Financial Analysis of Padini Holdings Berhad: A 10-Year Review

This report presents a comprehensive financial analysis of Padini Holdings Berhad, a Malaysian holding company in the garments and textile industry, covering a 10-year period from 2009 to 2019. The analysis examines the company's background, development, market positioning, technology adoption, and general prospects. It delves into the financial position and trends, including revenue, profitability, and net assets, highlighting key performance indicators such as gross profit margin and net profit margin. The report assesses the company's product profitability, liquidity, capital structure, operational viability, and risk factors. It also reviews share price movements and trends, providing a holistic view of Padini Holdings' financial health and investment potential, based on its annual reports and market data. The analysis also includes an assessment of the company's efficiency, operational performance, and product profitability, providing insights into its strengths and weaknesses.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student
Name of the University
Author Note

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Table of Contents
Background of company:.................................................................................................................2
Development of the company:.........................................................................................................2
Market development:.......................................................................................................................3
Technology and expertise:...............................................................................................................5
General prospects:...........................................................................................................................6
Financial position and trends:..........................................................................................................7
Products profitability:......................................................................................................................8
Liquidity:.........................................................................................................................................8
Capital structure and gearing:..........................................................................................................9
Operational viability:.......................................................................................................................9
Risk and prospects:........................................................................................................................10
Share price movements and trend:.................................................................................................10
Financial Position and Trend.........................................................................................................11
Capital Structure and Leverage..................................................................................................14
Efficiency and Operational Performance...................................................................................14
Product Profitability...................................................................................................................14
Conclusion.....................................................................................................................................15
References list:...............................................................................................................................16

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Background of company:
Padini Holding Bhd. Is a well-known Malaysian holding company whose subsidiaries are
solely engaged in the marketing and retailing of the garments and textile industry. Its operations
began in the year 1971 as a manufacturing company named as Hwayo Garments and is affiliated
in garment manufacturing and wholesaling (Corporate.padini.com, 2020). Eventually it entered
as a retail industry with the flagship brand called Padmini. This group is broadly categorized into
five different sections of strategic trading which include:-
1. Vincci Ladies' Specialties Centre Sdn. Bhd,
2. Padini Corporation Sdn. Bhd,
3. Seed Corporation Sdn. Bhd,
4. Yee Fong Hung (Malaysia) Sendirian Berhad,
5. Mikihouse Children's Wear Sdn. Bhd.
There are several other operating segments of this investment which comprises of the
management services and investment holding. However most of the business is operated in
Malaysia.
Development of the company:
It started to facilitate the retailers and the distributers with its manufacturing, trading and
supply through its apparel industry. The concept of the PADINI Concept Store is to sell all the
brand held by Padini in one single store thereby creating a one stop shopping. It was in Johor
Bharu City Square, in Malaysia that the first shopping outlet of Padini Store was set up. Padini
became the major forces of the apparel and the garment industry in Malaysia. Apart from being
involved in distribution it is also engaged in retail services of its own fashion labels through 190

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freestanding stores, franchise and consignment counters. The leading products of Padini are
formal, fashion wear and accessories. It is well known fashion brand in the Malaysian cities
having its well established brand houses widespread in Malaysia. One of the most significant
feature of this investment is the brand image associated with it which acts as s fashion
philosophy and engages an extensive range of products which aims at the target consumers
available. The real value of its brand image indicate 3 most important factors like Quality,
Functionality and Price, which any customer will value at the time of purchase and investment.
The ruling brands which are produced by Padini are PADINI Authentic, PDI,P & CO,
Seed, Miki, Vinci Accessories. All the 5 brands are well known to target both males aw well as
the female populations. Ther brands are gaining prominence not only in the apparel sector but
also the brand called Seed café is a new dimension to PADINI as its spreading its wings in the
food operations for its company. The famous brands Vincci and Vincci accessories are more
focused on the flexible taste of women consumers on shoes, bags and accessories
(corporate.padini.com 2020).
Market development:
Story of Padini can be seen as tracing the development of small business into one of the
largest fashion retailers of the world. Sole proprietorship basis was used to wholesale the
finished and manufactured ladies garments to the departmental stores with further expansion into
textile trading. Products in the domestic market are sold through consignment counters, various
retail stores and external and internal online portal. Marketing of the products is done by the
group by utilizing a great number of housing brand and also merchandizing the value for money
(Dales, 2019).

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Domestic market
(Source: corporate.padini.com 2020)
The company’s is famous for exporting its products like shoes and accessories, garments,
ancillary products, children’s garments, maternity wear and accessories both for men and women
through its various subsidiaries. Also, its goods are mainly exported to the South East Asian
countries and The Middle east countries as well. The ultimate vision of Padini is to wind up
market pioneer in the retail business with their outstanding benchmark of configuration,
fabricating, quality, client administration, marketing and advancement.

