ANNUAL REPORT ANALYSIS OF SAMSON INTERNATIONAL PLC

 

Samson International PLC Company Profile

 

 

Samson International PLC is a subsidiary of the DSI Samson Group (Pvt) Ltd which was founded in 1962. DSI Samson Group has an export turnover of more than USD 62 Mn and has a workforce more than 10,000 employees. The majority of their factories in the Group are located in remote rural areas. Samson International PLC is one of them.

 

Samson International PLC started its business on 14th October 1988 at a time the open economic policies had got firmly established in the country with a great tendency among the business community to commence export-oriented projects. Accordingly, this company was initially intended to produce rubber-based products largely for export markets. At the time of incorporating this company, the land bought for this factory was abandoned and it was an overgrown jungle and away from human habitations. Now it developed into a popularized semi-urban area due to presence of their factory. This is the greatest deed of social responsibility Samson International PLC has delivered to the villagers in Bogahagoda. A similar programme is being carried out for the villagers in Baddegama surround their recently acquired PVC factory. Samson International PLC manufactures and exports moulded and extruded rubber products such as hot water bottles, jar sealing rings, rubber mats, rubber floorings, beadings and mud flaps mainly to international markets and also sells rubber and PVC-related products to the local market.

 

The Company diversified in to PVC market a few years back with the intention of exploiting big & new markets and growth opportunities in the midst of the boom of the construction industry and positive economic outlook of the country. Samson International PLC has 415 employees and the main factory is situated at Bogahagoda, Galle. Other two factories are in Baddegama and Kalutara.

 

They received six awards and certification including the Gold Export Award from the National Chamber of Exporters of Sri Lanka on September 29, 2017 consecutively for three years. They also received the CNCI Achiever’s Bronze provincial Award and Merit National Award for industrial excellence from the Ceylon National Chamber of Industries of Sri Lanka on August 17, 2017. They use them as a marketing tool to exploit overseas customers and to improve and streamline current operational systems and procedures.

 

Ratio Analysis

1.     Liquidity & Efficiency Ratio

 

1.1 Current Ratio

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables. A current ratio that is in line with the industry average or slightly higher is generally considered acceptable. A current ratio that is lower than the industry average may indicate a higher risk of distress or default. Similarly, if a company has a very high current ratio compared with its peer group, it indicates that management may not be using its assets efficiently. The current ratio is called current because, unlike some other liquidity ratios, it incorporates all current assets and current liabilities.

 

	2017	2018	2019	2020	2021
Current Assets	614,231,671	594,335,798	721,311,233	713,640,164	1,221,292,614
Current Liabilities	412,117,531	375,526,714	457,344,274	440,970,097	1,002,535,407
Current Ratio	1.4904	1.5826	1.5771	1.6183	1.2182
	1.49:1	1.59:1	1.58:1	1.62:1	1.22:1

 

According to above ratio over 2017-2021 represents the companies’ ability to pay back its liabilities with its assets. Current ratio reflects the company’s financial health. If current assets are greater than current liabilities, it’s a favorable condition.  In 2017 assets are greater than liabilities. 2018, 2019, 2020 & 2021 has that favorable condition. According to the current ratio, it reveals that the financial health of the company is in a favorable over time.

1.2  Acid Test Ratio

	2017	2018	2019	2020	2021
Current Assets	614,231,671	594,335,798	721,311,233	713,640,164	1,221,292,614
Inventory	203,931,604	182,733,669	198,337,225	269,490,083	527,559,236
Quick Assets	410,300,067	411,602,129	522,974,008	444,150,081	693,733,378
Current Liabilities	412,117,531	375,526,714	457,344,274	440,970,097	1,002,535,407
Acid Test Ratio	0.9956	1.096	1.1435	1.0072	0.6919
	0.99:1	1.10:1	1.14:1	1:1	0.69:1

 

Acid-test ratio is a strong indicator of whether a firm has sufficient short term assets to cover its immediate liabilities. According to above calculations 2018, 2019 & 2020 has short term liabilities more than 1 per 1 rupee of liability. In 2017 and 2021 quick assets are less than current liabilities. According to the Acid-test ratio, it reveals that Samson International PLC is moving towards favorable condition when paying immediate obligations since 2018, but in 2021 quick assets has become less than current liabilities with the corona pandemic.

 

1.3  Accounts Receivable Turnover

	2017	2018	2019	2020	2021
Revenue	1,249,497,643	1,116,449,958	1,569,344,864	1,590,202,615	2,185,869,312
Trade Receivables	324,728,029	339,631,849	471,814,451	355,830,769	652,638,801
Average Trade Receivables	344,363,479.5	332,179,939	405,723,150	413,822,610	504,234,785
Accounts Receivable Turnover	3.6284	3.3609	3.8680	3.8427	4.3350

This ratio measures the company’s ability to covert its receivables into cash every year. And also measure how efficiently a firm uses its assets. Comparing above years, 2021 has the highest accounts receivable turnover & lowest turnover in 2018.

