Question 2
It has always been companies’ aim to have a favourable receivables turnover ratio. Discuss 4 different strategies that GFM can implement in
... [Show More] order to reduce its receivable turnover in days. (8 marks)
GFM set to list on Bursa after a long-delayed reverse takeover
AFTER some delay, the reverse takeover (RTO) of AsiaEP Resources Bhd by facilities management firm GFM Services Bhd has now come to fruition. GFM is scheduled to list on the ACE Market of Bursa Malaysia on Jan 9, 2017, which will see the company raising a total proceeds of RM42mil. “The listing price for GFM shares has been fixed at 38 sen apiece, from 22 sen previously,” managing director Ruslan Nordin tells StarBizWeek.
Ruslan explains that GFM is in a net cash position of RM5mil and has generated net operating cashflow of RM38.8mil in financial year 2015 (FY15). GFM has RM25mil in cash and RM20mil in borrowings. “GFM has a healthy cash position and hence does not need new fresh capital for now. GFM’s core business is in the integrated facility management (IFM) industry. GFM provides integrated facilities management and consultancy services. It has 26 ongoing projects and has completed RM1.2bil worth of projects to-date. GFM has an orderbook of RM377mil currently.
In FY15, GFM posted a profit after tax of RM13.8mil on the back of RM78.4 revenue. Its profit after tax margin in FY15 was at 18% and earnings before interest, tax, depreciation and amortisation was at RM19.3mil. “With the listing status of GFM, it would boost the company profile and elevate its market positioning,” Ruslan says. “Previously, we only had one large customer contributing more than 80% of our total revenue. On top of that, we had receivable issues that need to be solved,” he says.
On the company’s receivables, GFM chief executive officer Jeffery Mohamad Akhir says the company has set up a new work process to reduce its trade receivables turnover period to 76 days. “In this industry, cashflow is important. I’m proud to say that our receivable turnover has been cut down from five to six months a few years ago,” he says.
The IFM industry is expected to grow 9% annually from 2015 to 2020, on the back of raising awareness of sustainability and green building initiatives, according to Ruslan. “Outsourcing operations and maintenance helps companies save operating costs. They will no longer need to employ full-time staff to do this and are able to better focus on their core businesses,” he explains. Going forward, GFM is poised to benefit from more government public-private partnership (PPP) projects. [Show Less]