Last month, S.L. Horsfords & Co. Ltd. held its annual general meeting and declared a gross sales turnover of some $118.6 million and a net profit after tax of $4.4 million.
Its best year ever.
Large total sales figure, but a small net profit figure. Horsfords says that it's expensive to do business in St. Kitts.
I wrote about it.
And, of course, I got a bit of heat, because some people feel that as a Government Minister I should not get involved in a public debate on the affairs of a public company.
In fact, some people even feel that the general public has no business discussing the affairs of a public company. One well known individual in our community told me that the business of a public company only concerns its shareholders.
I've said it before and I'll say it again. The business of a public company is the business of the general public, and heres why:
- the public sector, that is to say the Government, has a major role in licensing, regulating, and taxing a public company, and the Government is the representative of the general public.
- the general public is the market for the goods and services for a public (or any other) company.
- the general public is also the group which a public company calls upon to buy its shares and other securities; and
- a public company has to deal with banks and other financial institutions which themselves need to be tightly scrutinized by the Government, in the interest of the general public.
Now a public company of the size and scope of Horsfords, with sales of over $118 million a year in this economy and in a community of less than 50,000, must be the subject of serious and responsible public discussion, and nobody, regardless of his or her station in life, is disbarred for the discussion, whether privately or publicly.
Indeed, it is such discussion, more than anything else, which will help to improve knowledge of corporate matters. And a company doing business in a more enlightened community ought itself to be more enlightened, robust and able to meet the challenges of local, regional and global competition.
Regulation 4 of the Regulations under the Securities Act 2001 states that a public company shall provide every member with a copy of its annual accounts not less than 21 days before its annual general meeting and not more than 3 months after the end of its financial year.
The law also requires a public company to file certain documents with the Securities Commission within a certain time.
Horsfords' last financial year ended September 30, 2006.It sent out its annual report to members in May, 2007, nearly 8 months after the end of its financial year (that is 5 months late) and it held its annual general meeting on 14 June, 2007.
Am I attacking or persecuting Horsfords by mentioning that? No. I am merely pointing out a fact. Maybe the law needs to be changed so that companies can be given more realistic time to prepare and submit these important documents.
Or maybe the time is okay, and it's the companies that are messing up.
So, now TDC has chimed in with its annual report which was sent to shareholders over the past few weeks.
TDC's financial year ends on 31 January and its report should have been sent to its shareholders by 30 April, so it too is also late (by 2 months).
Are you sitting down? If not, please do, because I am about to stagger you.
TDC's total sales for their last financial year were $190,520,261.00. Yes, you read right: one hundred and ninety million five hundred and twenty thousand, two hundred and sixty one dollars.
Another record (both Horsfords and TDC setting new records in terms of gross sales and the former reporting last year to be its best year ever).
And this $190.5 million represents an increase of about $34 million over the previous year's $166.5 million. That's a massive jump. What caused it? The "stellar performance" of City Drug Store? The strong performance of the Auto Division? Home and Building Depot? FINCO? Real estate developments? All of the above?
$190.5 million a year is almost $16 million a month, nearly $4 million a week, or nearly $600,000.000 a day.
However, the net profit figure for TDC looked kind of meagre: $7.7 million.
These net profit amounts are only 4% of the gross sales figures of these two major companies. Why?
Horsfords' explanation was high taxes and electricity rates. However, it reported that its before-tax profit was only $7.5 million (from sales of $118.5 million), which represents only 6% of its gross sales figure. Is it that low because of the high tariffs of the country, or because of the high internal costs of the company?
There is no question. Internal costs are high. Horsfords' cost of sales was $94.8 million (which is 80% of its gross). Its administrative expenses were $16.9 million; distribution costs $3.4 million, and so on. Also, its reserves stood at $31.2 million, $3 million over the previous year (it would be interesting to know what that money is reserved for), and its shareholders' funds stood at $61.4 million, also $3 million added to the previous year.
TDC shareholders' funds rose from $61.2 million in the year ending 31 January 31,2003, to $67 million in 2004, to $78.9 million in 2005, to $95.4 million in 2006, and to $100 million in 2007.
These figures represent a 66% increase over a 4-year period. And during that same period there was only a 27% increase in dividends paid
What is the reason for these substantial amounts of money being held in shareholders' funds? I am not suggesting foul play. I am just asking for an explanation.
TDC's reported cost of sales is $141.4 million which is about 74% of gross sales. And TDC's pre-tax profit is reported as $11.7 million, which is, like Horsfords, about 6% of its gross sales figure.
Then there are TDC's operating costs of $13.3 million, distribution costs of $5.2 million, administrative costs of $21.4 million and its reserves of $74 million(up $5 million over last year).
