Update Monday, 30th September | Mayberry Investments advised that the company has reconciled all applications in respect of Caribbean Flavours & Fragrances Initial Public Officering (IPO). There was full allotment for all reserved applications which included board of directors, staff, Mayberry Investments and Key Partner. The first 10,000 shares applied for by the public were allocated in full and balance over 10,000 units were allocated with approximately 19.355 percent of what was applied for.
Update Thursday, 26th September | Lead broker Mayberry Investments Limited announced that the initial public offering (IPO) of shares in Caribbean Flavours & Fragrances Limited (CFF) is oversubscribed and was closed at 9:01 am on Wednesday. Applications were received in excess of the $50.6 million on offer. The public will be advised of the basis of allotment by Friday, 27th September 2013.
The junior market of the Jamaica Stock Exchange should be welcoming its 19th listing in the form of Caribbean Flavours & Fragrances Limited (CFFL) as the company goes to market to sell up to 22,480,008 ordinary shares at j$2.25 per share. After the issue, the total number of shares will be 89,920,033 making it one of the smaller listed companies.
The company is one of the largest businesses of its kind in the English speaking Caribbean. It is engaged in the manufacturing and distribution of flavourings and water soluble colourings for the food, beverage, baking, confectionery and pharmaceutical industries and is a key supplier of these products. It also manufactures and supplies fragrances used in household cleaning, body care, aroma therapy and air freshener products.
Incorporated on 23rd February 2001, its business and assets were purchased from prior owner Bush Boake Allen Jamaica Limited and is a supplier to predominantly commercial customers in Jamaica, Trinidad and Tobago, Grenada, Barbados, St. Kitts, Guyana, USA and Canada. Its customers are well known names in the food and beverage business.
CFFL sources essential oils and natural extracts worldwide and receives key ingredients and technical support from International Flavors & Fragrances Incorporated (IFF), responsible for more than 70 percent of the company’s supplies. IFF is a US$5 billion company listed on the NYSE and is a member of the S&P 500 Index. Lascelles deMercado is a key local supplier, providing alcohol for use in fragrance distillates and other items. Some of the supplies used are commodities with variable prices linked to world markets. The company aims not to carry more than 6 months’ stock of supplies.
CFFL has one competitor in the local market, Virginia Dare (Jamaica) Limited. In the view of the Directors, their particular business focus is on the supply of custom blended products for large local businesses and this distinguishes it from their competitor that supplies retail and smaller business clients with generic products such as bulk syrups.
Income | Revenues amounted to $193.9 million in the 2012 financial year, an 8 percent increase over the $179.4 million recorded in the prior financial year. During 2012 financial year, the company generated increased gross profit of $79.4 million versus $60.9 million in 2011 fiscal year due to increased sales of its products and higher margins of 40.95 percent, compared with 33.95 percent in the 2011 financial year.
Operating Expenses totaled $72.94 million for the 2012 financial year, a year on year increase of 24.5 percent due mainly to increased promotional activity and compensation to directors. CFFL recorded improved Profit before Taxation in for the year, which grew to $6.46 million compared to the $2.36 million for the prior year.
Revenues for the 12 month period ended June 2013 was $229.89 million, increasing 19 percent over the $193.87 million recorded for the 2012. The growth in revenue was driven by increased sales of the products in the fragrance line of the business. Gross Profit totalled $92.73 million compared to $79.39 million. Total operating expenses amounted to $60.49 million for the year, 17 percent less than the $72.94 million recorded for the year prior. This decline was due to a reduction in directors’ fees. Other Income totalling $16.80 million is due mainly to sale of property. Finance Income was $2.53 million for the year. Profit before taxation totalled $51.57 million for the latest fiscal year and net profit amounted to $40.32 million.
Assets totalled $97.52 million as at June 2013, $22.90 million less than the $120.42 million at June 2012. The decline is due to the sale of property. During the period the company reduced the amount outstanding to directors resulting in liabilities totalling $31.45 million as at June, 2013 versus $94.7 million as at the end of 2012 financial year. Shareholders’ Equity stood at $66.06 million at the end of June 2013.
Earnings per share before taxation is 46 cents putting the PE around 5 times earnings to June this year, providing room for some appreciation in the short term. The negative is that the company and its management is not well known and the number of stock in issue is small creating and illiquid situation.
The Directors anticipate a payment of an annual dividend of not less than 25 percent of the annual net profits after payment of any applicable taxes where “such profits are available for distribution, subject to the Company’s need for reinvestment of some or all of its profits from time to time in order to finance the growth of the business of the Company.”
