74 per cent plummet in year-end profit and 20 per cent drop in revenues

Office furnishings and supply company, Stationery & Office Supplies Ltd is badly hurting from COVID-19 so much so that some staff are just returning to work full time since the pandemic.

Having started 2020 with expectations of improving on the phenomenal year experienced in 2019, the company is now reporting  that the pandemic hindered many of its plans for growth, resulting in a less than spectacular financial performance for the year. Managing Director, David McDaniel and Chief Administrative Officer and Company Secretary, Marjorie McDaniel have confirmed that staff in the Montego Bay branch only returned to full time duties last month.

They admitted that 2020 was a difficult year for the Kingston company, which is in the business of selling high-quality stationery and office furniture since 1965, only three years after Jamaica’s Independence. COVID-19 has affected the company both financially and physically.

The board in their 2020 report to shareholders advised, “This downturn caused a 17 per cent decrease in revenues during the March (first) quarter. The second quarter of 2020 was even worse due to work closures and curfews with SOS experiencing its first loss in this quarter since December of 2018.”

Minimising losses during COVID-19

During this period the management instituted procedures and policies to minimise losses and safeguard the health of its staff as revenues fell by as much as 70 per cent in April 2020 over the previous year. As such, the following months saw revenues steadily increasing but still far off from our corresponding year.

During all of this Stationery & Office Supplies was able to retain 98 per cent of its staff compliment and have all of its Kingston employees return to work on a full-time basis in August 2020.

As for the Montego Bay location, it was not as fortunate due to the downturn in visitor arrivals into the St James capital and the subsequent closure of hotels in the resort town.

The directors advised that it took more time for the Montego Bay branch to return to profitability resulting in the staff only returning to work on a full-time basis last month. During the third quarter of 2020, the company witnessed the impact of Covid-19 on its manufacturing division, as back to school SEEK products were in low demand given that schools were forced to remain closed and students were doing online classes from home.

The directors report that the management have been able to find a way to manoeuvre through these difficult times and show a reasonable level of sales and profits for the period ending December 31, 2020. Looking forward, the company reports that there are signs that Stationery & Office Supplies will continue to grow and return to its pre-COVID-19 trajectory.

COVID-19 disrupted earlier growth plans

Plans for growth were in place prior to COVID-19 such as the expansion of  the company’s warehousing facilities, the expansion of our showroom, and an acquisition of a company, which would have extended its reach to more consumers throughout the island. Everything was on target until COVID-19 virus began to affect the Jamaican economy during the middle of March.

On the positive side, the company managed to introduce new products to the market such as its industrial racking and home office lines, which have been well received in the market. Stationery & Office Supplies will continue to look at other products to expand its many lines as the company continues to grow and to move forward.

Financials for 2020

Stationery & Office Supplies’ total assets decreased by four per cent from $867 million at the end of 2019 to $834 million at the end of 2020. The most noticeable decrease in the total asset base was inventory, which fell by six per cent year-on-year as well as receivables and prepayments that declined by 45 per cent.

This reduction was mainly due to the decrease in the number of containers on order as well as a major push to collect outstanding receivables. Earnings per share at the end of 2020 was $0.14, a decrease of $0.40 compared to the $0.54 at the end of 2019.

Stationery & Office Supplies ended December 31, 2020, with revenues of $972.32 million relative to $1.22 billion in 2019, a 20 per cent decrease, while for the fourth quarter revenues moved from $284.77 million in 2019 to $260.64 million in 2020.

The company’s cost of sales totalled $526.89 million down 17 per cent relative to the $635.37 million reported in 2019. As a result, gross profit fell by 24 per cent amounting to $445.43 million relative to the $582.62 million booked in 2019, while for the fourth quarter gross profit moved from $116.44 million in 2019 to $101.05 million in 2020.

Administrative expenses totalled $286.67 million down six per cent compared to the $306.18 million booked in 2019 while selling and promotion expenses decreased by 20% closing the period at $74.94 million relative to the $93.21 million reported the prior year.

Profit before taxes decreased by 74 per cent amounting to $35.25 million relative to the $136.70 million earned in 2019. While, for the quarter, profit before tax closed at $6.62 million versus a profit before tax of $22.69 million reported in the prior comparable quarter.