TABLE OF CONTENT1. INTRODUCTION

1.1 SIZE OF THE COMPANY

2.0 FINANCIAL REPORT

2.1ELEMENTS OF FINANCIAL REPORT

2.2 ACCOUNTING SYSTEM

2.3 CONCEPT AND CONVENTION

2.4 CORPORATE GOVERNANCE

3.0 REPORTS AND SIGNIFICANT

4.0 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

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10.0 APPENDICES 10.1 APPENDIX 1

10.2 APPENDIX 2

10.3 APPENDIX 3

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1.0 INTRODUCTION

Scomi Group Berhad is a Malaysian Company. It’s 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 Scomi’s technical strength, along with its innovative solution,

customers and shareholders are assured innovative and competitive products and services that

help them grow their business.

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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 Scomi’s 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.

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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 Scomi’s 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 he’s

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.

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Electronic source: http://www.scomi.com.my

3.0 REPORTS AND SIGNIFICANT

There are three reports under the review being Chairman’s, Director and Auditors reports. The

content which mostly makes up the Directors report, auditor’s report and chairman’s 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

Chairman’s report; the chairman’s statement in most cases of annual reports is usually the

prologue of that report. It usually presents information like the company’s overview. These are

things that concern the company’s position in all aspects; socially, economically and financially.

Auditors’ report

Things like the rate of the company’s level of development throughout its entire life-span and

also how they plan to forge ahead in the company’s interest in the future. These reports helps the

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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.

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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

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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 firm’s 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

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2008 (RM) 2009 (RM)

Cash flow from operating activity 52232 149401

136285 25965

=0.38 =5.75

Cash flow to sales 52232 149401

2106140 1971453

=0.02 =0.08

Cash flow to asset 52232 149401

2817804.5 2817804.5

=0.02 =0.08

Cash flows Analysis

2008 (RM’000) 2009 (RM’000)Net Cash generated from Operating activities 52,232 149,401Net Cash used for Investing activities (232496) (64514)Net Cash generated from Financing Activities 124981 49536Net Change in Cash and Cash Equivalent (55283) 134423Cash and Cash Equivalent at the end of the year 23387 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

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2008 2009

The average time taken to clear their inventory (days) 77 78

The time taken to pay suppliers (days) (76) (68)

The time taken by customers to pay for the goods (days) 104 108

105 118

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. It’s 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.

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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

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.

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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.

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 2006 2007 2008 2009

1.profitability ratio

A. return on capital employed

net profit before interest 186812 120722 286416 140213 50715

finance cost 41854 78207 87946 75168 76404

PBIT 228675 194290 374362 215381 127119

Equity 596129 636998 948275 1080662 1237437

non-current liabilities 776357 1175450 970565 1001819 821174

ROCE % 33.32% 21.51% 39.02%

20.69

12.35%

13

%

B.net profit ratio

PBIT 228675 194290 374362 215381 127119

Sales 1067972 1577495 1955530 2106140 1971455

NPR% 21.41% 12.36% 19.14% 10.33% 6.45%

C.return on investment

net profit after taxation 172875 99871 282155 136285 25965

total assets 1863876 2585604 2691667 2943942 3093037

ROI% 9.28% 3.86% 10.48% 4.63% 0.84%

10.2 APPENDIX 2

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10.3 APPENDIX 3

year 2005 2006 2007 2008 2009

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ROCE% 33.32% 21.51% 39.02% 20.69% 12.35%

year 2005 2006 2007 2008 2009NPR% 21.41% 12.36% 19.14% 10.23% 6.45%

year 2005 2006 2007 2008 2009ROI% 9.28% 3.86% 10.48% 4.63% 0.84%

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2004 2005 2006 2007 2008 2009 20100.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

ROCE%

ROCE%

2004 2005 2006 2007 2008 2009 20100.00%

5.00%

10.00%

15.00%

20.00%

25.00%

NPR%

NPR%

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2004 2005 2006 2007 2008 2009 20100.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

ROI%

ROI%

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