Shams ul Nisa

The Service Industries Limited (SIL) unconsolidated results of calendar year 2023 reported an outstanding growth of 278.7% in net profit and 30.9% in revenue, compared to the previous calendar year 2022, reports WealthPK. The company’s growth in all segments was the primary factor for the increase in sales, with the Tyre segment and Retail segment contributing the most. During the review period, the Tyre segment posted an expansion of 25% in sales and an 87% rise in export sales in tyre because of higher volume and devaluation of the currency.

Despite lower purchasing power due to inflationary pressure accompanied by increased input costs, and high interest rates the company’s CY23 ended with a net profit of Rs1.34 billion and a revenue of Rs55.74 billion. The SIL’s gross profit increased by 71.70% to Rs13.69 billion from Rs7.97 billion in CY22, resulting in an improved profit margin of 24.56% in CY23 from 18.72% in the previous year.

The operating profit went up by 81.84% year over year to Rs7.31 billion in CY23 from Rs4.02 billion in the previous calendar year. Likewise, the profit before tax stood at Rs2.35 billion during the review period, up by 141.58% from Rs976.02 million in CY22. Thus, the net profit margin expanded to 2.41% and earnings per share to Rs28.56 in CY23 compared to a net profit margin of 0.83% and EPS of Rs7.54 in CY22.

Historical trend

Over the six years, the company’s sales posted a meager increase but the gross profit and net profit expanded significantly. The company recorded sales of Rs1.06 billion, a gross profit of Rs4.33 billion, and a net profit of Rs33.14 billion in 2018.

The year 2019 turned out in favor of gross profit, with a rise to Rs4.88 billion, but sales and net profit slipped to Rs886.0 million and Rs29.78 billion. This reflects that the rise in gross profit may be the result of increased borrowing causing higher interest expenses for debt servicing and reduced profitability during 2019.

Sales continue to slide down to Rs354 million in 2022 from Rs690.0 million in 2020. However, the gross profit expanded to Rs7.97 billion in 2022. The net profit peaked at Rs50.73 billion in 2021, before falling to Rs42.92 billion in 2022.  In 2023, the company registered an increase in sales to Rs1.34 billion, a gross profit of Rs13.69 billion but a contraction to Rs36.26 billion in net profit compared to the previous year.

Return to Shareholders

The company’s return on equity continues to decline from 21.85% in 2018 to the lowest of 7.81% in 2021. However, the company managed to enlarge the return on equity to 13.42% in 2022 and to the highest of 28.35% in 2023. A return on equity after tax is measured by dividing the net income received by the company after income taxes by the average amount of equity held by shareholders during the net income period.

The earnings per share after tax followed a decreasing trend from Rs22.59 in 2018 to Rs7.54 in 2022, but have a significant surge to Rs28.56 in 2023. The earnings per share is the income earned by the company on each outstanding share. However, the price-earnings ratio expanded from 32.10 in 2018 to the highest of 61.70, before declining to the lowest of 21.98 in 2023. The price-earnings ratio measures a company's share price to the company's earnings per share.

Future Outlook

The company aims to expand its market share in agricultural tyres by increasing the production capacity of the agricultural tyre segment to meet the increasing demand. Furthermore, the Company is expected to add 60 new outlets to increase the number of retail outlets to 300 by the end of December 2024.

Company profile

Service Industries Limited was established as a private limited Company on 20 March 1957 in Pakistan. The principal activities of the Company are the purchase, manufacture, and sale of footwear, tyres and tubes, and technical rubber products.

Credit: INP-WealthPk