Browsing Category: "News:Financal"
PSOJ and analysts express budget satisfaction
The Private Sector Organisation of Jamaica (PSOJ) and independent analysts have expressed satisfaction with the budget even though the capital budget is being slashed by $2 billion.
 |
| PSOJ president Chris Zacca |
PSOJ President Christopher Zacca, in support of the budget, said the country could not afford to undertake huge spending which, he said, would risk running a big fiscal deficit.
“The PSOJ recognises the need for a very tight budget right now as we have been running large fiscal deficits for a very long time and it has caught up with us,” Zacca told Caribbean Business Report yesterday.
In Parliament on Tuesday, the Government revealed a total expenditure package of $548 billion, up from the $508 billion that was estimated to have been spent during the previous fiscal year that ran to March 31, 2009. Most ministries and government offices will have to work with less or the same amount of funds that they spent last year, while a huge jump in debt servicing costs and key civil servants’ - police and teachers - pay have eaten away $12 billion from other areas of government.
The PSOJ’s favourable assessment was made despite the fact that the organisation had hoped that more money would have been allocated towards infrastructural development. A dip in infrastructural projects is one of the reasons why total non-debt capital expenditure is projected to decline by five per cent from $35.8 billion to $34.1 billion.
“Even though I think that businesses would really like more infrastructure spending and more stimulus-type activities in the budget, I think we understand the situation right now and support the government in its approach to being tight fiscally,” he continued. “The worst thing would be to run a big deficit again this year and be further downgraded by the rating agencies.”
Zacca said he did not want to speculate on how the Government will finance the budget, which will be revealed on Thursday, April 23 by Finance Minister Audley Shaw.
“We would have to wait and see, but we support any reasonable approach to cutting the deficit - tightening the expenditure and improving revenues,” said the PSOJ president.
But Charles Ross, financial analyst and businessman, is very concerned about the high interest payments which are expected to run the Government $159 billion, $35 billion more than the previous year - while debt repayment is expected to cost $150 billion, up $6 billion. This means that the total debt package increased by $41 billion - already more than the increase in expenditure over last year - and at a total of $309 billion, represents 56 cents out of every dollar the Government plans to spend this year.
For Ross the low levels of inflation, “1.1 per cent over six months”, can justify the rapid reduction of interest rates.
“It just makes no sense to me at all,” said Ross about interest rates which still remain above 20 per cent, which is directly spiking interest payments. “If rates do come down quickly then that will shave off billions of dollars off the interest cost which would mean significant savings for the budget. This could be ploughed into a number of things or not spent at all.”
Ross, who has advocated for government to spend its way out of the economic crisis, conceded that the $2 billion cut in capital spend could have been worse.
“Ultimately we do need to increase public investment but I suppose this is a very difficult year. And a reduction of two billion is not hugely significant,” he said.
Caribbean Policy Research Institute (CAPRI) analyst, Kim-Marie Spence agreed with Ross but added that priorities had to be made this year.
“It is a difficult year but could have been worse,” said Spence, who is also a business development consultant at CAPRI, based at the University of the West Indies.
“Despite the fact that this is a hard budget, capital expenditure is not the type of thing that is urgent. It is important but not urgent. It would seem that the government has tried to maintain some amount of capital spend in education in particular. That has been the topic of this Government, the need to reform our education, the need for more qualified teachers and more certification and so on,” she said.
The Fuller family: making Kingston Bookshop the top book retailer
In reflecting on the success of her father Steadman Fuller, Shauna Fuller offers a perspective that is as evocative as it is illuminating.
“Honestly,” she confesses, “I don’t believe my dad thought he could ever make it this far.”
 |
| The four members of the Fuller family who are nominated for the Family in Business Award. From left: Steadman Fuller, the executive chairman of Kingston Bookshop; Shauna, the executive director in charge of IT and new projects; Sonia Fuller, the executive director in charge of administration; and Steadman Fuller Jr, payable clerk at the company. |
There has to be some truth to this unscripted remark, because Steadman’s ascendancy to the ownership of Kingston Bookshop is nothing short of a modern-day miracle.
To appreciate Shauna’s sense of awe at her father’s lifelong journey of defying the odds, one just has to take a look at the profile of Kingston Bookshop.
Not the least among the telling statistics is the current gross annual revenue of over $1 billion - a sales performance that makes this company the leader in Jamaica’s book retail industry.
