Cover Story

Economy

Investment

Company Reports

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Contents

Your Move: How Will Butch Respond To The RJR Gleaner Merger? Part 1

Expand or Ignore. Following the August announcement by the Gleaner Company Limited and Radio Jamaica of their merger, those are the options that remain open for other media entities across the island.

Jamaican Economy Growing, Just Slower Than Expected, Reports BOJ Governor Brian Wynter. The Jamaican economy recorded a 0.8% boost in growth for the second quarter for the 2015 year when compared to the same period last year.

For Steven Whittingham, Managing Director GK Capital Management Content Is King As the dynamics of the Jamaican media landscape continue to change, Grace Kennedy has sought to...

Derrick Cotterell,s Derrimon Trading Closes Year

With $5.6 Billion In Revenues

Stockholders in Derrimon Trading Company Limited will be happy this quarter following its 7% increase in revenues for the year ended...

MarketingPanasonic Promises Max enjoyment, Max results with Max audio systems-Jose Alborch

Maximum Enjoyment at maximum volume with minimum worries. That’s the promise being made by Panasonic with the launch of its new MAX audio ...

4

CommentaryMark

,s Laas Lick: Has the nation forgotten Anthony

Hylton,s US $5 billion pipe dream?

This is high risk; very high. I would recommend not starting work. If we have started, we need to consider stopping.” That was back in April...

Regional

The Week Ahead

16

18

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Contents

Prime Minister Kamla Persad-Bissessar Says Trinidad Will Peg Budget On US$40 Oil Price. US$40 a barrel is the price the government of Trinidad and Tobago is pegging its budget on for next year.

Is Colombia A Strategic Ally For Caribbean Agribusiness Industry? Colombia is aiming to strengthen its commercial relation with the Caribbean in agribusiness exports by improving on its diversified offer of...

LIME Goes With The Flow Columbus Communications (FLOW) and LIME have finalized their merger and are now one

entity. Effective today, the Flow and LIME have... Withholding Tax on services Effective Tomorrow The new withholding tax on specified services will take effect tomorrow, September 1. The finance ministry says the tax, which targets...

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Credits

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Governor of Bank of Jamaica (BOJ)

Brian Wynter

The Jamaican economy recorded a 0.8% boost in growth for the second quarter for the 2015 year when compared to the same period last year. This is in conjunction with the reduction in the inflation rate to

3.8% for the 12 month period ending July 31, 2015. Wynter says this decrease in the inflation rate, which represents the lowest rate the country has experienced in the past 43 years, is 5.2% lower than the figure recorded for the corresponding period ending last year.

However Wynter says while this shows that the economy is growing, it is growing slower than expected. He says this slower than expected growth can be attributed to

Just Slower Than Expected, Reports BOJ Governor Brian WynterJamaican Economy Growing,

“BOJ expects that economy will continue to benefit from improvements in the business environment and external competitiveness.”

production disruptions of the previous fiscal year as well as the adverse impact of the current drought on Agriculture, Forestry and Fishing and Electricity and Water supply.

This view is shared by Director General of the Planning Institute of Jamaica (PIOJ) Colin Bullock who says drought conditions in the previous quarter held production of some agricultural products below potential. However, he says this was mitigated by strong performance of traditional export agriculture.

The PIOJ Director General says the growth in the Gross Domestic Product (GDP) was as a result of the ‘positive

Economy

6

impact of continued strengthening of the global economy on some of the major industries, notably Hotels and Restaurants; Transport, Storage and Communication; and Mining and Quarrying’. He also attributed the countries growth to what he described as an improvement in domestic demand resulting from the strength-ening of both business and consumer confidence levels; highway construction; hotel construction and expansion works; and building of new office space to facilitate expansion of Business Process Outsourcing activities.

Meanwhile, Wynter says the BOJ expects that economy will continue to benefit from improve-ments in the business environment and external competitiveness. He says the Bank is forecast-ing that the 12 month inflation rate will continue to fall through to the end of September before rising in the second half of the 2015/2016 fiscal year to end within the forecast target range of between 5.5 and 7.5 per cent. The BOJ governor

Growththe Jamaican economy recorded a 0.8% boost

in growth for the second quarter for the 2015 year when compared to the same

period last year

l

“The growth in the Gross Domestic Product (GDP) was as a result of the ‘positive impact of

continued strengthening of the global economy...’”

