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AKW 104 - ACCOUNTING AND FINANCE

SEMESTER II, 2014/2015


FINANCIAL STATEMENTS FOR HUP SENG INDUSTRIES BERHAD AND
ITS COMPETITOR ( LONDON BISCUITS BERHAD )

Chong Jia Fong 124811


Choong Wee Chin 126127
Ng Chi Yan 124860
Ting Sie Kim 126112
Tiou Wen Quan 126419

Lecturer : Ang Jili

Date of Submission: 22/5/2015

HISTORY, BUSINESS AND MANAGEMENT FOR HUP SENG INDUSTRIES BERHAD


Hup Seng Industries Berhad, established in 1958, has been a household name synonymous with
quality biscuit manufacturing. In recognition of Hup Seng's stringent quality management system, the
company was awarded the prestigious MS ISO 9002 Quality System Certification from SIRIM in 1995 and
upgraded to MS ISO 9001:2000 Quality System Certification in 2003.
Y. Bhg. Dato Keh (Kerk) Chu Koh, Malaysian aged 72, is the Chairman of the Company. He became
a member of the Board of Directors on 4 October 1991 and was appointed as the Managing Director on 3
August 2000. He has approximately 56 years of experience in the biscuits industry. He plans the Groups
strategic business development and production development as well as heading the research and development
team which researches new varieties of biscuits.

HISTORY, BUSINESS AND MANAGEMENT FOR LONDON BISCUITS BERHAD


London Biscuits Berhad was incorporated in 1981 as a confectionery manufacturer. In 1994, the
company was acquired by the Liew Family which provided fresh impetus to the companys growth. In early
2002, LBB was successfully listed on the 2nd Board of Bursa Malaysia and this was followed up within a
short period of time with a transfer to the Main Board of Bursa in late 2003. The company also become a
Disney licensee in Malaysia.
Dato Sri Liew Kuek Hin, aged 75, a Malaysian, was appointed as the Non-Independent NonExecutive Chairman to the Board of London Biscuits Berhad (LBB) on 27th December 1993. After
studying in Nanyang University, Singapore, Dato Sri Liew Kuek Hin, joined his family-owned businesses,
which includes logging, transportation, sawmilling, plywood manufacturing, plantations, palm oil mill and
hotel operations. His current directorship in other public listed company includes Khee San Berhad.

Financial Statements of Hup Seng Industries Berhad of the Latest 5 Years


No.

Information

2010

2011

2012

2013

2014

Sales or turnover or revenue

219,070,516

240,231,011

247,818,145

251,407,055

262,217,996

Cost of goods sol d

143,240,343

162,048,326

159,924,152

156,828,994

165,263,031

Gross profit (or loss)

75,830,173

78,182,685

87,893,993

94,578,061

96,954,965

Profit (or loss) before tax

32,742,314

27,616,929

44,351,085

50,081,724

51,724,827

Interest/finance expense/charge

86

222

N/A

N/A

Depreciation expense (for


property, pl ant and equi pment
only)

4,183,114

4,243,711

4,221,948

4,382,357

4,843,042

Provision/all owance for doubtful


debts/accounts

155,607

76,817

148,492

71,081

52,269

Profit (or loss) after tax

23,338,845

18,627,595

32,540,686

36,744,846

38,147,021

2.9

2.3

4.1

4.6

4.8

1.8

3.8

4.5

3.5

3.0

i
j

Earnings per share or EPS (i n


sen) for the financi al year end
Di vi dends per share or DPS (i n
sen) for the financi al year end

Di vi dends pai d by firm

19,200,000

18,000,000

26,400,000

39,000,000

33,600,009

Property, pl ant and equi pment


(gross amount)

68,574,320

68,491,837

66,889,803

64,834,110

67,936,722

Accumul ated depreciati on

58,866,754

60,083,920

56,423,670

58,907,339

62,742,613

Intangi ble assets

N/A

N/A

N/A

N/A

N/A

Total assets

194,113,084

203,813,804

204,947,578

205,202,821

226,006,738

Total liabilities

47,615,443

56,712,434

51,705,522

54,815,919

71,072,824

Income tax payable

3,245,984

3,296,926

4,401,800

4,872,092

4,603,268

Sharehol ders' equi ty

146,497,641

147,101,370

153,242,056

150,386,902

154,933,914

60,000,000

60,000,000

60,000,000

60,000,000

80,000,000

N/A

N/A

N/A

N/A

N/A

s
t

Ordinary share capital (amount


and number of shares)
Preference share capital (amount
and number of shares)

