Unaudited Financial Statements Six Months Ended 30 June 2020 Financial Highlights:
Year-to-date:
• Revenues: $857.1 million, up $110.7 million or 15% from $746.4 million in the prior period
• Gross Profit: $338.6 million, up $23.4 million or 7% from $315.2 million in the prior period
• Net Profit: $22.3 million, compared to 61.7 million in the prior period
• Earnings per stock unit: $0.04, compared to $0.12 in the prior period
Quarter 2
• Revenues: $408.3 million, up $40.5 million or 11% from $367.8 million in the prior period
• Gross Profit: $168.7 million, up $12.6 million or 8% from $156.1 million in the prior period
• Net Profit: $17.4 million, compared to $28.8 million in the prior period
• Earnings per stock unit: $0.03, compared to $0.06 in the prior period
Managing Director for Fosrich Company Limited Cecil Foster is reporting, in Unaudited Financial Statements for the Second Quarter Ended June 30, 2020, improved year-to-date income of JA$857.1 million, compared to JA$746.4 million for the prior reporting period, an increase of JA$110.7 million.
Commenting on the results he noted that improved Gross Profit for the year-to-date was recorded at $338.6 million, compared to $315.2 million for the prior reporting period, representing an increase of $23.4 million. These increases were attributed primarily to the greater availability of products required by the market, such as Industrial and PVC product lines he noted.
During the second quarter, the company generated an income of $408.3 million compared to $367.8 million
for the prior reporting period, representing an increase of $40.5 million. Gross profit for the quarter was
$168.7 million compared to $156.1 million for the prior reporting period.
Administration expenses for the year-to-date was recorded at $271.5 million, reflecting an increase of $38.3 million on the prior reporting period of $233.2 million, driven primarily, in Q1, by a combination of building out of Human resource expertise, building capacity for the future. Other cost increases were incurred due to staff benefits; increased legal and professional fees; increased selling and marketing costs; increased computer expenses; increased motor vehicle expenses; increased insurance costs; increased security cost and increased electricity cost he reported.
$31.5 million of the increased administration expenses for the year-to-date took place in Q1, with the balance of $6.8 million coming in Q2. During Q2 they effected certain cost-containment measures, which is expected to be the new normal for the company.
Finance cost for the year-to-date was $57.3 million compared to $43.8 million for the prior reporting period, an increase of $13.5 million. This increase is being driven primarily by the requirements of IFRS 16, which requires that all long-term leases be brought on the balance sheet as right-of-use assets with the financial obligation being reflected as financing and with the appropriate financing cost calculated.
Mr. Foster also noted in his comments that the Taxpayer Audit & Assessment Department also conducted an audit of their 2016 Income Tax returns and are seeking to raise additional Income Tax. Management has agreed most aspects of their findings, however, they are also now in the appeal stage of the process in respect of some adjustments, and have begun to make provisions to cover these additional taxes.
Profit-after-tax generated for the period was lower at $22.2 million, compared to the $61.7 million reported for the prior reporting period. Despite having $40.5 million lower Turnover in Q2 of 2020, compared to Q1 of 2020, Fosrich realised a $12.6 million increase in comprehensive income during Q2 of 2020, compared to Q1 of 2020. Management continues to monitor the changes in the purchasing patterns of their customers resulting from the presence of Covid-19, and have reviewed cost structures.
He noted also that the company continues to closely manage inventory balances and the supply-chain, with a view to ensuring that inventory balances being carried are optimised, relative to the pace of sales, the time between the orders being made and when goods become available for sale, to avoid both overstocking and stock-outs. Monitoring is done both at the individual product level and by product categories. Sales in most categories were less than anticipated, due to the uncertainties which resulted from the Covid-19 pandemic, which impacted customers buying patterns.
Trade Receivables are closely managed with an emphasis being placed on balances over 180 days, he reported, having implemented strategies to collect funds as well as ensure that the other buckets are managed. As a result of the anticipated impact of Covid-19 on customers, they have reviewed all credit arrangements. Where necessary credit limits have been reduced and credit periods shortened. For some items seven (7) day credit or cash was instituted.
Back in October of 2018 FosRich commenced discussion with JPS with a view to taking over their pole-mount transformer repair activity. This discussion, after 20 months, has resulted in an agreement and they have begun the process of sourcing the necessary equipment and anticipate commencement of activity in October this year.
Shareholders’ equity now stands at $823.4 million, up from the $799.6 million at 31 December 2019. The net increase of $23.8 million arose as a result of retained profits for the year-to-date amounting to $26.4 million and Treasury Shares amounting to $2.6 million.
Fosrich Company closed the year to date ended June 30, 2020, with lower earnings per stock unit of $0.04, compared to $0.12 in 2019.