The reason for this review and analysis is because I had not done one for Kingsmen’s FY 2009 results, as I was busy preparing my Analysis of Purchase (which was posted up in 3 parts). Furthermore, there were also some items within “Other Income” which I felt had to be adjusted to get a better picture of Kingsmen’s true performance, so I have prepared a spreadsheet showing the differences (you can view this later in the Income Statement Analysis section). This review is not meant to be very comprehensive and simply serves to highlight salient areas which I feel deserve mention; as an investor I have to look out for red flags as well as positive areas, so as to obtain some measure of assurance that I still have my requisite margin of safety.

Profit & Loss Analysis


As can be seen in the above table, I have plotted Kingsmen’s original Profit and Loss Statement, and at the side I have shown another Income Statement but removed the one-off items which are found in “Other Income”. I have also normalized the tax expense to be in line with the adjusted profit figure in terms of % increase in Profit Before Tax (“PBT”) of 55.4%; these lines are highlighted in grey. It can be clearly seen that when adjusted as such, PBT is actually 55% higher year on year due to one-off items such as bad debts recovered, foreign exchange gain and jobs credit (all highlighted in orange in the table below the Income Statement). 1Q being the traditionally slower quarter, this table shows that for 1Q 2009 Kingsmen actually only earned about S$1.5 million if the one-off items are removed; hence for 1Q 2010 they did significantly better as net profit on a comparative basis would have improved 55% while revenues only increased by 30.8%. This, I feel, is more reflective of the true situation as one should notice that staff costs only increased by 16.1% and other expenses by 9.2%, all lower than the increase in gross profit of 27.6%. Read more…