Home' Trinidad and Tobago Guardian : November 9th 2014 Contents NOVEMBER 9 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
The Jamaican company, Des-
noes & Geddes Ltd, is best
known for its Red Stripe
beer and Dragon stout, both
of which have a very small
share of the local market.
The company also distrib-
utes Diageo labels, such as Smirnoff vodka
and Johnnie Walker whiskey.
A new company, Celebration Brands Ltd,
is a joint venture with Pepsi-Cola Jamaica in
which it holds a 50 per cent stake. The primary
purpose of this venture is to serve as the selling
and distribution agent for the company s prod-
D&G s ultimate parent company is the Unit-
ed Kingdom based Diageo PLC Udiam Hold-
ings AB, which is a Swedish-based subsidiary
of Diageo, owns 57.87 per cent of the out-
standing shares. The other major shareholder
is Heineken Beverages Switzerland AG, which
has a 15.45 per cent stake. Collectively, the
ten largest shareholders own 85.41 per cent
of the company.
The company s chairman, Richard O Byles,
who is also president and CEO of Sagicor
Group Jamaica Ltd, owns almost 3.5 million
stock units while the managing director, Cedric
M Blair, owns 0.50 million shares. The Sagicor
Pooled Equity Fund owns more than 50 million
shares, which represents 1.79 per cent of the
total outstanding shares of 2.81 billion.
Let us now turn to D&G s performance for
the 12 months ended June 2014.
Income and profit
Sales, net of special consumption tax,
advanced from J$10.37 billion in the 2013 peri-
od to J$11.5 billion, representing an increase
of 10.9 per cent.
This growth was very robust in the Jamaican
(domestic) market, where sales expanded by
almost 15 per cent, moving from the 2013
base of J$8.44 billion to J$9.70 billion this
Exports were more subdued with sales
declining by 6.9 per cent to J$1.8 billion from
the previous year s level of J$1.93 billion. Sales
to the Unites States contracted to J$300 million
from the 2013 level of J$566 million. Similarly,
the Canadian market absorbed only J$369.3
million in products versus J$404.4 million in
2013. These changes were due to the relocation
of the production of Red Stripe sold in North
America to a USA-based facility.
On a brighter note, sales to Europe rose by
52.6 per cent, moving from the modest base
of J$109 million to J$166.3 million. Sales to
Great Britain advanced by 8.6 per cent to
reach J$461.4 million from J$425 million in
the 2013 period.
Sales to Caribbean territories increased by
almost 17 per cent, moving from J$288.4 mil-
lion to J$337 million in the 2014 period. Sales
to other jurisdictions were also encouraging,
moving from J$136.8 million to J$161.6 million;
this represented an improvement of 18.1 per
The cost of sales, which registered a 10.8
per cent increase, was marginally lower than
the sales improvement. Among the factors
that drove the increases was the devaluation
of the Jamaican dollar, which increased the
cost of imported materials and local inflation.
In addition, the outsourcing of selling and
distribution costs to the new company, Cel-
ebration Brands Ltd, increased direct distri-
Marketing and related costs, offset by other
income or expense, declined from almost
J$2.4 billion in 2013 to less than $2 billion
this year. Two principal factors accounted for
The implementation of various cost cutting
measures combined with the new distribution
arrangements helped lower general, selling
and administrative expenses from J$1.336 bil-
lion in 2013 to J$1.223 billion in the current
Interestingly, D&G wants to replace 20 per
cent of its imported barley with locally grown
cassava; perhaps, Carib Brewery already has
plans for a similar initiative?
Also, in 2013, there were net "other expens-
es" of J$130 million; in 2014, there was net
"other income" of J$232 million. The 2014
result represented revaluation gains on invest-
ment properties, foreign exchange gains and
dividend income from overseas investments.
Helped by these changes, the trading profit
improved by 46.6 per cent to J$2.72 billion
from 2013 s J$1.86 billion.
During 2014, D&G Ltd sold its 5 per cent
stake in Brasserie Nationale d Haiti, valued
at J$487.9 million and its 10 per cent share-
holding in Windward and Leeward Brewery
Ltd, valued at J$472.7 million. The disposal
of these two investments on December 19,
2013 to Heineken generated a one-time profit
of J$973.7 million for the company.
