Despite lower revenues, mostly occasioned by the formation of Caribbean Distribution Partnership (CDP), Goddard Enterprises Ltd (GEL) was able to report higher profits.
One highlight of the year was the formation of CDP with Trinidad-based Agostini's Ltd and we will see how that affected GEL's income and profit.
Last week, we saw that the CDP triggered significant one-off costs to Agostini's Ltd; this week, we will see that GEL enjoyed significant one-off benefits.
GEL gave us additional information on the companies it transferred to CDP. For example, in January 2015, they bought an additional 750,000 shares in Bryden & Partners Ltd at a cost of B$8.054 million, increasing their shareholding from 67 per cent to 100 per cent. This company was first merged into Peter and Company and then transferred to CDP Ltd on July 1, 2015.
Let us now review in more detail GEL's performance for the year ended September 2015.
Changes in financial position
Net assets employed rose by 3.1 per cent to B$582.8 million from B$565.3 million.
Long-term assets increased from B$680.5 million to B$683.3 million. Much of this change was triggered by the formation of CDP, which involved the sale/transfer of some of its subsidiaries to that entity and CDP's purchases of 50 per cent of Trinidad-based Hand Arnold.
Its investment in associated companies jumped to B$126.9 million from B$75.2 million. The net increase of B$51.66 million largely accounts for 50 per cent of the value of CDP assets; the fair value of CDP assets was B$108.94 million, comprising B$75.5 million of former GEL companies and B$33.4 million of former AGL companies. (Although transferring fewer assets, AGL is considered to be the "senior partner" in CDP.)
For a similar reason, property, plant and equipment contracted to B$320 million from B$355.6 million. Resulting from that transaction, B$27.7 million was transferred to the new company. The current year's depreciation and other disposals consumed a further B$29.8 million, while net additions and other adjustments added almost B$22 million.
Intangible assets experienced a similar fate, moving down to B$25 million from 2014's B$35 million. Here, the current year's amortisation consumed B$5.5 million while the transfer to CDP accounted for B$4.5 million.
Current assets fell by more than B$30 million to B$349.5 million from B$380 million.
Inventories contracted to B$121.2 million from B$165.5 million, once again reflecting the transfer of companies to CDP. The largest decline was noted under finished goods, which closed at B$94.2 million from B$140.9 million previously; this is consistent with the type of businesses that were transferred to CDP.
The sums due from associated companies jumped to almost B$34 million from B$6.7 million. Included in the 2015 figure was almost B$32 million (TT$101.9 million) due from Agostini's Ltd.
Both cash and trade and other receivables declined; the former fell to B$70.2 million from B$74.4 million while the latter closed at B$101.8 million from 2014's B$111.3 million. With respect to the latter, the trade receivables component contracted to B$60.6 million from B$94.1 million; again, this reflects movements into CDP.
Long-term liabilities fell to B$100.5 million from B$115.2 million. The major item that increased was pension plan liabilities, which climbed to B$11.6 million from B$4.5 million.
Total debt fell to B$180.8 million from B$203.4 million. The biggest change was noted under the long-term portion, which declined to B$85.6 million from B$107.5 million; current borrowings were marginally lower at B$95.2 million from B$95.9 million.
Equity improvements
Total equity closed at B$582.8 million from 2014's B$565.3 million, however, non-controlling interests fell to B$95.8 million from B$103.6 million.
Stockholders' equity advanced to B$487 million from B$461.7 million.
Retained earnings rose by more than B$40 million to B$366.8 million from B$326 million. Both the current year's profit of B$48.4 million and other comprehensive profit of B$4.7 million boosted the opening balance, while dividends of B$11.7 million and repurchase of shares of B$0.8 million lowered the net result.
The other reserves component fell to B$75.6 million from B$91.8 million, reflecting a decline of B$16 million; B$10.4 million of this related to the disposal of subsidiaries, while B$3.66 million reflected adverse currency movements.
Although GEL did repurchase 139,000 shares, it also issued almost 168,000 new shares. With 58,339,306 shares outstanding as at September 2015, each share has a book value of B$8.35 (September 2014: B$7.92).
