The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods believes it will generate a full-year dividend yield of $0.11-$0.12 per share, after it yesterday unveiled an almost 10-fold year-over-year net income increase for its second quarter.

Gavin Watchorn, the BISX-listed retail group’s chief executive, acknowledged that the year-over-year bottom line increase for the three months to end July 2014, from $172,000 to $1.05 million, was aided by a weak comparative period last year.

Explaining that this was when the impact from the 2013-2014 Budget’s tax increases was first felt, Mr Watchorn told Tribune Business that the group’s continued focus on extracting internal efficiencies had literally paid dividends for the third consecutive quarter.

Following swiftly behind the $0.02 per share dividend paid to AML Foods shareholders on July 4, the company has now declared a further $0.03 per share capital return that is payable on October 3.

And, despite Value-Added Tax (VAT) looming on the horizon, Mr Watchorn indicated that this profit and dividend trend was expected to continue through a financial year that ends on January 31, 2015.

“We have increased the dividend from $0.02 per share to $0.03 per share,” Mr Watchorn told Tribune Business. “As the business gets better, it’s my job to produce shareholder returns, and as we generate profits we have to return that to the shareholders.

“We think for the full year we will probably produce an $0.11-$0.12 dividend yield. Our policy is that we will issue at least 50 per cent of earnings as a dividend.

“That may not be on a quarter-by-quarter basis, but once we finish the year and know where we are, we will ensure the dividend paid equals 50 per cent of earnings.”

Mr Watchorn said AML Foods had spent two quarters in its previous financial year absorbing the increased costs, and adjusting to changed consumer spending habits/patterns, that stemmed from the 2013-2014 Budget.

With that process now behind it, the BISX-listed retail group was continuing to focus on driving internal efficiencies and higher margins, via a combination of better buying, improved logistics and reduced inventory levels.

This was reflected in the 5.8 per cent, or almost $1.5 million, drop in its cost of sales year-over-year. Despite a relatively flat top-line, this dropped from $25.721 million to $24.234 million, and was the main driver of the improved bottom line.

AML’s gross profit jumped by 12.2 per cent, increasing from $10.841 million to $11.762 million, and Mr Watchorn said: “The results we are producing are the result of an internal focus on running the business as efficiently as we can, reducing waste and shrinkage, and controlling expenditure.”

He told Tribune Business that AML Foods had managed to reduce shrinkage by a further 8 per cent, adding: “We’re not quite there yet, but very close to the target level of shrink that we want to operate at.

“We’ve had three to four quarters where we’ve been able to reduce shrinkage. There is still a lot of theft going on, but where we’ve been able to reduce shrinkage is in efficiently managing the warehouse and buying better.”

Mr Watchorn also disclosed to Tribune Business that AML Foods planned to invest $1 million per year, over the next three years, on measures to reduce energy costs.

Revealing that AML Foods had managed to lower its energy costs on an annualised basis by $400,000 to-date, the AML chief said: “We’re going to invest in that for the foreseeable future.

“We will finish this fiscal year having invested $1 million in direct energy usage reduction projects, and expect to spend at least $1 million a year for the next three years on that.

“The reality is that energy is too expensive in the Bahamas. It is three times’ what it is in Florida, and has a major impact on the cost of doing business in the Bahamas. It’s a real reason why it’s so expensive to do business here.”

Mr Watchorn said AML Foods had experienced a “very strong August”, while September sales to-date were tracking “a little above last year”.

But, while anticipating a good November and Christmas, Mr Watchorn acknowledged that “the big unknown” was post-January 1 and the final month of AML Foods’ financial year, due to VAT’s implementation.

“There obviously is going to be an impact on consumer spending,” he added. “It’s just a reality, and we will have to react to whatever trends come out of that."

Suggesting that Bahamian consumers were already “looking to January with what is going to happen when VAT is introduced”, Mr Watchorn said: “There are a lot of factors out there impacting consumer confidence, and then consumer spending. I doubt if consumer confidence is very strong at the moment.”

AML Foods is also on track to complete its $750,000 investment in upgrades to its Domino’s Pizza store network by next year.

Mr Watchorn said the group planned to complete one more store this year, after finishing the Carmichael Road outlet at the weekend, leaving two to be done in 2015,.

“Domino’s is doing very well,” he told Tribune Business. “We’ve got some very strong sales increases in some of our stores.”