The Tribune

AML Foods says the Budget’s tax increases, coupled with Value-Added Tax (VAT) uncertainty, have pushed it to switch $1 million earmarked for food store expansion into energy efficiency.

Reiterating that the BISX-listed food retail and franchise group was being squeezed by Business Licence rate increases, and an “oppressive price control regime” that stopped it compensating via consumer price rises, Dionisio D’Aguilar, AML Foods’ chairman, said the company had been forced to reassess its growth strategy.

“We will now focus on franchise business and efficiency driven areas, such as energy reduction to improve earnings, while looking to minimise the impact of increased taxation on our customers and our shareholders”, he said.

“AML expects to invest $1m in projects to reduce energy usage over the next six months. These funds were previously earmarked for expansion of our food distribution business”.

Commenting on the 2013-2014 Budget’s tax increases, Mr. D’Aguilar added: “The current taxation policy to tax companies on sales volumes is fundamentally unfair, as it targets high volume, low margin businesses, such as retail, construction and gas stations.

“This presents great difficulty for these businesses as we already operate under an oppressive price control regime”.

There was better news for AML Foods shareholders in Mr D’Aguilar’s announcement that the company will move to regular quarterly dividend payments of $0.02 per share.

“Dividends for the quarter ending June 30, 2013, will be payable on July 8 to shareholders on record as of July 1, 2013,” he added. “Subsequent payments will be made following the end of each calendar quarter.”

Gavin Watchorn, AML Foods’ president and chief executive, previously told Tribune Business that a combination of increased Business Licence fee rates and the 1 per cent Customs processing charge would increase the company’s annual tax burden by $2 million - a sum equivalent to 60 per cent of its profits.

Mr Watchorn did not return Tribune Business phone messages seeking comment on Friday, but AML Foods profits for the first quarter of its 2014 financial year rose by 13.5 per cent year-over-year.

Net income was up from $578,000 to $656,000 for the three months to end-April 2013, although comparisons were difficult as this year’s performance benefited from the Solomon’s Fresh Market outlet at Harbour Bay Shopping Centre - which was not open at this point last year.

According to AML Foods’ statement, sales for the 2014 first quarter -the year-end is January 31 next year) rose by 28.2 per cent to $35.98 million, compared to $28.06 million for the same period in 2012.

This again likely illustrates the impact the second Solomon’s Fresh Market, and Solomon’s Lucaya, have had on AML Foods’ top-line. Operating income was up 30.2 per cent year-over-year at $656,00, as opposed to $504,00 in 2012.

Sales, general and administrative expenses fell as a percentage of AML Foods’ top-line from 27.9 per cent to 27.1 per cent, while the company’s net cash balances had risen by $2.5 million in the three months to end-April 2013.

Due to $616,00 in accrued dividends, and a $504,000 insurance payable, AML Foods’ accounts payables rose.

“We are pleased that we are able to increase shareholder returns in our current economic environment”, said Mr D’Aguilar. “Due to strong management of our balance sheet during the quarter, we saw a reduction in inventory investment and an increase in cash balances.

“After our focus on expansion in 2011 and 2012, our management team has refocused on our operations for the past quarter, and we are seeing the results of this focus through reduced shrink, inventory balances and operational expenses.

“These areas, along with a strong focus on increasing same store sales, will remain our objective for the coming quarters.”

AML Foods said operational cash flow remained strong, as it continued to fund its debt repayment while increasing ordinary shareholder dividends.