May 2010 Financial News

GK unveils new dividend policy

May 19, 2010

GraceKennedy's board has approved a more generous dividend policy that will now see the conglomerate paying returns to shareholders three times per year instead of two.

Shareholders will also get a bigger share of profit - a minimum 15 per cent of net income attributable to stockholders, up from 10 per cent.

GraceKennedy last year paid dividend amounting to J$381 million on its 331.445 million listed shares, or around 14.8 per cent of profit, according to the May issue of StockTrack, a publication of the Financial Gleaner.

GraceKennedy's next payout of J$165.7 million or 50 cents per share will be on May 27.

The next payment dates will be in September and December.The company in a market filing cautioned that the new policy "must be viewed against the background of an unpredictable environment and is subject to available cash flow."

The announcement coincided with the release of the conglo-merate's first-quarter results in which GraceKennedy shed profit and reported a marginal decline in revenue.

The group reported net profit of J$835 million at March 2010 off revenue of J$14.5 billion, down from J$934 million in Q1 2009 made from revenue of J$14.7 billion.

Net profit fell 10.6 per cent; revenue 1.45 per cent.

Net profit attributable to shareholders fell 15 per cent from J$884 million to J$754 million.

Douglas Orane, chairman and chief executive officer, said in his statement to shareholders that profits were impacted negatively in the short term by the Jamaica Debt Exchange, but that the effect of the bond recall on the group's balance sheet was projected at less than two per cent of equity.

GK is a J$98-billion company by assets.

In the short term, its largest asset pool, investment securities, dipped less than one per cent from J$43.4 billion at December 2009 to J$43 billion at March 2010.

But its capital base improved from J$24.8 billion to J$26.3 billion in the respective periods.

Mixed markets

Orane said the March quarter was challenging for the conglomerate, because of persistently soft markets in Jamaica and the Caribbean. North America, however, is now performing above 2009 levels, he said, while Grace Foods UK "is showing signs of recovery" - an indication that turnaround plans are bearing fruit.

Domestically, it added a new product, Chillin', a line of flavoured waters in watermelon, sorrel and cranberry.

The company also faced other tests in court, but emerged victorious in the copyright lawsuit brought against its subsidiary GraceKennedy Remittance Services Limited by Paymaster Jamaica, in a Supreme Court judgment handed down April 30.

GK remains locked in battle with another legal adversary in a suit filed December 28, 2009, against a former vice-president and trader, Rohan Rose, and other parties.

GK, through subsidiary First Global Bank, is seeking to recover US$7.6 million in that suit which alleges misappropriation of funds.

Rose is fighting the suit and GK has sought and acquired an injunc-tion barring its former employee from disclosing bank secrets.

Looking ahead, domestically, the conglomerate expects cost savings from its new centralised ware-housing and distribution centre, now being stocked with inventory held at different locations.

GK has chosen the Bernard Lodge facility for its next annual general meeting on May 26 to showcase it to shareholders.

The group is also weighing a new plan for loss-making retail subsidiary Hardware and Lumber Limited (H&L) that includes a remake of its Rapid True Value stores in the image of the True Value American chain.

In the March quarter, H&L reported a slight dip in revenue, from J$1.5 billion to J$1.43 billion but managed to cut its losses from J$113 million in the March 2009 quarter to J$9.6 million in the review period by cutting expenses and finance costs.


Source:
business@gleanerjm.com
Jamaica Gleaner
Wednesday May 19, 2010

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