The market leader provides full-time employment for 181 Jamaicans, and adds another 200 to its payroll each summer when there is a seasonal spike in the demand for textbooks ahead of the new school term in September.
 |
| Adrian Ewan, student of Wolmer’s Boys School, pays for an item while his schoolmates Andre Rambana (left) and Delano Stephens (centre) await their turn. Accepting the payment is cashier Connelia Barnes (right) while Sonia Fuller looks on. Sonia began her career at the book shop in 1975 as a cashier. |
Its corporate headquarters at 70 King Street in downtown Kingston, is among the dozen locations - nine of which are its retail shops -from which the company operates. Six of these were opened in the past seven years, a measure of just how dynamic this company has been, even in the face of relatively flat market conditions.
One key strategy that helped Kingston Bookshop surpass competitors in whose shadow it once operated, is the development of multiple distribution channels that complement its own retail infrastructure.
It is through this network that many of the 6,000 plus titles for which the company has distribution rights regularly find their way into the hands of Jamaican readers.
 |
| Five of the six family members who are shareholders in Kingston Bookshop. From left: Steadman Fuller jr, Sonia, Shauna, Steadman, and Sandi-Kay a teacher at Campion College. |
They include pharmacies, novelty stands, supermarkets and other bookshops, as well as over 300 secondary and junior high schools that are supplied directly with books under the Jamaican government-funded textbook programme.
Another important dimension to this company is the dealership arrangements involving some of the best-known brands in the world of publishing. Books penned by authors who work for big-name UK publishing houses like Macmillan Publishers, Oxford University Press, The Hodder Group and Nelson Thornes, find their way into the backpacks of high school and university students here, thanks to the partnerships forged between the Fuller family and these publishers.
With its roots so deeply embedded in the educational system, it is not surprising that this company has become such a national iconic brand.
 |
| The Fuller family at Kingston Bookshop headquarters on King Street, (from left) Sonia, executive director of administration; Steadman Fuller Jr, payable clerk; Steadman Fuller, executive chairman; Shauna Fuller, executive director in charge of IT and new projects. |
The strong name-recognition of the institution they have built stands in contrast to the relative anonymity of the principals and personalities behind this business.
As patriarch of the six-member Fuller family, and the executive chairman, Steadman is the one who is most closely associated with the firm in the broad marketplace.
Less known is his wife of 31 years, Sonia, and the pivotal role that she has played in anchoring the meteoric rise of the book retail and distribution company.
Sonia’s formal title is that of executive director in charge of administration, though, with her deep institutional memory and unmatched knowledge of all aspects of the company, she continues to play a role in just about any aspect of the business.
Shauna, the second of four children and heir presumptive to this emerging book empire, has been an executive director since 2002. She is one of two siblings now working in the company, but the only to hold a board seat.
This Campion College and University of Bristol (UK) graduate who takes pride in the fact that “I cannot remember a time when I was not working at Kingston Bookshop” is the sibling that is now most active in the company.
In addition to being in charge of information technology, she is the company’s point person on projects, and the executive to whom the family looks to drive new business.
The fourth family member in the company is scion, Steadman Jr, a recent University of the West Indies graduate who has been dispatched to the accounts department as a clerk with the mandate to learn all aspects of the organisation, beginning with accounts payable.
Though neither the eldest sibling Ricardo nor third child Sandi-Kay works in the company, each has equity ownership. Ricardo works in the USA as a training specialist, and Sandi-Kay teaches at her alma mater, Campion College.
While the ownership and management structure that the Fullers have in place at Kingston Bookshop leave no doubt about the primacy of family in this company, they have managed to infuse some level of meritocracy within the organisation.
The situation with Steadman Jr highlights how this culture works.
“His ambition is to one day become the financial controller of Kingston Bookshop,” Shauna lets on, in speaking about her brother. “He is now in accounts payable and will be exposed to different aspects of the company.”
Critically, in line with what is now an inalterable family tradition, Steadman Jr will have to work his way from bottom up, as was done by Shauna, and before her, Steadman and Sonia.
Even with his obvious gift as a visionary who was able to see and reach for new opportunities, Steadman insists that the key to his early success was his understanding of another fundamental economic principle.
“From day one I understood the value of economies of scale,” he explains.
But ultimately, the important factor that separated the young Steadman from the average youth who similarly aspired for success, was how that revelation got translated into action.
