Ann: Trading Update, page-52

A quick review of the balance sheet:

Inventory $17m, accounts payable $15m: so this should be fine. Especially against half year sales of $86m. So inventory and stock obsolescence shouldn't be a problem.

Majority of the remaining current liabilities are Lease liabilities of $14m (one year rental). But a quick check of the cash flow statement shows $27m of cash from operations less $7.6m for lease payments (6 months, so corresponds to 1 year lease liability of $14m), gives $20m odd after paying rent.

So basically DSK can loose money in the 2nd half of the year because it makes very good money in the first half of the year.

Next safety check:
Current Assets - Current Liabilities - NC Lease Liabilities= -ve 6m.
So basically if DSK sales drop so badly that it can't pay any rent at all for the remainder of ALL their leases, then they would have a deficiency of $6m.
This is very very remote, but it gives me a feeling as to DSK blowing up and liquidating. Sought of an adjusted Graham number.

Other members of the hotcopper community can also play around with the numbers.

With the share price at $1.12 odd, I felt comfortable today doubling my position to 2% of the portfolio. If the share price drops further, I will slowly continue to add to the position now.