Early tentative signs suggest that the economic environment within the Caribbean Region is stabilizing but it is still weak at present. Unemployment remains high in many of the developed economies throughout the world, especially among young people in the Euro zone. International financial markets continue to be unsettled, mainly due to the resurgence of political and financial uncertainty in Greece; disquiet in the banking sector in Spain; and doubts regarding both the capacity of some governments to comply with necessary tax reforms or fiscal adjustment as well as the political will of other members of the Euro zone to continue to support the weaker members of that group.
Output in Latin America and the Caribbean expanded by about 4.5% in 2011, down from a modest improvement of 6.25% the previous year. Growth in Latin America has been steady, in part as a result of the slow but continuing recovery in the United States of America (“USA”). The Caribbean Region’s high debt levels and tourism dependence continue to constrain an optimistic economic outlook. Coupled with continued instability in the Middle East and the resultant probability of higher energy prices filtering through early in the New Year, we anticipate that the future for the Caribbean Region will continue to be challenging within the short to medium term. We believe that economic growth will depend on how quickly the USA and Europe can rebound.
For the financial year ended September 30, 2012, third party revenue increased by 5.3% to $999.1 million, just below the $1 billion mark. Gross Profit as a percentage of Sales stood at 35.2%, compared to 33.5% in the prior year, mainly as a result of improved inventory management. Our selling, marketing and administrative expenses totaled $303.0 million or 30.3% of Sales compared to 29.5% in 2011. For comparative purposes, when we eliminate acquisitions from this year’s figures, the percentage is similar to last year. Profit from Operations before Other (losses)/gains – net, which is essentially the Group’s “core profit”, increased by 29.5% over prior year to $52.8 million.
Other (losses)/gains – net fell from a net loss of $27.8 million recorded in 2011 to a net loss of just $1.6 million this year. This was due to one-time write-offs in 2011 totalling $38.0 million, which represented goodwill impairment, provision for losses on our hotel investments and a write-down of a short-term investment. Our Profit from Operations increased from $12.9 million in 2011 to $51.1 million this year.
Finance costs increased marginally by 4.8% to $12.4 million reflecting increased long-term borrowing to finance the acquisition of the service contracts of Sea Freight Agencies (Barbados) Limited (“Sea Freight”) during the year. Our share of income after taxation from our Associated Companies increased by $3.2 million to $7.9 million, due mainly to the improvement in profitability of Sagicor General Insurance Inc. Income before taxation reached $46.6 million compared to $5.8 million last year and, after deducting taxation of $12.7 million representing 27.3% of Income before tax, Net Income for the year totalled $33.9 million, which was an increase of $39.2 million over the prior year. This Net Income was shared between non-controlling interests ($9.2 million or 27.2%) and the equity holders of the company ($24.7 million or 72.8%). Our basic earnings per share is 41.2 cents compared to a loss of 17.6 cents in 2011. This is a satisfactory result, given the challenging trading conditions and sluggish economies described earlier.
Turning now to the Balance Sheet, our working capital ratio has improved from 1.43 last year to 1.51 this year due to better stock turns (4.1 times compared to 3.9 times in 2011) and improved average periods of credit (1.3 months this year compared to 1.5 months last year). In 2012, 37.4% of our total assets were financed by creditors compared to 38.3% in 2011, which is well within acceptable corporate financing guidelines. Our net asset value per share stood at $7.57 compared to $7.30 last year, and with a closing share price on the Barbados Stock Exchange at year-end of $5.50 (in 2011: $6.00), this equates to a price to earnings ratio of 13.3 times compared to (34.1) times in the prior year.
We also note that our rating agency, CariCRIS, maintained our rating of Cari AA- for 2012 and issued a positive Report on GEL in general.
The Directors have declared a dividend of eighteen cents per common share on the issued and outstanding shares of the Company for the year ended September 30, 2012, whichcompares to a dividend of twelve cents per common sharepaid to shareholders for the year ended September 30, 2011. An interim dividend of seven cents having been paid onAugust 31, 2012, the Board declared a final dividend ofeleven cents per share on the issued and outstanding sharesof the Company at its meeting held on December 11, 2012. The final dividend will be paid on February 28, 2013.
Progress with Construction of the New Office Building
In our Report last year, we informed you that in May 2011 GEL and Sagicor Life Inc., its joint venture partner, had broken ground for the construction of a new four storey 60,000 square foot office building at Haggatt Hall, St. Michael. We are pleased to advise you that the project has progressed well and on budget, albeit with some inevitable delays. It is anticipated that construction will be completed in early January 2013 to facilitate the fit-out process and the eventual relocation of our offices to Haggatt Hall.
In closing, we take this opportunity to thank our customers, suppliers, management, staff and shareholders for their invaluable support and loyalty during the last financial year and we look forward to your continued support and patronage in the coming year.