Treasury shares/stocks

N/A

N/A

N/A

N/A

N/A

Inventories (or stocks)

25,405,811

22,392,687

20,586,831

20,817,932

20,778,877

Bank overdraft

N/A

N/A

N/A

N/A

N/A

Short-term debt

39,064,339

48,502,469

43,748,011

47,087,947

63,178,231

Long-term debt

8,551,104

8,191,965

7,957,511

7,727,972

7,894,593

Retained earni ngs/profit/loss


(financial year end bal ance)

67,768,742

68,396,337

78,908,923

76,053,769

74,933,914

aa

Cash flows from operations

30,589,165

32,868,464

39,214,511

53,917,593

46,834,332

-87,548

-709,629

-1,253,675

-27,107

-5,871,004

-19,200,086

-12,000,222

-32,400,007

-39,600,000

-21,600,005

Indirect

Indirect

Indirect

Indirect

Indirect

bb
cc
dd

Cash flows from investing


acti vi ties
Cash flows from financing
acti vi ties
Direct or indirect method used to
obtain cash flows from
operations

Financial Statements of London Biscuits Berhad of the Latest 5 Years


NO

Information

2010

2011

2012

2013

2014

Sales or turnover or revenue

223,434,122

232,743,032

253,519,864

289,978,832

359,995,183

Cost of goods sol d

169,284,276

175,285,455

195,354,339

230,136,849

279,665,124

Gross profit (or loss)

54,149,846

57,457,577

58,165,525

59,841,983

80,330,059

Profit (or loss) before tax

17,594,691

17,273,443

14,218,130

18,788,953

21,512,819

Interest/finance expense/charge

8,192,781

10,250,219

10,655,531

12,214,659

14,037,285

9,865,174

14,999,909

13,461,172

16,053,870

19,645,029

456,258

356,395

129,655

N/A

N/A

18,065,326

16,104,618

13,762,277

15,079,256

17,311,670

17.31

14.21

9.71

8.96

9.71

2.7

1.5

N/A

1.0

0.9

f
g
h
i
j

Depreciation expense (for


property, pl ant and equi pment
only)
Provision/all owance for doubtful
debts/accounts
Profit (or loss) after tax
Earnings per share or EPS (i n
sen) for the financi al year end
Di vi dends per share or DPS (i n
sen) for the financi al year end

Di vi dends pai d by firm

2,617,500

1,440,202

N/A

1,366,235

1,422,235

Property, pl ant and equi pment


(gross amount)

348,820,122

361,398,719

477,402,287

517,426,107

571,779,296

Accumul ated depreciati on

85,046,234

95,857,698

105,220,324

112,256,540

125,327,889

Intangi ble assets

12,659,547

12,659,547

12,659,547

12,659,547

12,659,547

Total assets

501,363,872

603,464,454

614,986,037

683,341,095

738,622,576

Total liabilities

252,586,763

313,202,836

283,822,015

320,153,023

316,946,153

Income tax payable

827,883

2,227,738

2,660,893

6,164,238

11,133,620

Sharehol ders' equi ty

248,777,109

290,261,618

331,164,022

363,188,072

421,676,423

96,013,500

96,013,500

132,623,500

142,223,500

163,556,789

N/A

N/A

N/A

N/A

N/A

s
t

Ordinary share capital (amount


and number of shares)
Preference share capital (amount
and number of shares)

Treasury shares/stocks

N/A

N/A

N/A

N/A

N/A

Inventories (or stocks)

31,562,835

33,867,886

26,814,097

29,114,051

27,370,139

Bank overdraft

398,295

6,217,849

7,318,294

3,977,651

8,763,584

Short-term debt

152,378,455

239,677,764

283,822,015

241,617,098

249,875,504

Long-term debt

100,208,308

73,525,072

78,517,259

78,535,925

67,070,649

Retained earni ngs/profit/loss


(financial year end bal ance)

85,726,144

97,937,511

109,029,738

120,027,620

132,017,909

aa

Cash flows from operations

39,043,518

-19,565,440

50,208,720

18,450,963

12,127,124

-40,091,999

-7,101,396

-78,577,348

-13,566,163

-34,334,743

6,933,052

22,585,701

23,159,611

6,530,742

4,913,655

Indirect

Indirect

Indirect

Indirect

Indirect

bb
cc
dd

Cash flows from investing


acti vi ties
Cash flows from financing
acti vi ties
Direct or indirect method used to
obtain cash flows from
operations

