FMT Tafi Federal LATEST

FINANCIAL
STATEMENT
ANALYSIS
TAFI Industries Berhad &
FEDERAL FURNITURE Holdings (M) Berhad
TAFI INDUSTRIES BERHAD
FEDERAL FURNITURE HOLDINGS (M) BERHAD

CONTENT
1 OVERVIEW OF THE COMPANIES
2 INCOME STATEMENT
3 BALANCE SHEET
4 CASH FLOW STATEMENT
4.1 CASH FLOW FROM OPERATING ACTIVITIES
4.2 CASH FLOW FROM INVESTING ACTIVITIES
4.3 CASH FLOEWS USED IN FINANCING ACTIVITIES
5 ANALYSIS
5.1 CASH FLOW STATEMENT
5.2 FIXED ASSETS AND LEASING
5.3 RATIO
6 TREND ANALYSIS
7 SUMMARY
TAFI Industries Berhad
 TAFI Industries Berhad is a Malaysia-

based company.
 The Company is engaged in investment
holding and provision of management
services.
 Through its subsidiaries, the Company is
principally engaged in the manufacturing
and marketing of furniture products
predominantly in Malaysia
FEDERAL FURNITURE
Holdings (M) Berhad
 Federal Furniture Holdings (M) Berhad is

a company are manufacturing, marketing,
trading and exporting furniture and
renovation and interior fit-outs of offices
and hotels.
 The Group also specialises in contract
renovations, fit-outs and interior design of
private, commercial and public projects.
INCOME STATEMENT
TAFI Industries Berhad 2004 2005 2006 2007 2008
Revenue 9,059,994 54,275,680 61,374,264 54,276,760 62,056,338

(-)Cost of sales (4,658,096) (33,611,245) (36,765,458) 27,382,183 (34,897,007)
Gross profit 4,401,898 20,664,435 24,608,806 81,658,943 27,159,331
Other operating income 0 559,767 604,933 1,004,070 1,830,706
Changes in inventories 0 1,280,538 (357,264) (1,534,971) (108,782)
Director's remuneration (280,747) (680,720) (777,360) (825,800) (896,380)
Staff cost (1,141,422) (6,800,316) (7,902,088) (7,611,769) (9,522,476)
Depreciation of property,plan & equipment (238,895) (1,432,276) (1,046,173) (1,221,085) (1,637,344)
Accretion of reserve on consolidation 61,657 369,943 0 0 0
Other operating expenses (1,961,382) (8,153,279) (8,453,559) (9,355,500) (10,758,622)
(3,560,789) (14,856,343) (17,931,511) (19,545,055) (21,092,898)
Profit from operations 841,109 5,384,637 6,677,295 7,349,522 6,066,433

Finance costs (1,650) (11,242) (9,067) (1,279) (150)
Income from other investment 59,234 423,555 0 0 0
Profit before tax 898,693 5,796,950 6,668,228 7,348,243 6,066,283
Income tax expense (110,524) (855,167) (800,491) (1,125,699) (968,418)
Net profit for the year 788,169 4,941,783 5,867,737 6,222,544 5,097,865
Earning per ordinary share 9.08 6.29 7.39 7.90 6.50
INCOME STATEMENT
 CFI of the company shows a significant increase

in investment especially in purchase of property,
plant and equipment (PPE) from RM139,887 in
2004, RM 958,4827 in 2005, RM 821,174 in
2006, RM 1,692,968 in 2007 and RM 5,560,268
in 2008.
 CFI shows decreasing curve in order of
investment by purchasing property but in the
term of operating capital expenditure by CFF
curve its shows the U shape from the fluctuate in
2004 to 2006 and recovered in the year of 2006
to 2008.
INCOME STATEMENT
2004 2005 2006 2007 2008
Revenue 38,419,932 48,219,076 45,069,142 52,809,869 53,665,738

