Ann: Trading Halt, page-61

Hi Bowie - why I said it made it more difficult to analyse ...

To understand the organic growth of an acquisitive business like CTD you have to:

1/ estimate a running rate for the business at the end of a financial year. This requires looking at the dates of acquisitions, the info provided at the time of purchase and the adjusting the FY results to reflect holding those businesses for the whole year.

2/ do the oppositite for the following year (ie. backing out additional purchases).

3/ adjusting for changes in accounting procedures between the years (ie. the extra step)

4/ repeating these calcs for several years and comparing year to year to get a picture (3 sets of numbers for each year!)

I started doing this myself, but found that Portfolio had done a great job of it about a year ago. His post/string demonstrates the complexity and the number of assumptions you have to make to generate a set of numbers to calculate organic growth for CTD. I recommend reading for anyone who hasn’t already.

IMO good practice is for companies to clearly provide these key numbers in a consistent form from year to year. This builds trust. I’d love to see CTD doing a better job in clearly separating acquisition and organic growth in their management accounts (and from what I’ve read, the professional analysts would too).