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Overseas market
(Source: corporate.padini.com 2020)
Technology and expertise:
One of the growing feature of retail industry is digital revolution with such revolution
bringing various opportunities and threats. Technology is continuously leveraged by Padini on
setting the business strategy and business growth. Retailers such as Padini have been facing
challenges in staying relevant to the demand and needs of the customers due to myriad of the
information and choices and technology availability at the consumer’s disposal. Customer are
becoming less loyal to the organizations because of the ease of information that is available at
the finger tips. Since year 2009, Padini has been actively engaged with various digital
technologies such as Twitter, Facebook, Instagram and Twitter. Company has been actively
engaging with the responses and request of their customers and have been using these channels
for posting the videos, campaign shoots and products offerings. The servicing and maintenance
of all the digital operations of the company is done by twenty six employees and with the
increase in the pace of these activities with the escalation of online shipping, the number of
employees working on such operations is expected to increase. For the e commerce, the company
has invested approx. RM 500k for the acquisition of required software and development of

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systems. Company remain focused on delivering the online service and the intensification of
competition is dealt by staying competitive (Ali & Haseeb, 2019).
General prospects:
In the financial year 2019, a commendable business performance was achieved by Padini
Holdings despite the fact that the overall market outlook of retail sector of Malaysia was
uncertain. Operating environment of the company has become so very challenging because of the
currency volatility, trade war, global economy uncertainty and intensification of regional
business competition. However, the strong consumer spending due to the outlook of stable
employment would support the domestic economy outlook and thereby extending supporting to
the retail industry of the country. The rapid evolvement in the retail industry due to the price
competition intensification driven by the vertical retailers and digital sellers and the continuous
growth has continuously affected the growth of Padini. All such factors requires the operating
condition of the business of Padini to be efficient particularly in mortar and brick stores for
sustaining. For the continuous success, it is critical to account for the factors such as having a
good insight of the needs of customers, speed to market and ability to deliver. One of the main
drivers of the profit and revenue is the domestic operations of the group and has the strong base
built on the progressive fruition on talent development and on the domestic front (Siah & Fam,
2018). Overseas market have not found to create a significant impact on the financial
performance in year 2019 as against the domestic operations as the overseas operations has been
at the infant stage. Overseas market would be continuously monitored by the group for
identification of the opportunities so as to increase their market presence particularly in ASEAN
countries. The group strategize to manage both the bottom and top lines and is optimistic on
delivering continuous profits for its shareholders.

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Financial position and trends:
The financial year 2019 marked a commendable year depicting the business performance
of Padini Holdings because of an increase in the revenue growth rate of 6.2% compared to
previous year of RM 1.68 billion in year 2018 as against RM 1.78 billion in year 2019. However,
there was fall in the figure of profit before taxation by 8.5%, with the previous year value
recorded at RM 240 million compared to RM 219 in the current financial year that is 2019. This
decline in the net profit is attributable to the reduction of contributions of mall operators and fall
in gross profit margin. When evaluating the trend of revenue, it is observed that there has been a
year on year increment in revenue figure from 977904 (RM’000) in year 2015 to 1570722
(RM’000) in year 2017 and further to 1678790 (RM’000) and 1783022 (RM’000) in year 2018
and 2019 respectively. Looking at the figures of profit before taxation, it has been observed that
there was a continuous increase in the figure from 111835 (RM’000) in year 2015 to 213189
(RM’000) in year 2017 and further to 239696 (RM’000) in year 2018. A fall in the value was
reported in year 2019 to 2019265 (RM’000) implying it the first fall in the profit before taxation
in the trend of last five years. Furthermore, total amount of net assets held by the group increased
year on year, from 405634 (RM’000) in year 2015 to 552102 (RM’000) in year 2017 and further
to 653200 (RM’000) and 740344 (RM’000) in year 2018 and 2019 respectively. Moreover, there
has been significant increase in the net assets per share from 61.7 in year 2015 to 83.9 in year
2017 and further increased to 99.3 and 112.5 in year 2018 and 2019 respectively. Under the
current financial year review, there was a fall in the gross profit margin and fall in the total
comprehensive income by 10.1% compared to previous year. The fluctuation in the gross profit
margin is attributable to reasons such as type of promotion, sales mix, varied purchase and
product type for sales. The consolidated revenue generated by the group comprise of 95.5% of