First, a bit of history.
Steadman is not the founder of Kingston Bookshop. That credit belongs to a now deceased Englishman by the name of Leslie Ridout whom Steadman sentimentally remembers as “the blackest white man I have ever known”.
The history of the bookshop is somewhat woven into the fabric of Jamaica’s colonial and religious heritage. It has its antecedent in another bookstore called SPCK that was operated by the Anglican Church at 70B King Street, as part of a Caribbean-wide retail network that distributed Christian literature to churchgoers - hymn books, Bibles, etc. Ridout, the regional general manager, was stationed in Jamaica.
In 1974, the Anglicans decided to pull out of the business across the region, and negotiated with Ridout for the acquisition of the Jamaican operation. In order to consummate the deal, the general manager sought a local ‘partner’, apparently to satisfy the minimum statutory requirement (of two directors) for the limited liability company that would be the vehicle for the acquisition.
Beginning in the late 1960s, Steadman had worked part-time at the bookshop, doing so while studying at the now defunct Tutorial College - a private high school that the New Testament Church of God operated on Waltham Park Road in Kingston.
Steadman, who grew up in West Prospect, St Catherine, attended Mico College between 1971 and 1973, taught at Water Valley All-Age in St Mary after graduating, but would work at the bookshop during holidays.
Ridout asked him to be the one per cent partner in the venture to which he agreed.
The name was changed to Kingston Bookshop in 1974, a year before Steadman quit his teaching job to join the company full-time as the warehouse manager.
“I got progressively entrenched in the company,” he says. “I started off owning one per cent. I did not feel too guilty about leaving the classroom because at least I was still involved in education by distributing the material to teachers.”
Eight members of staff operated from the cramped space from which $400,000 worth of books were sold each year.
In 1975, a young and attractive girl named Sonia was employed as secretary to the chairman - Ridout.
Steadman remembers the chairman and principal shareholder as an unflappable and conscientious human being, but who, as an entrepreneur, lacked the risk-taking instincts to drive the growth and expansion of the business. That task fell to Steadman.
“He was not aggressive or adventurous, but I knew the potential of the business if we could achieve economies of scale,” says Steadman.
The impetus to expand sales at the fledgling bookstore would have assumed greater urgency when Steadman married Sonia in 1978 and now had a family to care for.
As wife of the store manager and minority shareholder, Sonia saw in herself a partner who, by providing broad administrative support to the business, could free up her husband to venture into the Jamaican market and generate business.
“I had to do everything,” she recalls. “My first assignment was as chief cashier. I took pride in efficiency, knowing all the titles, prices and so on.”
Sonia went on to Duff’s commercial school, and later CAST (now UTech) to upgrade her skills and was responsible for training the new recruits to the company.
Steadman became the ubiquitous salesman, driving his Cortina motorcar to schools throughout Jamaica to convince teachers to include his titles on their book list.
“As store manager I had to find ways to drive growth,” he says. “I had a Cortina motorcar, and I travelled to all the schools to do displays, and signed up the accounts of schools. We started to broaden the offerings.”
Back then, Kingston Bookshop was the minnow in an industry dominated by household name institutions like Sangster’s Bookstore, Teachers Book Centre and Times Store.
But not for long. By 1980, this manager had succeeded in tripling annual sales to $1.2 million, thus taking a much bigger slice of the book market. At this level, the company had enough market clout to begin negotiating better terms with suppliers.
Better terms meant potentially more competitive pricing, which in turn opened up a new frontier for this business.
“We started becoming supplier to the smaller bookshops,” explains Steadman.
This new business model where the single-branch retailer could broaden its market presence through distributorship arrangements marked the first early turning point for the company.
At the same time, Steadman continued to push sales through the schools, this time leveraging a unique asset that he had.
“The schools were my personal playground,” he stresses. “I went to college with several of the teachers and had a good relationship with many of them.”
From one per cent shareholding in 1975 to five per cent in a few years, and 20 per cent by the mid-1980s, sweat equity was proving to be a viable path to ownership for this highly driven and enterprising manager.
In fact, so inexorably linked were the fortunes of the Fullers to the performance of the bookshop that by 1990 their shareholding had reached 40 per cent - though they actually paid for part of the new shares with cash.