Director General of the PlanningInstitute of Jamaica (PIOJ)

Collin Bullock

says barring unforeseen adverse developments or events, the Bank expects that the inflation target is going to be met.

Wynter says the country will also addition-ally benefit from what he says is the strong ‘positive sentiment about the economy within the business community’. His declaration follows the publication of the Business Confidence Sur-vey for the June 2015 quarter. He says ‘encour-agingly ‘a significant portion also believed that it was a good time to expand capacity and that the economy would improve during the year ahead’.

The BOJ Governor says this is further bolstered by the current account balance of Payments for March 2015 quarter which reflected a mod-est surplus of US$39.4 million representing the first quarterly surplus in 11 years. He says the current account deficit is also estimated to have narrowed in the June quarter, compared to the June quarter last year. BM

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Grace Kennedy And ISSA Will Now Hold That Power.

For Steven Whittingham, Managing Director of Grace Kennedy Capital Management Content is king

Governor of Bank of Jamaica (BOJ)

Steven Whittingham

“The aim of the venture is to push the reach and awareness of the events in Jamaica, the diaspora and on the international scene.”

A s the dynamics of the Jamaican media landscape continue to change, Grace Kennedy has sought to make its own steps to be recognized with the recent acquisition

of the media rights for the next 15 years for all activities and sporting events associated with the Inter Secondary Schools’ Sporting Association (ISSA).

Although, GK has been a long standing supporter and sponsor of ISSA events such as Boys and Girls Athletics Championship (Champs) where it spends roughly US$1million a year, this venture marks the group of company’s entry into media.

Managing Director of GK Capital Management, the arm responsible for the investment, Steven Whittingham says the move follows recent mergers and acquisitions in the Jamaican media space. He says this includes changes made between LIME and Columbus Communications, Digicel, SportsMax and Telstar, and RJR and the Gleaner. Whittingham says with bigger players in the market, it was logical to determine that content while already playing a major role, will be King. He says by obtaining all the media

rights for the ISSA events, Grace Kennedy and ISSA will now hold that power. Whittingham was reluctant to disclose the cost of the investment however; he says talks are currently underway with media entities about the auctioning of the media rights. For reference, in order to air the 2012 DaCosta Cup schoolboy football season, RJR Group paid $3 million. Meanwhile exclusive media rights to show all FIFA events being held from 2015 to 2022 cost the company US$2 million in 2013.

Whittingham says the aim of the venture is to push the reach and awareness of the events in Jamaica, the diaspora and on the international scene. He says the investment made by Grace Kennedy into the media rights for ISSA events will see a turnaround in terms of improving the revenue from sale of the rights themselves, and thus eclipsing revenue obtained from direct sponsorship and revenue from the events themselves. He says the joint venture between ISSA and GK, ‘Greenfield Media Productions’ will manage the sale and distribution of the television, radio and internet rights locally and globally.

He says the joint venture aims to increase the develop-ment of media content for traditional and non-traditional sports and expand distribution in the local and international markets.

Under the joint venture with ISSA , Grace Kennedy will be responsible for the media rights to the entire portfolio of High School Boys and Girls sports, which includes Boys and Girls Championships (‘Champs’), Football, Cricket, Netball, Basketball (Boys and Girls), Volleyball, Swimming, Table Tennis, Badminton and Hockey

Investment

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94D Old Hope RoadKingston 6Jamaica

Telephone: (876)978-5508/ 978-0426

(876)619-1351

Fax: (876)927-9125

Customer Feedback/ Queries:

Your Move:

TO THE RJR GLEANER MERGER?HOW WILL BUTCH RESPOND

Part One

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E xpand or Ignore. Following the August announcement by the Gleaner Company Limited and Radio Jamaica of their merger, those are the options that remain open for other media entities across the island.

While it is not yet clear if or how the Observer and other media in Jamaica intend to respond, there are reports of conversations between at least one radio station and one local TV station.

According to Chairman of the Jamaica Observer, Gordon ‘Butch’ Stewart, the move is a bold one ‘in a challenging environment, especially for print media.’ He says ‘the merger is admirable, notwithstanding the fact that we (the Observer and the Gleaner) are competitors. It will improve the ability of both companies to survive in an environment made even more difficult by the emergence of social media which, while not as credible as traditional media, enjoys popularity’.

