Gleaner third quarter boosted by pension-fund income

The Gleaner Company Limited, for the nine-month period ending September 30, 2010, posted a profit of $651 million before tax, up from $36 million last year. Included in the result was a one-off $495-million booking for income arising from the company's decision to wind up its Defined Benefit Pension Fund.

Trading profit, which excludes the impact of the activities of the pension fund and other one-off items, improved to $156 million, from $53 million in the prior year.

Asked to comment on the posted results, Deputy Managing Director Christopher Barnes said that while he was pleased to see that the company was able to improve on its profit position of last year to date, he was still concerned about what seemed to be a prolonged depressed economic environment which was stifling revenue growth for the company and producing less-than-acceptable operating results. He commended Gleaner staff and management for efforts in containing costs in the face of this challenge.

The unaudited accounts released to the Stock Exchange yesterday showed a revenue decline of one per cent, while the company was able to reduce its cost of sales by $48 million, or four per cent. Other expenditure went down by $102 million, or eight per cent, characterised by a five per cent decrease in administrative expenses and a respectable 20 per cent decrease in other operating expenses. These decreases in cost reflect some degree of success in the implementation of cost-reduction strategies to combat the contraction of revenue.

$18-million improvement

The above resulted in profits from continuing operations, before pension income and taxes, increasing from $36 million to $156 million. The company's net finance income improved by $18 million on the back of investment of proceeds received from the sale year of its book and stationery subsidiary, Sangster's Book Stores Limited. Profit after tax from continuing operations was $486 million, up from $27 million in the prior year.

The balance sheet showed working capital moving from $600 million to $1.7 billion, largely due to the accounting impact of the company's portion of the surplus from the wind-up of the pension fund.

The company's Defined Benefit Pension Fund was discontinued on July 15, 2010. The actuarial surplus in the fund has been used to enhance member benefits, with the balance to be divided equally between the company and participants in the fund. The accounts explained the pension income posted as being the incremental value over and above the $783 million already booked as employee benefit asset.

On the subject of the winding up of the pension fund and the resulting surplus, Barnes said the remarkable performance of the pension fund allowed for all contributors to benefit in a significant way while retaining important funds for retirement planning. The company now operates a defined contribution scheme.

Barnes also said that the additional liquidity provided by the company's share of the surplus afforded a greater opportunity to explore new investment options for greater shareholder return.

Stockholders' equity per share increased 16 per cent to 184 cents. The share price of the Gleaner Company closed at $1.28 on November 12, 2010.