Stationery and Office Supplies (SOS) enjoyed a blow year in 2022, with earnings hitting a record high, after profits jumped 169 percent before tax to $284 million and $257 million after tax from a 55 percent jump in revenues to $1.75 billion from $1.12 billion in 2021. SOS benefitted from one time income from a Gain on disposal of property, plant and equipment of $30 which was partially offset by unusually large impairment losses of $11.5 million.
Income tax on the year’s profit amounts to $27 million compared with a tax credit of $1 million in 2021. Net profit in 2021 was $107 million but gross profit jumped 59 percent from $574 million in 2021 to $912 million for 2022, as gross profit margin slipped during the year to 47.8 percent from 49 percent in 2021.
Administrative and general expenses rose 25 percent to $399 million from $320 million in 2021. Selling and promotional costs rose 64 percent to $132 million from $80 million in the prior year, Impairment loss on financial assets jumped 698 percent to $11.5 million up from $1.4 million and Depreciation and amortisation costs rose 13.7 percent to $30 million up from $26.4 million. There were cost savings during the year with Loss on foreign exchange falling 85 percent to $1.2 million from $8 million in 2021 and Finance costs dropping 22 percent to $8.7 million from $11 million in 2021 as loans were partially repaid.
Allan McDaniels CEO of SOS
Gross cash flow during the year brought in $336 million, which was used to fund increased working capital needs of $84 million, capital expenditure amounting to $50 million, loan repayment of $49 million and dividend payment of $45 million, leaving $97 million to add to cash funds.
At the end of the year, shareholders’ equity grew to $1.1 billion with long term borrowings at $67 million and short term at $43 million. Current assets ended the period at $737 million inclusive of trade and other receivables of $200 million versus $124 million in the prior year. Cash and bank balances rose to $132 million from $34 million in the previous year and inventories climbed to $369 million up from $296 million in 2021. Current liabilities ended at $181 million and resulted in Net current assets of $556 million.
Earnings per share came out at $1.03 cents for the year up from 43 cents in 2021. IC Insider.com forecasts $2 per share for the current fiscal year, with a PE of 7.3 times the current year’s earnings down from 14.5 based on 2021 results, compared with 11.3 for the market based 2023 earnings at $14.50 the stock traded at on Friday on the Jamaica Stock Exchange Junior Market.
Stationary & Office Supplies – Montego Bay office.
Of note is a 37 percent increase in fourth quarter revenues, which was at a slower pace than the 63 percent increase for the nine months to September and a 45 percent rise in the 4th quarter of 2021, suggesting that the pace for 2023 should be strong, but most likely slower than that of 2022. The pace in 2023 will be helped by a deal struck with a company in Trinidad to cross sell products as well as the possibility that other deals may be struck with others.
SEEK division produced receipts and other ruled books as well as graph paper for the first time in June last year, using machinery that was purchased from the former operators, they will enjoy increased production for the entire year in 2023 compared with approximately six months in 2022 and contributed $43 million to gross profit for 2022.
With improving profits and shrinking supplies outside of the TOP 10 shareholders, who control 91 percent of the issued shares, the stock is setting up for a stock split that cannot be far off and when given will catapult the stock price upwards.
Going forward, with the Jamaican economy recovering and now growing, the stage is being set for SOS to continue to grow at an attractive pace for a while and deliver above average returns for investors in cash dividends and stock price gains.
