2019 Was A Challenging Fiscal Year For Caribbean Producers, Suffering A Loss US$ 1.17M Due To Impact Of A Failed Implementation Of New Technology.
Caribbean Producers Limited (CPJ) Chief Executive Officer Dr. David Lowe is describing the company’s just concluded FY2019 as a challenging fiscal year due to the extraordinary impact of a failed implementation of new technology.
In his report to shareholders, included in just released Consolidated Financial Results for the year ended 30 June 2019, he points to CPJ’s announced plans at the start of the year, for two major capital projects earmarked for meeting future growth targets and to strengthen its competitive position in the future.
These he said included the construction of a new 56,000 square feet Distribution Centre to complement the existing 120,000 square feet of warehouse capacity.
This project was completed on time and budget.
The other was the implementation of new technology to enable greater capabilities to manage the large and complex portfolio of inventory, along with the integration of supply chain operations across multiple geographic domiciles.
The CPJ Group however experienced a critical failure at implementation of the new IT system at the start of the FY, which resulted in significant variable and one-off costs, along with the lost bids and annual contract opportunities for servicing its core business, the hotel and food service markets.
The impact and recovery extended throughout the first 3 quarters, which correlated with the peak tourism season, with logistic challenges creating excessive delays and challenges for smooth procurement and delivery capability to fulfil demand.
Nevertheless, CPJ’s robust 25-year business model demonstrated resilience during the year, containing disruption to the largest and most sensitive hospitality and food service accounts at the cost of profitability to retain the business relationships and commitments.
The Group was still able to increase its gross sales despite these extraordinary events and recorded its highest level of gross revenues to date.
The group reported its best performing year with gross revenue of US$109.62M, compared to US$107.80M reported for 2018, as they focused on competing in selected product classes with positive results.
The four key tactical categories which delivered year on year growth were Spirits (33%), RTD beverages (13%), Seafood (7%), and Frozen groceries (7%).
Compressed margins and the consequential increase in non-budgeted variable costs along with the extraordinary write off the IT asset, however resulted in a loss US$ 1.17M for the group.
Earnings per share as a result decreased from 19 cents to a loss per share of 11 cents, with the stock price for the CPJ share closing at $4.88 as at June 30, 2019.
The balance sheet of the Group and current ratio as at end of June 30, 2019 revealed current assets increasing by US$7.09M or 15.80%, from US$44.88M to US$51.97M.
Total assets increased by US$9.08M or 16%, when compared to 2018.
Total liabilities increased by USS10.61M or 30.5% when compared to prior year.
The Group he said demonstrated efficient treasury management to enable construction of the new infrastructure including the 56.000 square feet distribution centre in Montego Bay and a new retail outlet in St. Lucia.
In his outlook on the business Mr. Lowe assured shareholders that management believed that the Group was still poised for further growth and profitability in the new fiscal year, with exciting opportunities despite the interruption to profitability in FY 2019.
The core business model remains resilient and the introduction of new delivery and procurement capabilities creates opportunities for greater efficiency and economies of scale he reported.
Also, the introduction of new product categories, combined with the planned incremental growth of hotels on the island over the next 3 years also presents an attractive growth trajectory.
The launch of the new Distribution Centre is projected to enable higher operational efficiencies and ultimately support long term value in their ability to fulfill greater demands required to support the growth of the hotel industry.
The Management he said remains committed to the objective to maximize long term shareholder value by creating scale and implementing strategic business transformation initiatives, in which CPJ remains ahead of the competition, ensuring that it’s the preferred partner and purveyor of choice.