Virus hits SOS in 2020 Q1

The 2019 financial year was an excellent one for Stationery and Office Supplies, with record revenues of just over $1.2 billion, resulting in net profit rising 47 percent to $135 million over the previous year.
On the heels of the robust 2019 performance, SOS started the 2020 fiscal year on a much more somber note as the Coronavirus intervened and changed what started as a promising quarter and ended with lost sales in the final month. The Deputy Managing Director, Allan McDaniels and Marjorie McDaniels,  Chief Operating Officer in their joint report accompanying the interim results, reported that the ”revenues dropped 17 percent year over year for March, after a strong showing for the first two months of the quarter.” The directors also stated that the company “was only able to deliver on one of three planned shipments of goods for the first four months of the year to Grenada.” as a result of the disruption caused by the Coronavirus.”
SOS closed out its first quarter with sales of $337 million, a 2 percent decline versus the $343.5 million in comparative period for 2019, net profit dropped a more aggressive 24 percent, from $57.4 million in 2019 to $43.8 million in 2020.
Direct expenses were down 2 percent to $172 million, but the Gross profit margin for the quarter was constant at 49 percent in the 2020 quarter, similar to the 2019 first quarter. Gross profit closed out the quarter at $165 million down slightly from $168 million in the March 2019 quarter.
Net profit margin before finance cost declined for the March quarter to 14 percent with $45.54 million generated compared to $60 million for a 17 percent margin, in 2019.
Administrative expenses grew by 11 percent to $86 million, but selling and promotional expenses were effectively flat at $23 million. SOS realized $3.3 million profit from the disposal of property and equipment, helping to offset some of the reduced operating profit for the period.
Earnings per share
came out at 18 cents for the quarter, down from 23 cents for the 2019 first quarter. IC is forecasting $1 per share for PE of six times earnings, but that depends on how quickly the company can recover from the dislocation to sales.
The operations generated $50 million in cash inflows and the company paid out a net amount of $22 million in increased working capital, capital expenditure and loan repayment.
Cash and equivalents rose 66 percent between March 2019 and 2020 to end at $90.4 million. Current assets increased by 8 percent to $521 million with trade and other receivables accounting for $173 million, down from $182 million from a year ago. Inventories ended at $226 million from $223 million at the end of March 2019. Current liabilities stood at $120 million down 23 percent year over year from $156 million.  Current liabilities include borrowings of $30 million and payables of $91 million. Overall total loans payable amounted to $91 million. Shareholder’s equity climbed to $640 million up from $540 million at the end of March 2019 and $597 million at the end of December last year.
The stock traded at $6 on the Junior Market of the Jamaica Stock Exchange with a PE ratio of 6 times 2020 earnings.

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