(-)Cost of sales (3,241,736) (3,912,149) (6,196,354) (8,607,784) (6,813,474)
Gross profit 35,178,196 44,306,927 38,872,788 44,202,085 46,852,264
Other operating income 3,166,905 1,730,104 2,016,953 31,892,008 889,658
Changes in inventories of finished goods 174,458 (394,474) 1,490,197 269,496 (2,693,943)
Contract costs (24,784,165) (29,855,847) (23,860,191) (31,475,777) (27,101,553)
Finished goods purchased (138,618) (1,113,056) (2,879,204) (3,250,339) (435,113)
Staff costs (5,478,736) (5,466,445) (6,551,449) (7,463,586) (7,552,869)
Depreciation (1,908,882) (1,912,756) (1,644,295) (1,188,973) (1,106,497)
Other operating expenses (4,191,617) (4,600,848) (9,778,394) (8,073,596) (5,415,373)
(loss)/gain on disposal of a subsidiary - (18,233) - - -
(33,160,655) (41,631,555) (41,206,383) (19,290,767) (43,415,690)
Profit from operations 2,017,541 2,675,372 (2,333,595) 24,911,318 3,436,574

Finance costs (8,657,984) (9,338,844) (9,467,086) (1,751,443) (908,540)
Profit/ Loss before tax (6,640,443) (6,663,472) (11,800,681) 23,159,875 2,528,034
Income tax expense (76,873) 1,565,781 (277,191) (975,695) (1,445,189)
Profit/(loss) for the year (6,717,316) (5,097,691) (12,077,872) 22,184,180 1,082,845
Basic loss per share (sen) 24 18 (44) 32 1
Fully diluted loss per share (sen) N/A N/A N/A 24 1
BALANCE SHEET
CASH FLOW STATEMENT

ANALYSIS :
CASH FLOW STATEMENT
1. Cash Flow From Operating Activities (CFO)

 CFO is a method in measuring amount of cash
generated or used by the firm as a result of its
production and sales goods and services.
 Although deficits or negative cash flows from
operations are expected in some
circumstances, for most firms positive CFO are
essential for long run survival.
 Internally generated funds can be used to pay
dividends or repurchase equity, repay loans,
replace existing capacity or invest in
acquisitions and growth.
ANALYSIS :
CASH FLOW STATEMENT
2. Cash Flow From Investing (CFI)

 CFI is a reports the amount of cash used to
acquire assets such as plant and equipment as
well as investments and entire businesses.
 These outlays are necessary to maintain a firm’s
current operating capacity and to provide
capacity for future growth. CFI also includes
cash received from the sale or disposal of assets
or segments of the business.
ANALYSIS :
CASH FLOW STATEMENT
3. Cash Flow From Financing (CFF)
 CFF contains the cash flow consequences of the
firm’s capital structure (debt and equity) decisions.
 TAFI & FEDERAL presenting the cash flow statement
that in Direct Method. An advantage of the direct
method, which displays the individual cash flow
impact of normal operating revenue and expense
items, it is permits an evaluation of cash flows
relating to specific line items in the income statement
such as gross sales, cost of goods sold or even total
operating expenses
ANALYSIS :
CASH FLOW STATEMENT
 The analysis will focus on performance, liquidity

and financial that show by comparasion the ration.
3 ratio that we focus is :
1 Cash Flow To Sales CFO/Sales
2 Cash Flow To Net Income CFO/Net Income
3 Free Cash Flow (FCF) CFO-Capital

Expenditure
Tafi Industries Berhad
1.Cash flow statements highlight :
Summary of Tafi Industries’s cash flow statement for
2004-2008 :
2004 2005 2006 2007 2008
Year
RM’000
CFO 2,783,240 4,941,707 7,416,620 9,086,521 6,168,787