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the domestic operations (corporate.padini.com 2020). In addition to this, the group adopted the
strategy to streamline their operations and maximize their return on equity by opening one brand
outlet store, two Padini concept stores and three free standing stores.
Products profitability:
The main products of the group comprise of fashion accessories, garments and shores that
have continued to drive the profits and operations of the group. Company compete on various
grounds and attributes of the product such as product variety, product quality, price comparison,
distribution channel, product life cycle and speedy delivery of apparels. Profitability of the
products is also depends upon the ability of the group to maintain robust supply chain for
ensuring speedy supply, variety of products and product quality. It is believed by the Padini
Holdings that keeping the customer satisfied helps in driving the profitability of business by
selling the products. In this regard, the company focuses on enhancing the quality and volume of
the products instead of charging them higher price by increasing the price of the product. Such
strategy is believed to be the best way forward as the customers are well informed about the
availability of the products offering and also they are price sensitive. The objective of the
company is to keep the customers satisfied and happy by offering them value for money fashion.
The net profit margin of Padini have been slipping from 10% and 10.6% in year 2017 and 2018
to 9% in year 2019, with the fall in the profit margin to lower gross margins
(corporate.padini.com 2020). It is reported that the group would strive to increase the products
profitability by increasing the top line growth by enhancing its products offerings and giving way
to new product lines.

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Liquidity:
The ability of the group to make the payment of its short term obligations is measured by
liquidity ratio, which is assessed by comparing the short term liabilities with the current assets
held by the company. It is important for the acid test ratio to exceed 1 for financially sound and
healthy company. For the current financial years under review that is 2019 and 2018, it is
observed that the liquidity indicators of the group is healthy. This is attributable to the improved
and healthy position of cash reserves.
Capital structure and gearing:
The current financial year does not mark any major changes in the total amount of the
capital invested. The first and foremost objective of the capital management is to ensure strong
base of the capital for providing shareholders with fair return, supporting the operations of
business and benefitting all the other stakeholders. Capital structure of the group is attributable to
the total amount of equity owned to parents. In addition to this, capital structure is managed by
the group by adjusting to the responses of the changes in the economic conditions. Also, for
adjusting the capital structure, the group might also opt for issuing the new shares and adjusting
the payout of dividend to its shareholders. In the financial year 2019, there was no changes in the
processes, policies and objectives and there are no externally exposed requirement of capital. In
the current financial year, there has been an improvement in the gearing ratios reflected by
relatively low level of liabilities held by the group (Hanaysha, 2017).
Operational viability:
The main driver of the profit and revenue of the group is attributable to its domestic
operations and compared to the overseas operations, domestic operations of the group
significantly impacts the financial performance because of its wide presence. At all the levels of

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operation, Padini Holdings has adopted judicious cost management and intend to enhance the
efficient of supply and value chain by offering the products that are good in value. However,
operations of the company are subjected to risks with some inherent risks arising from rising
costs and unfavorable changes in the business and economic conditions. The risks to the
operations are limited by the group by continuously evaluating the operations of the group,
adopting the prudent management policies, human resource development and working closely
with the stakeholders. Under the operational plan, the fast fashion retailer is expecting to enhance
its presence overseas by opening it’s forth retail store in Cambodia. In year 2018, the group
established its operations that comprised of concept stores and brand outlets. When it comes to
the expansion, it is reported that the retailer intends to tap the new market using the most viable
option and witnessing for the opportunities to expand their operations (Harun et al., 2019).
Risk and prospects:
The operations, business activities, growth prospects and the financial results of the group
is subjected to uncertainties and the risks associated with the market where Padini operates.
There are various risks to which the group is exposed to and these includes cash flow risk, credit
risk, foreign currency risk, market risk and interest rate risk. The group has an established
framework of risk management that is used to manage and address various types of the risks
faced. Internal control systems, programs of risk review, adhering to the policies of the financial
risk management and insurance programs are used to conduct the financial risk management
(Crinis, 2017).
Share price movements and trend:
The chart below depicts the movement in the share price of Padini Holdings limited for a
time period of ten years that is from 2011-2020. It is easily observed from the chart displayed

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that in the initial years of analysis, the share price experienced an upward movement with closing
price at 1.87 as on 1st December, 2013 and the highest closing price at 5.98 in year on 1st August,
2018. It is suggested from the figure that there was a significant increase in the price of share
within a time span of four years. However, the share price started dropping and it fell to 3.45 on
1st December, 2018 and the price kept on fluctuated within a price range of 3.53 to 3.81
throughout the year 2019. It was on 2nd January, 2020, there was a further fall in the price to 3.30
and it further dipped to 2.02 as on 1st March, 2020.
Share price movement of Padini Holdings limited:
(Source: in.reuters.com 2020)
Financial Position and Trend
The financial position and trend for Padini Holdings Berhad can be determined appropriately by
following the annual report for the company. In order to properly understand the trends in growth
of different areas of operations, estimates are considered for 10 years. The financial trends for