Stewart says the media has an enormous responsibility of maintaining Jamaica’s

tradition of respect for democracy. Meanwhile, Stewart says he is proud of the credibility the Observer has earned over the past 22 years as well as the growth of the recently introduced music radio station, FYAH 105 FM. He says ‘the RJR/Gleaner merger can only enhance democracy by continuing to give the Jamaican people more avenues for expression and information’.

Chairman of The Gleaner Company Oliver Clarke says the merger follows what he describes as unfavourable local economic conditions. He says independent news cannot be provided unless the move is viable. ‘What Jamaica faces is that there are a number of foreign companies coming in and putting up programmes that solicit advertising and you have a lot of businesses that are not making their way’.

Chairman of the Jamaica Observer

Gordon ‘Butch’ Stewart

“...The move is a bold one ‘in a challenging environment, especially for print media.”

Your Move:

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The Gleaner and Radio Jamaica have both announced what they said was a merger between the two companies. However in describing the process that it would follow, the company heads announced that the transaction will be achieved through an acquisition of the media subsidiary of The Gleaner Company Ltd. by Radio Jamaica Limited.

RJR Group chairman, Lester Spaulding and The Gleaner’s Chairman, Oliver Clarke, say after the transaction, the acquired media operations will be consolidated with those of Radio Jamaica Limited and marketed under a new group name reflective of the ‘rich legacies of both operations’.

Clarke says the Gleaner Company is effectively being split into two. All its media business is effectively being moved over to RJR and that which is left allows the company to continue on a reduced basis. However he says shareholders of The Gleaner Co Ltd. will reportedly hold 50% of and the consolidated entity with existing shareholders in RJR holding the remaining 50%.

Why merge? The RJR Communications Group currently owns seven broadcast radio and television stations, including RJR 94FM, FAME 95FM, Television Jamaica (TVJ), Reggae Entertainment Television (RETV), and Jamaica News Network ( JNN), plus Multi-Media Jamaica Limited which offers digital media solutions. Meanwhile, the Jamaica Gleaner Company publishes The Gleaner newspaper and at least 10 other publications for the Jamaican, North American and UK markets and owns local radio stations of its own including Power 106.

Gleaner Chairman, Oliver Clarke says the media predominantly depends on advertising for its revenue and that the economic environment has not been encouraging to advertisers. He says people spend on advertising to sell products. Clarke says it is expected that advertisers will spend more if there is a strong economy. He says the value of the transaction is just over $1.56 billion, and the new entity is expected to have a turnover of approximately $5 billion per year.

According to Clarke, the coming together of the entities is “intended to give us

Chairman of the Gleaner

Oliver Clarke

“there are plans for more interesting times ahead for our advertisers...”

Merger or Acquisition?

12

longevity, diversity and new energy”. He says “there are plans for more interesting times ahead for our advertisers, with added value and more options in these new, social and digital media spaces”. Meanwhile, chairman of RJR, Lester Spaulding, says the decision to merge the entities has created what is arguably the most exciting development in Jamaican media in a century.

The influence of technology has also been considered as a major deciding factor in the move as the Gleaner and TVJ (both considered traditional media) are no longer the only channels through which citizens can access information. For example, and according to Alexa (an online portal that analyses the popularity of sites), the Gleaner, is current-ly the 14th most visited website in Jamaica. In the sites most recent update on August 26, the gleaner.com is ranked 42,373rd globally. Meanwhile, data from Traffic Estimate suggests that The Gleaner’s monthly visitor traffic has been declining by over 20% year on year to just over 550,000 per month as at July 2015.

Implications of the merger While still in the early stages, it is expected that the resulting entity will be a true multimedia brand, covering print, audio, video, through which a broad range of opportunities could emerge. As the Gleaner and TVJ are leading brands, it is expect-ed that there may be some emphasis on bolstering those properties, and possibly identifying ways in which there could be synergies between the two. It is also expected that the merged entity will also benefit from economies of scale and scope.

The expanded entity will be led by J. A. Lester Spaulding CD as Chairman, with Oliver F. Clarke OJ as Deputy Chairman. There will be an initial fourteen member board represented equally by seven directors from each of the existing companies. Gary Allen is to be CEO while Christopher Barnes will serve as COO.

