Top Glove Corporation Berhad Group has been in business for 30 years and is the world's largest surgical rubber gloves manufacturer! The group exports to 195 countries worldwide and has also diversified into healthcare related products. The group employs over 17,000 people and commands over 25% of the global market share in rubber gloves. Apart from Malaysia, the group has operations in China, Singapore, Thailand, Indonesia, Brazil, Germany, and the United States. The Group has seen rapid revenue growth due to global demand arising from the Covid-19 pandemic. The financial statements are denominated in Ringgit Malaysia (RM). The following Group Statement of Profit or Loss and Group Statement of Financial Position for the year ended 31 August 2020 are provided below: Statement of Profit or Loss for the financial year ended 31 August 2020 2020 2019 RM'000 RM'000 Revenue 7,237,427 4,801,139 Cost of sales (4,387,010 (3,917,14 4) Gross profit 2,850,417 883,995 Distribution and selling costs (155,021) (133,357) Administration and general expenses (551,023) (293,938) Operating profit 2,144,373 456,700 Interest income 23,889 10,611 Other income 33,116 38,552 Finance costs (34,399) (79,601) Share of results of associate (1,428) (2,674) Profit before tax 2,165,551 423,588 Income tax expense (376,721) (56,042) Profit net of tax 1,788,830 367 546 Statement of Financial Position as at 31 August 2020 2020 2019 RM'000 RM1000 Assets Non-current assets Property, plant and equipment 3,010,233 2,480,026 Land use rights 178,495 Right of use assets 201,425 Investment property 163,900 163,900 Investment in associate 10,425 11,853 Deferred tax assets 19,589 58,472 Biological assets 28 Investment securities 392 392 Intangible assets 1,012.319 1,015,970 4,418,311 3,909108 Current assets Inventories 530,729 629,896 Trade and other receivables 798,805 832,623 Other current assets 74,884 63,511 Investment securities 1,674,676 87,285 Cash and bank balances 1,208,559 165,782 4,287,653 1,779,097 Total Assets 8,705,964 5,688,205 Equity and Liabilities Equity attributable to owners of the parent Share capital 1,675,704 788,326 Treasury shares (1,519) (1,781) Other reserves 65,040 (1,553) Retained earnings 3,131,530 1,751,963 4,870,755 2,536,955 Perpetual sukuk 1,295,262 Non-controlling interests 24,866 17,186 Total equity 6,190,883 2,554,141 Non-current liabilities Loans and borrowings 226,340 1,379,369 Lease liabilities 9,672 Deferred tax liabilities 141,988 159,714 Provisions 4,557 3,190 382,557 1,542,273 Current Liabilities Loans and borrowings 314,199 1,041,325 Trade and other payables 810,824 492,414 Contract liabilities 879,386 55,610 Lease liabilities 1,442 126,673 Income tax payable Derivative financial instruments 789 1,653 1,591,791 2,132,524 Total liabilities Total equity and liabilities dditional information is provided as follows: 2,515,081 8,705,964 3,134,064 5,688,205 1. 2020 2019 000 2,708,697 Number of ordinary shares 000 2,559,814 Share price RM26.28 RM4.75 Dividends per share 11.83 sen 2.50 sen (1) Share capital of RM1,675,704,000 as shown in the Statement of Financial Position, is issued and fully paid. In accordance with local company legislation there is no share premium or par value for shares. The average PE ratio for the industry was 30 in 2020. 100 sen equals RM1. 2. 3. a) Using the above information, compute the following ratios for the years 2020 and 2019. i) gross profit margin ii) operating profit margin ii) return on capital employed iv) trade receivable settlement (days) v) trade payables settlement (days) vi) inventory turnover period (days) vii) revenue to capital employed viii) current ratio ix) earnings per share x) price earings ratio Show your workings b) Using the ratios calculated in (a) above, advise a local rubber supplier whether to enter a contract with Top Glove Berhad to supply all its annual raw latex crops totalling between RM20 to RM25 million per annum to the group. You may include non-financial information in your advice