The early 1990s saw the first tentative steps towards geographic expansion by the company that had been at 70 King Street in downtown Kingston from inception. The opportunity came when Teachers Book Centre was closed down and the owners vacated the building they once occupied at 74 King Street.
Kingston Bookshop also had to rent warehousing space on Church Street in downtown Kingston, to store its expanding stock of books.
It was, however, the opening of a bookstore in Pavillion Plaza in Half-Way-Tree, Kingston in 1991 that represented the most adventurous move by the company to date.
The decision, according to Steadman, was considered risky because it marked the first expansion of the store outside of downtown Kingston where the brand was anchored. The move uptown became a test of the strength of the brand, and whether it could survive outside that narrow marketplace of downtown Kingston with which it was now synonymous.
“It was a major leap,” he notes. “There was a brand recognition with downtown. This was the biggest store in Jamaica for back-to-school supplies.”
Between 1991 and 1997, no new stores were opened, but it would be misleading to conclude that this implied a slowdown in the expansion of this book company.
Quite the opposite, according to Steadman. This was because, from as far back as 1978, Kingston Bookshop had started to develop what he calls “a strategic link with suppliers” - basically the agency arrangements with a host of publishers, beginning with Nelson Thornes of the UK. Several others followed.
“This gave us a competitive edge,” he says. “We were doing good volumes. We had the biggest portfolio of schools for back-to-school supplies.”
The death of Ridout in 1996 and the full takeover of the company by the Fullers via a preemptive share purchase arrangement, paved the way for the frenetic store expansion of the succeeding decade.
By the end of that period, Kingston Bookshop emerged the leading retailer of books in Jamaica.
Here is the chronology of that expansion:
. In 1998, a store and stationary centre were opened at 74 King Street.
. In 2000, another store on King Street.
. In July 2003, a store was opened in the Boulevard Shopping Centre, Kingston.
. This was followed by another store in the Springs Plaza in September of that same year.
. A store was opened in 2004 at the Liguanea Post Mall, Kingston.
. In 2005, Spanish Town.
. King Street again in 2007.
. In September 2008, a small store called The Script was opened at the Edna Manley College of the Visual and Performing Arts.
It is important to note that this expansion was funded in large part by equity - profit that was generated and ploughed back into the company. This approach was in keeping with the relatively risk averse posture of the Fuller family.
“I decided that expansion would be driven not by bank borrowing, but by equity, by reinvesting every dollar of profit back into the business,” declares Steadman.
He is backed up here by wife Sonia who explains how this policy impacts the day-to-day experience of the family.
“We have had to live modestly until we can afford more,” she says. “Because all the profits go back into the business we have had to live on the salary that we earn. Also, we do not expand until we know how we are going to afford the expansion.”
One notable exception is the 2006 acquisition of the 11,000 square-foot three-storey building at 80 King Street that was once the headquarters of the Jamaica Urban Transit Company. The Fullers spent $100 million in buying and retooling the building. This investment was funded largely from bank borrowing.
The Fullers had initially attempted to tap into cheap funding that is available for inner-city renewal initiatives, but say they abandoned that effort after being stonewalled by bureaucracy.
The result of the investment, however, is a sea change from the once unsightly structure and blighted surroundings. The now pristine building and well-kept yard houses the company’s stationary centre and community outreach facilities.
They include a 300-seat hall named after Leslie Ridout, which provides seminar and conference facilities for schools. There is a study room and Internet café - free access provided by Lime - for the children in the surrounding communities.
The acquisition and renewal of this structure along with the inclusion of community facilities is, according to the Fullers, emblematic of what their company is all about: a corporation with a strong social conscience and sense of community.
“The city needs renewal and we want to be part of that rebuilding process,” declares Steadman. “The investment has lifted the spirit of the community. We try to be a catalyst for change.”
This gentrification has been extended to an empty lot that was once an eyesore but is now a secured car park.
Shauna also points to the branch that was opened in 2005 in the rough neighbourhood of March Pen Road, Spanish Town, as another example of the Fuller family bucking conventional wisdom with its philosophy of community engagement.
“It was done at a time when many were reluctant to invest in our old capital,” she notes. “It has never thwarted our views on the need for businesses to go into communities… it will help drive these communities to grow and develop.”
Shauna says that her social consciousness was developed in part during childhood from observing her parents.
