CAC lines up joint venture, contracts on road to recovery
CAC 2000 has plans and business prospects lined up that it hopes will reinvigorate the company after a bad year that was characterised by a decline in revenue and losses at the bottom line.
Given ongoing roadworks at Three Miles in Kingston that served to drive customer traffic away from CAC, the company had expected its performance to suffer. The works have also been disruptive to CAC’s utility services and Internet connectivity. But now it is looking to rebuild the lost business.
CAC which distributes Carrier, LG and Fujitsu, among other brands, closed its 2018 fiscal year with revenue of $1.2 billion and profits of nearly $75 million. But for year ending October 2019, as the overpass project barrelled through its completion deadlines, revenue at the company declined more than seven per cent to $1.12 billion, which in turn dragged CAC into losses of $26.5 million.
Its disclosures indicate that it actually experienced a $300-million to $400-million fallout in core revenue, but ‘other income’, which included earnings from its Barbuda project, tripled to $47 million, offsetting some of the decline.
The company is also telegraphing that while it “effectively lost 1½ years of normal business activities” due to the roadworks, it has reason to be optimistic that it can effect a turnaround in short order.
“The good news is, we have seen a ramping up of revenues in our last quarter and we started our new financial year with over $870m of contracts in hand,” said Chairman and CEO Steven Marston in a message to shareholders that was issued with the year-end financial report.
The market has been sensitive to reports about CAC, which trades on the JSE junior exchange. The company paid dividends in July 2018 and the share price shot up to its highest ever in October of that year to $19.
Since then, news of construction delays has translated to declines in the stock price, which bottomed out at $9 in April 2019 on low volumes. The same low volumes accompanied a rebound in the price to $15.59 last August after the company’s annual general meeting and payment of dividends in July.
By November the stock was back down to $10, but has since regained territory and has been trading in the $14 range since the start of this year.
Marston, in an interview with the Financial Gleaner from overseas, says he expects the company’s recovery to weigh on three things: completion of the overpass, partnership, and expansion in local and overseas markets.
“The long-delayed Three Miles overpass should be finished soon. We will, therefore, see less of an impact on our business from roadwork. A new location is in the works and this should boost our capacity to execute on a joint venture that we should be inking while we pursue regional expansion,” he said.
He held back on the details about the new CAC location and the joint-venture deal, citing market rules and non-disclosure agreements, but said more would be revealed at midyear when the company reports to its shareholders.
As for the $870 million of projects lined up, he said it should result in a substantial boost at the top line.
“We will convert about $450 million to $500 million, plus a smaller percentage of the won jobs; so we will definitely be delivering significantly improved revenues,” said Marston.
“Expenses have been constrained and we simply need to recover revenues and gross profits,” he said.