The miscellaneous costs line amalgamates
pension and medical benefits expenses, results
of joint venture (Celebration Brands - CBL),
and losses on disposals of fixed assets.
While CBL s revenues rose by ten-fold in
2014 to J$18.9 billion, it incurred a loss of
J$44.7 million (D&G s portion= J$22.4 million).
In 2013, CBL recorded a profit of J$23.8 million
on sales of J$1.82 billion.
Pre-tax profit for 2014 registered at J$3.68
billion; this represents an increase of 96.5 per
cent over the J$1.87 billion recorded for the
2013 fiscal period.
Despite the higher pre-tax profit, taxation
declined to J$524 million from J$660 million
in the prior period. The Jamaican tax rate fell
from 30 per cent in 2013 to 25 per cent this
year. This change benefitted the company to
the extent of J$89.4 million.
In addition, the profit on the disposal of
investments was not taxable; consequently,
this lowered the tax bill by J$238 million.
Finally, depreciation and capital allowances
reduced the tax take by a further J$111 mil-
The after-tax profit of J$3.15 billion trans-
lated into EPS of J$1.12; this compares
favourably with a 2013 net profit of J$1.21 bil-
lion and EPS of J$0.43.
Changes in financial position
Total assets, offset by current liabilities,
moved from J$8.31 billion as at June 2013 to
J$9.63 billion on June 30, 2014.
Long-term assets rose to J$7.61 billion from
J$6.67 billion a year earlier. The disposal of
its shares in two companies saw the "invest-
ments" line item reduced to zero from J$960.7
million as at June 2013.
The value of the joint venture (CBL) declined
to J$181 million from J$203 million to reflect
the current year s loss.
Investment properties rose to J$889 million
from the prior year s J$276 million. This reflect-
ed a revaluation gain of J$195 million and a
reclassification of J$419 million for items pre-
viously classified as property, plant and equip-
The most notable change occurred under
property, plant and equipment where year-
end values moved from J$4.55 billion to J$5.50
billion. This increase reflects the company s
continued strong emphasis on upgrading and
improving its physical plant assets with more
modern equipment while helping to reduce
D&G s accounts receivable increased by 22
per cent to J$1.37 billion. In contrast, its account
payable was marginally lower at slightly more
than J$2 billion.
Amounts due from fellow subsidiaries
increased by J$89.2 million to J$407.2 million.
Conversely, sums due to fellow subsidiaries
fell by J$55.3 million to end at J$193.6 mil-
Shareholders equity increased from J$7.67
billion as at year-end 2013 to J$9.01 billion
on June 2014. This figure was mainly boosted
by the net profit of J$3.15 billion before being
reduced by dividends of J$1.4 billion. Pension
and other adjustments account for the net
difference of J$0.41 billion.
Share price movements and yield
Over the past year or so, the company s
share price reached a peak of J$5.40 on January
31, 2014. On July 25, 2014, the share traded
at J$4.00. More recently, the share price closed
on November 4, 2014 at J$4.94.
The 2014 dividend of J$0.50 reflected a 66
per cent improvement over the 2013 dividend
As at the November 4 share price of J$4.94,
the dividend yield is a robust and very attractive
10.1 per cent.
It is unlikely that profit for the current year
ending in June 2015 would be as high as that
recorded for the 2014 period; nevertheless, it
should still be comfortably higher than that
recorded for the 2013 fiscal period.
On that assumption and given the high level
of payment in 2013 (nearly 70 per cent), the
dividend could increase marginally. In fact,
based on strong first quarter earnings, an inter-
im dividend of J$0.27 will be paid on December
15, 2014. This is higher than the J$0.25 paid
around the same time in 2013.
Over the period early-June 2014 to mid-
October 2014, directors of D&G Ltd bought
more than six million shares in the company.
At the company s recent AGM, the chairman
exhorted shareholders to increase their pur-
chases of shares in the company. Given the
company s recent performance and current
prospects, this advice appears to be well found-
ed.Perhaps, this recommendation might also
be valid for non-Jamaican investors?
Desnoes & Geddes Ltd
delivers strong 2014 results
Links Archive November 8th 2014 November 10th 2014 Navigation Previous Page Next Page