 

1.4  Total Asset Turnover

	2017	2018	2019	2020	2021
Revenue	1,249,497,643	1,116,449,958	1,569,344,864	1,590,202,615	2,185,869,312
Total Assets	1,101,129,363	1,080,385,578	1,195,251,017	1,178,574,883	1,829,716,137
Average Total Assets	1,003,027,985	1,090,757,471	1,137,818,298	1,186,912,950	1,504,145,510
Total Asset Turnover	1.2457	1.0236	1.3793	1.3398	1.4532

 

Total asset turnover measures the firm’s sales or revenues generated relative to the value of its assets. According to above calculations year 2021 has the highest total asset turnover rate. It implies that, for every 1 rupee generates 1.45 rupees of sales. 2018 shows the lowest asset turnover when compared to the other periods.

 

1.5 Day's Sales in Inventory

	2017	2018	2019	2020	2021
Ending Inventory	203,931,604	182,733,669	198,337,225	269,490,083	527,559,236
Cost of Sales	974,787,331	895,959,431	1,261,795,596	1,300,271,205	1,778,637,433
Day's Sales in Inventory	76.36	74.44	57.37	75.65	108.26

 

Days’ sales in inventory reflect how long will, it take a firm to convert its inventory into sales. It measures liquidity of inventory. According to the above calculations, Samson International PLC shows fluctuations where year 2019 shows the best Day's Sales in Inventory and 2021 shows the worst Day's Sales in Inventory.

 

1.6  Day's Sales Uncollected

Day's Sales Uncollected = (Accounts Receivable/ Revenue) ×365

	2017	2018	2019	2020	2021
Revenue	1,249,497,643	1,116,449,958	1,569,344,864	1,590,202,615	2,185,869,312
Accounts Receivable	324,728,029	339,631,849	471,814,451	355,830,769	652,638,801
Day's Sales Uncollected	94.86	111.04	109.74	81.67	108.98

 

Above ratio measure the approximate time period required to collect the receivable. Unusually high figures imply the inadequate collection process within the company. According to above calculations over time, 2018 has an unusually high figure to collect receivables which means an unfavorable condition.

1.7 Merchandise Turnover / Stock turnover

	2017	2018	2019	2020	2021
Inventory	203,931,604	182,733,669	198,337,225	269,490,083	527,559,236
Average Inventory	191,172,465.5	193,332,636.5	190,535,447	233,913,654	398,524,659.5
Cost of Sales	974,787,331	895,959,431	1,261,795,596	1,300,271,205	1,778,637,433
Merchandise Turnover	5.09	4.6343	6.6224	5.5588	4.4631

 

Merchandise turnover shows how many times a company’s inventory is sold and replaced over time. High turnover means nothing unless the company is making a profit on each sale. According to the above calculations, merchandise turnover fluctuates, in 2017 high turnover, 2018 rapid decrease, again 2019 high increase. 2019 has the highest merchandise turnover when compared to other years.

 

2.     Solvency Ratios

2.1 Debt Ratio

	2017	2018	2019	2020	2021
Total Liabilities	474,910,843	461,146,426	557,113,765	536,165,483	1,089,934,798
Total Assets	1,027,292,234	1,015,234,529	1,195,251,017	1,178,574,883	1,829,716,137
Debt Ratio	46.23%	45.42%	46.61%	45.49%	59.57%

 

Above ratio measures the portion of a company’s assets are contributed by creditors. According to above calculations year 2021 has the highest debt ratio. Since 2017, debt ratio has fluctuated in same level but in 2021, it has increased highly.

 

2.2 Equity Ratio

	2017	2018	2019	2020	2021
Total Shareholder's Equity	552,381,391	554,088,103	638,137,252	642,409,400	739,781,339
Total Assets	1,027,292,234	1,015,234,529	1,195,251,017	1,178,574,883	1,829,716,137
Equity Ratio	53.77%	54.58%	53.39%	54.51%	40.43%

 

The equity ratio measures what portion of a company’s assets are contributed by the owners. According to above calculations year 2018 has the highest equity ratio. From 2017 to 2015 we can see overall increment with certain fluctuations which means investors seems desire to invest within the company. From 2018 to 2019 we can see overall decrement with certain fluctuations which means investors seems reluctant to invest within the company. In 2021, there is a high decrement of equity ratio.

