Home' Trinidad and Tobago Guardian : March 15th 2015 Contents MARCH 15 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
GraceKennedy Ltd (GKC) con-
tinues to make progress
towards the attainment of
its 2020 goals, which has as
one of its major pillars to
generate more than 50 per
cent of revenues from out-
side Jamaica; eventually, this could also lead to
having greater than 50 per cent of its net income
from those sources.
This company is usually among the earliest to
report on its operations for the fiscal period ended
December 2014; a role that many other listed
companies might want to emulate.
Although their results showed almost 16 per
cent revenue growth, this was accompanied by
a less than stellar improvement in net profit.
Total assets fell to J$101.9 billion from J$108.6
billion as at December 2013. The principal driver
of this contraction was the sale of First Global
Financial Services Ltd.
This exit is most prominently reflected in the
reduction of its gross and pledged assets with
the latter contracting to J$9.5 billion from the
previous level of J$27.1 billion.
The groups largest asset, investment securities,
declined marginally to J$20.6 billion from the
2013 level of J$20.9 billion. The largest components
were Government of Jamaica securities of J$14.5
billion (2013: J$35.6 billion), corporate bonds
valued at J$6.5 billion (2013: J$6.4 billion) and
Bank of Jamaica at J$5.9 billion (2013: J$3.3 bil-
Loans receivable increased from J$16.2 billion
to J$18.4 billion. Of the latter sum, J$6.3 billion
matures in the next 12 months.
The value of inventories rose to J$10.8 billion
from J$8.3 billion in 2013, reflecting an increase
of 29.4 per cent. This movement is greater than
the almost sixteen per cent increase in revenues.
The major change was in merchandise inventories,
which rose by 56 per cent to J$6.9 billion from
J$4.4 billion as at December 2013.
Receivables advanced to J$11.5 billion from the
previous year s J$9.1 billion. The largest compo-
nent, trade receivables, rose by 28 per cent to
J$6.9 billion (2013: J$5.4 billion). Again, we note
this increase far exceeds the revenue improvement
of slightly less than 16 per cent.
The increases in both inventories and trade
receivables are directly related to the rise in sales
in the food trading segment, which climbed by
22.6 per cent.
The value of fixed assets rose from J$6.9 billion
to last December s J$8.7 billion. The major move-
ments comprised current year s additions of J$1.1
billion, acquisition through business combinations
of J$0.9 billion and a revaluation adjustment of
J$0.6 billion; the depreciation charges for the
year were J$0.76 billion.
Liabilities declined to J$63.6 billion from J$74.4
billion as at year-end 2013.
The major contraction was noted under secu-
rities sold under agreements to repurchase, which
fell to J$7.5 billion from J$25 billion as at year-
end 2013. Deposits rose to J$21.2 billion from the
previous level of J$17.8 billion; this reflected an
improvement of 19.3 per cent.
Bank and other loans declined marginally to
J$11.1 billion from J$11.6 billion as at December
2013. On the one hand, loans that are secured
on assets increased from J$1.97 billion to J$2.65
billion. On the other hand, unsecured loans
declined to J$8.4 billion from J$9.6 billion. Almost
60 per cent of the 2014 figure or J$6.6 billion
relates to bank borrowings.
Payables climbed to J$19 billion from 2013 s
level of J$15.2 billion. The major increase, at 36.8
per cent, was recorded under the trade payables
line; this item rose to J$8.8 billion from the
previous level of J$6.4 billion.
This figure is almost J$2 billion greater than
the trade receivables referred to earlier. This indi-
cates that the company is using its suppliers
funds to a much greater extent than it is allowing
customers to reciprocate. This is a hallmark of
good cash flow management.
Equity improvements were influenced by both
a deliberate reduction in share capital supported
by increases in both capital reserves and, more
importantly, retained earnings.
Share capital fell to J$588.5 million from the
previous level of J$643.1 million. As at year-end
2014, the number of issued shares was
330,974,000; this compares with 331,921,000
as at December 2013. This reduction largely
reflected the successful completion of its share
Capital and fair value reserves improved to
J$4.36 billion from J$5.19 billion. Here, the principal
movements were a positive contribution from
other comprehensive income of J$955.8 million,
which was reduced by a transfer of J$120.7 mil-
The retained earnings segment was lifted by
J$3.2 billion in the current year s profit and lowered
by dividends paid of J$770 million. These changes
saw this component close 2014 at J$5.19 billion
(2013: J$4.36 billion).
Total shareholders equity improved to J$36.53
billion from the previous level of J$32.77 billion.
With a reduced number of shares outstanding,
the book value of each share advanced to J$110.38
from the 2013 figure of J$98.72.
