subsidiaries A subsidiary is a separate entity over which the group has the power to control the financial and operating policies so that can obtain benefits from its Activities. The Group has power to hold more than 50% of the issued share Capital or control more than half of the voting power or control the percentage of the board of directors.
Associates It is an entity, not being a subsidiary, in which the group has significant control. Groups investments in associates are accounted for using the equity method.
Property, Plant and equipment The Net Book Value of the Property, plant and equipment amount decreased by 3% from 291.075mil (2007) to 282.544mil (2008), after depreciation. Net cash out flow of purchase for this year is 43.108mil which is less compare to 49.496mil for year 2007. (Ref. Note 13) We could say its one of the cost control measure as mentioned in the Directors report.
Depreciation As mentioned in the Group depreciation policy, the cost of plant and machinery for the manufacture of electric components is depreciated on a straight-line basis over the plant and machinerys estimated economic useful lives. Management estimates the useful lives of these plant and machinery to be within 3 to 10 years. These are common life expectancies applied in the industry.
Investment in subsidiaries As a company Hi-P Singapore totally invested 193.119mil in its subsidiaries as for year 2008 as shown in the balance sheet. Its represents interest foregone on the interest-free long term loans granted by the company to its subsidiaries. During the year 2008, the company has increased its investment in Hi-P Thailand Co. Ltd. by 199.20% from S$1.000 mil to S$ 2.992mil.
Investment in Associates and Other investments are have not changed much as shown in the balance sheet for the end of year 2008 except Other Receivables. At the balance sheet date the group has impaired an allowance of $17,000 for the impairment of the unsecured amounts due from minority shareholders of a subsidiary with a nominal amount of S$827,000. Differed Tax Asset has been increased from 1.868mil (2007) to 4.381mil for the FY2008. which can be refer this from consolidated Profit /loss account under Income Tax (Note 11a)
Deferred Tax Asset resulted in reduction of Income tax of year ended FY2008. The corporate income tax of the Singapore companies of the Group was waived 2% for the year 2008 by Singapore government from 20% to 18%.
Current Asset
There has been slight increase of 4.5% in Groups current asset compare to previous years due to change in inventories (Includes WIP - 44.2 mil., Raw material 47.5 mil and Finished Goods 22.7 mil.). Trade and other receivables are reduces by 16.3 % to 245.7mil. from 285.3mil (2007) Prepaid operating expenses shrink by 50% compare to 2007 for the same period. Cash and Cash Equivalents are up 218% to 131.5mil from 46.7mil (2007) due to cash at bank and in hand also interest earn by short term fixed deposit for 1 to 6 months.
Current Liabilities
Post Module Assignment FACS Total current liabilities have been reduced by 39% from 306mil (2007) to 220.8mil (2008). Loans and borrowings have been kept lower due to enough cash in hand from previous earning which is resulted in more Income Tax liabilities.
Summary
Healthy Balance Sheet, the over all groups net asset increased by 22.2% to 558.6 mil for FY2008. Good result has been achieved by effective cost control and increase in sales. Which underpins the returns on shareholder equity and should provide an support for upcoming obstacles.
10
Gross profit increased form 13.33% (FY2007) to 18.33% this financial year 2008 and Net profit has significantly increased as 102mil. from 6.07% (FY2007) to 9.5% achieved this FY2008.
Profitability Ratios
Gross profit Ratio Net profit Ratio 30% 24% 18% 12% 6% 0%
2004
2005
2006
2007
2008
Other income such as interest income, tax refund on capital investment, sale of scrap materials, incentives from government etc has slightly increased compare to FY 20007.
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Other Expenses Other item of expenses has been controlled very well over this 12 month of period particularly Administrative expenses have been managed efficiently, with the increase of 5.5 % only. Increase in Gross profit and less expenses we could able to achieve record high of 102 million Net Profit this year. Summary The income statement clearly shows that Returns on shareholders equity increased from 13.2% in 2007 to 18.3% in 2008. If we look at the net profit figures over the past five years there is a ups and downs, except FY2006 and 2007 profitability of the Group is growing steadily and acceptable.
2005 73.197
2006 33.244
2007 46.764
2008 131.566
The Group started the financial year 2009 with cash balance of record high of 131.5 mil.(2008) which is more than 200% of 46.7 mil (FY2007). Reason behind is on 15th march 2007 the Group acquired 960,000 ordinary share of its 52% own subsidiary for a total consideration of $209,000. The five year summary of cash flow shows the impression that cash is well managed and borrowings kept as low as possible in order to maintain the low gross Gearing of 1%. Also the money not only invested in rapid expansion of fixed assets also wisely kept in reserves and Banks.
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5. Ratios
Ratios can be used to analysis the overall performance of a business and its shows the result of Board of Directors whether the business is on the track or not. Its also provide some focus on areas that need investigations.
2.24 :1
Liquidity Ratios
Acid test Ratio 3.00 2.80 2.60 2.40 2.20 2.00 1.80 1.60 1.40 1.20 1.00
Successful business might have Current Ratio factor as more than 1:1, if we analysis Hi-Ps past five years trend for Current ratios all shows factor more than 1:1 .
