Home' Trinidad and Tobago Guardian : November 15th 2015 Contents Similar factors that hampered
its half-year results continued
to impede profit growth for
GraceKennedy s nine months
results to September 2015.
These reasons included the costs of inte-
grating its recently expanded USA operations,
immediate (first quarter) recognition of the
assets tax liability, lower foreign exchange gains
and higher finance costs.
Let us now further expand on these and
other developments that impacted on its third
Changes in financial positions
Total assets expanded by 4.1 per cent to
J$106 billion from last December s J$101.9 bil-
The largest component, investment secu-
rities, closed at J$22.4 billion; this represented
growth of 8.9 per cent over the J$20.6 billion
at which it closed last year-end.
Strong growth of 16.7 per cent was noted
under loans receivable, which expanded from
J$18.4 billion to J$21.4 billion.
Cash balances declined marginally to J$9.2
billion from J$9.5 billion. Pledged assets con-
tracted to J$7.3 billion from J$9.5 billion. Mean-
while, receivables advanced to J$12.3 billion
from J$11.5 billion.
The value of inventories fell to J$9.4 billion
from J$10.8 billion; this decline was positively
helped by the reallocation of Hardware & Lum-
ber s portion of J$1.9 billion to assets held for
sale. This factor also explains the decline in
fixed assets, which fell to J$8.1 billion from
J$8.7 billion; the H&L portion was J$0.715 bil-
Investments in associates advanced by 20
per cent to J$1.5 billion from J$1.3 billion. This
gain was influenced by higher profitability at
A new line item, valued at J$3.6 billion, rep-
resented the assets of H&L, now described as
being held for sale.
Total liabilities rose to J$66.9 billion from
J$63.6 billion or by 5.1 per cent.
Here, the liabilities of H&L represented J$2.1
billion. These comprised payables (J$1.5 billion),
bank and other loans (J$0.26 billion) and other
post-employment obligations of J$0.35 billion.
Not surprisingly, the payables component
fell to J$17.3 billion from J$19 billion, primarily
due to reallocation from H&L.
Deposits grew to J$22.9 billion from J$21.2
billion as First Global Bank continued to attract
Bank and other loans grew from J$11 billion
to J$13.8 billion. This was influenced by the
reduced usage of securities sold under agree-
ments to repurchase, which declined to J$6.3
billion from J$7.5 billion.
Total equity advanced to J$39.1 billion from
J$38.2 billion. Excluding minority interests,
shareholders equity rose to J$37.2 billion from
last year-end s J$36.5 billion.
Consistent with its buy-back programme,
GKC s share capital fell to J$567.8 million from
All reserve balances improved modestly.
However, retained earnings advanced to J$25.4
billion from J$25.1 billion. This change was
boosted by total comprehensive income of
J$1.03 billion and then reduced by dividends
of J$522.5 million and transfers to capital and
banking reserves totalling J$241.4 million.
With 330,639,000 shares outstanding each
share has a book value of J$112.47 (December
Revenues and profit
Total revenues expanded to J$59.7 billion
from J$52 billion or by 14.4 per cent. In contrast,
gross profit declined from J$2.23 billion to
J$1.99 billion. This reduction was influenced
by the disproportionate increase in expenses
to J$57.7 billion from J$49.9 billion or by 15.6
Other income fell to J$1.11 billion from J$1.27
billion. This category includes contributions
from net foreign exchange gains, fees and com-
missions and dividend and interest income.
With the falloff in foreign exchange earnings,
mentioned earlier, this decline was not sur-
These changes saw profit from operations
fall to J$3.1 billion from J$3.5 billion.
Net interest income from non-financial serv-
ices came in at J$255 million; this represented
a decline of J$42.8 million or 14.4 per cent
from the 2014 result of J$297.4 million.
In contrast, and consistent with its higher
debt load, interest expense in relation to its
non- financial services rose to J$527.4 million
from J$474.7 million.
In line with their higher profitability, the
contribution from associated companies
expanded by almost 30 per cent to J$246.2
million from last year s J$190.1 million.
These movements resulted in a pre-tax profit
of J$3.08 billion; this represented a decline of
J$439.1 million or 12.5 per cent over 2014 s
With the effective tax rate marginally declin-
ing to 26 per cent from 26.6 per cent, GKC s
after- tax profit from continuing operations
registered at J$2.28 billion from last period s
J$2.58 billion. The discontinued operations of
Hardware & Lumber then contributed J$112.7
million, down from the prior period s J$134.2
million. (That result will be expanded on later.)
