November 06, 2020
Grace Kennedy Limited (GK) recorded total revenue of $86.13 billion for period (2019: $77.03 billion), a year over year increase of 12%. Of this, Revenue from products and services amounted to $82.88 billion (2019: $73.93 billion) and interest revenue totalled $3.25 billion (2019: $3.11 billion).
The biggest contributor to the Group’s overall revenue for the nine-month period came from the ‘Food Trading’ segment which contributed a total of $67.90 billion (2019: $61.15 billion), an increase of 11% relative to the prior year’s corresponding period. The Group noted that this was “mainly as a result of the performance of our international food businesses. Results produced by GK Foods (USA) LLC were particularly strong.”
Revenue for the third quarter of 2020 climbed 16% to $29.59 billion (2019: $25.54billion).
GK indicated that, “Our chain of supermarkets in Jamaica, Hi-Lo Foods Stores, showed an increase in revenue over the corresponding period of the prior year attributable to growth in all core categories and a revamped product mix. Upgrades to our stores will continue in 2021, along with the move of our Negril supermarket to a newly built location, which is expected to improve the customer experience.” Additionally, GK noted, “Consumer Brands Limited delivered a creditable profit before tax when compared to the corresponding period of the prior year as growth in some key products was recorded. The entity will continue to focus on increasing visibility of the entire range of products and enhancing strategic partnerships.”
“Among our manufacturing companies, Grace Agro Processors (GAP) Hounslow and GAP Denbigh recorded strong performance contributing to an improvement in the overall profit before tax for GK Foods & Services. We supported Jamaican farmers through significant purchases of their produce, as they have been experiencing challenges due to reduced demand as a result of the COVID19 pandemic. The meat plant continues to enjoy record production, given the increased demand both locally and internationally. Strategies to improve efficiencies remain a priority and in this vein the construction of a new warehouse at our Canning Division in Kingston, Jamaica should be completed shortly. Additionally, Dairy Industries Jamaica Limited (DIJL) has resumed work on a new yogurt product line. In keeping with the mandate to foster strategic partnerships, DIJL recently formalized an agreement with Nestle to produce Nestle’s EverydayMilkPowderatDIJL’sfactory.Theincreasedproductionoutputwillalsoimprovetheoperational efficiency of that factory,” as per GK.
In addition, Management stated that, “GraceKennedy Foods (USA) LLC recorded another period of strong performance in the third quarter, buoyed by elevated demand and expanded distribution channels. Sustained management of operating expenses coupled with improved margins have also been important drivers of the company’s performance. YTD revenue growth for the Grace brand remained strong, partially fueled by the “Chill and Grill” Promotion held in July, and a generally positive market response to key products. We also note that the La Fe brand saw some growth partially attributed to an improvement in supply reliability. This company is expected to sustain positive results for the remainder of the year.”
The Group also noted, “Grace Foods UK’s performance reflected encouraging revenue growth, and a rebound in the Food Service sector as lockdown measures were temporarily eased. Profit before tax for the nine-month period also reflected marked improvement, attributed to tightly managed operating expenses and improved margins. The Nurishment brand continues to show recovery, supported by a new listing in Wait rose and are listing in Sainsbury. Grace, Encona and Dunns River brands are also reflecting consistent growth YTD. A reintroduction of lockdown measures in the UK will temper the recovery in Food Services and export business to mainland Europe, however our focus will remain on cost containment and maximising margin gains in all other areas of the business.”
The other segments contributing to revenue are as follows:
‘Banking & Investments’ went up 2% year over year to total $4.68 billion (2019: $4.56 billion). GK noted, “Growth was however recorded in the loan and deposit portfolio as the team continues to drive business development. First Global Bank Limited remains focused on building customer relationships and successfully hosted a virtual townhall discussion, engaging a large number of clients and potential clients.” GK also noted that, “Our first GKONE Cashless Digital Store is now open on the first floor of the new GraceKennedy Headquarters. The location is the first of its kind, offering the full range of services in a digital format including Bill Payments, Currency Trading, Insurance, Banking, Loans and Remittances. We are pleased with the level of interest and take up ahead of the activation of our marketing campaign. A new GKONE location was recently opened in Port Maria, St. Mary, Jamaica bringing the total number of these stores to 15.”
