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With the second rollover done, we are moving towards the end of the beginning of the course. One of the interesting things I'm seeing as I wander around the labs and talk to people is the general level of sophistication that people are bringing to bear to running their companies. It's also interesting the wide variety of approaches people are using, and hence the different issues that are 'up' for each of the teams. Where I can, I try and help each team with what it seems to need as they pursue their strategies.  But one common thing I seem to have talked to most teams is the issue of debt. Consequently, this graph of debt was a surprise to me.

Why are some many firms intent on paying off debt? I don't understand it. Yes, as a individual it is a good thing to have little or no debt; but that's because much of the time the debt is used for non-productive resources. For firms–who can use the borrowed money to generate more money–debt isn't a bad thing. Of course, even in a firm debt can get out of hand, but for where most companies are right now debt (at a 20% or even 40% level) isn't a bad thing. 

Some firms are generating some big margins (details later) and all but the least performing of those firms would be better off if they had kept or even increased their debt ratio ... maybe they aren't increasing it as quickly as their equity is increasing (I haven't checked).

Anyway, it will be interesting to see if that changes when we get to the main event next week.

So what am I seeing and what am I thinking about as I look at the results. First, the worlds are diverging. Some definitely seem to be better places to be in than others. Let's start by looking at Sales Revenue. Wellington is certainly moving ahead of Christchurch and Dunedin in terms of sales. But does that convert into profit.

Well actually it does. But the striking thing here is how close together are Wellington and Christchurch and how (after last year's fall) Dunedin is struggling to catch-up. 

Meanwhile. I'm always curious about advertising, and I'm not surprised to see all three regions increasing their spending in this area. Of course, the question underneath this is, "How much is enough?". When we compare the ratio of sales to advertising a somewhat different picture appears.

But it makes sense as Dunedin isn't hitting the same levels of revenue as the other regions.

I'm also interested in the efficiency of each of the regions. And here there is a very distinct difference between the regions, with Wellington appearing to be much more efficient in generating revenue from each SCU it has. As an aside, I also start to think about the capacity of each region.

So, Dunedin has been a little more conservative in growing its manufacturing capacity.

And yet, only Wellington has actually reduced its idle time.

But let's turn now to some numbers.

IndustryFirmSalesCash
WellingtonSigma$61,407,408$23,869,237
WellingtonTau$39,368,754$15,413,986
ChristchurchIndigo$38,550,316$19,867,954
ChristchurchWheelin N Dealin$36,756,722$10,193,230
ChristchurchEpsilon$33,294,315$18,984,984
DunedinE.N.T.E.R.T.A.I.N$32,071,218$15,050,966
DunedinRho$31,609,602$5,563,968
WellingtonUpsilon$28,105,883$3,414,183
DunedinPsicle Path$24,315,952$194,020
DunedinPeakPerformance Bros$23,595,108$8,216,462
ChristchurchWheelie Cool Bikes$19,994,709$5,126,699
Wellingtonswerve.$14,857,970$7,526,785

The largest firms are in Wellington and Christchurch ... true, but its worth noting the 'pack' of companies in the middle–Wheelin N Dealin, Epsilon, E.N.T.E.R.A.I.N, Rho, Upsilon–that is a tight pack and there could be a great deal of movement there. So the leaders (Sigma and Tau) shouldn't be feeling too comfortable about their lead. 


So, how does that play out in terms of profit?

IndustryFirmProfitSalesCash
WellingtonSigma$19,594,145$61,407,408$23,869,237
ChristchurchEpsilon$12,065,184$33,294,315$18,984,984
ChristchurchIndigo$8,006,857$38,550,316$19,867,954
WellingtonTau$7,717,348$39,368,754$15,413,986
ChristchurchWheelin N Dealin$7,439,724$36,756,722$10,193,230
DunedinE.N.T.E.R.T.A.I.N$5,711,546$32,071,218$15,050,966
WellingtonUpsilon$2,984,347$28,105,883$3,414,183
DunedinPeakPerformance Bros$2,261,051$23,595,108$8,216,462
Wellingtonswerve.$1,850,645$14,857,970$7,526,785
DunedinPsicle Path$1,759,188$24,315,952$194,020
ChristchurchWheelie Cool Bikes$1,217,442$19,994,709$5,126,699
DunedinRho$815,992$31,609,60236,823

The challenge with just looking at profit is that it is hard to see how much people are spending to 'invest in the future' and that, of course, can cut deep into profit. No-one this year invested in developing new bikes (no surprises there), but some were definitely spending as if the practice rounds were going to continue ... they were definitely practicing for the future.

