Aggressive on expansion, Derrimon acquiring another retailer
Derrimon Trading Company burned through another round of expansion cash paying down loans and building working capital in the first quarter - and it is buying a sixth retail outlet.
The company, which operates Sampars retail outlets and distributes NestlÈ products as well as its own brand, Delect, paid off $95 million in long-term loans out of the $250 million it raised through a preference-share issue in March.
This helped increase the company's working capital by $230 million, or 170 per cent, after Sampars' balance sheet was upended by the acquisition of an Old Harbour, St Catherine, retailer last August.
When Derrimon bought My Neighbourhood Supermarket, the current liabilities of the company's wholesale and retail operations climbed above its current assets by just shy of $100 million at the end of 2014. Sampars outlets had positive working capital of $80 million a year earlier.
Since then, Derrimon has decided to acquire another wholesale outlet in St Ann. In February, the directors approved the purchase of Northern Cash and Carry, which brings the number of outlets under the Sampars brand to six.
Although the company did not disclose the purchase price for its latest acquisition, it recorded $23 million for purchase of property, plant and equipment in the three months to March 2015, compared with $5 million in the corresponding three months in 2014. It also posted $11 million in cash used on goodwill under investing activities.
Additionally, the trading company increased its investments in securities by $42 million during the quarter under review. Consequently, Derrimon's cash balance fell to $28 million at the end of March, from $50 million at the end of December 2014.
The company's acquisitions have been helping to boost its bottom line. Sampars' gross profit climbed from $208 million in 2013 to $266 million last year, when its distribution business showed only a slight gain - gross profit for that segment rose from $353 million in 2013 to $360 million last year.
Moreover, the purchase of a 49 per cent stake in Caribbean Flavours and Fragrances (CFF) last August directly increased Derrimon's bottom line by $8.4 million during the three months to March 31. Net profit totalled $20.5 million for the review period, compared with $11.2 million in the corresponding three months in 2014.
Considering that Derrimon paid $121 million for the shares in CFF, the $16.5 million it earned for its share of profits since it acquired the food flavouring company last August suggests full payback on the investment in less than four years.