What is Management's reasoning to have $74 million in reserves? Is there some thought being given to some acquisitions? If so, can shareholders be given the courtesy of being told about this?
It is in all of these different costs, and in the sums retained that we might find out why and how these companies end up with such piddling profits.
Shareholders need to look at the numbers over the years to see whether there has been improved efficiency in Management. This could be reflected in downward movement of cost of sales, operating costs, administrative costs, etc, as a percentage of gross sales. Of course, shareholders will be happy when gross sales increase.
If these costs have remained essentially the same, and there are no plausible external reasons, then the shareholders need to do something about it. Likewise if gross sales have increased, but there has been no improvement in yield, as is the case now with TDC.
Shareholders need to know if purchasing is done through purchasing companies, and if so, they need to know who are the persons involved in these purchasing companies.
It is also helpful for shareholders to be given more information than is given about subsidiary companies and other companies in which the Group has investments. After all, it's their money that is being invested and managed, and managers need to account and to be transparent in doing so.
Shareholders also need to know in detail what the emoluments and perquisites of the high level officers are.
If and when the true picture is given then Management, shareholders [and Government] can sit down and talk to find the best way possible to ensure that everybody receives the greatest benefits. If this means redesigning the tax arrangements, then so be it. But the best results can only come under conditions of transparency.
Now back to the TDC report. It seems that the Automotive Division, the Home & Building Depots, FINCO and most of TDC's other operations did very well, with City Drug Store putting in a "stellar performance", as I have indicated above.
To be truthful, if I was employed in TDC's Automotive Division or its Home and Building Depots, I would feel slighted by not being praised for a "stellar performance" too, because both of these operations did well on their own, and brought massive revenue to the Group.
And I can say this about the staff in these two operations. Their employees are especially nice to me.
In fact, I am planning, as you know, to buy out TDC. I already have 20 shares and I'm well on my way to a takeover. I'm working quietly and patiently.
When I do make my big move, I am going to transfer Mikey to St. Kitts Masonry, Nick to SNIC, and my big friend Jackie to a new Division called "TDC Safe", which will provide security to all TDC facilities.
Jackie will be properly outfitted with uniform, shock baton, pepper spray, Oakley sunglasses and a motor scooter, and he will be given captain status.
I plan to invite Don Boncamper, Glen Jeffers, and some other Labour people (yes, you read right) to join the Board. After all, these companies' sales figures are going through the roof under Labour! What we need to do is to get costs down and to clean up where we need to clean up. So more Labour people are needed at the top.
Incidentally, I also intend to buy Horsfords, where I also have 20 shares, and I am in concentrated execution of my very long-term buyout plan.
At the appropriate time, I will retire Anthony and Donald and give them an opportunity to have a contract to dispose of the company's garbage, and to deliver lumber, etc. But this will happen only if they win the bid, and, to be honest, I have people like De Don, Bumpy, Sensie, Dr. J, Lascelles and a number of others who I favour over A & D on this one. So call me biased.
I will also engage a very able local person to manage Valumart. He or she will have to be respectful to my workers, and I will promote and take better care of Nana, Belinda, Joanne, Joycie and the other young ladies and gentlemen up there who do such a nice job in serving the general public. All of them will be offered shares in the Company, and will be given access to housing and an attractive benefits scheme which I will make available at an affordable price to all of my employees.
All of that will happen when I become owner of Horsfords. Pray for me.
And I can assure you that you will not see a mango priced at $15.
One last thing; I want to commend TDC and its employees on their wonderful in-house contributory investment scheme. It is voluntary, but I am almost tempted to say that it should be mandatory. Every employer of a certain minimum size in this country should have such a scheme.
The employee puts in 5% of his or her pay and TDC puts in 7%.So these TDC employees are hooked into not one but two schemes, namely, Social Security and TDC.
Within the scheme there are many benefits, including loans to build homes and so on, and each employee has a direct source of return.
You know what would be interesting? Suppose more employees in TDC joined the scheme. Suppose employees of other companies decided to set up schemes within their companies like we see at TDC. Suppose the Police Credit Union jumped in with its $18 million. Suppose our taxi drivers, bus drivers, crafts persons, vendors and other smaller entrepreneurs stepped into the fray.
Suppose all of these folks decided to put a stop to the divisiveness and small mindedness which they have allowed to keep them back thus far. Suppose they started to become really hungry for investment and to use their schemes to buy up large chunks of equity in some of our local and regional companies, and to acquire real estate and do some major capital investing.
Wouldn't that be wonderful? Can't you see the quick and miraculous transformation that would come to our economy and to our national psyche? Isn't that the empowerment which all well-intentioned people in this country want?
I Gone, See!
Until Next Time,
Plenty Peace.
