DTL reports 32% increase in six months net profit

Date: August 13, 2019

Derrimon Trading Limited (DTL) Trading Income climbed by 56%, to end the six months to total $6.29 billion compared to the $4.04 billion for the prior period. For the quarter, the company reported a 49% increase in Trading Income totalling $3.14 billion relative to $2.10 billion. The Group highlighted that, “The distribution and retail arms of the business (core) six (6) months results recorded revenue of $5.73 billion which was $1.90 billion (47.05%) more than the $4.04 billion reported for the corresponding period last year. For this second quarter ended June 2019, revenue generated from core activity was $2.85 billion representing a growth of $870.19 million (43.95%) over the $1.98 billion reported for the similar reporting period in 2018.”

“It should be noted that both the SM Jaleel portfolio and the Woodcats International Limited acquisition were added in the third quarter of the 2018 financial year,” DTL mentioned.

Cost of Sales increased by 57% to $5.19 billion for the period (2018: $3.31 billion). As a result, gross profit amounted to $1.09 billion relative to $731.57 million the prior year period, an increase of 50% year over year. Gross profit for the quarter totalled $542.07 million relative to $378.10 million reported the prior period. Management stated that, “The growth in Gross Profit continues to reflect improvements in margins arising from strategies employed within both the distribution and retail segments of the business from procurement to sales.”

Other Income for the period fell 50% to close the six months at $12.15 million relative to $24.33 million in 2018. However, for the quarter, other income amounted to $7.23 million (2018: $17.60 million).

Total operating expenses was $824.21 million for the period, representing a growth of 47% on the $559.73 million recorded in the prior year. Administrative expense totalled $631.17 million, 30% higher when compared to the $484.90 million in 2018. Selling and distribution expenses totalled $193.04 million (2018: $74.83 million). For the quarter, total operating expenses closed at $410.01 million (2018: $295.47 million). DTL noted that, “This increase was partly due to annual increases in salaries and wages which took effect on April 1, 2019 and costs associated with the full refinancing of short-term debt facilities.” In addition, “The major factors for this increase were utilities, distribution costs inclusive of trucking cost for the new portfolios, marketing, advertising, and staff cost,” the Group added.

Finance Cost increased by 30% to total $95.69 million for the period relative to $73.35 million in 2018. DTL mentioned that, “The realignment of our debt portfolio from short term to long term amortized facilities continues to have a positive effect on the Group by way of lower interest cost.”

Consequently, profit before taxation grew by 52%, ending the period at $186.45 million for the six months compared to $122.82 million in 2018.  Taxation of $24.31 million (2018: nil) were reported for the period, as such net profit amounted to $162.14 million (2018: $122.82 million), a 32% increase year over year. For the quarter the company reported a 35% increase in Net Profits to $88.14 million (2018: $65.25 million).

Total comprehensive income closed the period under review totalled $148.76 million (2018: $105.72 million), while for the quarter, total comprehensive income amounted to $80.25 million versus $54.12 million reported in the previous comparable period.

Earnings per share (EPS) closed the period at $0.06 (2018: $0.04), while for the quarter the EPS was $0.03 (2018: $0.02). The twelve month trailing EPS amounted to $0.12. The total number of shares used in the computation amounted to 2,733,360,670 units. Notably, DTL closed the trading period on August 12, 2019 at a price of $2.77.

Balance Sheet Highlights

As at June 30, 2019, the company’s assets totalled $4.34 billion, $1.35 billion more than its value as at June 30, 2018 of $2.99 billion. This was due to increases in ‘Receivables’ and ‘Inventories’ which closed the period at $1.59 billion (2018: $961.47 million) and $1.38 billion (2018: $987.70 million), respectively. ‘Goodwill’ also contributed to this increase closing at $163.94 million (2018: $33.22 million).

Shareholders’ equity totalled $1.39 billion (2018: $1.11 billion) which translated to a book value of $0.41 per share (2018: $0.51).

Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.