Daejan – financial distress risk

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Piotroski factors provide some insight into the likelihood of financial distress by examining trends in key accounting metrics over two years.

If all nine are in a positive direction then a very low level of distress is indicated. Any score under five out of nine should make us wary.

The first factor is profits.

Daejan was profitable in the year to 31st March 2019 with £159m operating profit and £120m profit after tax (ignoring exceptional items).

In the six months to the end of September it made an operating loss of £8m after taking a £46m valuation hit on properties in NY. The loss after tax was £11m.

A Piotroski point is awarded for the annual accounts analysis but not for the half-yearly analysis.

Does it produce positive cash flow from operations?

Cash flows from operating activities in the year to end March was £62m. One Piotroski point scored.

In the half year to end September net cash generated from operations was £31m, so it gains a Piotroski point for the half-year analysis.

Has the return on capital employed figure improved?

Net income divided by beginning of year total assets in the year to 31st March 2019 was £120m/£2535m = 4.7%.

For 2018: £203m/£2,407m = 8.4%

There has been a deterioration on the annual analysis. There was also a deterioration on the six month analysis – going from profits to losses.

No Piotroski points.

Is cash flow greater than profit?

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