According to both entities, the management structure will be set up to best cover the operational lines of the business as well as their associated administrative support needs. The CEO and COO will be responsible for selecting and implementing the most appropriate structures which will be announced in due course.

This transaction, which require both shareholder and court approval as well as support from regulators including the Jamaica Stock Exchange and Broadcast Commission, is expected to take between 4 and 6 months to close. Next week we explore the likely moves open to Butch Stewart and other media players.

740,000

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Stockholders in Derrimon Trading Company Limited will be happy this quarter following its 7% increase in revenues for the year ended December 31, 2014.

In his report on Derrimon’s 2014 year in review and its six months financial results for the period ending June 30, 2015, Chief Financial Officer, Ian Kelly says the company reported revenues for their financial year ending 2014 of $5.6 billion dollars resulting in a 7% increase over the previous year.

Speaking at the company’s Annual General Meeting on Wednesday, August 26, Kelly said despite the challenging operating environment the company still achieved growth in revenue by $354m and a subsequent growth in gross profit by $65m when compared to the previous year.

Meanwhile, net profit saw an increase of $1.7m to end the year at $51.6m.

He says a contributing factor to the financial results were the continued expansion of the Sampars Cash & Carry chain, adding a new location to Old Harbour in 2014, the acquisition of 49% of Caribbean Flavours and Fragrances, and the con- tinued product expansion of the Delect line.

Last week, Derrimon reported the share value of its stocks peaking at $2.70 per share; a figure that Kelly says was expected based on company’s current position and future aspirations for the later down in the year. A noteworthy conclusion at the AGM, was its recent six months Financial Results ending June 30th, 2015. According to Chief Executive Officer, Derrick Cotterell the Net Profit result of $51m has already matched the net profit that was reported for the 2014 financial year.

Derrimon Trading Company Limited trades on the JSE Junior Market and has been a major distributor of consumer goods to the Jamaican market since1998.

It has since joined the ranks of the largest distribution and allied companies in Jamaica.

Derrick Cotterell,s Derrimon TradingCloses Year With $5.6 Billion In Revenues

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Company Reports

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For the listener with less money to spend, the Panasonic Audio specialist says the other MAX models, which come at a more affordable price also offer similar functions. Alborch says the only difference between the Max 8000 and the Max 6000 or even Max 4000, is the power of the sound. MAX 6000 offers 31,350W (PMPO) and MAX 4000 offers 26,400W. Meanwhile, the series AKX covers a wide range of PMPO (Peak Music Power Output) in four different models includ-ing the superior AKX800 model, a mid-power mini system of 22,000W PMPO with 2GB internal memory. It features Bi amplifiers, records music to internal Memory via Bluetooth, enables Latin Equalizer and external Super Woofer. Alborch says AKX also offers specialized functions such as request-ing songs from Internal Memory or USB using the MAX Juke App, Multi color illumination in the external woofer & knobs, Max Juke app for smartphone; as well as enabling Wireless Connectivity with Bluetooth, USB to USB and AUX Input. The AKX series also includes the AKX600, AKX400 and the much smaller and more affordable version, the AKX200.

And the final piece in the line, Panasonic presents the CMAX 5, a portable speaker designed as an ONEBOX Speaker with 2GB internal memory of 11,000 PMPO. It is operated through the MAX JUKE App as well as DJ Jukebox. Alborch boasts that the most defining feature of the CMAX5 is that it delivers a great Bass Beat with triple amplifiers.

Panasonic says it expects that the new line up with offers the best sound quality and connectivity to make the listener feel and experience the best sound on the market. Alborch says the lineup is aimed at fulfilling the need Jamaicans have of constant enjoyment via music and dance. He says he expects that the variation in prices and styles will appeal to listeners in different demographics with different needs.

Panasonic Promises Max Enjoyment, Max Results With

... Jose AlborchMAX Audio System

Maximum Enjoyment at maximum volume with minimum worries. That’s the promise being made by Panasonic with the launch of its new MAX audio systems.

Speaking at the recent launch of the MAX and AKX series, Panasonic Audio Specialist, Jose Alborch said the new line up is expected to deliver the power of music with new meaning, while meeting the high expectations of Jamaicans, who like to have their own parties with the power of volume without distortions. He’s promised that these audio systems make it possible to combine power and sound quality.