This contribution boosted the net profit to
J$2.39 billion from J$2.72 billion. Of these fig-
ures, the profit attributable to shareholders
came in at J$2.05 billion (nine months 2014:
These results translated into diluted EPS of
J$6.18 versus J$7.21 for 2014.
Despite a 17.3 per cent improvement in rev-
enues, the food trading segment s operating
results contracted by 26.3 per cent.
A significant part of that decline can be
attributed to continuing integration costs of
its US food operations via GraceKennedy Foods
(USA) LLC. Notwithstanding these costs, there
were several positives.
GKC has a distribution agreement with a
global beverage distributor, Arizona, which is
expected to expand its reach within the USA.
Also, its Grace Jerk Seasoning (and related
products) was launched using the Internet dis-
In addition, there have been improved results
at Hi-Lo stores. Finally, efficiency gains and
lower commodity prices have helped demand
and profitability at its manufacturing facili-
Despite a marginal decline in external sales,
the banking and investment segment delivered
a strong 18.7 per cent improvement in operating
This result was primarily due to the improve-
ments in both net interest income and non-
interest income at its flagship operation, First
Global Bank, where loans expanded by 28 per
cent and deposits grew by 21 per cent.
The insurance operations delivered a 16 per
cent expansion in external sales accompanied
by a 10.7 per cent improvement in its operating
results. This was mainly due to the improved
underwriting results at the general insurance
unit. That company has recently launched
Internet access for its growing clientele.
The star performer in terms of operating
results was money services.
Here, external sales expanded by a modest
1.6 per cent. However, operating profit grew
by 6.4 per cent.This result was helped by three
factors: cost containment initiatives; higher
revenue from its cambio operation in Trinidad;
finally, higher remittance transactions and
improved market share in Jamaica.
Dividends and share price
On December 16, 2015 GKC will pay its
third interim dividend of J$0.90. This brings
its total dividends for the calendar year to
Its EPS for the last quarter of 2014 was
J$2.68, which, when added to the EPS to Sep-
tember 2015 of J$6.18, brings it up to J$8.86
for the most recent twelve months. Thus,
when related to the dividend of J$2.48, rep-
resents a pay-out of 28 per cent.
Given that many companies distribute a
much greater percentage of their net profits
as dividends, there appears to be significant
leeway for GKC to improve this figure in the
Its share price ended on September 28, 2015
at J$63.92. By October 19, 2015, the price
advanced to J$64.71 and closed at J$67.28 on
October 26, 2015.
Following the release of these results on the
afternoon of November 5, 2015, the share price
rose and it closed on Wednesday November
11, 2015 at J$74.39 with asking prices coming
in at J$77.75 (about TT$4.18). At that closing
price, Jamaican investors enjoy a dividend
yield of 3.33 per cent.
On the local exchange, the price closed at
TT$3.61 on September 25, 2015, then it held
steady at TT3.60 for the entire month of Octo-
ber. As at last Wednesday, when its third quar-
ter results were issued in the local print media,
it closed at TT3.60, with offers to sell coming
in at TT$4.00 (about J$74.35).
hardware and lumber
H&L s assets closed on September 30, 2015
at J$3.6 billion while liabilities stood at J$2.1
billion; thus, the equity position was J$1.5 bil-
Revenues rose marginally to J$5.36 billion
from J$5.24 billion, however, gross profit fell
to J$101.8 million from J$127.7 million. In addi-
tion, there was a notable decline in other
income, which contracted to J$19.2 million
from J$69.7 million.
Helped by a favourable tax add-back of J$7
million, the net profit from its discontinued
operations closed the 2015 nine months at
J$112.7 million from last year s J$134.2 mil-
GKC announced on October 16, 2015, that
all the main conditions have been agreed for
the sale of its majority (58.1 per cent) stake
in H&L to Greystone Equity Partners Inc. It
is now anticipated that the sale should be
concluded by the end of December 2015.
This transaction should provide GKC with
a useful one-off lift to its year-end 2015 results.
NOVEMBER 15 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
GraceKennedy prepares to
divest hardware, lumber
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