A top executive at AML Foods has attributed a significant profit rise at the BISX-listed grocery retailer and fast food restaurant company to a successful drive to "run our business better", reducing costs while sales remained generally flat in a sluggish economic environment.
Gavin Watchorn, chief executive officer of AML Foods, said the company was "reasonably happy" with its $1.34 million profit in the quarter ended April 30, 2014. The same period last year had yielded a $655,000 profit.
The news came late in a day in which AML Foods also announced that it will reinstate a share buy back plan that previously ended on January 31, 2014.
Under the previous program, the company had repurchased and subsequently cancelled 292,104 of its ordinary shares.
"The board of directors has deemed it prudent, given the illiquid state of the market, to buy back available ordinary shares and thereby provide increased earnings per share and maintain stable or increased selling prices for those shareholders needing to divest their portfolio."
The company said that the reinstated program will not have a set end date. However, the board has given a mandate that the share repurchase plan may not exceed 10 percent of the current outstanding shares.
"The program will be reviewed annually to assess its viability for shareholders. The company will commence the plan after the Board meets on June 18, 2014.
In an interview with Guardian Business about the company's financial results, Watchorn said: "We're pleased we've been able to increase results on generally flat sales by basically focusing on running our business better; improving purchasing, logistics, warehouse and shrink and maintaining our expenses has allowed us to be able to produce better results."
As for the company's recently launched Carl's Jr fast food restaurant, located in the parking lot of Solomon's Super Center, Watchorn said that it has been "beating expectations", although he declined to go into more detail for competitive reasons.
"We're very happy with the initial response."
In its first quarter financial results, the company recorded sales of $35.3 million in sales, compared to $35.9 million for the same period last year. Cost of sales fell from $25.3 million to $23.8 million.
The company's business license expense rose from $250,000 to $465,000. Earnings per share moved to $0.087 during the quarter, from $0.043.
Commenting on AML Food's share buy back plan, one local market watcher, who spoke on condition of anonymity, said he would "be interested to see the price they are working with (to) get a sense of whose interests they are really trying to protect."
"My key concern with most share buy backs is that they are done principally to protect the share price, as opposed to what should be the primary aim of creating value for the remaining shareholders. The rationale is typically driven by a large number of shareholders, who have become disenchanted with the stock and are steadily forcing the price down, below what is considered a fair market value, in their efforts to exit.
"As they note in the objectives, in addition to increasing earnings to remaining shareholders, they are looking to protect the share price and provide liquidity to exiting shareholders. My general sense is they have seen the share price fall from $2.10 to $1.60 over the last six months, and certain of the larger shareholders would like to see the price go higher so they have a higher value on their shares. The share buy back does not mention a price or price range, so it is difficult to know what they intend," said the source.
In the case of AML Foods, the majority of shares are held by a few major shareholders and the company has been trying to consolidate their position over the last few years to limit the possibility of a "hostile takeover".
The company had been potentially at threat from such a move a few years ago when Mark Finlayson indicated his intention to make an offer to AML shareholders, noted the observer.
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