Home' Trinidad and Tobago Guardian : August 10th 2014 Contents AUGUST 10 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
While top-line growth
at GraceKennedy Ltd
was encouraging in
local currency terms,
the depreciation of
the Jamaican dollar
continued to negatively impact operating costs,
at both the subsidiary and associated companies.
This was more pronounced in the food trading
and retail and trading segments.
For the six months ended June 2014 GKC
reported revenues of J$37.24 billion; this rep-
resented an improvement of 13.9 per cent over
the J$32.71 billion delivered for the comparative
period in 2013.
Helped by lower taxes, profit attributable to
shareholders increased by a robust 20.6 per
cent to J$1.68 billion from the J$1.39 billion
earned for the half-year to June 2013.
On April 24, 2014, GKC signed an agreement
to sell 100 per cent of First Global Financial
Services Ltd (FGFS) to Proven Investments Ltd
for J$3.05 billion.
It is very likely that GKC made a profit on
this deal, thus boosting this period s results.
Consequently, unless core businesses deliver
better results, profit increases for the second
half may be less robust.
One effect of the prior transaction resulted
in a decline in total assets to J$92.45 billion
from J$108.64 billion as at December 2013.
The most notable contraction was recorded
in the pledged assets line, which fell to J$5.66
billion from J$27.14 billion last December.
Also exhibiting a decline was pension plan
assets, which fell to J$4.8 billion from J$5.5
billion as at December 2013.
Cash and deposits increased by J$1.98 billion
to end at J$11.11 billion from J$9.13 billion on
December 31, 2013. Investment securities also
rose; in this case the balances moved from
J$20.88 billion last December to J$21.62 billion
as at June 30, 2014.
Receivables rose to J$11 billion from J$9.1 bil-
lion last December. This figure comprises trade
and insurance receivables as well as prepayments
and other receivables.
Inventory values rose to J$9.15 billion. Last
December, this item was J$8.35 billion, while
a year earlier this figure was J$7.7 billion. The
growth in inventories is consistent with the
rise in revenues.
Resulting from the sale of FGFS, liabilities
moved down to J$56.4 billion from J$74.4 billion
The value of securities sold under agreements
to repurchase contracted to J$4.05 billion from
J$25.07 billion last December. This change rep-
resented the largest single movement.
Also declining was the value of bank and
other loans; in this case, values came in at
J$10.44 billion from J$11.57 billion as at the end
of the last fiscal period.
On the other hand, there was a strong 15.2
per cent increase in the value of deposits held;
this figure moved from last December s J$17.77
billion to J$20.47 billion as at June 2014. Most
of this would have represented growth at its
banking subsidiary, First Global Bank Ltd.
Payables balances increased to J$16.78 billion
from last December s J$15.23 billion, representing
a change of 10.2 per cent. In addition to trade
payables, this value includes insurance claims
outstanding, insurance reserves, accruals and
As at last December, trade receivables exceed-
ed trade payables. In an inflationary environment
and with a depreciating currency, this imbalance
allows a company to settle its payables more
economically using a depreciated currency. If
carried to an extreme by multiple parties, this
strategy will cause social and economic chaos.
Expansion in shareholders' equity
Late last year, GKC initiated a programme
to repurchase and cancel up to a maximum of
2 1/2 per cent of its issued shares over a one
year period. The first such purchase of 2,000
shares was made on November 20, 2013. This
programme has started to bear some fruit. As
at June 2014, the number of issued shares
declined to 330,592,000 from 331,921,000 as
at January 1, 2014.
This decline is reflected in the value of share
capital moving from J$643.1 million as at
December 2013 to J$563.5 million on June 30,
2014. The difference reflects the cost of repur-
chasing 1,329,000 shares (J$80.5 million) reduced
by J$907k received from the issue of 18,000
Notable increases were recorded under both
the capital and fair value reserves and retained
earnings components of equity. In the case of
the former, comprehensive income (J$254 mil-
lion) provided the major lift. In the case of the
latter, comprehensive income of J$1.18 billion,
less dividends of J$231.5 million, accounted for
the bulk of the increase.
These changes resulted in shareholders equity
improving to J$34.31 billion last December from
J$32.77 billion as at June 2014. Consequently,
the book value of each share appreciated from
J$98.72 last December to J$103.78 as at June
The food trading segment delivered a 16.2
per cent increase in external sales. Despite this,
operating profits declined to J$741 million from
J$785.5 million in the 2013 half-year period.
The international business in the UK and USA
delivered very encouraging results.
The local business, however, despite higher
revenues, was adversely impacted by the depre-
ciation of the Jamaican dollar; this severely
affected operating costs, which pulled down
The situation was similar at the retail and
trading segment. Here, revenues advanced by
7.2 per cent while operating profits contracted
by 21 per cent.
The banking and investments segment expe-
rienced a 5.5 per cent improvement in sales.
Operating profit at this segment was almost
J$77 million lower (25.2 per cent) than the com-
parative 2013 result. The strong growth in
deposits at First Global Bank Ltd should lead
to a larger book of performing loans in the latter
half of the current year.
The insurance segment delivered a 5.5 per
cent increase in revenues. The absence of unusu-
ally large claims combined with a good under-
writing performance helped this segment deliver
a robust operating profit; the half-year 2014
result was almost four times the profit for the
comparative 2013 period.
Strong results in both Jamaica and Guyana
helped boost the results for the money services
segment. Sales for the current reporting period
were 18.7 per cent greater than for the com-
parative 2013 period. In addition, operating
profits rose by 26.6 per cent.
Total operating profit rose to J$2.58 billion
from J$2.3 billion; this represented an improve-
ment of 12.3 per cent over the comparative 2013
Net finance costs increased from J$116.8 mil-
lion in 2013 to J$123.3 million in the current
The share of profit from associates contracted
to J$118.3 million from J$152.4 million in the
2013 half-year. This is consistent with comments
On July 18, 2014, GraceKennedy Foods (USA)
LLC paid US$26 million to buy La Fe Foods
Inc. in the USA. This company was established
in 1968 and had annual revenues of about
It is a food distributor specialising in the
Hispanic market and has a presence on the
east cost of the USA in such states as Florida,
Georgia and the New York/Tri-State areas.
GKC expects to leverage La Fe s manufac-
turing and distribution capabilities to deepen
its presence in selected American states, starting
on the east coast.
Share price and dividend yield
On the local exchange, GKC s share price
started 2014 at TT$3.45 and, by the end of
January was quoted as high as TT$3.70. For
the next few months the price ranged from
TT$3.70 to TT$3.40. It recently closed at
In its home market, trading has occurred
within a very narrow band. After starting 2014
at J$55.07 the price appreciated to J$60 on
March 6, 2014; it recently closed at J$56.50.
At that price, the discount to its book value
of J$103.78 is more than 45 per cent. This is
one of the reasons that the company has initiated
the stock buy-back programme.
GKC s first interim dividend for 2014 of
J$0.70 was paid on April 30 while a second
interim dividend of J$0.78 will be paid on Sep-
tember 30, 2014.
Based on an annual dividend of J$2.18 (about
TT$0.13), the stock s price of J$56.50 in Jamaica
gives investors a yield of 3.86 per cent.
GraceKennedy Ltd half-year results:
Mixed but encouraging
Links Archive August 9th 2014 August 11th 2014 Navigation Previous Page Next Page