 

2.3 Times Interest Earned

 

	2017	2018	2019	2020	2021
Profit Before Tax	65,972,191	16,973,525	43,634,555	12,086,113	108,360,778
Finance Cost	6,334,984	3,034,983	27,897,695	22,050,478	9,242,770
Profit Before Tax + Finance Cost	72,307,175	20,008,508	71,532,250	34,136,591	117,603,548
Times Interest Earned	11.4139	6.5926	2.5641	1.5481	12.7238

 

Times interest earned ratio measures the ability of an organization to pay its debt obligations. According to above calculations year 2021 has the highest times interest earned ratio. From 2017 to 2021 Samson International PLC has a favorable times interest earned which is greater than 1. That implies the ability to service debt is not a problem for a borrower.

 

 

 

 

 

 

3.     Profitability Ratios

3.1 Gross Margin

	2017	2018	2019	2020	2021
Revenue	1,249,497,643	1,116,449,958	1,569,344,864	1,590,202,615	2,185,869,312
Cost of Sales	974,787,331	895,959,431	1,261,795,596	1,300,271,205	1,778,637,433
Gross Profit	274,710,312	228,967,821	307,549,267	289,931,410	407,231,879
Gross Margin	21.99%	20.51%	19.59%	18.23%	18.63%

 

This ratio measures how profitable a company sells its inventory or merchandise. In the year 2017 has the highest gross margin and the year 2020 has the lowest gross margin. According to above calculations Samson International PLC has an unfavorable gross margin of 2017 to 2018 and 2019 to 2021.

 

3.2  Profit Margin

 

Net Profit Margin= (Net Profit/ Revenue) × 100%

 

	2017	2018	2019	2020	2021
Revenue	1,249,497,643	1,116,449,958	1,569,344,864	1,590,202,615	2,185,869,312
Net Profit	42,898,525	8,849,469	25,007,162	12,311,009	98,808,338
Net Profit Margin	3.43%	0.79%	1.59%	0.77%	4.52%

 

The above ratio measures the company’s ability to earn a net income from sales. According to above calculations year 2021 has the highest profit margin. From 2017 to 2018 net profit margin has a decrement which is an unfavorable condition.

3.3  Return on Total Assets

Return on Total Assets = (Net profit of the year/ Average total assets) ×100%

	2017	2018	2019	2020	2021
Profit for the year	42,898,525	8,849,469	25,007,162	12,311,009	98,808,338
Total Assets	1,027,292,234	1,015,234,529	1,195,251,017	1,178,574,883	1,829,716,137
Average Total Assets	1,003,027,985	1,021,263,382	1,105,242,773	1,186,912,950	1,504,145,510
Return on Total Assets	4.28%	0.87%	2.26%	1.04%	6.57%

 

The above ratio measures the overall profitability of the company. In 2021 Samson International PLC has the highest return on total assets ratio. In 2018 has the lowest return on total assets ratio. From 2017 to 2018 return on total assets ratio has been decreased. Above figures imply that the overall profitability of the company has been decreasing over time.

 

3.4  Return on Common Shareholder's Equity

	2017	2018	2019	2020	2021
Profit for the year	42,898,525	8,849,469	25,007,162	12,311,009	98,808,338
Total Equity	626,218,521	619,239,151	638,137,252	642,409,400	739,781,339
Average Total Equity	534,748,148	622,728,836	628,688,201.5	640,273,326	691,095,369.5
Return on Common Shareholder's Equity	8.02%	1.42%	3.98%	1.92%	1.43%

 

The above measure indicates how well the company employed the owners’ investment to earn income. From 2018 to 2019 return on common shareholders’ equity has been increased which means the way that the company has been employed the owners’ investment seems favorable. From 2017 to 2018 return on common shareholders’ equity has been decreased, which means the way that the company has been employed the owners’ investment seems unfavorable.

 

3.5  Book Value per Common Share

 

	2017	2018	2019	2020	2021
Total Equity	626,218,521	619,239,151	638,137,252	642,409,400	739,781,339
Number of shares	4,232,771	4,232,771	4,232,771	4,232,771	4,232,771
Book Value per Common Share	147.945	146.296	150.761	151.77	174.77
	147.945:1	146.296:1	150.761:1	151.77:1	174.77:1

Book Value per Common Share = shareholder’s equity applicable to common shares/ number of   common shares outstanding

 

                                  

 

The above ratio measures liquidation at reported amounts. The year 2021 has the higher book value per common share. Which is a favorable for liquidation at reported amount.

 

 

 

 

 

3.6  Basic Earnings per Share

	2017	2018	2019	2020	2021
Profit for the year	42,898,525	8,849,469	25,007,162	12,311,009	98,808,338
Number of shares	4,232,771	4,232,771	4,232,771	4,232,771	4,232,771
Basic Earnings per Share	10.13	2.09	5.91	2.91	23.34

 

The above measure indicates how much income was earned for each share of common stock outstanding. The year 2021 has the highest basic earnings per share and the year 2018 has the lowest basic earnings per share.