QUARTERLY FIGURES FOR THE LASTEST THREE YEARS

Hup Seng Industries Berhad


2012
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Sales/revenue/turnover (RM '000)

61794

66016

56864

63144

Profit before tax (RM '000)

10756

12835

9480

11280

Profit after tax (RM '000)

8018

9161

6927

8435

Earnings per share or EPS (i n cent)

6.68

7.63

5.77

7.03

Di vi dend per share or DPS (in cent)

12

18

Net asset backing (NAB ) per share (in RM)

1.19

1.27

1.21

1.28

2013
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Sales/revenue/turnover (RM '000)

59873

66126

58716

66692

Profit before tax (RM '000)

12142

14593

10580

12767

Profit after tax (RM '000)

8904

10706

7783

9352

Earnings per share or EPS (i n cent)

7.42

8.92

6.49

7.79

Di vi dend per share or DPS (in cent)

15

Net asset backing (NAB ) per share (in RM)

1.17

1.26

1.18

1.25

2014
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Sales/revenue/turnover (RM '000)

64450

68254

55868

73646

Profit before tax (RM '000)

13060

13284

8639

16742

Profit after tax (RM '000)

9558

9740

6253

12596

Earnings per share or EPS (i n cent)

1.19

1.22

0.78

1.57

Di vi dend per share or DPS (in cent)

1.5

1.5

Net asset backing (NAB ) per share (in RM)

1.25

0.19

0.19

0.19

London Biscuits Berhad


2012
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Sales/revenue/turnover (RM '000)

59734

63112

58384

63095

Profit before tax (RM '000)

3291

2351

5493

3828

Profit after tax (RM '000)

2813

2573

5206

3540

Earnings per share or EPS (i n cent)

1.86

1.77

3.33

2.12

Di vi dend per share or DPS (in cent)

Net asset backing (NAB ) per share (in RM)

2.18

2.08

2.09

2.11

2013
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Sales/revenue/turnover (RM '000)

63803

97562

73220

92337

Profit before tax (RM '000)

3801

3886

5581

6994

Profit after tax (RM '000)

3513

3069

5044

5756

Earnings per share or EPS (i n cent)

1.79

1.97

3.06

3.45

Di vi dend per share or DPS (in cent)

Net asset backing (NAB ) per share (in RM)

2.08

2.16

2.13

2.17

2014
First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Sales/revenue/turnover (RM '000)

96228

98202

87693

89993

Profit before tax (RM '000)

3367

5890

6445

5253

Profit after tax (RM '000)

2279

4103

5808

4350

Earnings per share or EPS (i n cent)

1.28

2.14

2.91

1.94

Di vi dend per share or DPS (in cent)

Net asset backing (NAB ) per share (in RM)

2.05

2.11

2.05

2.02

6 RATIOS FOR THE LASTEST THREE YEARS


2012

Debt to equity
ratio
Current ratio
Quick rati o

2013

2014

Formul a

Hup
Seng

London

Hup
Seng

London

Hup
Seng

London

Total liabilities / Total equi ty

0.337

0.857

0.364

0.882

0.459

0.752

3.150

0.584

2.976

0.620

2.498

0.653

2.679

0.453

2.533

0.499

2.619

0.496

Total current assets / Total


current liabilities
(Current assets - Inventories) /
Total current liabilities

Profit margin
ratio(% )

Net income / Net sales

13.1

5.4

14.6

5.2

14.5

4.8

Debt ratio

Total liabilities / Total assets

0.252

0.462

0.267

0.469

0.314

0.429

Rate of return
on total
assets(% )

(Net income + Interest


expense) / Average total assets

15.9

4.6

17.9

4.2

17.0

4.4

COMMENT ON THE FIRMS PAST PERFORMANCE


Hup Seng Industries Berhad had low debt to equity ratio over the past three years, ranging from 0.337
0.459. Hup Sengs low debt to equity ratio shows that it is financing more assets with equity than debt.
Although its debt to equity ratio increased for the particular period, the increase was considerably trivial and
this indicates a low-risk position for the company. On the contrary, London Biscuits Berhad almost showed a
double in its debt to equity ratio compared to Hup Seng Industries Berhads. The highest ratio was attained in

