Home' Trinidad and Tobago Guardian : August 9th 2015 Contents AUGUST 9 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG11
Similar to NCBJ, GraceKennedy
Ltd (GKC) half-year results
were adversely impacted by
the immediate recognition of
the total asset tax liability.
Additionally, lower foreign
exchange gains, higher finance cost along with
the expenditures of transitioning of its new
US food operations adversely impacted the
Also, GKC, in June, entered into a conditional
agreement to sell its 58.1 per cent stake in
Hardware & Lumber Limited; this sale should
be finalised before the end of 2015.
We will now review GKC s performance for
its half-year ended June 30, 2015.
Changes in financial position
Total assets rose from J$101.9 billion last
December to J$104 billion as at June 30, 2015,
reflecting an increase of 2.1 per cent.
Included in the current period s total is J$3.3
billion, which reflects H&L assets, which are
now classified as being held for sale. The major
components of this figure were inventories of
J$1.7 billion, fixed assets of J$722 million and
receivables of J$630 million.
This treatment helped lower the value of
inventories to J$9.05 billion from J$10.8 billion
last December. Also benefitting from this
reclassification was fixed assets, which fell to
J$8.1 billion from J$8.7 billion. A third major
asset to be impacted by this change was receiv-
ables; in this case, the end of period value
increased to J$12.8 billion from J$11.5 billion.
The largest asset, investment securities,
climbed by 14.4 per cent to J$23.56 from
J$20.59 billion. Another significant asset, loans
receivable, rose by 5.6 per cent to J$19.39
billion from J$18.36 billion.
Also, its investments in associates rose to
J$1.41 billion from J$1.27 billion. Meanwhile
cash and deposits fell by more than J$1 billion
to J$8.4 billion from J$9.51 billion.
Total liabilities advanced by 1.7 per cent to
J$64.68 billion from J$63.61 billion.
H&L liabilities comprised J$1.8 billion. The
most significant impact was under payables,
which due to H&L s J$1.23 billion, helped push
down the June 2015 balance to J$17.64 billion
from J$19.05 billion.
Banks and other loans were also influenced
by the H&L treatment, which amounted to
J$220 million. Overall, the current balance
rose to J$12.45 billion from J$11.06 billion.
The largest liability, deposits, rose from
J$21.2 billion to J$22.06 billion, or by four per
Securities sold under agreements to repur-
chase contracted by 17.2 per cent to end at
J$6.24 billion from J$7.53 billion last Decem-
Stockholders equity advanced to J$37.35
billion from the year-end balance of J$36.53
The net repurchase of 278,000 shares pulled
down share capital to J$570.6 million from
the year- end value of J$588.5 million.
The retained earnings figure was boosted
by the current period s comprehensive income
of J$806.6 million while dividends of J$248
million restrained the net increase. Other pos-
itive reserve movements helped the overall
With 330,696,000 shares outstanding, each
share has a book value of J$112.96 (December
Equity attributable to non-controlling inter-
ests climbed to J$1.94 billion from J$1.71 billion;
this reflects higher profitability at those enti-
Income and profits
Total revenues advanced by 16.5 per cent
to reach J$39.27 billion from the comparative
2014 outturn of J$33.71 billion.
On the other hand, expenses climbed by a
disproportionate 18.5 per cent, moving from
J$32.17 billion in the first half of 2014 to J$38.11
billion in the current half-year. As indicated
earlier and in the Directors report, several
contemporaneous items conspired to limit
Consequently, gross profit registered at J$1.16
billion; this was J$381 million or 24.7 per cent
lower than the J$1.54 billion recorded for the
Other income also declined, coming in at
J$712.5 million from J$915.8 million in the 2014
half- year. These changes saw profit from
operations come in at J$1.87 billion from J$2.46
billion in the comparative 2014 period.
Interest income from non-financial services
was slightly lower at J$169.1 million from
2014 s J$188.4 million. In contrast, interest
expense from non-financial services climbed
from J$298.1 million to J$334.1 million or by
12.1 per cent.