After Campion College, she spent a year in Columbia on a student exchange programme, then went to Surrey, England, where she sat the Cambridge A Levels examination at Woldingham School - where she became head girl. She did her Bachelor’s degree in economics and politics at the University of Bristol, then returned to Jamaica in 2002.
She attributes the success of the family business to the passion that each member brings to the task at hand.
“We have succeeded because we are passionate about what we do,” she says. “We build relationships with key stakeholders like the Ministry (of Education), suppliers and customers. It’s not business as usual at Kingston Bookshop.”
Shauna traces her passion to her childhood, remembering how she would satisfy her voracious appetite for written material by regularly visiting the bookstore. From Nancy Drew she quickly graduated to Sydney Sheldon novels.
Now, as head of the IT department, her latest project is to find new ways of doing old things in an industry that has been around for centuries.
“I am trying to evaluate how our stores connect to one another and believe we can save $100,000 per month just by better utilisation of technology,” she lets on. “Also, as a family business there are certain processes that have not been formalised, so we are trying to introduce modern best practices into specific areas of the organisation.”
She also has the unexciting task of overseeing monthly stocktaking, a job which she says regularly keeps her up past midnight.
While Steadman concentrates on the hard, business side of Kingston Bookshop - warehouse, strategic planning, purchasing, accounts - Sonia’s focus is on the softer aspects of the operation.
“The big part of our success,” she notes, “is to make the staff feel that they belong to a large family, that they have a friendly place to work.”
She is in charge of the company’s work experience programme that is open mainly to students of non-traditional high schools.
“When you see them grow and succeed,” she says of the youngsters, “that is the greatest satisfaction for me.”
In sharing some of the other secrets of success, Sonia points to what she describes as a shared outlook and vision for Kingston Bookshop among the stakeholders.
“We all have the same views about the business and share the same vision for the company,” she notes. “As a family we respect each other’s position and space. That has been very important in keeping us together.”
UPDATE: Plastic Omnium Sees Limited Exposure To U.S. Car Cos
PARIS -(Dow Jones)- French car parts maker Plastic Omnium (POM.FR) said Tuesday it has relatively limited exposure in the event of the collapse of one of the large U.S. automobile corporations.
Chief Executive Laurent Burelle estimated the company’s exposure to Chrysler Corp. at about EUR10 million.
It has virtually no exposure to Ford Motor Co. (F), he told a group of journalists, with exposure to General Motors Corp.’s (GM) U.S. operations at between EUR30 million and EUR40 million. Exposure to GM’s European operations is about the same, he added.
If one of the company’s big U.S. customers were to collapse, he said, it would be “very nasty, but not fatal” to Plastic Omnium, which makes bumpers and front- end modules for cars.
Earlier Tuesday, Plastic Omnium reported it swung to a net loss of EUR63.2 million in 2008 from a year-earlier profit of EUR51.0 million as downsizing costs and collapsing car markets undermined its performance in the second half of the year.
Burelle said industry volumes were down 36% at the end of February compared to a year before, and said the company is basing its assumptions for the full year on a drop of 40% in the first half of the year followed by a 10% contraction in the second half.
He noted that the board’s plan to halve this year’s dividend payout to EUR0.35 a share represents a cash outlay of just EUR5 million, even though the company posted its first-ever loss in 2008. He commented that the dividend is designed to reassure shareholders and bankers that the company doesn’t need EUR5 million to survive. The company bought back 650,000 shares last year and cancelled 550, 000 of them, he noted.
Burelle said that in line with its policy of reducing debt and preserving cash Plastic Omnium will steer clear of acquisitions in the medium term, though it could resume looking at possible targets at the end of 2010 for 2011.
He said his company has been approached by some car makers that are worried their existing suppliers of parts may not be around to fulfill their obligations, but said there have been no talks directly with competitors.
Burelle noted that car manufacturers whose suppliers get into financial difficulties and can’t deliver can try to get another supplier to take over their tooling and production facilities to ensure continued supplies of parts and limited disruption of car assembly.
But he said Plastic Omnium would be reluctant to take on extra capacity and the additional personnel, development and start-up costs that such a move would involve. “We’re not vultures,” Burelle said.
Plastic Omnium shares surged 12.4% Tuesday to close at EUR5.62 on the back of the company’s relatively reassuring comments on its financial situation. -By David Pearson, Dow Jones Newswires; +331 4017 1740, david.pearson@ dowjones.com