This year Panasonic is offering seven models. It boasts that no matter the listener’s preference, one can always find the answer in the MAX8000, MAX6000, MAX4000, AKX800, AKX600, AKX400 or the AKX200. The systems boast Bluetooth Wireless Technology which allows listeners to enjoy music wirelessly. It also boasts a Near Field Communication (NFC) that allows the pairing of two products just by putting them together.

Alborch says the MAX 8000, which is the high-end model, comes equipped with a giant speaker Box with four 3-way speakers and triple amplifiers bursting out 44,000 W (PMPO). It boasts the ability to allow the user to record music to internal memory via Bluetooth for personal use. He says the mini system also has what he describes as ‘Max Functions’ including Airquake Bass with extreme bass extra ports that allows you to request songs from intezrnal memory or USB using its MAX JUKE App. It also offers a one touch connection using NFC and recording from USB to USB and REC & PLAY from USB.

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Marketing

Withholding tax on services

takes effect Tomorrow

The new withholding tax on specified services will take effect tomorrow, September 1. The finance ministry says the tax, which targets non-compliant taxpayers as well as those outside of the tax net, will impose a three per cent levy on services provided by professionals and other groups. The tax was to be implemented in May, then

June, but was delayed even further as businesses sought clarification on its structure and how the tax would be computed.

Payers of the tax will be able to reclaim it as a tax credit, and any excess credit may either be claimed as a refund or used to offset a future assessment. The Ministry of Finance says it is expected that this tax measure will result in a broadening of the tax base, increased compliance, improved revenue collection and ultimately lower income tax rates, which is a commitment under the Government's broader tax reform.

The Government will be using designated 'Tax Withholding Agents', or TWAs, to collect the tax from service providers with whom they do business. It will be applicable to invoices above $50,000.

In the first phase of implementation, the affected services will include accounting; auditing; catering; consultancy, that is, a professional service by persons who are not acting in the capacity of an employee; decorating; engineering - architectural, electrical, mechanical and structural; entertainment; information technology; janitorial; laundry; landscaping; legal; management; repairs and maintenance - to buildings and motor vehicles; the rental or leasing of motor vehicles or equipment; transportation of people and goods; and haulage of goods or tours. It may also apply to any other service specified by the minister of finance and gazetted.

Columbus Communications (FLOW) and LIME have finalized their merger and are now one entity. Effective today, the Flow and LIME have integrated their business units, rationalised their store footprint and are consolidating administrative offices.

Corporate spokeswoman Gail Abrahams says the merger is going accord-ing to plan however, it will take about 18 months to completely integrate both companies.

She says the corporate office is leading the regional rebranding Exercise across the Caribbean and is working with local teams to ensure that goals are met.

The process began with Barbados. Jamaica is the second country to transition to the retail brand, referred to as new Flow.

Abrahams says the new entity offers a new brand personality focusing on service as a key differentiator from competitors. She says there will also be heavy investment in back office support, staff training and empowering team members to delight customers

=

LIME goes with the Flow

Q

Week Ahead

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Regional

US$40 a barrel is the price the government of Trinidad and Tobago is pegging its budget on for next year.

Addressing a recent Rotary Club of Port of Spain meeting, Prime Minister Kamla Persad-Bissessar said t

Meanwhile, her Finance Minister Larry Howai says he has “asked that the government relook at the numbers between US$40 and US$45. So we are in the process of redoing those numbers projecting into next year.” However, Howai says after looking at the forecasting agencies, before the Chinese problem occurred, it was expected that the price would recover to US$50 a barrel next year.

He says because of this, the government will be reworking

the figures. Up to last week, oil on the international market rose as much as 3 percent as oversold conditions brought some buyers back to the market. However, there are concerns that the slowing economy in top commodities consumer China kept crude prices near 6-1/2-year lows.

Futures of U.S. crude and Brent, the global oil benchmark, are both down more than 16 percent on the month, with about half of those losses incurred in the past two sessions as plummeting Chinese equities sparked a selloff across global markets.

Some analysts expect further deterioration in China's growth and also a U.S. rate hike by the year-end that could add to the dollar's rally, putting more weight on commodities

Prime Minister Kamla Persad-Bissessar SaysTrinidad Will Peg Budget On US$40 Oil Price

Prime Minister of Trinidad and Tobago

Kamla Persad-Bissessar

“the government will be using this

‘conservative baseline’ as oil prices do tend to go up during the winter

months.”

last week, oil on the international market rose as much as 3 percent as oversold conditions brought some buyers back to the market.

