Abaco Markets Reports More Losses
Company has lost money for years due to foolish expansion and bad management but prefers to blame it on hurricanes and anything else.
Abaco Markets Limited reported its year-end results which reveal the significant impact of Hurricanes Frances and Jeanne on both sales and operating income for the year ending January 31, 2005.
The group's financial highlights include:
-A net loss from continuing operations of $3.3m in 2004, compared to a net loss of $3.2m in 2003.
-Sales of $96.2m, $6.7m or 6.6% below 2003. Food distribution division sales decreased by $7M to $87M primarily due to the impact of Hurricanes Frances and Jeanne and the lost "back to school" sales period.
-Net margins increased by $0.6m, despite the decrease in sales, and as a percentage of sales increased from 27.1% to 29.7%.
-Net operating profit amounted to $0.2m compared to the break even last year.
-Bank debt was reduced by $3.8m to $13.9m at year end and remains ahead of the debt reduction plan agreed with the bank.
-Operating expenses increased by $482k and as a proportion of sales from 27.1% to 29.6%.
-A one time charge of $968k relative to the planned disinvestment of Dunkin' Donuts.
"In 2004, we were making good progress before hurricanes Frances & Jeanne dealt a significant blow to our operations in Freeport," said David J. Thurlow, President, Abaco Markets Limited.
The Company's achievements included an increase in margins from improved central purchasing and the addition of organic and private label products providing customers with broader product offerings, a statement said.
The group's bank debt remained ahead of targets - further reduced by $3.8m to $13.9m at year end and, after protracted negotiations, Abaco Markets also reached an agreement with preferred shareholders to rollover the $7.9m of indebtedness.
The Company said the year end financial results were impacted by three significant factors: the insurance deductibles and other irrecoverable losses from the hurricane, the operating losses incurred in Turks and Caicos in closing down, remodeling and re-launching the business as a Cost Right store, and the losses sustained and provisions made in respect of the disinvestment of the Dunkin' Donuts business.
The hurricanes in September, 2004, caused an immediate loss of business and cash flow in Grand Bahama.
Solomon's was closed for three months, partially reopening in November with a much smaller sales floor space, and Thompson Wholesale was closed for approximately a month, reopening with a significantly smaller wholesale trade due to the closure of many small businesses and restaurants which it served.
"The group was not only impacted by the loss of sales at those locations but also from the lost "back to school" sales period, our second largest in the year, due to the busy hurricane season," explained Thurlow. "Our results will continue to be impacted by the storms as sales will be reduced by an estimated $15m in 2005."
In response to the lower sales base, Abaco Markets embarked upon a cost reduction programme after the storm and has substantially reduced payroll and other controllable costs, the statement said.
The Company also reported that the focus in Turks has been the completion of renovations and the right sizing of operational costs after overly optimistic projections resulted in excess staff and inventory.
"Cost Right Turks, after these initial missteps, is now recording positive sales trends and we are pleased with the progress we are making there," said Thurlow.
Earlier this year, Abaco Markets announced that it would divest Dunkin' Donuts as the business has not been profitable since the group purchased the franchise in 2002.
As a result, the Company recorded a one-time charge of $968k related to the disinvestment or closure of Dunkin' Donuts. In April, 2005, Abaco Markets entered into an agreement to sell the franchise as a going concern and is working to complete the transaction, which is contingent upon the approval of the franchisor, within 60 days.
President Thurlow said that the storms came at a critical point in the turnaround - requiring the team to change focus and redirect resources.
"Our road to recovery will be slow going as we rebuild from a smaller revenue base and pay down a heavy debt load," said Thurlow.
"In 2005, we plan to complete the store redevelopment program in the first half of the year and thereafter focus on building same store sales, regain lost market share and generate operational cash flow. We will then rebuild "Solomon's on the Mall" in Freeport in the second half of the year with a target re-opening date of June 2006.
Thurlow added that the group's ability to respond quickly and decisively after the storms demonstrated the group's progress.
"Although 2004 has been largely defined by the impact of the storms on our turnaround, it is about much more. It is about Abaco Markets' resilience in the face of tremendous challenge and our ability to adapt reflects how far the Company has matured to meet the challenges ahead. While our turnaround has been delayed by these setbacks, we are meeting these challenges and are on track to resume the course to profitability in the second half of 2005," said Thurlow.
From The Bahama Journal