The Board of Directors of Goddard Enterprises Limited (“GEL”) is pleased to present the Group’s financial review for the year ended September 30, 2013.
Output in the region is projected to expand by 2.75% in 2013, the lowest rate in four years, with domestic demand remaining the main driver. It is anticipated that growth will edge up to 3% in 2014 as external demand strengthens gradually, but this growth level would still be below the average growth rate of the last decade.
The outlook for emerging markets is fair and although growth has slowed in some emerging markets, they seem only slightly impacted by the challenges facing the European countries. Other economies like the United Kingdom (“UK”) and the United States of America (“USA”) continue to show signs of improvement in job creation, stock market activity and overall economic growth as indicated by consistent stock market improvement over the last few years. In China, a key market for Latin America’s commodity exports, growth is projected to decrease further to 7.25% in 2014 from 7.5% this year. Lower medium-term growth expectations for China have been a key contributor to the decline in commodity prices since the beginning of the year, although they remain at relatively high levels from a historical perspective.
In the Caribbean, fiscal, external and financial vulnerabilities remain significant in the tourism- dependent economies. Barbados' economic fundamentals continue to weaken, reflecting not only the tough global economy, but also reduced competitiveness and structural shortcomings. Barbados' narrow and open economy continues to suffer from the 2008 global financial crisis. Results for the first half of 2013 show that Barbados has fallen back into recession after a very weak recovery in 2010-2012, with average annual real Gross Domestic Product (“GDP”) growth of just 0.4% in those years (slightly negative on a per capita basis). A decline in real GDP of about 0.5% in 2013 and a slow recovery in 2014-2015 have been projected.
For the financial year ended September 30, 2013, Group revenue decreased by 3.7% over the prior year to $962.6 million. This decrease generated a Gross Profit of $357.3 million, which was up over the prior year by 1.6%. Gross Profit expressed as a percentage of Sales was 37.1%, which was above the 35.2% achieved in 2012. This was accomplished despite an economic environment plagued by spiralling costs, increased competitive activity and high volatility in financial markets. Our selling, marketing and administrative expenses were $312.7 million, compared to $303.0 million in 2012, which represented an increase of 3.2%. These expenses were due to cost-of-living allowances and mandatory salary adjustments in some of the territories where we operate. They included restructuring costs and one-time charges of $3.4 million incurred on the implementation of a new Economic Profit (“EP”) Incentive Programme and the introduction of an Enterprise Resource Planning System. Profit from Operations before Other (losses)/gains – net decreased over prior year by 7.8% to $48.7 million.
Other (losses)/gains – net increased by $0.6 million on a prior year loss of $1.6 million. This represented a 36.1% increase, which was attributable mainly to hyper-inflationary adjustments made in our Venezuelan operations. Overall Net Income for the year of $34.0 million evidenced a marginal improvement of 0.2% over the prior year, despite a 6.4% decline in Income before Taxation. The overall reduction in the taxation charge of 24.2% was a result of reduced profits seen in our businesses in St. Lucia, a high tax jurisdiction in which we operate.
Our share of Income after Taxation from our Associated Companies rose by $1.9 million to $9.8 million as a result of improved performance by Globe Finance Inc. as well as some of our Associated Companies within our Manufacturing Division.
With regard to the Group Consolidated Balance Sheet, our working capital ratio at 1.49 was marginally below prior year’s ratio and reflected adequate management control over the number of days of inventories and trade receivables. The total assets of the Group’s business was financed by 37.7% debt, which was well within conservative financial guidelines and consistent with the previous year’s experience. Our Net Asset Value per share now stands at $7.67 compared to $7.57 in 2012, an increase of 10 cents per share, and our share price, which moved from $5.50 as at September 30, 2012 to $6.15 as at September 30, 2013, has shown some signs of recovery.
During the year, our former Managing Director, Mr. Martin J.K. Pritchard, retired. The Board commissioned a recruitment firm and issued it with the mandate to locate candidates for the position of Managing Director/Chief Executive Officer who possessed international experience and strategic thinking capability. We were pleased to attract and hire Mr. Anthony H. Ali, who joined the GEL Group on August 1, 2013. Mr. Ali has already started to make his mark and the Board is very pleased with the contribution that he has made to date. We are confident that he will lead the Group in re-examining its strategy and increasing its focus on the key operations that can contribute the most to our future recovery and growth.
Managing Director’s Outlook
As we look forward to 2014, we recognize that we will continue to operate in an uncertain economic environment but take the view that such uncertainty also presents many opportunities. During the coming year, we intend to focus on enhancing our efficiency, maximising our productivity and improving our cost control mechanisms to ensure that we are poised to capitalize on opportunities as they arise. Such focus will also ensure that we are well positioned by the time the markets return to more predictable performance levels. More importantly, given our strong Balance Sheet we will also seek, during this period, to re-invent ourselves, to keep true to the values that have brought us to this point and to create a strategic road map which will allow us to solidify our position in the key markets in which we operate. Contemporaneously, we will establish strategies that target growth initiatives with concentration on channels and economies that meet our growth expectations.
In the new financial year, we also intend to tighten our corporate governance practices and policies while aligning management skills, competencies and compensation to shareholder expectations with the end goal of maximising shareholder value. Our success thus far has been predicated on the commitment of our people, our diversification over a broad range of industries and our geographic expansion, which have buffered some of the uncertainty we have seen in the last few years. We will continue to build on our core strengths but will also supplement them with innovation, investment in new technologies and information systems that enable growth. We will focus our efforts on our number one asset, our people, and foster, throughout the entire organization, a culture of value creation, a sense of urgency and a climate of continued stakeholder engagement.
On August 7, 2013, the Board was saddened to learn of the passing of Mr. Patrick David Patterson. Mr. Patterson served as a Director of GEL from September 29, 1972 until his resignation on April 30, 2001. He rendered 46 years of loyal and dedicated service to the GEL Group, serving in various managerial capacities within the Group, and in particular at Goddards Shipping & Tours Ltd. The Board recalls the outstanding contribution made by Mr. Patterson both to its deliberations and to the Group as a whole and expresses condolences to his family.
The Directors have declared a dividend of fourteen cents per common share on the issued and outstanding shares of the Company for the year ended September 30, 2013, which compares to a dividend of eighteen cents per common share paid to shareholders for the year ended September 30, 2012. An interim dividend of six cents having been paid on August 30, 2013, the Board declared a final dividend of eight cents per share on the issued and outstanding shares of the Company at its meeting held on December 10, 2013. The final dividend will be paid on February 28, 2014.
Subsequent to year-end, on December 6, 2013, the Company repurchased 1,950,095 of its own common shares. On cancellation of these shares, the Company’s issued and outstanding share capital will be 58,174,594 common shares.
Completion of The Goddard Building
During the year, construction of the new four storey office building at Haggatt Hall, St. Michael, a joint venture project between GEL and Sagicor Life Inc., was completed. The Building has been named “The Goddard Building” in tribute to the tremendous legacy of the Company’s founding fathers as well as to honour all members of the Goddard family who have made an indelible contribution to the growth, leadership and success of GEL over the years. The Goddard Building features several energy conservation techniques, many of which are the first for Barbados. GEL re-located its offices to the Goddard Building in May 2013. We are pleased to report that as at the date of this Report, the Building is fully tenanted.
We wish to acknowledge the patronage of our customers, the loyalty of our suppliers and the support of our shareholders over the year just gone. We sincerely thank the management and staff of our Group for their service and commitment during the past financial year and count on your continued support and contribution in the coming year.