DERRIMON Trading Company Limited says delays in completing its audited financial statements disrupted the normal review of its banking facilities through much of the first half of the year, constraining access to working capital and contributing to a sharp decline in revenue.

The distribution and retail group on Wednesday told the Jamaica Observer that its bankers would normally begin reviewing its credit facilities during the first quarter, but were unable to to complete those assessments without the audited accounts, which were eventually released on July 10.

Kelly said the delayed facility reviews restricted Derrimon’s access to working capital at a time when the group needed to replenish inventory.

“Certainly, we wouldn’t have experienced this amount of decline in revenue if we had the timely arrival of inventory,” CEO of Derrimon, Ian Kelly said in an e-mailed response to queries.

Kelly was unable to quantify how much revenue was lost or deferred as a result, noting that softer economic conditions also affected consumer demand during the period.

The impact, however, showed up in the company’s results.

Revenue for the June quarter fell 35.4 per cent to $2.72 billion, while first-half revenue declined 33.3 per cent to $5.68 billion. The group recorded a consolidated net loss of $442.4 million for the six months to June, little changed from the corresponding period a year earlier.

Derrimon attributed the weaker performance to supply chain challenges, delays in securing working capital, and softer consumer demand.

Against that backdrop, Derrimon increased its use of short-term borrowing to help bridge the financing gap.

Its second-quarter report disclosed that the group had tapped more short-term debt facilities during the period, even as management identified debt reduction as one of its priorities.

Kelly said discussions with its financial partners have progressed since the audited accounts were released last month, with financing proposals already beginning to come in.

“We are confident that we will see improvements in the second half of the year based on our discussions with our financial partners since the release of our audited statements,” the CEO told the BusinessWeek.

“ Although we are off to this unprecedented late start regarding our reviews, we’re encouraged by the pace at which our partners have been conducting their assessment, and we have already started to receive some options to review,” Kelly added.

At the same time, management is trying to reduce the group’s debt burden.

Kelly said it has restructured parts of the business to improve efficiency and reduce expenses, while the proposed disposal of the Arosa property remains part of its debt-reduction plans. Work continues to assess the company’s assets and operations with a view to reducing debt and improving cash flow. He added that the financial reporting problems that contributed to the disruption have also been addressed.

The company said problems associated with its enterprise resource planning (ERP) system were the sole reason for the delay in completing its audited financial statements.

Reporting has since returned to normal, Kelly said, while additional safeguards have been introduced to prevent a recurrence.

Among them is a new application developed to monitor the ERP system and identify anomalies, including instances where products are sold outside expected margin ranges. External firms have also been engaged as part of the effort to strengthen the group’s financial reporting process.

The CEO said the measures should allow it to identify problems earlier and improve the reliability and timeliness of its financial information.

New York operation

Meanwhile, in providing an update on the severe flooding damage to Derrimon’s New York operation, Kelly told the Jamaica Observer that the company is yet to receive any insurance proceeds, even as the business gradually returns to normal.

The Jamaican distribution group is now consulting legal counsel on the possibility of recovering losses associated with the March 2024 incident.

“To date, no insurance proceed has been received,” Kelly said. He did not disclose the value of the outstanding claim or the losses for which the company is seeking recovery.

The group operates in New York through Marnock LLC and Marnock Retail LLC. Derrimon owns 80 per cent of Marnock LLC, which operates a wholesale business, and all of Marnock Retail LLC, which operates a supermarket business in the United States. Its US operations include FoodSavers New York and Good Foods for Less in Brooklyn.