February 14, 2020

Honey Bun (1982) Limited, for the quarter ended December 31, 2019, recorded a 14% increase in revenue to total $422.47 million (2018: $369.01 million). The company stated that, “ this was due to increased capacity and new markets penetration.”

Cost of sales for the period increased by 9% to close the quarter at $210.85 million relative to $194.15 million in 2018. As such, gross profit for the quarter amounted $211.62 million, a 21% increase year over year from the $174.87 million booked in 2018.

Other gains for the first three months amounted to $186,604 (2018: $1.82 million). As such, profit before expenses amounted to $211.81 million relative to$176.68 million reported in 2018.

Administrative expenses increased by 23% to $88.83 million (2018: $71.99 million). Selling and promotional expense increased 5% from $62.90 million in 2018 to $66.22 million. Thus total operating expenses increased by 15%. The Company stated, “This was driven mainly by increased spend on marketing activities.”

Consequently, this resulted in profit from operations of $56.76 million, this compares with the operating profit of $41.79 million reported for the corresponding quarter for prior year.

The company reported finance income of $725,259 for the quarter (2018: $89,155). Finance cost & policy expenses amounted to $1.43 million compared to $2.21 million reported in 2018’s corresponding period.

Profit before taxation amounted to $56.05 million for the first quarter ended December 31, 2019. This compares $39.67 million booked for the prior corresponding quarter. Net profit totaled $49.12 million for the period, relative to $38.10 million reported in 2018.

Earnings per stock unit for the quarter amounted to $0.10 (2018: EPS $0.08). The trailing EPS is $0.36. The number of shares used in the calculations is 471,266,950. HONBUN last traded on February 14, 2020 at $7.15.

The company noted that “In November 2019, Honey Bun launched The Honey Bun Foundation whose mission it is to support SMEs and the Creative Sector, through the development of strategic business models. The foundation is a program of corporate social responsibility, which places our interest squarely on support for companies based on our own experience of growth. We believe that our intervention will provide the support to positively impact Jamaica’s economic growth through the development of the country’s entrepreneurial ecosystem.”

Balance Sheet at a Glance:

As at December 31, 2019, total assets rose by 27% to $1.07 billion (2018: $840.12 million). This increase was primarily driven by “Cash and Cash Equivalents” which amounted to $245.74 million (2018: $126.79 million). “Inventories” increased by 25% to close the quarter at $75.76 million relative to $60.55 million reported the prior corresponding period and “Receivables” increased by 72% to close the quarter at $128.42 million relative to $74.68 million as at December 31, 2018.

Shareholders equity as at December 31, 2019, amounted to $780.70 million (2018: $645.96 million) resulting in a book value per share of $1.66 (2018: $1.39).

Analyst Certification -This research report is for information purposes only and should not be construed as a recommendation. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.