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Post Module Assignment FACS Acid Ration for FY 2008 Acid test Ratio =
FY 2008 =
Acid ratio calculate liquidity with out Stock of the Current asset, because its always difficult to sell stocks in case of Liquidation. So shareholders point of view Acid ration more important than Current ratio. Acid Ratio also shows positive result over the past five years of business. As mentioned in The Directors Report, to overcome the current financial crisis they have to be strict in cost control to compete more effectively and maintain its customer base.
Profitability Ratios
Gross profit Ratio Net profit Ratio 30% 24% 18% 12% 6%
0%
Gross Profit Ratio measures amount of profits regarding to total amount of sales for every financial year. Gross profit Ratio =
2008 =
Hi-P is making margin of 18.3% (2008) compare to 13.3% for year 2007.
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Net profit Ratio used to compare the profitability of different entities internally as the Group applied same accounting polices. The Directors Report says Hi-P received bonus news of Gross margin improved from 13.3% in 2007 to 18.3% in 2008. So business is being more competitive and profitable.
36% 30% 24% 18% 12% 6% 0% 2004 2005 2006 2007 2008
As mentioned in the Director Reports for FY2008, Return on shareholder equity increased from 13.2% in 2007 to 18.3% in 2008. Even the board has recommended 2.2 S$ cents of Dividend per share for its shareholders.
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Efficiancy Ratios
Asset Turnover Ratio Fixed Asset Turnover Ratio 3.80 3.40 3.00 2.60 2.20 1.80 1.40 1.00
2004 Asset Turnover Ratio Fixed Asset Turnover Ratio 2.07 3.27
It provides an analysis of how efficiently the fixes assets are at generating sales.(Ref. FACS module notes). There is no significant change in Fixed asset in 2008 (289 mil) compare to year 2007 (294Mil.) also the fixed asset at NBV. So the FA turnover ratios increased from 3.3 times (2007) to 3.7 times (2008).
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Debtor Collection Period This ratio gives an indication of how quickly a business is collecting its debts from customer. Its very useful as credit management is important for cash flow. Debtor collection period =
2008 = S$ '000 265,576 1,077,102
X 365
As per Accounting policy Note 18. Trade and other receivables Trade and other receivables are non-interest bearing and are generally on 30 to 90 days terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition.
(Ref. Annua Report Hi-P FY2008)
Although we manage it with in acceptable level we have to target reducing the no. of days from 60 to 90 day which is quite normal for manufacturing businesses.
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CLOSING SHARE PRICE ON END OF APRIL 29' 2009 2008 = 0.022 0.520 4.23 %
CLOSING SHARE PRICE ON END OF APRIL 25' 2008 2007 = 0.015 0.540 2.78 %
Dividend yield used to calculate the returns on share holders investments. As per the Directors Reports, Hi-P rewarding highest dividend of S$0.022 per share despite lowering market price per share. It will give shareholders 52% more Dividend Yield compare to last year if the market price of the shares remains same. It might be helpful to increase shareholders level of confident thus can increase share price for the upcoming years.
(Ref. www.sgx-st.com.sg)
Devidend (S$)
SGD 0.024 SGD 0.020 SGD 0.016 SGD 0.012 SGD 0.008 SGD 0.004 SGD 0.000 2003 2004 2005 2006 2007 2008
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Gearing =
S$ '000 5,781 558,650
FY2008 =
The Gearing ration gives and idea of how risky an investment in a business might be. Here I used to calculate the gearing ration by adding all short and long-term liability of borrowing. Compare to FY2007 Gearing ration of 7.54% Hi-P achieved very low gross Gearing ration of 1.03% this year by in creasing its total equity from 457Mil.(2007) to 558Mil. (2008) and reducing the net borrowing from 34Mil (2007) to 5.7 Mil. (2008).
Gearing Ratio
10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
2005 3.27
2006 7.00
2007 7.54
2008 1.03
As per the Directors Reports, the strong financial position with a low gross Gearing of 1.0% and Net Cash balance of S$126 mil, will allow the Group to navigate through the upcoming difficult times.
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Annual Reports
20
21
22
2006
1.49
:1
2005
1.67
:1
2004
1.65
:1
2007
1.11
:1
2006
1.03
:1
2005
1.29
:1
2004
1.17
:1
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Profitability Ratios
Gross profit Ratio
2008 =
2007 =
13.33
2006 =
14.46
2005 =
22.41
2004 =
24.94
2007 =
6.09
2006 =
6.89
2005 =
13.92
2004 =
15.70
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Efficiency Ratios
Asset Turnover Ratio
2008 = S$ '000 1,077,102 558,650
2007 =
2.14
2006 =
2.10
2005 =
1.74
2004 =
2.07
2007 =
3.30
2006 =
3.05
2005 =
2.64
2004 =
3.27
ROCE =
2008 =
25
2006 =
14.49
2005 =
24.23
2004 =
32.47
2007 =
95.9
Days
2006 =
87.6
Days
2005 =
74.6
Days
2004 =
49.8
Days
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Gearing
2008 =
2007 =
7.54
2006 =
7.00
2005 =
3.27
2004 =
8.48
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