Revenues & profit
Total revenues grew by 15.9 per cent to J$78
billion from J$67.3 billion in 2013. The bulk of
this improvement was recorded under the food
trading and money services segments. Due to
the sale of First Global Financial, the banking &
investment segment generated lower sales (and
Geographically, sales growth in Jamaica was
lethargic at 3.7 per cent (J$44.6 billion vs. J$43.04
billion). United Kingdom revenues rose to J$13
billion from the previous year s J$10.26 billion or
by 27 per cent. The biggest jump, however, was
recorded by revenues from the USA; these
expanded by a solid 94.6 per cent to reach J$9.55
billion from J$4.91 billion in 2013, reflecting the
effect of new acquisitions.
In 2014, non-Jamaican revenues of J$33.34
billion accounted for 42.8 per cent of that year s
revenues. This result compares favourably with
2013, when external revenues of J$24.22 billion
represented 36 per cent of that year s total of
Despite this robust top-line growth, expenses
rose at a much faster clip, moving to J$74.9 billion
from 2013 s J$63.9 billion; this represented an
increase of 17.2 per cent.
The largest component, cost of inventory
recognised as expense, rose to J$43.6 billion from
J$36.6 billion, or by 19.1 per cent.
The next major item was staff costs, which
went up by 17.4 per cent to J$10.85 billion from
the previous level of J$9.08 billion. The most
significant component, wages and salaries, rose
by 18.7 per cent to J$8.08 billion (2013: J$6.81
Legal and professional fees and occupancy
costs also registered increases. The former rose
from J$1.6 billion to J$2.52 billion, reflecting a
57.4 per cent change. In the case of the latter,
the increase of 19.9 per cent saw costs move
from J$2.25 billion to J$2.7 billion.
Gross profit declined to J$3.09 billion from
the previous year s J$3.34 billion.
Other income registered growth of 6.45 per
cent, moving from J$1.71 billion in 2013 to last
year s J$1.82 billion.
Notable increases were recorded from fees and
commissions and interest income on available-
for-sale securities. In the case of the former, the
2013 figure of J$208.3 million improved to J$318.3
million in 2014, reflecting a 52.8 per cent gain.
In the latter s case, income rose by 32.5 per cent
to J$359.8 million from the previous year s J$271.5
million. Net foreign exchange gains contracted
by 23 per cent; this line item, although still sig-
nificant, fell to J$586.6 million from the J$761.6
million earned in 2013.
Net interest expense from non-financial services
increased from J$240 million in 2013 to J$294
million last year.
Also impacting these results, the share of profit
from its associated companies declined to J$231
million from the previous level of J$260 million.
The principal reduction was from its 50 per cent
stake in Dairy Industries Jamaica Ltd, where
after- tax profits fell to J$281.5 million from the
2013 result of J$358.2 million. The other major
associate was its 40 per cent stake in CSGK
Finance Holding Ltd, whose main operating com-
pany is Signia Financial Group. Here, after-tax
profits fell from 2013 s J$182 million to J$158.2
million last year.
In summary, GKC s pre-tax profit for 2014
came in at J$4.85 billion versus J$5.08 billion for
2013. The net result was helped by lower taxation,
which fell to J$1.05 billion from J$1.28 billion.
This smaller tax bill reflected the beneficial effects
of an employment tax credit (J$41.4 million),
prior year s adjustment (J$108.3 million) and dif-
ferent tax rates in other countries (J$45.8 million).
The after-tax result of J$3.8 billion was marginally
higher than the J$3.79 billion recorded for the
previous year. Profit attributable to GKC share-
holders registered at J$3.29 billion (2013: J$3.22
Because of the reduced number of shares out-
standing, the diluted EPS came in at J$9.89 (2013:
Although the food trading segment is well-
diversified geographically and remains the largest
in terms of revenues, it has not yet proved that
it can deliver consistently meaningful profits to
the group. In terms of its contribution to the
bottom line, the money services segment con-
tinues to provide excellent value to the group.
The insurance segment improved its contri-
bution to net profit. This result was helped by
the better performance from Jamaica International
Insurance Company and its increased shareholding
in EC Global Insurance Company. Although size
helps with cash flows, investors place a higher
value on profits!
Share price and dividends
On the Jamaican exchange, over the past year
or so, GKC has traded as low as J$53.63 on June
2, 2014 and as high as J$63.00 on January 22,
2015. On March 10, 2015, it was quoted at J$61.05.
During 2014, total dividends paid were J$2.33.
At its most recent price, the yield is 3.8 per cent.
On the local exchange, prices ranged from a
low of TT$3.41 on July 2, 2014 to a high of TT$3.85
on November 6, 2014. Last week, it was quoted
GraceKennedy Ltd 2014 results:
Revenues up, but profits flat
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