Income and profits
Total revenues fell by 3.1 per cent to B$924.5 million from the 2014 level of B$954.1 million.
Gross profit also declined to B$349.9 million from B$356 million or by 1.7 per cent.
Both these changes were influenced by the formation of CDP, which excluded the last quarter's results for the transferred companies. In its first operating quarter, CDP incurred a small loss of B$306,000 (GEL's portion = B$153,000).
Underwriting income from its insurance operations declined to B$3.2 million from B$4.1 million. Aggressive pricing played an important part in this result.
Selling, marketing and administrative expenses fell to B$297.8 million from B$310 million. These movements allowed profit from operations to improve to B$55.3 million from 2014's B$50.1 million. Other net gains registered at B$26.8 million versus B$14.6 million in 2014. Here, the largest item was the gain on disposal of subsidiaries, which contributed B$20.8 million.
Consequently, profit from operations came in at B$82 million compared with B$64.7 million in the previous year.
After allowing for finance costs of B$11.9 million and the share of income from associated companies of B$3.3 million, pre-tax profit registered at B$73.5 million (2014: B$59 million).
Helped by a large increase in tax-exempt income, the effective tax rate fell to 15.8 per cent (B$11.6 million) from 17.1 per cent (B$10.1 million). Consequently, its after-tax profit was B$61.8 million versus B$48.9 million in 2014.
Of this sum, the shareholders' portion was B$48.5 million (2014: B$36.4 million.)
These results translated into 2015 diluted EPS of B$0.811 compared with B$0.61 for 2014.
Segment performance
The table is more detailed than normal in order to highlight contributions from GEL's many associated companies, including its newest addition, CDP; this is one way that it reduces its exposure to risk, especially in Latin American countries.
Under the import, distribution and marketing segment we see the revenues from CDP in the associated company's line. The higher profit recorded in 2014 was boosted by a total of B$11.9 million, reflecting special one-off transactions initiated by Peter & Company and Minvielle & Chastanet Insurance Brokers.
In 2015, a better performance from the automotive sector was somewhat negated by an adverse performance from the food division, which has now gone over to CDP.
This division is being reorganised and will assume the new name of automotive, building supplies and services division. One of its first initiatives is the import and distribution of cars and parts from Zhengzhou Nissan Automobile Company ("ZNA") in China.
The Manufacturing and services division suffered from weak results in its printing and packaging business and continuing challenges in its rum division. Positive results were achieved by its Farmer's Choice and Eve meat products, Wonder bread and its range of insecticide offerings.
Catering and ground handling is its most geographically diverse operation. Both Trinidad and Venezuela are challenging markets, with the latter accounting for significant currency losses while the former was due to the loss of a major energy client.
GEL derives only 24.2 per cent of its sales from Barbados, while that country accounted for 32.2 per cent or B$23.6 million of its pre-tax 2015 profit. In contrast, Latin America accounted for 9.2 per cent of sales but contributed 20 per cent (B$14.7 million) to pre-tax profit. Finally, other Caribbean territories delivered 50.2 per cent of sales but generated only 13.3 per cent of pre-tax profit (B$9.8 million).
Dividends and share price
GEL's share price improved from B$6.31 as at year-end 2014 to B$6.58 on September 30, 2015; the price recently closed at B$6.61 with bids to buy coming in at B$6.70.
Shareholders will receive a final dividend of B$0.14 on February 29, 2016; this brings the total dividend for the year to B$0.20, which is unchanged from last year.
At the recent closing price of B$6.61, the yield is 3.03 per cent.
Future prospects
Like Agostini's, Goddard's has great expectations for CDP. After any teething problems are resolved, hopefully by the end of March 2016, we should begin to see some measurable incremental progress.
As a company dependent on travel and tourist services, one piece of good news is that international tourism rose by 4.0 per cent in the first half of 2015; assuming that this trend continues into the current period, this will certainly benefit GEL companies.
In addition to the new automotive venture described earlier, GEL, on November 18, 2015, acquired a catering company in Columbia. These and other initiatives will help it grow its businesses while simultaneously keeping its existing operations as profitable as possible.
Next week, we will look at the local conglomerate, Massy Holdings Ltd.