CFI 5,720,273 3,262,378 (301,129) (863,307) (6,740,347)
CFF (16,668) (2,547,433) (2,935,935) (2,204,674) (1,929,651)
Net cash & cash 8,486,845 14,143,497 18,323,053 24,341,593 21,840,382
equivalent at the
end of the year
ANALYSIS OF CFO, CFI AND CFF
2004 - 2008
2004 - 2008
 Analysis : CFO for the company report positive sign and

its shows an increasing amount (except for 2008). Higher
CFO is a quality of satisfaction customer. Increasing of
CFO will lead the decreasing in CFI. It’s show sales is not
influence to the changes net income.
 Major cash inflows are cash receipt from customers that
is RM898,693 in 2004, RM5,796,850 in 2005,
RM6,668,228 in 2006, RM7,348,243 in 2007,
RM6,066,283 in 2008. In 2008 the CFO is decrease
because the company unrealised loss on foreign
exchange.
 Average exchange rate per unit of United States Dollar in
2007 is RM8,174,812 but in 2008 the average exchange
rate per unit of United States Dollar is RM6,340,047.
Decreasing in CFO in 2008 will affect more negative sign
in CFI.
2004 - 2008
1.Cash Flows Ratios

(b)Cash Flow to sales
Relationship between CFO and sales for 2004-2008
Year 2004 2005 2006 2007 2008
RM’000
Sales 9,059,994 54,275,680 61,374,264 54,276,760 62,056,338
CFO 2,783,240 4,941,707 7,416,620 9,086,521 6,168,787
CFO/Sales 31% 9% 12% 17% 10%

2004 - 2008
2004 - 2008
 Analysis : Cash flow to sales ratio

measures the sales are realized in cash.
This will be an indicator of the ability to
generate cash flow.
 For Tafi Berhad it shows an decreasing
percentage that i1 31% to 9% at 2005. Its
start increase percentage until 2007 . Then
the percentage decrease to 10% in 2008. It
shows that the company ability to generate
cash is moderately.
2004 - 2008
Cash flow to net income

Relationship between CFO and Net Income for 2004-2008
2004 2005 2006 2007 2008
RM’000
Net Income 788,169 4,941,783 5,867,737 6,222,699 5,097,865
CFO 2,783,240 4,941,707 7,416,620 9,086,521 6,168,787
CFO/Net Income 353 100 126 146 121

2004 - 2008
2004 - 2008
 Analysis:There is an increasing of CFO parallel

with the increasing of net income. At 2008 both
net income and CFO are decrease. The rule is
when net income is positive, CFO also should be
positive.
 Net income for the company increased from RM
788,169 to RM 6,222,699 in 2007. CFO
company also increase from RM2,783,240 in
2004 to RM6,168,787 in 2007. In 2008 the CFO
and net income are decrease RM1,124,834 and
RM2,917,734 respectively.
2004 - 2008
Free cash flow (FCF)

Relationship between Net Income, CFO and FCF 2004-2008
Year 2004 2005 2006 2007 2008
RM’000
Net Income 788,169 4,941,783 5,867,737 6,222,699 5,097,865

CFO 2,783,240 4,941,707 7,416,620 9,086,521 6,168,787
FCF 2,643,353 -4,643,120 6,595,446 7,393,553 608,519
2004 - 2008
2004 - 2008
 Analysis :The company has a positive

FCF in 2006 , 2007 and 2008. The FCF is
decreasing in 2004 and 2008. This
company has not in steady state and
generating growth.
 This company can make drastic change in
FCF where the amount increased from
RM-4,643,120 to 6,595,446.
2004 - 2008
FEDERAL FURNITURE HOLDINGS BERHAD
1.Cash flow statements highlight :
Year 2004 2005 2006 2007 2008
RM’000
CFO (5,873,411) (41,830) 241,379 8,704,934 55,536
CFI 5,027,252 89,365 (234,338) (212,694) (7,557)
CFF (52,607) (45,446) (17,291) (8,496,483) (17,292)
Net cash & 18,126 20,215 9,965 5,722 36,409

cash
equivalent at
the end of the
year
2004 - 2008
2004 - 2008
 Analysis :From the graph, we can conclude that CFO for

