Grace new HQ close to the end of construction in downtown Kingston
Grace Kennedy reported net profit attributable to shareholders of $3.26 billion for the year to September compared with $3.3 billion in 2017 on strong gains in Food and Insurance segments. For the September quarter, the group earnings of $1.06 billion was realized, down from $1.5 billion.
The current quarter’s result is negatively impacted by one off expenses.
Segment results show declines in the Money transfer business with segment results down to $2.34 billion from $2.46 billion in 2017. Banking was flat with results of $401 million but both Insurance and Food trading recorded healthy increases. Food reported $1.35 billion in 2017 and climbed a strong 12.5 percent to $1.52 billion and Insurance jumped a robust 22.7 percent from $508 million to $734 million.
When adjusted for non-recurring gains in 2017 and one-time expenses of $236 million in the September 2018 quarter, profit for the nine months would have been greater by approximately $600 million.
For the nine-months, the Company revenues rose 7 percent to $73.8 billion but climbed a healthier 11 percent to $25.46 billion for the September quarter, over the same period in 2017. Group Chief Financial Officer, Frank James, informed IC Insider.com that the savings from the rationalisation exercise will generate savings considerable higher than the cost, due partially to some former employees being retired and not incurring separation cost.
Operating cost rose faster than revenues, with an increase of 13 percent to $24.6 billion for the
Group Chief Executive Officer, Don Wehby.
Shareholders’ equity increased of $3.2 billion to $48.4 billion over 2017. Loans receivables remained flat at $26.4 billion compared to $26.58 billion in September 2017 and is down from $27.55 billion at the end of 2017. At the end of the period total assets increased $7.3 billion to $137 billion since September in 2017 and liabilities rose by a smaller $3 billion to $86.44 billion.
In speaking to the recent performance, Group Chief Executive Officer, Don Wehby, affirmed, “The Company is investing strategically for future growth and efficiency to achieve this objective. We are seeing a 12.6 percent increase in profit over prior period, with the one-off adjustments, and we expect continued growth based on our strategy.”
Since 2018, the Group embarked on a programme which aims to improve its return on investment and shareholder value. The process involves a review of its overall organizational design, cost structure, and business processes at all levels resulting in restructuring which affected a number of positions in August. In expounding further Wehby stated, “Although the restructuring costs of $236 million impacted the quarter’s performance, I am confident that the Company will realize the benefits of this in subsequent periods.”
Grace pays an interim dividend of 50 cents per stock unit on December 13, bringing dividends to date to $1.35 per stock unit of more than $1.3 billion.
Wehby and the group’s chairman Gordon Shirley in their report to shareholders stated that Grace Kennedy anticipates continued growth for the fourth quarter, subsequent to the quarterly report the group announced changes in their Florida distribution with an investment in the company that manufactures it patties that will take over Graces distribution and warehousing in that area. The new arrangement will mean less cost and more profits for Grace.
IC Insider.com projects earnings is $4.80 for the current fiscal year to December and $6 for 2019. The stock is listed on the Jamaica Stock Exchange and trades at $60 for a PE of 12.5 times current year’s estimated earnings versus an average for the market in the region of 15, with a premium of a mere 20 percent above net book value per share and seems undervalued, currently. The stock looks like a good long term investment.
Shocking 4 years of Cargo Handlers errors
The number of shares issued by publicly listed companies is very important information for investors to know, but investors would not think so when examining interim financial statements in Jamaica and Trinidad and Tobago of some of the companies.
There have been so many occasions one has to search high and low to find it if at all it is reported in the interim numbers. This is such a simple matter and the stock exchanges in the region could cure it easily, by making it one of the items that must be included in quarterly reports. It should be included as a part of the statement of movement in Shareholders’ equity.
Take the matter of segment reporting. Some companies report it quarterly and some only annually. Most correctly report the current period and the comparative previous year’s period. Why can’t the JSE insist on some minimum standards for the benefit of investors so they get information consistently? Limners and Bards is the latest company to provide a quarterly report with no segment results yet they report it in the audited report albeit just one year forcing investors to have to go back to the previous year’s report for the comparison. Seems if that is the approach they should just report the current year’s figures and let investors go back to the previous year’s reports for profit and balance sheet information.
Communication with investors is a subjective matter but there are some simple matters that it just takes some thinking or consulting to get right.
The latest shocking reporting is that of Cargo Handlers that shows the number of shares issued as a part of the statement of shareholders’ equity. The oddity is the company reporting only 37.466 million issued shares since 2018 when it increased to more than 374 million units. The Jamaica Stock Exchange website shows them as having 416.25 million shares issued and the audited accounts show that the change took place in 2018 the numbers moving from 37.485 to 374.653 million shares. One wonders why no one discovered this glaring error when the list of top 10 shareholders show four of them having more shares than what they list as issued. The error goes back to 2018 for all of the quarterly reports.
This is such a glaring error and neither the Stock Exchange, the Financial Services Commission the directors of the company or its accounting staff have found out.
Our reporting standards are not up to scratch and some persons in the financial system love to talk about best practices globally.
The vast majority of listed companies report profit results with direct and indirect costs and gross profit. But others do not. The group shockingly includes GraceKennedy, 138 Student Living, Knutsford Express. It is full time that companies lift the standard of reporting so that investors can get pertinent information to use in their investment decision making. In response to a question put to Don Wehby about the bulking of all cost on the profit statement suggest that they are in compliance with accounting standards, but that is such a lame and shocking excuse from a company of such standing in the country. Seprod produces it, Jamaica Broilers does it and several other listed companies so why not Grace. Are grace directors suggesting that their shareholders are lesser persons than those of other companies? The case of 138 Student Living is shocking when one considers that the Chairman, Ian Parsard is also Group Senior Vice President – Finance & Corporate Planning at Jamaica Broilers.
AMG Packaging is in a class by itself when it comes to poor communication. The company has embarked on a major capital project, but the directors appear to be of the view that minority shareholders are best kept in as much darkness as possible about it. The audited accounts for 2020 are silent on any commitment to the project.
The latest quarterly the only capital spend, is shown as work in progress on the balance sheet in the amount of $57 million, with no comments on the progress, the total commitment and when it is expected to be complete and be in use. Worse there are no comments on its use. It is noted that the purpose has moved from a warehouse to a factory between 2018 and now.
In the 2018 annual report, the Chairman stated that “the Company recently took an option to purchase an adjoining property. If the transaction is completed, the additional space will be used to alleviate some of the space constraints in the existing facility, making operations more efficient.”
In the 2019 annual report “The Company completed the acquisition on the property at 12 Retirement Crescent which will allow us to expand our operations and to better serve our customers.” The company also stated that they “obtained funding from Proven Wealth Limited to assist with the development of 12 Retirement Crescent. The KSAC is in the process of reviewing the architectural drawings for 12 Retirement.”
The 2020 annual report states, “the company plans on utilizing the strong cash and cash equivalents position into developing 12 Retirement Crescent. The pandemic had caused the development of 12 Retirement Crescent to delay from 2020 to 2021. A contractor has been chosen and the building of an additional 11,370 square feet is set to begin in February 2021.”
In the results to February this year, the only comment made about the development is “that the new steel frame warehouse purchased from China arrived and construction commenced. The financial statement shows WIP at $49 million, with a zero balance in the November quarter.”