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Lauren Hellfury
Full Pocket Aggro
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Posted - 2011.02.17 00:58:00 -
[1]
Mid-month Report
Just to set a bit more background I'll give a brief overview of the month so far. It has definitely been a more challenging period with both the cost of materials rising and the market price of our product falling. This has seen the gross margin fall from 21.92% to 15.29% although this figure is still higher than originally anticipated.
Part of this has, I believe, come from the influx of traders and producers eager to cash in on the high number of incursions being launched within close proximity to the local trade hub. There has been more than one producer dumping the entirety of a weeks production into single sell orders as well as people keen to garner quick sales by making large cuts in the price. The most destructive has been when those two actions have been combined within the one sell order/producer. The market now appears to be starting to return to normality although there is still a scarcity of material which has resulted in purchases having to be made at other locations and shipped across for production. So far this has not resulted in any additional costs as I have been able to combine the purchase and shipment of these materials with other business in those areas.
For easy comparison with the initial periods results I have turned over approximately the same value of sales and have run one additional batch of materials through the production cycle.
Figures (previous period in parenthesis) Sales: 5,478,160,639.54 Isk (5,219,806,010.28) Materials: 4,751,623,208.74 Isk (4,281,419,747.74) Gross Profit: 726,537,430.80 Isk (938,386,262.54) Operating Costs: 85,429,533.23 Isk (49,499,275.02) [1] Net Profit: 641,107,897.57 Isk (888,886,987.52) Dividend per share: 320,553.95 Isk (444,443.49)
Notes: [1] The majority of the difference comes from the fact that this is the first period to include auditing/consultancy services as well as office rental.
IPO Restructuring
As stated in the initial prospectus an average monthly dividend was expected to be around 200,000 Isk. Whilst a 20% return is rather high I felt it justified the perceived risk that investors would be asked to take given that I had no provable history of manufacturing and that the offering was itself not backed by any collateral. Whilst the former is changing as the business continues the latter is and will continue to remain true and I therefore intend to continue offering a higher than average return.
The aims of the restructuring can be laid out with three simple statements and those are:
1) To increase the rate at which the corporation gains isk. 2) Provide room for future sub-optimal expansion. 3) Avoid becoming too bond like.
This requires that a shift is made from the amount paid out to investors to the amount that the corporation retains for its own use. Similarly this can be achieved through any, or any combination, of the following four possible actions:
a) Issue shares to the initial NAV of the corporation to myself, Lauren Hellfury. b) Adjust the percentage of the profit to be split between investors. c) Place a hard cap on dividend payments. d) Make dividend payments arbitrary at my discretion.
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Lauren Hellfury
Full Pocket Aggro
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Posted - 2011.02.17 01:01:00 -
[2]
I will state here and now that the first of those options is unacceptable to me. It would not achieve the primary aim of the restructuring which leaves us with the other three options.
The second option allows the simplest reduction in dividend payments in-line with the original prospectus but does nothing to allow for sub-optimal expansion. Which would mean that any future expansions would need to be at least as profitable as the current operations to avoid it having a negative impact on current shareholder dividends without further adjustments to the structure of the IPO.
The third option will definitely help to achieve the second aim since all the time the business is performing above the capped level there is room to pay extra investors without utilising any additional funding which makes the issue of expansion easier to address. However if the cap is placed too low then there is significant risk that this becomes a bond. i.e. If I make the cap within the first week every month then I might as well just have a fixed return percentage.
The fourth option is also unacceptable to me personally. Whilst it allows for complete control over the amount being paid out based on how I feel the business has performed it adds an additional risk for all investors that I am not compelled to issue any dividend at all. This could be tempered by the ability of investors to call for a vote of no confidence. Overall this option does not meet any basic principle of transparency and certainly falls short of the benchmark that FPA is setting in this area.
So, my personal preference would be for a combination of the second and third options.
I propose that an upper cap of 150,000 isk be placed on dividends and that the percentage to be distributed is adjusted from 50% of the net profit to 12.5% with the difference being added to the corporate retention taking that up to 62.5% Whilst this is a massive change allow me to present some numbers.
If we average out the five and a half weeks of operation so far (allowing for the fact that the first three were well above average and the other two and a half being below average) we get a dividend per week of approximately 139,000 and per month of 556,000. With the changes outlined in the above paragraph this would change to a per month dividend of approximately 139,000.
This represents a drop from the projected 20% return on average, which in hindsight was much higher than it should have been, to one of 13.9%
As far as the corporation is concerned the effect would be that instead of the 382.5M retained it would have retained 843.75M this is out of the net profit so far achieved of 1.53B
My personal income from the business would remain unchanged at 382.M so far. It may well be argued that anything the corporation keeps is effectively mine since I own it and that I am simply looking to line my own pockets at the expense of the investors. I will point out that shareholders have already been notified that any changes made as a result of this discussion will not take place until after a minimum of 1M per share has been paid in dividends and I would like to further state that this will be actual payments made, not payments made and pending. So if, at the end of a period, I have paid out 999,999 per share in dividends then the changes would not take effect until the 1M mark was breached with the subsequent dividend payment.
That decision was made so that despite there being no firm buy-back offer no shareholder would be subject to any changes until after I had paid at least as much as the funding I received from the share issue.
I welcome all discussion around the issues raised here-in regardless of whether you currently hold any shares but will point out that I will give greater attention to posts made by shareholders. I do expect this to cause problems in light of the fact that there were 200 shares voted against the inclusion of the office rental fee as an expense. Let the discussion begin!
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Kalrand
GoonWaffe Goonswarm Federation
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Posted - 2011.02.17 01:02:00 -
[3]
Has anyone mentioned that your NEISIN is an anagram for "I P00P 49 CROCS"?
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Breaker77
Gallente Reclamation Industries
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Posted - 2011.02.17 01:03:00 -
[4]
Originally by: Kalrand Has anyone mentioned that your NEISIN is an anagram for "I P00P 49 CROCS"?
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Dethmourne Silvermane
Gallente Northstar Cabal R.A.G.E
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Posted - 2011.02.17 01:05:00 -
[5]
As a shareholder, I'm fine with a restructure, though I don't necessarily believe dividend payments should be "arbitrary".
I've expressed my ideas ingame, though
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Companion Qube
Minmatar Electron Conservation Inc
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Posted - 2011.02.17 01:06:00 -
[6]
Originally by: Kalrand Has anyone mentioned that your NEISIN is an anagram for "I P00P 49 CROCS"?
And here I was going to make a post about MD at large needing to refuse refinancing just to make LH pay 55% interest in perpetuity, but jesus christ...
drunkpoasting best poasting |
Lauren Hellfury
Full Pocket Aggro
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Posted - 2011.02.17 01:09:00 -
[7]
Originally by: Kalrand Has anyone mentioned that your NEISIN is an anagram for "I P00P 49 CROCS"?
and you said they were pointless.
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Vaerah Vahrokha
Minmatar Vahrokh Consulting
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Posted - 2011.02.17 07:29:00 -
[8]
Originally by: Lauren Hellfury
Originally by: Kalrand Has anyone mentioned that your NEISIN is an anagram for "I P00P 49 CROCS"?
and you said they were pointless.
Some days ago I was googling for something and I randomly stumbled upon one of those documents with the listing of all the known investments and their result. Guess what, the guy in charge of the PDF indexed them by a code... From that to switching over to an industry standard is not phenomenally impossible. - Auditing & consulting
When looking for investors, please read http://tinyurl.com/n5ys4h + http://tinyurl.com/lrg4oz
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