Time for some KCQs

Key Concepts and Questions

Click on 2013-2014 Annual Report for Pacific Brands
Click on 2011-2012 Annual Report for Pacific Brands

Morning all. The focus for this post is to really highlight important notes that come across the current Annual Report for the company, and expose any unsure thoughts about the information provided.

Key Concepts

Reduced earnings, higher working capital and capital expenditure plus additional restructuring costs led to an increase in net debt at 30 June 2014 to $249.1 million. (Net debt reduction is the goal for the company in the 2015 financial year)

Continuous growth in Bonds and Sheridan resulted in an increase of sales by 3.8% to $1,322.1 million for the 2014 financial year as opposed to $1,273.3 million in 2013

Earnings before interest and taxes decreased by 25.3% to $91.2 million and net profit after tax decreased by 28.2% to $53 million. Financial year of 2013 saw that EBIT fell from a profit of $122.1 million to a loss of $209.9 million.

If the company owns the brand directly, it has the potential to allow international exploitation, whereas if it didn't, the ownership is usually limited to Australia and New Zealand (In this case).

Pacific Brands are trying to invest more to the direct-to-consumer channels to maximise revenue as their results showed last year peaking at $89.7 million which went at 22.6%.

Gross margins prior to significant items dropped by 2.1 percentage points from 49.1% to 47% which was created through a higher level of promotional and clearance activities.

The cost of doing business increased in 2013 by $27.4 million making the total $530.8 million. Freight and distribution increasing by 4.8% making a difference of $5.4 million, sales and marketing jumping up $24.7 million to a 9.0% increase although administrative costs dropped $2.7 million from 2013 to 2014 with a percentage of 2.3%.

Working capital had an increase of 17.7% with a change of $46.5 million from F13 to F14. trading operations peaked $309 million in 2014.

Since F14 had poorer performance in wholesales, retail expansion investments adjacent categories and acquisitions and the fluctuating currency depreciation, inventories resulted in a rather larger quantity.

Operating cash flow pre interest and tax showed a drop of $100.9 million. Cash conversion was significantly lower in F14

Sales revenue in the statement of comprehensive income shows the sales revenue in F14 is higher than F13 by $48,776 although gross profit still remains higher in F13 reaching $620,813 as opposed to $618,363.

Questions

Not sure how cash conversion gets affected by working capital?

What is a reported loss due to impairment of goodwill and brand names?

Why does the Former Chief Executive Officer have a lower short term incentive than a Chief Financial & Operating Officer?