The company shifted their plant to Gujarat later on. Service Industries got listed on the stock exchange in the year 1959. Tyre manufacturing was started by the company in the year 1970. In the initial years of tyre manufacturing, the company targeted bicycle tubes and tyres. In 1990, the company expanded into motorcycle tyres and now is the major supplier to all motorcycle manufacturing companies in Pakistan.
In the footwear segment, the company has numerous outlets spread across the country and its brand 'Servis' is a household name in Pakistan. The company is also largest footwear exporter in the country. Majority of its exports are directed towards Europe. The company has also won export awards given out by FPCCI.
In 2015, the management of Service Industries decided to venture into power business in order to diversify its income sources. Two companies were set-up, S2 Power Limited and S2 Hydro Limited, which will invest in coal and hydel projects respectively.
Historical performance: Over the years, the financial performance of the company has seen significant growth. The top line of the company, on average, increased by 10 percent. Sales growth can be attributed towards the overall growth in the country which has translated into increase in per capita income.
The company has also increased its focus on marketing campaign which saw its brand equity going up. Advertising on mass media during holiday season drove scores of people into their stores.
The export scenario has been different from local sales. The exports of the company are largely dependent on the European market which has slowed down across the board. Subsequently the Euro has also gone down taking the export revenues of the company down with it.
In its tyres and tubes segment, the company has been increasing its capacity each year to cater to the growing demand. This segment over the last couple of years has provided the company very good opportunity to keep its growth intact.
Share price: The share price of Service Industries (PSX: SRVI) has outperformed the benchmark KSE-100 index since reporting its half year results in August 2016. The investors have taken a likeness to the stock and have considered its growth prospects which lie ahead. The share trades on very thin volume and the average trading volume over the last twelve months is around 8,600 shares. Occasionally spikes in volume are witnessed when institutions are active.
CY16 performance: The company continued its growth in the year 2016 and improvement could be seen across the board. The top line of the company grew by 8 percent, while earnings growth clocked in at 32 percent. The increase in earning can be attributed towards gross margins which showed an improved of almost 3 percent.
The margins of the company were aided by input costs such as raw material. Product mix and plant efficiency also played their part in impacting the bottom-line. However, exports of the company continued to suffer because of weaker Euro.
During the year, the company also increased its tyre manufacturing capacity. Increase in capacity was not fully utilised. Excess capacity would come in handy going forward.
Future outlook: The outlook for the company looks very positive because if of its footing in growth oriented sector. The consumer spending in Pakistan is picking up which will direct benefit the footwear retail business of the company. The auto sector is also showing tremendous growth and demand for tyres and tubes are directly linked to auto sales.
Additionally, the company plans to expand its tyre business and also venture into power business. These projects will keep the market and investors interested in the company.
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Pattern of Shareholding (As of December 31, 2016)
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Directors, CEO, and their Spoces and minor children 5,380,116 44.72%
Associated Companies, Undertakings and related parties 580,138 4.80%
Banks, DFI, NBFI 836,420 4.95%
Insurance Companies 12,054 0.10%
Modarabas and Mutual Funds 1,953,353 16.20%
General Public 2,300,780 18.92%
Others 965,028 8%
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Source: Company Accounts