FosRich profit spikes despite lower revenue
Revenue fell at FosRich Company Limited but profit spiked 81 per cent, which Managing Director Cecil Foster says comes at the tail end of branch rationalisations, and other efficiency measures ahead of taking the company public.
The adjustments began in late 2016 and accelerated last year, he said.
"We had a careful look at how we sourced our goods in preparation for the IPO. This led to stronger and deeper partnerships with companies such as General Electric and Siemens," Foster said, noting that the Siemens deal started in January 2017.
"They wanted the market and so they put in the effort to give us the best value, with us acting as a channel partner for them," Foster said.
FosRich reported sales of just over $1 billion for year ending December 2017, but that was nearly $110 million less than the previous year's turnover. Profit spiked from $30 million to $55 million, due mainly to reduced cost of sales.
During the year, the lighting supplies company rationalised its branches in Kingston, Mandeville and Montego Bay after market assessments, to align the available stock with demand.
"We aligned the branches with the product offerings, so for Mandeville, they wanted more water heaters, and Montego Bay would mean a lot more LEDs because of the hotel sector and new homes going up," Foster explained.
But in the first four months of execution, sales were down across the network the opposite effect of the programme's intent. Foster said the company introduced products at the start of the year that the market was slow in taking up.
FosRich, for example, went heavy on fire-resistant cables and other electrical products that did not give off halogenic fumes. Halogens are highly reactive gases such as fluorine, chlorine, bromine, among others, that react readily with air or other chemicals present in the environment or would be otherwise harmful to humans, especially in the event of a fire.
Foster said that at first, sales of the products were slow as its clients needed to be educated about the technology. So he began making direct pitches to technical experts.
"By taking up the problem with the consultants and engineers who know about this product we were able to make the case for buying these cables. With that the response has been phenomenal to the point where we don't even have enough products to sell them," Foster said.
He maintains that FosRich has recovered from that early 2017 setback, and is predicting that revenue will rise by 29 per cent this financial year. That out-turn more than covers the nine per cent fall-off in revenue last year.
To drive the numbers, Foster said delivery time has been cut and stock boosted to have items available on order.
"We've improved our delivery system with a doubling of our truck fleet. These are bigger trucks that can carry more cargo. The result is that we can fill orders in as little as a day after the order rather than the three or four days that obtained before," he said.
Foster also hinted at plans for acquisition, saying the 29 per cent growth in revenue forecast for the year "will not be relying on organic growth". He is also adding sales staff, but intends to keep the branch network at three.
"What we're doing is to maximise our footprint in our various locations by using the expanded sales staff. Right now we have taken on six key staff on top of the total 84 that we have," he said.
FosRich also has one more project to execute a tracking system for inventory, using bar codes and digital location indicators for warehousing. The system is intended for implementation by the third quarter. The company is currently carrying $625 million of inventory amid total assets of $901 million.
FosRich listed on the junior market in mid-December at $2 per share. The stock is now trading at $2.56, valuing the company at $1.28 billion.