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C olombia is aiming to strengthen its commercial relation with the Caribbean in agribusiness exports by improving on its diversified offer of fruits, vegetables and confectioneries. Currently, Colombia’s agribusiness sector generates about 6.2% of the GDP, playing a key

role in the growth of the country’s economy. According to the National Statistics Department (DANE), the exports in agribusiness grew by 10% compared to 2013 and its products have reached more than 127 countries.

Colombia continues to position itself as a strategic partner for the Caribbean market, showing a sustained growth over the last couple of years. Agribusiness exports reached US$ 192.2 million representing an increase of 15.5% compared to 2013. In addition to bananas and flowers, the fastest growing sub-sectors of the country, in June 2015 the agribusiness and agricultural exports of sugar and honey, oils and fats, confectionery and bakery, among others, have contributed to a 6% increase in sales of Colombian products in the region.

The availability of land and water resources, variety of climates favoring crop yields and its geographical location allows the country to offer a diverse range of products such as fruits, vegetables and flowers all year long.

Colombia is the largest exporter of flowers in Latin America and the second in the world after the Netherlands with over 1,500 varieties of flowers and 7,200 hectares cultivated. Due to its enviable logistical position with access to several markets worldwide, Colombia has established itself as an export platform for logistic hubs.

Colombia is taking advantage of its 13 free trade agreements and 3 partial agreements which allows the country access to more than 45 countries and 1.5 billion consumers in markets such as United States, Europe Union, Brazil, Mexico, Chile and Peru. Colombia current opportunities exist in products such as yuca, yams, citrus juices, flowers and raw materials for the bakery industry.

Is Colombia A Strategic Ally For Caribbean

Agribusiness Industry?

18

Has The Nation Forgotten Anthony Hylton,s US $5 Billion Pipe Dream

Mark’s LaAs Lick

t his is high risk; very high. I would recommend not starting work. If we have started, we need to consider stopping.” That was back in April when I had a friend of mine employed at a high position in

a multinational based in New York run a check on Anchor Finance.

If our memories are disposed to operating beyond the cliched ‘nine day wonder,’ we will recall that earlier this year Anthony Hylton, Minister of Industry, Investment and Commerce announced to much fanfare that Krauck Systems out of Austria/Germany and Anchor Finance out of New York were identified as the entities to begin the build out of the long promised logistics hub in Jamaica.

Well, a few journalists like myself who had immediate-ly jumped at investigating the bona fides of these com-panies had warned the nation that not only were the companies not in any position to take on such a mammoth task but it was highly improbable that between them both, the huge sum of US $5 billion could be sourced to begin the build out.

It has been the position of many shapers of public opinion that every political administration needs one big project going if it wants to maintain its electoral viability and if the country is to move forward. Many believe that small and medium sized outfits, if they have access to ready capital can fill the breach at the lower end.

The idea was sold to us in the 1990’s and eventually rolled out as Highway 2000, that the construction of a massive road network in Jamaica would improve the transit sys-tem by the easing of bottlenecks and the much short-er time of access between various points. Plus interna-

tional research had shown a correlation between highway networks and increased commercial activity.

Makes sense but, we are yet to hear from our economists what has been measured as the specific value-added in that exercise.

With the silence attending the Krauck and Anchor undelivered promise, Minister Hylton, no longer young or particularly exuberant still got to keep his job. It is now nearly five months since the big announcement and the even bigger letdown and I am amazed that commentators have seemingly decided to let the minister off the hook.

Like most politicians, the minister cannot deal with criticism, and, as one who has moved from being one of his most ardent supporters to his harshest critic, the minister no longer speaks to me. This only proves that he has neither statecraft nor stagecraft.

I would however like to use this medium to ask the minister two simple questions. On the assumption that the Krauck/Anchor deal is dead, is it buried yet? Is there another big promise just waiting in the wings, ready to be announced at any time, especially as general elections are to be announced soon?

You have been a disappointment Minister Hylton but I am certain that in your delusions, you believe you have made quite a success of it.

CommentaryBy Mark Wignall

*The views expressed in this article are not those of Businessuite Magazine.

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