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ANALYSIS OF DERRIMON

March-30-2012

1

Profitability & Revenue
Derrimon has shown increased profitability over the 6 year review period driven by increased sales, diversity of revenue (rental income) and key partnerships with renown brands. The growth in profitability however, has been a bit erratic. Net Profit/(Loss) For the Year

60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 11,661,103 8,387,370 10,000,000 0 Dec-06 (10,000,000) Dec-07 Dec-08 Dec-09 Dec-10 9-Months Est. 'Decto Sep-11 211 (2,970,803) 4,664,720 308,596 0.0% 500.0% -110.4% -44.4% 150.0% 1500.0% 1000.0% 396.3%

Growth in Net Profit/(Loss) For the Year
57,874,197
3000.0% 2617.9% 2500.0%

43,405,648
2000.0%

Dec-07
-500.0%

Dec-08

Dec-09

Dec-10

Est. 'Dec-211

March-30-2012

2

Profitability & Revenue
While sales has shown tremendous growth, cost of sales and operating expenses has also grown in similar proportions–leading to thin margins. Sales/Revenue Growth 135.0% Growth in Cost of Sales Growth in Operating Expenses 126%

115.0%

95.0% 72.2% 75.0% 71.2% 62% 55.0% 40% 35.0% 22.4% 20.4% 15.0% Dec-07 Dec-08 83.5%

84.4%

87%

65.7% 63.3%

38.0%

35.4%

32.7%

Dec-09

Dec-10

Est. 'Dec-211

March-30-2012

3

Operating Cash Flows
Net cash flow from operations has been negative for 3 of the last five 5 financial years, expensive bank over draft is being used to fund operations. Listing would ease pressure, but business must be able to generate cash on its own. What are the plans to improve this? Net Cash Provided by Operations

60,000,000 40,000,000
20,000,000 12,684,280 9,518,411 10,000,000 5,476,246 12,435,134

Bank Overdraft
30,000,000

Cash on Hand
28,997,580 $16,580,179

58,314,746

20,000,000 0

7,809,010

(5,264,676)

Dec-07 (20,000,000) (40,000,000) (60,000,000)

Dec-08

Dec-09

Dec-10

9-Months to Sep-11

Est. 'Dec2011

0 Dec-07 (10,000,000) (1,092,685) Dec-08 (3,264,004) Dec-09 Dec-10 9-Months to Est. 'Dec-2011 Sep-11

(30,963,280)

(20,000,000)

(66,461,982) (80,000,000) (88,615,976) (100,000,000)
March-30-2012
(40,000,000) (30,000,000) (35,879,169)

(26,045,266) (34,727,021)

4

Financial Ratio Comparison to Lasco Dist. (as at listing date) Derrimon’s ROE (55%) consistently above inflation and higher than Lasco distributors (19.2%). However Return on Sales (ROS) is almost half (2.8%) of Lasco’s ROS (4.4%). The ratio of current assets to current liabilities is high for Derrimon (1.2) compared to Lasco (0.15). Derrimon also buys and sells goods at a much faster rate than Lasco with inventory & receivables turnover of 22.8, 13.9 versus 7.5 , 5.6 respectively. March-30-2012

5

Balance Sheet
Derrimon’s current ratio seems healthy– i.e. the company is able to adequately address its short term liabilities. Current Ratio Derrimon 1.2 1.0 0.8 0.6 0.4
0.26 0.22 0.18 0.9 1.1

Current Ratio Lasco
1.2 1.1 1.1 1.2

0.9

0.2 0.0 Dec-06 Dec-07 Dec-08 Dec-09

0.15

0.15

Dec-10

9-Months to Sep-11

Est. 'Dec211

March-30-2012

6

Balance Sheet
However a deeper look using the acid test ratio indicates that there may be an issue.

1.01

Acid Test Derrimon
0.92 0.91 0.91

Acid Test Lasco
Acid Test Line
0.95 0.76 0.74 0.61 0.56 0.74

1.00 0.90 0.80
0.69 0.76

0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Dec-06 Dec-07 Dec-08 Dec-09

Dec-10

9-Months to Sep-11

Est. 'Dec211

March-30-2012

7

Acid Test Ratio Defined
The acid test ratio is a stringent indicator that determines whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. A ratio less than 1 is a cause for concern.

March-30-2012

8

Leverage & Coverage Ratios
In general, Lasco’s debt and coverage ratios are relatively more comfortable than Derrimon’s. Debt/Equity, Debt/ Capitalization as well as times interest earned and cash coverage ratios are more manageable. Derrimon 2011 Est Debt...
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