By Andrew Green, Staff ReporterDESPITE A substantial increase in turnover for the half year ended September 28, Courts Jamaica Limited saw a 36.5 per cent drop in net profits.
"Turnover for the six months increased by $310.2 million or 14.5 per cent over prior year primarily due to the growth in credit and merchandise sales," said managing director Hayden Singh in his statement accompanying the recent results. Turnover was $2.5 billion for the six months.
"Operating profits declined by $120.3 million over the corresponding period from $597 million to $476.7 million, due mainly to the increase in credit costs and warehousing and distribution," he said.
Kiesa Ansine, research analyst for Mayberry Investments, said one issue was the $651.9 million bank overdraft at the end of September. This impacted on the bottom line, resulting in a $35.09 million finance cost for the period. By comparison, at the end of September last year Courts earned $66.7 million from this source.
SHORT TERM DEPOSITS
At the end of September last year Courts had $805.9 million in cash and short term deposits. By September of this year, the amount had plunged to $50.8 million.
"This is not the first time they have been strapped for cash," Ms. Ansine said. "But they are able to go through these phases and come out profitable."
Its last financial year was a "very successful" one for Courts, chairman Bruce Cohen sated in his report to shareholders in the 2003 annual report. At the annual general meeting in October, shareholders approved a record $889 million dividend payout in November.
Ms. Ansine said cash was available to pay out, because of the high level of cash sales last year.
Courts initiated the credit revolution for furniture sales in Jamaica, but also sells goods on a cash basis. Profit from sales done on credit is booked over the period of the credit arrangement, which can be several years, but the profit from cash sales is booked directly. Where the level of sales on credit is high, the company can find itself doing well with a high volume of turnover, but without the actual profit in hand to pay out to shareholders as it is held in reserve, Ms. Ansine said. Sales on credit remain substantial, resulting in Courts reserves growing from $781.25 million at June 30 to $834.43 million at the end of September. "Don't anticipate a high dividend now," Ms. Ansine said. "Courts is a good long term investment."
Courts is Jamaica's biggest furniture retailer and has been expanding its market share, said Ms. Ansine. "Sales are growing."
The furniture product range has been expanded with new designs and products, Mr. Singh said in his statement. "In October we launched our 'Ready Finance' credit card to complement the successful Options package and this has been well received in the market."
The company also refurbished its Constant Spring store with new in-store design and fittings, resulting in an improvement in the branch's performance, Mr. Singh said. "To date, trading for the third quarter is comparable to last year," the managing director said.