2013, which was 0.852 and dropped back to 0.752 for the following year. Having a high debt to equity ratio
indicates that London Biscuits Berhad has been aggressive in financing its growth with debt.
Quick ratios or acid-test ratios for both companies showed the same trend as their respective current
ratios over the past three years. Hup Seng Industries Berhad had an average quick ratio of 2.610 wheareas an
average of 0.483 was recorded by London Biscuits Berhad. This means that London Biscuits Berhad has
approximately RM 0.50 of liquid assets available to cover each RM 1.00 of current liabilities. On the other
hand, high quick ratio registered by Hup Seng Industries Berhad is an indicator for the companys good
liquidity position.
Hup Seng Industries Berhad recorded 13% - 15% profit margin ratio whereas London Biscuits Berhad
showed figure of 0.4% - 0.6% during the financial years concerned. Clearly, Hup Seng Industries Berhad with
significant higher profit margin ratio was a more profitable company since it had bettercontrol over its costs
compared to its competitor. Both companies had considerably low debt ratio over the past three years, where
an average ratio of 0.278 and 0.453 were attained by Hup Seng Industries Berhad and London Biscuits Berhad
respectively. The higher this ratio, the more leveraged the company and the greater its financial risk.
In the context of rate of return on total assets (RRTA), Hup Seng Industries Berhad showed almost
triple percentage compared to London Biscuits Berhad. Hup Seng Industries Berhads RRTA ranged from 15%
to 18% whereas it competitors RRTA ranged from 4% to 5%. This indicates that Hup Seng Industries Berhad
is more effective in using its assets to generate earnings.

OPINION ABOUT THE MANAGEMENT OF THE FIRMS


Hup Seng Industries Berhad showed greater efficiency and better performance its competitor London Biscuits Berhad. Its high profit margin ratio represents its ability to translate sales dollars into profits
besides its ability in generating returns for its shareholders which is clearly revealed from its considerably
high RRTA. In future, this company seems to able to attract further funds from investors enticed by the
possibility of high returns of their investments. Hup Seng Industries Berhad is committed to broadening its
portfolio through product innovation and diversificationto support its growth. Besides, the Group undertook
an investment of about RM 6.4 million to commission a new Cookies production line towards end of 2014. Its
move to maintain the status of market leadership is the secret of success of this company.
London Biscuits Berhad seems to have been under performing over the past few years as compared to
Hup Seng Industries Berhad, however this company is still continuing to achieve progressive increase in
operating revenue, year on year a good sign though. The Group derives approximately 53% of its revenue
from the domestic Malaysian market and the balance 47% from exports. This shows that London Biscuits
Berhad still has a good outlook and prospect. Consistency will be the key component in maintaining its
competency in this field.
6

PART 2 REFERANCES AND DOCUMENTARY EVIDENCE


REFERENCES
http://www.bursamalaysia.com/
http://www.hupseng.com/company.htm
http://www.investopedia.com/
http://www.londonbiscuits.com.my/
APPENDIX
Ratios/Measurements

Method of Computation
Measures of Short-term Liquidity
1. Current Ratio
Current assets / Current liabilities
2. Quick Ratio
(Current assets - Inventories) / Current liabilities
3. Working Capital
Current assets - Current liabilities
4. Net Cash Provided By Operating Activities
Appears in the statement of cash flows
5. Cash Flow From Operations To Current Liabilities Cash flows from operating activities / Current liabilities
6. Receivables Turnover Rate
Net sales / Average net accounts receivable
7. Days to Collect Average Account Receivables
365 days / Receivable turnover rate
8. Inventory Turnover Rate
Cost of sales / Average inventory
9. Days To Sell Average Inventory
365 days / Inventory turnover rate
10. Operating Cycle
Days to sell inventory + Days to collect receivables
11. Total Asset Turnover
Net sales / Average total assets
Measures of Solvency
12. Debt Ratio
Total liabilities / Total assets
13. Equity Ratio
Total shareholders' equity / Total assets
14. Debt to Equity Ratio
Total liabilities / Total shareholders' equity
15. Times-interest-earned Ratio
Income from operation / Interest expense
Measures of Profitability
16. Profit Margin
Net income / Net sales
17. Gross Margin Ratio
Gross profit / Net sales
18. Basic Earnings Per Share
(Net income - Preferred dividends) / Average number of
shares of common stock outstanding
19. Return On Total Assets
Net income / Total assets
20. Return On Common Stockholders' Equity
(Net income - Preferred dividends) / Common
stockholders' equity
21. Book Value Per Common Share

Total shareholders' equity / Total common share


outstanding
Measures For Evaluating The Current Market Price of Common Stock

22. Price-Earnings Ratio

Market price per share of common stock / Earnings per


share

23. Dividend Yield

Dividend per share / Market price per share