Revenue from ‘Insurance’ amounted to $7.07 billion, a year over year increase of 28% over last year’s corresponding period of $5.54 billion. Management mentioned, “Key Insurance, our new acquisition, has reported encouraging results under the leadership of its new management team. Portfolio growth will be the focus for the remainder of the year and a marketing campaign to reconnect with its clients has been launched. GK General Insurance Company Limited reported growth in revenue YTD, when compared with the corresponding period of the prior year. The company also recently launched a new online channel allowing for increased self-service as customers adapt to a more digital environment.”
‘Money Services’ brought in $6.48 billion, 12% more than the $5.78 billion reported in September 2019. The Group stated, “this performance was driven largely by the performance in Jamaica and Guyana. The business continues to drive digital alternatives which have shown a YTD increase of over 220% in the number of customers registered digitally and a 400% increase in Western Union(WU)digital transactions. Our digital strategy will expand safe, convenient offerings for our remittance customers, throughout our major territories.”
Direct and operating expenses amounted to $80.38 billion relative to $73.79billion booked in 2019, indicating a9% growth compared to twelve months earlier. Net impairment losses on financial assets totalled $629.79 million (2019: $362.28 million). Whereas, direct and operating expenses for the third quarter amounted to $27.41 billion, up from $24.15 billion for the same quarter of 2019.
As such, gross profit for the nine months amounted to $5.12 billion relative to $2.88billion booked for the similar period of 2019, a78% increase. Gross profit for the third quarter ballooned 67% to $2.05 billion compared to $1.23 billion reported for the third quarter of 2019.
Other Income during the nine-month period, rose 18% to total $2.27 billion (2019: $1.93 billion).
Interest income from non-financial services rose 9% to total $351.31 million compared to $322.78 million reported in the prior year’s corresponding period. Interest expenses from non-financial services amounted to $843.87 million versus $761.38 million a year earlier, an 11% increase.
Share of results of associated companies fell by 10% amounting to $409.68 million, versus $453.43 million reported for September 2019.
Pre-tax profits increased52% to $7.31 billion, compared to pre-tax profit of $4.82billion documented for the nine-month ended September 2019. Additionally, GK incurred taxation expenses amounting to $2.37 billion compared to $1.11 billion in September 2019.
Consequently, net profit rose33% to $4.93 billion from $3.71billion booked for the corresponding period of 2019. Net profit for the third quarter surged 31% to $1.88 billion (2019: $1.44 billion).
Net profit attributable to shareholders amounted to $4.42 billion compared to $3.27 billion in the previous year’s corresponding period, showing a 35% increase. Net profit attributable to shareholders for the third quarter amounted to $1.68 billion, up from the $1.26 billion booked for the same quarter of 2019.
Total comprehensive income closed the nine months at $5.82billion (2019: $9.26billion). Total comprehensive income for the quarter amounted to $2.20billion (2019: $2.09billion).
Earnings per share for the third quarter amounted to $1.69 (2019: $1.27), while for the nine months GK booked an EPS of $4.45 (2019: $3.29). GK’s trailing EPS amounted to $5.67. The number of shares used in our calculations is 995,012,431 units. GK’s stock price close the trading period on November 05, 2020 at $57.74.
Management noted that, “in an effort to address the high level of uncertainty associated with the virus, especially with spikes in the number of confirmed cases in certain markets, we have taken various initiatives to manage risks. These initiatives include ensuring our international supply chain remains strong with effective inventory and liquidity management, offering new delivery channels for both products and services, and improving our efficiencies to better manage costs.”
Moreover, GK stated that, “as part of its strategic initiatives, the Group is intent on embracing digitization and leveraging inorganic growth opportunities. To this end, two new business units have been established, Digital Transformation and Mergers and Acquisitions.”
Balance Sheet Highlights:
As at September 30, 2020, the Group’s assets totalled $167.83 billion, 8% or $13.03 billion more than the $154.80 billion a year ago. The improvement resulted in part from a growth in ‘Loans Receivables’ and ‘Cash and Deposits’ which closed at $31.80 billion (2019: $28.70 billion) and $22.72 billion (2019: $14.18 billion), respectively.
Shareholders’ equity amounted to $56.50 billion which compares to equity of $52.26 billion as at September 30, 2019. As a result, book value per share amounted to $56.78 (2019: $52.53).
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