• Knutsford Express Services Limited (KEX) delivered a strong revenue performance for the fiscal year ending May 31, 2024; however, rising costs weigh on net profit growth.
• KEX saw a record-breaking 18.9% (or $312.38Mn), increase in revenue, reaching JMD $1.96Bn, up from JMD $1.65Bn in the previous year, making it the highest reveneus ever recorded by the company. This surge was driven by continued demand for its passenger and courier services, as well as additional contributions from rental income at its Drax Hall Business Centre and café operations. The company reported higher passenger volumes across all routes.
• However, this growth did not translate into a substantial increase in earnings as the company recorded only a modest 1.7% increase in net profit for its financial year ended May 31, 2024 ($309.46Mn from $304.36Mn in the prior year). This marginal increase is largely attributed to rising administrative expenses.
• Administrative expenses increased by 24.9% to $1.66Bn, largely due to workforce expansion to support growing customer demand. The sharp increase in expenses outpaced revenue growth, leading to a marginal 3.5% (or $14.13Mn) rise in operating profit. The operating margin, as a result, dipped by 3.22 percentage points to 21.52%.
• The company’s growth trajectory is promising, but profit margins will remain under pressure unless management can control rising expenses. To address this, management has been implementing cost containment strategies to curb rising expenses and support profitability.
• However, with plans of expanding its fleet with new coaches and deploying kiosks in its depots to provide a seamless digital experience in the booking and check-in phases of travel for its customers, careful cost management will be crucial. If these investments can enhance operational efficiency, profitability could improve over the medium term. However, short-term profitability is likely to remain constrained unless there are deliberate efforts to yield more immediate results.
• KEX’s stock price has fallen 14.0% since the start of the calendar year, to $10.87 at the close of Wednesday’s trading session. It currently trades at a P/E of 14.9x, which is below the Junior Market Other Sector Average of 15.8x.

(Sources: JSE & NCBCM Research)

• iCreate Limited has announced its planned transition to Kintyre Holdings (Ja) Limited and its appointment of Dr. Nick Rowles-Davies to its Board of Directors, effective September 9, 2024. The restructuring of iCreate to Kintyre Holdings (JA) Limited represents a strategic shift for the company as it aims to transform from a digital and creative training company to a diversified investment holding company.
• Rowles-Davies brings over 20 years of leadership experience in legal finance and investment management. As part of this transition, he will serve as Chairman of the Corporate Governance Committee and Chairman of the Investment Committee.
• iCreate’s reorganisation comes following significant compliance challenges, which resulted in two suspensions from the Jamaica Stock Exchange (JSE) over the past year. The most recent suspension was lifted on June 19, 2024, after the company addressed outstanding issues, including the submission of financial statements and appointment of a board mentor.
• It is anticipated that the new Committee Chairman will help shape the company’s investment strategy while enhancing corporate governance, transparency, and ethical business practices as the company attempts to revamp its business model.
• iCreate’s stock price is down 17.3% since the start of the calendar year. It closed at $0.43 at the end of Wednesday’s trading session. At this price, iCreate trades at a P/E of 11.0x, which is below the Junior Market “Others” sector average of 15.8x.

(Sources: JSE & NCBCM Research)

