The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods believes the anticipated 5 per cent year-over-year sales increase for its third quarter may bring its top-line back in line with last year’s, with 2015 to-date performance beating budgeted expectations.

Gavin Watchorn, AML Foods’ president and chief executive, told Tribune Business that 1.99 per cent year-over-year sales decline witnessed during the first half of its financial year was better than the 3-5 per cent post-Value Added Tax (VAT) drop that had been projected.

And, with just two weeks before its third quarter ends, the BISX-listed food retail and franchise group believes sales for the first nine months could come back into line with 2014 figures if current trends hold.

“Our budgets were looking for anywhere from 3-5 per cent decrease, so the fact we’re only two percentage points down, we’ve bettered that,” Mr Watchorn told Tribune Business of AML Foods’ sales performance for the six months to end-July 2015.

“Having said that, our third quarter numbers are going to end up about 5 per cent over last year, so for year-to-date that will bring us close to flat and, hopefully, set us up and provide us with momentum going into the fourth quarter.”

That period is traditionally the busiest for retailers worldwide, as it contains the Christmas shopping season, which will provide another barometer of the Bahamian economy’s health and consumer spending/confidence.

Mr Watchorn was speaking after AML Foods largely shrugged off the effects of VAT and a stagnant economy, plus the Baha Mar impasse, to post profit and sales figures that were relatively flat for the first half of its financial year.

Net income for the first six months of its financial year was down just 3 per cent, at $1.051 million compared to $1.084 million in 2014, while sales showed a similar pattern - falling from $35.987 million to $35.278 million year-over-year.

Mr Watchorn added that the sales decline stemmed from a reduction in average transaction spend by consumers, as VAT influenced them to “make conscious choices” in how incomes were used.

“Right now, consumers are looking for value,” the AML Foods chief told Tribune Business. “Our transaction counts are showing that. Our transaction counts didn’t move that much for the first six months.

“The drop-off was in spending coming from what people are putting into the basket. You can see the consumer making choices in their spending. It’s [average spend] pretty much the same as the drop-off in sales, and transaction count is flat.”

Mr Watchorn reiterated that AML Foods and most Bahamian retailers faced “a tough environment out there”, as consumers completed the transition to a post-VAT implementation environment.

“It could be a lot worse,” he told this newspaper. “It’s OK. We have our expectations that we’re hoping to meet. We hope we’ll meet with last year’s sales and will be pleased with that; to maintain last year’s sales levels and hopefully grow again next year.

“Our marketing and purchasing teams have done a pretty good job in driving sales. We are getting that drop-off but have been able to get some increase over last year, and that will help balance the fall-off seen earlier this year.”

Mr Watchorn added that the BISX-listed group would maintain the focus it has employed over the previous two quarter, namely “keeping costs down, managing the business as best we can and looking for efficiencies that we can get out of it.

“We have to do more with less. It’s part of a plan to continue to drive consumers, drive the bottom line and drive shareholder returns. If we can come through 2015 in relatively good health, that will set us up for a better 2016. We’re not taking anything for granted.”

AML Foods has already declared another $0.02 per share dividend, which is payable on October 23, 2015, to investors of record as at Friday this week.

Mr Watchorn said the group’s share price had appreciated by 15 per cent from year-end 2014 when he last looked, and had probably risen further since then. This, he added, was already ahead of the 9 per cent appreciation achieved during the 2014 full year.

“We just have to keep strengthening the balance sheet and producing good returns for shareholders,” he added.

“That’s our job. Our job is to produce returns for shareholders. We are also producing good cash flow; on quarterly basis our cash flow remains strong.”