Returning to the issue of efficiency. Let's look at the margin that each firms produces (Profit/Sales). The cut line is the interest rate being paid by the bank. If investors can make more money leaving on deposit at the bank then .....

IndustryFirmProfitSalesCapacityMarginProfit/SCU
WellingtonSigma$19,594,145$61,407,40849,48832%$395.94
ChristchurchEpsilon$12,065,184$33,294,31529,14236%$414.01
ChristchurchIndigo$8,006,857$38,550,31639,36821%$203.38
WellingtonTau$7,717,348$39,368,75437,29820%$206.91
ChristchurchWheelin N Dealin$7,439,724$36,756,72246,22120%$160.96
DunedinE.N.T.E.R.T.A.I.N$5,711,546$32,071,21829,95418%$190.68
WellingtonUpsilon$2,984,347$28,105,88336,12311%$82.62
DunedinPeakPerformance Bros$2,261,051$23,595,10832,93310%$68.66
DunedinPsicle Path$1,759,188$24,315,95229,1217%$60.41
Wellingtonswerve.$1,850,645$14,857,97023,20012%$79.77
ChristchurchWheelie Cool Bikes$1,217,442$19,994,70937,6116%$32.37
DunedinRho$815,992$31,609,60236,8233%

$22.16

Margins in MikesBikes over 10% are generally, solid, over 20% are good, and over 30% are exceptional.

It's really nice to see how much profit Epsilon can generate per SCU. That's a tidy number!

Anyway, on to the 'big board'.

IndustryFirmSHVSharePriceProfitSalesCapacitySharesEPSCapitalizationTotalSHVEVACash
WellingtonSigma$48.11$46.48$19,594,145$61,407,40849,4881,810,120$10.82$84,130,636$87,081,132$18,844,132$23,869,237
ChristchurchEpsilon$29.75$29.75$12,065,184$33,294,31529,1422,000,000$6.03$59,504,482$59,504,483$11,473,284$18,984,984
ChristchurchWheelin N Dealin$25.42$25.42$7,439,724$36,756,72246,2212,000,000$3.72$50,846,206$50,846,206$6,702,280$10,193,230
ChristchurchIndigo$24.32$24.32$8,006,857$38,550,31639,3682,035,591$3.93$49,497,522$49,497,522$7,321,964$19,867,954
WellingtonTau$23.80$23.50$7,717,348$39,368,75437,2982,000,000$3.86$46,996,316$47,596,315$7,119,816$15,413,986
DunedinE.N.T.E.R.T.A.I.N$22.49$21.99$5,711,546$32,071,21829,9542,000,000$2.86$43,987,714$44,987,714$4,890,402$15,050,966
WellingtonUpsilon$18.64$18.14$2,984,347$28,105,88336,1231,809,843$1.65$32,824,245$33,729,166$2,371,374$3,414,183
DunedinPsicle Path$17.34$15.42$1,759,188$24,315,95229,1212,000,000$0.88$30,840,376$34,688,376$1,172,269$194,020
Wellingtonswerve.$15.57$15.07$1,850,645$14,857,97023,2002,000,000$0.93$30,134,360$31,134,360$1,099,796$7,526,785
ChristchurchWheelie Cool Bikes$14.36$14.36$1,217,442$19,994,70937,6111,987,529$0.61$28,541,348$28,541,347$497,478$5,126,699
DunedinRho$14.31$14.28$815,992$31,609,60236,8232,076,817$0.39$29,658,693$29,720,998$111,878$5,563,968
DunedinPeakPerformance Bros$12.65$12.65$2,261,051$23,595,10832,9332,093,052$1.08$26,480,779$26,480,780$1,744,610$8,216,462

At the end of the practice round, Sigma held it's place as the top ranked firm, following by a tight pack of firms with SHV in the $20 range. Only Dunedin's PeakPerformance Bros have materially moved backwards from their opening position.

I guess the gloves come off now as we move into the main event (so many sporting analogies).  I know some firms have been testing things out during the practice rounds (i.e., just practicing) whereas other firms have been practicing being the best they can be. It's going to be exciting as these firms move to really compete with one another.

It's going to be interesting to see which teams change their names next week, and which ones keep their brand. If it were me—no matter where I was on the scoreboard—I'd be changing my name. 



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