 

4.     Market Ratio

 

4.1 Price Earnings Ratio

	2017	2018	2019	2020	2021
Market Price Per Share	98.90	88.10	97.90	72.10	134.25
Earnings Per Share	10.13	2.09	5.91	2.91	23.34
Price Earnings Ratio	9.76	42.15	16.56	24.78	5.75

 

According to the above calculations, the year 2018 has the highest price earnings ratio. The PE ratio has been increased highly from 2017 to 2018 which means the company has the opportunity to grow. Since 2018, this ratio has fluctuated and in 2021, it has reached to lowest level.

 

4.2  Dividend Yield

Dividend Yield = (Dividend per Share/ Market Price per Share) × 100%

 

	2017	2018	2019	2020	2021
Market Price Per Share	98.90	88.10	97.90	72.10	134.25
Dividend Per Share	2.00	1.25	2.00	1.00	2.00
Dividend Yield	2.022%	1.42%	2.04%	1.39%	1.49%

 

According to above calculations year 2019 has the highest dividend yield and seems to be having a favorable condition.

 

Working Capital

Working Capital = Current Assets- Current Liabilities

	2017	2018	2019	2020	2021
Working Capital	202,114,140	218,809,084	263,966,959	272,670,067	218,757,207

 

 

Altman Z-Score Analysis

Z-Score = 1.2T₁ + 1.4T₂+ 3.3T₃ + 0.6T₄ + 0.999T₅

T_{1 =} Working Capital/Total Assets

T_{2 =} Retained Earnings/Total Assets

T_{3 =} Earnings before Interest & Tax/Total Assets

T₄= Market Value of Equity/Total Liabilities

T₅ = Sales/Total Assets

 

	2017	2018	2019	2020	2021
Working Capital	202,114,140	218,809,084	263,966,959	272,670,067	218,757,207
Total Assets	1,027,292,234	1,015,234,529	1,195,251,017	1,178,574,883	1,829,716,137
T1	0.1967	0.2155	0.2208	0.2314	0.1196
Retained Earning	332,781,180	334,487,892	418,537,041	422,809,189	520,181,128
Total Assets	1,027,292,234	1,015,234,529	1,195,251,017	1,178,574,883	1,829,716,137
T2	0.3239	0.3295	0.3502	0.3588	0.2843
Earning Before Tax	65,972,191	16,973,525	43,634,555	12,086,113	108,360,778
Total Assets	1,027,292,234	1,015,234,529	1,195,251,017	1,178,574,883	1,829,716,137
T3	0.0642	0.0167	0.0365	0.0103	0.0592
Market Value of Equity	418,621,051.9	372,907,125.1	414,388,280.9	305,182,789.1	568,249,506.8
Total Liabilities	474,910,843	461,146,426	557,113,765	536,165,483	1,089,934,798
T4	0.8815	0.8087	0.7438	0.5692	0.5214
Sales	1,249,497,643	1,116,449,958	1,569,344,864	1,590,202,615	2,185,869,312
Total Assets	1,027,292,234	1,015,234,529	1,195,251,017	1,178,574,883	1,829,716,137
T5	1.2163	1.099	1.3129	1.3493	1.1946
Z Score	2.6453	2.3581	2.6336	2.5035	2.2431

 

Zone of Discrimination

·         Z > 2.9 – “Safe” Zone

·         1.23 < Z 2.9 – “Grey” Zone

·         Z < 1.23 – “Distress” Zone

The Altman Z-score is the output of a credit-strength test that gauges a publicly traded manufacturing company's likelihood of bankruptcy. The Altman Z-score is based on five financial ratios that can one can calculate from data found on a company's annual report. It uses profitability, leverage, liquidity, solvency and activity to predict whether a company has a high probability of being insolvent.

According to the Z Scores derived from Samson International PLC Financials, in the years of 2017 to 2021 the company is in the Grey zone and none of years showing the Z value more than 2.9 seems it is not located in safe zone in none of years.

 

Conclusion

Analysis of 5 years summary of annual reports reveal that revenue of the Samson international PLC, has increased during each year from since 2017.But in the 2020 and 2021, there is a sudden downfall of the revenue in high amount. The major reason for that is corona pandemic situation which affects different sides for manufacturing processes in the organization. Z score analysis also proves that company is riding towards the distress zone. In 2021 this company has lowest Z score, which is near to distress zone when compare with previous years.

As a responsible management, they should take necessary actions to increase profits by developing new strategies. Also, they can develop new business plan to face challenges successfully and survive in the industry.