the company is fluctuating over the year. Even though it
is fluctuate but it shows positive sign Positive CFO
means the company financial health is good.
 Major cash inflows are cash receipts from customers that
is RM35,178,196 in 2004, Rm44,306,927 in 2005, RM
38,872,788 in 2006, RM 44,202,085 in 2007 and
RM46,852,264 in 2008.
 Whereas major outflows are contract costs that is
RM24,784,165 in 2004, RM29,855,847 in 2005,
RM23,860,191 in 2006, RM31,475,777 in 2007 and
RM27,101,553 in 2008
2004 - 2008
1.Cash Flows Ratios

b)Cash Flow to sales
Relationship between CFO and sales for 2004-2008
2004 2005 2006 2007 2008
RM’000
Sales 38,419,932 48,219,076 45,069,142 52,809,869 53,665,738
CFO (5,873,411) (41,830) 241,379 8,704,934 55,536
CFO/Sales -15.29% -0.09% 0.54% 16.48% 0.10%

2004 - 2008
2004 - 2008
 Analysis:Cash flow to sales ratio measurea the

sales are realized in cash. This will be an
indicator of the ability to generate cash flow.
 For Federal Furniture Holdings (M) Berhad, both
CFO and sales shows the same pattern. It is a
stable position of CFO and sales. Therefore the
company ability to generate cash is good. Higher
percentage is a sign for healthy company.
2004 - 2008
a)Cash flow to net income

Relationship between CFO and Net Income for 2004-2008
Year 2004 2005 2006 2007 2008
RM’000
Net Income 35,419,932 48,219,076 45,069,142 52,809,869 53,665,738
CFO -5,873,411 -41,830 241,379 8,704,934 55,536
CFO/Net -16.58 -0.09 0.54 16.48 0.10

Income
2004 - 2008
2004 - 2008
 Analysis: The graph shows that the

company is a “growth” company, its net
income and CFO (2008) shows constant
growth from 2004 to 2008.
2004 - 2008
a)Free cash flow (FCF)

Relationship between Net Income, CFO and FCF 2004-2008
2004 2005 2006 2007 2008
RM’000
Net Income 35,419,932 48,219,076 45,069,142 52,809,869 53,665,738
CFO -5,873,411 -41,830 241,379 8,704,934 55,536
FCF 5,863,679 97,380 227,936 8,492,240 47,979

2004 - 2008
2004 - 2008
 Analysis:FCF is positive in each year, a

healthy sign given rapid growth. FCF
patterns have to be monitored carefully for
growth companies to ensure that they are
not growing too fast, which can cause
liquidity problems.
FIXED ASSETS AND LEASING
 FEDERAL FURNITURE HOLDINGS (M)

BERHAD AND TAFI INDUSTRIES BERHAD
use the same method of depreciation Straight
Line Method.
 The straight-line depreciation method is one way of

recording this reduction in value. This method calculates
the annual depreciation expense by taking the cost of
the fixed asset minus the scrap value of that asset then
dividing by the life span (the number of years the fixed
asset will be in use).
 The annual depreciation rates for TAFI INDUSTRIES are

as follows:
 Land under long leases Over period of lease of 60 - 99
years
 Buildings 2% - 10%
 Plant and machinery 10%
 Motor vehicles 10% - 20%
 Tools, equipment and electrical installation
5% - 10%
 Furniture, fixtures and fittings 10%
 The annual depreciation rates for FEDERAL

FURNITURE HOLDINGS are as follows:
 Buildings 2%
 Motor vehicles 20%
 Furniture and fittings 5% - 15%
 Plant and machinery 6.7% - 20%
 Office equipment 10% - 20%
 Renovation 10% - 20%
 For example, a fixed asset that depreciates over six

years is purchased by a firm. The cost of that asset
is RM35,000 and it has a scrap value of RM5000.
The calculated annual depreciation expense will be
RM5000
 This method is used in financial accounting because

it allows for the firm or organization to report a
higher net income in the earlier years to the
stockholders. Financially it makes the company or
organization look better to current investors and
future investors. But for tax purposes it might not be
the company or organization’s first choice for recording
depreciation.
YEAR 2004 2005 2006 2007 2008