The share of results from associated com-
panies climbed by almost 49 per cent to J$176.1
million from J$118.3 million. Most of this
improvement was recorded in the first quarter;
in the second quarter, this line item fell to J$10
million from J$15.4 million in the comparative
These changes allowed GKC to report a pre-
tax profit from continuing operations of J$1.88
billion. This represented a decline of J$582
million or 23.6 per cent from the J$2.46 billion
earned for the first six months of 2014.
At the after-tax level, the current period
showed a profit of J$1.42 billion; this compares
with J$1.81 billion for the 2014 half-year.
Profit from its discontinued operations,
Hardware & Lumber, of J$90.9 million helped
boost the current period s result to J$1.51 billion
(2104: J$1.89 billion).
Of this sum, the profit attributable to share-
holders came in at J$1.29 billion versus J$1.68
billion for the comparative 2014 period.
These results translated into 2015 diluted
EPS of J$3.90 compared with J$5.07 for 2014.
The 33 per cent increase in revenues under
the food trading segment was driven by strong
gains both in Jamaica and in the USA. Although
favourable raw material prices helped to main-
tain competitive prices, transition expenses
at its USA division restrained profit growth.
Despite lower external sales, the banking
and investing segment generated higher pre-
tax profits. Both loans and deposits exhibited
The Jamaica International Insurance Com-
pany Limited has been rebranded as GK Gen-
eral Insurance Company Ltd. Similarly, First
Global Insurance Brokers Ltd is now GK Insur-
ance Brokers Ltd. These changes help keep
customers focussed on the group s identity.
Despite higher external sales, the insurance
units delivered lower pre-tax profits; this was
partly attributed to reduced foreign exchange
Accounting for about eight per cent of the
group s revenues, the money services segment
delivered almost 56 per cent of its 2015 pre-
tax profit. Although profits were flat compared
with the previous half-year; this was explained
by the additional cost of investments in tech-
nology combined with efficiency reviews.
In both periods, unallocated income (in
2014) and unallocated expense (in 2015) were
Dividends and share price
During calendar 2014, GKC paid three div-
idends totalling J$2.33.
In May 2015, it paid its first interim dividend
of J$0.75 (2014: J$0.70). Based on its recent
results, it will pay a second interim dividend
of J$0.83 (2014: J$0.78) on September 30,
2015. Following this trend, it seems likely that
its third dividend for 2015, payable in December
2015, could be J$0.91 (2014: J$0.85), bringing
the full year s total up to J$2.49.
In its home market, GKC shares ended 2013
at J$54.80 and moved generally in a positive
direction before ending 2014 at J$61.75. So far
in 2015, it has consistently traded above the
J$60.00 price. On May 11, 2015, the price
peaked at J$65.12 and was recently traded at
Relating that price to the 2015 estimated
dividend of J$2.49, the yield is a reasonable
3.89 per cent. Based on a trailing EPS of J$8.72,
the P/E multiple is 7.34.
On the local market, the share price followed
a similar trend. Almost two years ago, on Octo-
ber 15, 2013, the share price closed at TT$4.15,
but slipped down to TT$3.45 at the end of
that year. By the end of 2014 it was quoted
In 2015, it reached as high as TT$3.67 on
February 2, 2015 and recently closed at TT$3.65.
Over the last six months or so, it has generally
traded above TT$3.45.
GKC entered into an agreement with Grey-
stone Equity Partners /Argyle Industries
(Jamaica) Ltd to sell its stake in Hardware &
Lumber Ltd for a maximum price of J$18.50
per share, subject to certain conditions. (HL s
share price recently closed at J$15). H&L s
operations include 10 Rapid True Value outlets
and six Agro Grace Retail centres. This sale
will allow GKC to focus exclusively on its food
and financial services sectors.
The full impact of the asset tax will no
longer affect this year s earnings.
The group s food manufacturing and dis-
tribution businesses are expanding on many
fronts. The USA base is focussed on the Florida
and Tri-state markets. Expansion in Canada
The group s trust into Europe, initially, Ger-
many and The Netherlands, is based in the
UK. Meanwhile, it continues to expand its
foray into some African markets, including
Many of its Hi-Lo stores are undergoing
renovations which should result in improved
profitability for those units.
GraceKennedy registers lower
profits, but dividends trend higher
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