The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods is targeting $3.5-$4 million in net income for its current financial year, its chief executive yesterday telling Tribune Business it was “confident” it could slash annual operating expenses by $1.5 million.

Gavin Watchorn, who is also the BISX-listed food retail and franchise group’s president, said it had already begun to realise synergies from last year’s expansion, with some contract costs remaining flat even though they were now spread across seven stores as opposed to five.

Speaking after the official opening of AML Foods’ latest Solomon’s Fresh Market store at Harbour Bay, Mr Watchorn said its sales growth rate three months in was below the company’s expectations.

Suggesting this was partly due to consumer misconceptions, many believing Solomon’s Fresh Markets products were higher priced than those sold in AML Foods’ other retail formats, Mr Watchorn said the company was engaged in an education drive to change this.

Emphasising that AML Foods was “quietly confident” despite the Bahamian economy’s challenges, Mr Watchorn told Tribune Business: “We foresee continued growth in sales, and continued growth in the bottom line.

“I think we’re aiming to increase profits to $3.5-$4 million -that’s our goal for this year. We’ve done about $2 million for the past two-three years, and we are going to show an increase for this year.”

Hitting that target would mean AML Foods doubling its net income compared to its 2011 financial year, which generated $1.742 million in bottom line profit when it closed at end-January 2012.

Such expectations also indicate that AML Foods is confident that its recent expansion, which has seen the opening of two Solomon’s Fresh Market outlets and a Solomon’s store at Lucaya in Freeport, will result in increased sales generating improved shareholder returns.

Confirming that 2013 was a year in which AML Foods would seek to “consolidate the gains” made over the past 18 months, Mr Watchorn said the group had spent the start of the year “looking at where we can improve efficiencies, maximise synergies”.

“We’ve already been able to pull $1.2 million in annualised savings out of the expense base,” he told Tribune Business.

“Some of that will take effect in the first quarter, but the largest portion will take effect from April and May, as we have a lot of contracts coming up for renewal then.

“In some cases, we’ve been able to maintain the same amount of contract that we had with five stores for seven stores.”

Apart from AML Foods’ increased buying power, which enables it to negotiate better terms with suppliers, Mr Watchorn said security, insurance and cleaning contracts were areas where cost savings had been realised.

Labour efficiencies had come from “aligning payroll to sales per hour”, while economies of scale had been achieved by spreading costs out across a much larger sales base.

“We’ve identified another $0.5 million of expenses that can be saved, and we need to put effort into realising them,” Mr Watchorn said. “That $0.5 million will come, but we have to work a lot harder to realise them.

“I feel confident we’ll get up to $1.5 million, at least another $300,000 to come out this year. We feel confident we can knock $1.5 million out of the expenses base for the year.”

While sales at the Solomon’s Fresh Market outlet at Harbour Bay had started off well, Mr Watchorn said the top-line was now below what the company had expected.

“We had expected them to grow at a fairly rapid rate, but the growth has not been as quick as expected,” he added.

AML Foods had listened to consumer feedback and “tweaked the model” by adding familiar brands that were still healthy. It was also tackling incorrect perceptions that Fresh Market prices were higher than at its other store brands.

On a positive note, Mr Watchorn said Harbour Bay’s sales were “very close together” with the inaugural Solomon’s Fresh Market outlet at the Old Fort Bay Town Centre.

The ‘cannibalisation’ between the two sites had stopped, and Mr Watchorn said: “We think the changes we are making in product mix are going to benefit the stores.

We feel it will allow us to capture a greater share of the middle income group in the western area. We are putting a lot of effort in focusing on those customers, focusing on their needs......”

Mr Watchorn also expressed confidence that construction would start this year on the first outlet for its Carl’s Jr hamburger chain, the franchise launch it recently “parked” due to concerns over consumer spending and the economy.

AML Foods chairman, Dionisio D’Aguilar, speaking at the official Solomon’s Fresh Market opening, said the company had invested $20 million in the Bahamas over the past 18 months.

Renovating, outfitting and stocking Harbour Bay had cost $7 million, and its 92 staff would generate an annual $1.3 million payroll.

Noting that AML Foods currently employed 860 persons, with a collective $15 million annual payroll, Mr D’Aguilar added: “In the past 18 months, when many companies cut back or closed down, AML Foods created over 250 jobs for Bahamians in Nassau and Freeport. “

Noting that the company only required three work permits, covering 0.2 per cent of its workforce, Mr D’Aguilar added: “With the opening of this store, AML’s annual sales will now top the $150 million mark……almost double where it was five years ago.

“In addition, in these same five years, AML’s share price has risen from $0.78 in 2008 to $2.06 today, which equates to a healthy 20 per cent return every year for the past five years.”