Service Industries Ltd’s net profit soars by 148% in 1QCY24

July 09, 2024

Shams ul Nisa

Service Industries Limited's financial report for the first quarter of calendar year 2024 revealed an impressive net profit increase of 147.8% to Rs733.3 million compared to Rs295.9 million in 1QCY23, reports WealthPK.

Starting from Rs11.35 billion in 1QCY23 to Rs15.09 billion in 1QCY24, the company posted a 32.9% growth in revenue, indicating strong topline growth and improvement in business activity mainly driven by the increase in sales of the tyre and retail divisions. Additionally, there was a noticeable gain in gross profit, which increased by 43.74% from Rs2.70 billion to Rs3.88 billion. This implies that cost management and operational efficiency improved during the review period. Thus, the gross profit margin expanded to 25.71% in 1QFY24 from 23.77% in 1QFY23.

Furthermore, the operating profit escalated significantly by 69.87%, signifying improvement in managing operating costs while raising sales. The profit before taxation climbed from Rs505.87 million to Rs1.12 billion, suggesting a 121.467% rise. At the end of the quarter, the net profit margin and earnings per share spiked to 4.86% and Rs15.61 respectively.

Assets Analysis

Between December 2023 and March 2024, the company observed growth in fixed assets, long-term investment, and long-term security deposits. This resulted in a 2.93% rise in non-current assets to Rs25.9 billion. Similarly, from Rs19.17 billion in December 2023 to 22.25 billion in March 2024, the current assets increased by 16.06%, demonstrating an improvement in the short-term liquidity position. The hike in current assets is mainly due to the higher stock in trade, increase in trade debts, loans and advances, trade deposits, prepayments, other receivables, and cash and bank balances. Resultantly, the total assets climbed by 8.60%, reaching Rs48.25 billion in March 2024 from Rs44.43 billion in December 2023.

Equity and Liabilities Analysis

The company’s total equity rose 8.72% to Rs9.04 billion in March 2024. However, non-current liabilities slid to Rs14.49 billion in March 2024 from Rs14.78 billion in December 2023, mainly due to the decline in long-term financing. The company’s current liabilities jumped to Rs24.7 billion in March 2024, up 15.88% from Rs21.32 billion in December 2023. This spike was because of an increase in trade and other payables, and short-term borrowing during the review period. At the end of March 2024, total equity and liabilities amounted to Rs48.24 billion, 8.60% higher than Rs44.42 billion in December 2023.

Leather and Tanneries Sector

The Leather and Tanneries sector showed significant growth in sales, net profit, and earnings per share at the end of the first quarter of calendar 2024. The sector comprises Service Global Footwear Limited (SGF), Service Industries Limited (SRVI), and Bata Pakistan Limited (BATA). The sector registered an upward swing in the sales of around 26.65% to Rs24.13 billion in 1QCY24. This was due to the increased sales by 54.21% in SGF, 32.94% in SRVI, and 9.37% in BATA. Similarly, the net profit grew by 54.21% in SGF, 147.76% in SRVI, and 71.71% in BATA during the review period. Thus, the leather and tanneries sector noted an expansion of 98.74% in net profit to Rs1.33 billion in 1QCY24.

At the end of 1QCY24, the earnings per share of SGF stood at Rs1.87 compared to Rs1.22 in 1QCY23. Similarly, SRVI and BATA posted earnings per share of Rs15.61 and Rs28.37.

Future outlook

Despite the challenges posed by the Covid-19 pandemic disruptions, currency fluctuations, soaring interest rates, persistent inflation, political uncertainty, and international conflicts, the management is unwavering in navigating challenges through uncertain national and international landscapes. The company is dedicated to its ongoing capital spending plans to strengthen manufacturing capabilities, improve processes, and increase power-generating capacity.

Company profile

Service Industries Limited was established on March 20, 1957, under the private limited company status. The company's main business ventures are the acquisition, production, and retailing of technical rubber goods, tires, and tubes.

Credit: INP-WealthPk