FosRich reports flat half-year after tax audit, new plant
Electrical company FosRich expects to bounce back from a flat half-year, saying its performance to date resulted from one-off events, including an unexpected tax bill.
Managing Director Cecil Foster says the company, which recently added manufacturing to its operations, was also hit by expenditures related to the new unit.
Although revenue grew at a healthy 26 per cent clip to $746.4 million, FosRich’s profits barely inched up by two per cent to $61.7 million at half year ending June.
“There were two factors to consider there,” said Foster. “On one hand, we invested heavily in upgrading the team both through training and new members. On the other, the authorities audited us, and while we’ve appealed their ruling, we made provision for the tax assessment,” he told the Financial Gleaner.
As a listed junior stock market company, FosRich is entitled to a full waiver on corporate taxes for five years and a 50 per cent waiver for another five. The company entered the market in December 2017.
The audit conducted by the Taxpayer Audit and Assessment Department relates to FosRich’s 2016 income tax returns, but Foster says that while the company agrees with most aspects of the findings, it has challenged others. The company has made a provision of $16 million for the tax assessment.
FosRich, up to this year, was solely a distributor of electrical and energy products, inclusive of brands such as Nexans, Siemens and GE. Its PVC pipe and conduit extrusion plant was commissioned in May after a $150-million investment.
New hires for the production facility included a business and relationship manager and a new general manager, plus other staff.
“We have invested in new staff for the manufacturing plant. We took on 28 people, and so far, we are reaping the benefits of that, judging by what we’re seeing in July and so far in August,” Foster said.
“If the trend continues, then the third quarter will outdo all the other quarters. One month has already gone, and it has been the best month in our history. We can’t say too much, but let’s see what the rest of August and September will bring,” he said.
Meanwhile, FosRich has contracted tTech Limited, a tech firm also listed on the junior market, to help modernise its inventory system.
“They are helping us to implement a major part of our warehousing/inventory-management system, along with having us fully digitised by the end of the year to take on the demands of the modern marketplace,” Foster said.