FIXED DEPRECIATION TAFI
ASSETS (238,895) (1,465,855) (1,046,173) (1,221,085) (1,637,344)
FEDERAL (1,908,882) (1,912,756) (1,644,295) (1,188,973) (1,106,497)

COST TAFI 13,701,634 19,719,752 23,641,803
21,819,067 19,298,629
FEDERAL 55,540,388 54,637,405 24,164,823 11,856,702 11,544,510
LEASING OPERATING TAFI 2,302,878 2,269,299 904,285 884,570 2,031,856

FEDERAL 70,378 42,850 42,850 38,166 38,991
 FRS 117 – Leases

 In prior years, leasehold interests in long leasehold land were
classified as property, plant and equipment and were stated at cost
less accumulated depreciation. With the adoption of FRS 117 on
January 1, 2006, leasehold interests in long leasehold land are
accounted for as being held under operating leases and are
reclassified as prepaid lease payments. Such leasehold land will
no longer be revalued. Where the leasehold land had been
previously revalued, the Group retained the unamortised revalued
amount as the surrogate carrying amount of prepaid lease
payments as allowed under the transitional provisions of FRS 117.
RATIO ANALYSIS FOR TAFI INDUSTRIES BERHAD
& FEDERAL FURNITURE (M) BERHAD
YEAR 2004 2005 2006 2007 2008

LIQUIDITY RATIO Current Ratio TAFI 3.51 4.54 4.5 5.15 6.11
FEDERAL 0.24 0.24 0.24 0.96 1.06
Quick Ratio TAFI 2.5 3.43 3.63 4.52 5.16
FEDERAL 0.21 0.19 0.19 0.73 0.93
ASSETS Average collection TAFI 397 60 60.6 69 46

MANAGEMENT period
RATIO FEDERAL 178.29 119.58 142.8 115.84 98.6
Inventory turnover TAFI 1.08 6.5 8.25 10.48 10.37

ratio
FEDERAL 9.47 7.32 5.88 2.26 4.05
Fixed asset TAFI 0.66 2.49 2.84 2.47 2.23

turnover ratio
FEDERAL 0.35 0.43 0.5 2.38 2.62
Total assets TAFI 0.21 0.97 1.02 0.84 0.94

turnover ratio
FEDERAL 0.27 0.33 0.36 0.98 1.12
YEAR 2004 2005 2006 2007 2008

PROFITABILITY Profit margin on TAFI 1 9 10 11 8
RATIO (%) sales
FEDERAL (17) (11) (27) 42 2
Basic earning TAFI 2 1.00 11 11 9

power
FEDERAL 1 2 (2) 46 7
Return on asset TAFI 2 9 97 10 77

FEDERAL 5 3 10 41 2
DEBT MANAGEMENT Debt ratio TAFI 0.19 0.13 0.14 0.13 0.09
RATIO
FEDERAL 0.99 1.02 1.21 0.67 0.60
Times interest TAFI 509.76 478.98 736.44 5746.3 40441.89

earned
FEDERAL 0.99 1.02 1.21 0.67 0.6
COMPARISON FOR BOTH COMPANIES

1. Current Ratio

1. Current Ratio
 Both companies significantly have a good

performance regarding to current asset. The
ratio continuously increase from year to year but
the performance for Tafi Industries Berhad is
much better than Federal Furniture Holding (M)
Berhad. Both company manage to control their
current assets and current liabilities depend on
situation faced.

2. Quick Ratio

2. Quick Ratio
 The quick ratio also shows the same result

as current ratio. In year 2004 to 2006
quick ratio remain the same it is 0.2 this is
because the increase in current assets,
inventories and current liabilities.

