Mar 2016 Financial News

GraceKennedy eyes savings from Urban Renewal Act

Mar 09, 2016

Group CEO of GraceKennedy Ltd Don Wehby said Wednesday that with the planned construction of new space for its business units in downtown Kingston, the company expects to take advantage of the Urban Renewal Act and realise tax savings.

The Urban Renewal Act is one of the few surviving incentive schemes following the reduction of such benefits under the Omnibus legislation within the last three years.

The new GK headquarters – to be completed at a cost of around US$25 million — should benefit under the Urban Renewal Act which provides relief from income tax, stamp duty and transfer tax in aid of organisations or people who carry out development in areas suffering from blight or urban decay with a view to the improvement or restoration of those areas.

The Act also allows tax relief to people who purchase bonds issued for the funding of such developments.

The programme offers a tax credit of 33 per cent on capital sums invested, which is set off against other income tax liability. It is, however, limited to 50 per cent of that liability in any one year of assessment.

The new GK commercial centre – set for completion in 2017 – is slated to accommodate offices, a gym and retail enterprises. It is being constructed on a 48,000-square foot plot of land acquired from the Urban Development Corporation (UDC).

Wehby said Wednesday that a major opportunity for the Group will be to eliminate costly office rental space in the new development. Additional space has also been designed for rental to third parties.

Tax charges weighed on results for GK for the 12-month period ended December 31, 2015, even more so than the year before, with higher asset taxes in 2015 due to an increase in the rates (from 0.14 per cent to 0.25 per cent).

Net profit attributable to the shareholders of the company during the year was $2.76 billion for 2015 compared with $3.29 billion for 2014. Accordingly, earnings per share declined to $8.35 in 2015 compared with $9.90 in 2014.

Although group revenue climbed by $79.74 billion, or 12.6 per cent more than $70.84 billion in 2014, Wehby says performance overall was impacted by a number of factors.

These included costs associated with the integration of the US foods operations through GraceKennedy Foods USA LLC; a non-recurring non-cash credit in 2014 related to post-employment obligations under IAS19; lower foreign exchange gains; additional finance costs and an increase in the taxation charge.

Altogether, the increase in taxation of approximately $287.7 million to $1.27 billion was mainly due to some tax losses incurred within the Group that have not yet been recognised as a credit but are available for offset against future taxable income, the group CEO said.

He noted as well that the Group’s financial services companies realised increased profits which are subject to a higher rate of tax.

Higher cost of sales during 2015 was attributed to higher turnover in all business segments which was accompanied by increased expenses.

Otherwise, expenses which saw an increase included one-off integration costs related to the recently acquired GK Foods (USA) LLC [previously La Fe] operations.

Results were also affected by additional depreciation and amortisation of fixed and intangible assets as a result of software implementations, including SAP (accounting software), as well as upgrading of retail and factory facilities.

“These are non-cash expenses and the capital outlay will begin to show results in 2016,” the CEO said.

There were also higher staff-related costs due to the non-recurrence of a credit in 2014 associated with post-employment obligations as required by IAS19.

For 2016, the group CEO said, GK aimed to grow the Grace and La Fe brands in North America, building on revenue growth from GK Foods (USA) LLC business.

Revenue from the Grace brand grew four per cent year over year while revenue from La Fe grew at one per cent. In 2015 GK partnered with American beverage giant, Arizona, to distribute Grace beverages in select markets in the United States.

In Europe, the group is aiming to increase listings in key markets. In 2015 new listings added were Albert Heijn, the number one supermarket chain in Holland.

In the current year, Wehby said, GK also is making efforts to grow its domestic foods business through brand building. The Group will also continue investments in its HiLo retail store brand. A new store, Hi-Lo Liguanea, is currently being upgraded.

The CEO said GK will continue to roll out new services in its financial services division. Subsidiary GK Insurance launched GKGOnline in 2015, an online portal for motor insurance purchases. The technology will be leveraged for expansion into the Caribbean, Wehby said.

During the year just ended, the business unit also invested in video teller-machine technology for its commercial-banking arm First Global Bank (FGB) which also launched its mobile banking app.

 

Source:
BY AVIA COLLINDER
collindera@jamaicaobserver.com
Business reporter
Jamaica Observer
Wednesday March 9, 2016    

http://www.jamaicaobserver.com/business/GraceKennedy-eyes-savings-from-Urban-Renewal-Act_53429