4. Inventory turnover ratio

5. Fixed asset turnover ratio

6. Total asset turnover ratio

7. Profit margin on sales

8. Basic earning power

9. Return on asset

10. Debt ratio

11. Times interest earned

12. Return on equity
Return On Equity
200
100
0
Year
-100 2004 2005 2006 2007 2008
-200
-300 TAFI
-400 FEDERAL
-500
-600
SUMMARY
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FINANCIAL

FEDERAL FURNITURE HOLDINGS (M) BERHAD

 TAFI Industries Berhad is a Malaysia-

 Federal Furniture Holdings (M) Berhad is

Revenue 9,059,994 54,275,680 61,374,264 54,276,760 62,056,338

(3,560,789) (14,856,343) (17,931,511) (19,545,055) (21,092,898)

Profit from operations 841,109 5,384,637 6,677,295 7,349,522 6,066,433

 CFI of the company shows a significant increase

Revenue 38,419,932 48,219,076 45,069,142 52,809,869 53,665,738

Profit from operations 2,017,541 2,675,372 (2,333,595) 24,911,318 3,436,574

TAFI Industries Berhad

1. Cash Flow From Operating Activities (CFO)

2. Cash Flow From Investing (CFI)

 The analysis will focus on performance, liquidity

1 Cash Flow To Sales CFO/Sales

2 Cash Flow To Net Income CFO/Net Income

3 Free Cash Flow (FCF) CFO-Capital

CFO 2,783,240 4,941,707 7,416,620 9,086,521 6,168,787

 Analysis : CFO for the company report positive sign and

1.Cash Flows Ratios

Year 2004 2005 2006 2007 2008

Sales 9,059,994 54,275,680 61,374,264 54,276,760 62,056,338

CFO 2,783,240 4,941,707 7,416,620 9,086,521 6,168,787

CFO/Sales 31% 9% 12% 17% 10%

 Analysis : Cash flow to sales ratio

Cash flow to net income

Net Income 788,169 4,941,783 5,867,737 6,222,699 5,097,865

CFO 2,783,240 4,941,707 7,416,620 9,086,521 6,168,787

CFO/Net Income 353 100 126 146 121

 Analysis:There is an increasing of CFO parallel

Free cash flow (FCF)

Year 2004 2005 2006 2007 2008

Net Income 788,169 4,941,783 5,867,737 6,222,699 5,097,865

 Analysis :The company has a positive

1.Cash flow statements highlight :

Year 2004 2005 2006 2007 2008

CFO (5,873,411) (41,830) 241,379 8,704,934 55,536

CFI 5,027,252 89,365 (234,338) (212,694) (7,557)

CFF (52,607) (45,446) (17,291) (8,496,483) (17,292)

Net cash & 18,126 20,215 9,965 5,722 36,409

 Analysis :From the graph, we can conclude that CFO for

1.Cash Flows Ratios

2004 2005 2006 2007 2008

Sales 38,419,932 48,219,076 45,069,142 52,809,869 53,665,738

CFO (5,873,411) (41,830) 241,379 8,704,934 55,536

CFO/Sales -15.29% -0.09% 0.54% 16.48% 0.10%

 Analysis:Cash flow to sales ratio measurea the

a)Cash flow to net income

Net Income 35,419,932 48,219,076 45,069,142 52,809,869 53,665,738

CFO -5,873,411 -41,830 241,379 8,704,934 55,536

CFO/Net -16.58 -0.09 0.54 16.48 0.10

 Analysis: The graph shows that the

a)Free cash flow (FCF)

Net Income 35,419,932 48,219,076 45,069,142 52,809,869 53,665,738

CFO -5,873,411 -41,830 241,379 8,704,934 55,536

FCF 5,863,679 97,380 227,936 8,492,240 47,979

 Analysis:FCF is positive in each year, a

 FEDERAL FURNITURE HOLDINGS (M)

 The straight-line depreciation method is one way of

 The annual depreciation rates for TAFI INDUSTRIES are

 The annual depreciation rates for FEDERAL

 For example, a fixed asset that depreciates over six

 This method is used in financial accounting because

YEAR 2004 2005 2006 2007 2008