• Panama´s port operators had, for the first time in three years, increased container volume by 18.5% in the period January-July. According to statistics released by the Panama Maritime Authority (AMP), all terminals showed double-digit growth during the seven months, with an average of 18.5% and a combined volume of 5.59 million TEU, Seatrade Maritime reported.
• On the Atlantic side, Colon Container Terminal (CCT) and Port of Cristobal volumes grew by 22.3% and 30.5%, respectively.  Meanwhile, PSA Panama International Terminal (PPIT) and Port of Balboa, on the Pacific Side, posted an increase in volume of 26% and 14.7%, respectively. SSA Marine’s MIT terminal also saw a growth of 10.5%.
• A key factor driving this growth has been the strategic expansion of operations to accommodate the increased volume diverted from the Canal due to draught restrictions. Congestion in other transshipment hubs in the Caribbean, along with the ongoing Red Sea crisis, which led to the diversion of commercial routes, has also worked positively towards the increment of transshipment volume into Panama.
• According to the general manager of SSA Marine’s MIT, Manuel Pinzon, on the supply side, the Panama Canal’s reduction in transit numbers and allowable vessel draughts, due to a lack of rainfall in the Canal watershed, created an opportunity for ocean carriers to exploit Panama’s land bridge more effectively. The ability to connect containers via rail or truck between the Atlantic and Pacific oceans increased container volumes handled by container terminals in Panama, as global supply chains continue to seek efficient routes to navigate trade uncertainties and logistical challenges.
• On the demand side, the global economic recovery post-pandemic has significantly driven up container throughput. Imports to Latin America have risen by nearly 10%, while exports from the region have increased by over 7%.
• As international trade volumes surged with the revival of global markets, ocean carriers have increasingly relied on Panama’s ports to expedite their services between major economic centres which has therefore led to increased container volume for the sovereign.

 (Source: Seatrade Maritime News)

• The Bahamas’ national debt fell by more than $200Mn during the three months to the end of June 2024 as total repayments exceeded new borrowings by the Government. The Central Bank, unveiling its economic review for the second quarter of 2024, added that the country’s debt only increased by “a muted” $3.6Mn over the last 12 months to close the fiscal year at a total of $11.653Bn.
• The modest increase, combined with economic growth, also took The Bahamas’ debt-to-GDP ratio to a fraction below 80%. As a ratio to GDP, the direct charge decreased by an estimated 2.7 percentage points on a yearly basis to 77.6% at the end of June. In addition, the national debt-to-GDP ratio declined to an estimated 79.9% compared to 83% in the second quarter of 2023.
• In terms of overall fiscal operations, provisional data on the Government’s budgetary operations for the first ten months of FY2023/24 (July 1, 2023, to June 30, 2024) showed that the overall deficit declined by $68.8Mn (27.9%) to $177.9Mn, relative to the previous corresponding period in FY2022/23.
• The outturn reflects a $195.9Mn (8.3%) expansion in total revenue to $2,550.9Mn on account of higher value-added tax (VAT) collections and higher proceeds from stamp taxes on financial and realty transactions, which outpaced the $127.1Mn (4.9%) growth in aggregate expenditure to $2,728.8Mn.
• Going forward, the fiscal deficit is projected to fall to $69.8Mn for FY2024/25, relative to FY2023/24 budgeted $131.1Mn. This represented an estimated lower budgeted deficit to GDP ratio of 0.5% for FY2024/25 from the planned 0.9% of GDP for FY2023/24. Correspondingly, the National Debt to GDP ratio is forecasted to be lower at 75.3% for FY2024/25 from the budgeted 80.6% for FY2023/24.

(Sources: Central Bank of the Bahamas & The Tribune)

• U.S. consumer prices rose slightly in August, but underlying inflation showed some stickiness amid higher costs for housing and other services, further dashing hopes of a half-point interest rate cut from the Federal Reserve next week.
• The mixed inflation report from the Labour Department on Wednesday followed data last week showing the labour market still cooling in an orderly fashion in August, defying fears of a sharp deterioration, with the unemployment rate retreating from the near three-year high touched in July.
• As a result, financial markets boosted the chances of a quarter-point rate cut next Wednesday and sharply lowered the probability of a 50 basis point reduction.
• The consumer price index increased 0.2% last month after rising by a similar margin in July, the Labor Department's Bureau of Labor Statistics said. The rise in the CPI was in line with economists' expectations.
• Food prices edged up 0.1% after climbing 0.2% in each of the past two months. Grocery store food prices were unchanged as increases in the costs of meats, fish, eggs and dairy products were offset by decreases in the prices of non-alcoholic beverages, fruits and vegetables.
• In the 12 months through August, the CPI advanced 2.5%. That was the smallest year-on-year rise since February 2021 and followed a 2.9% increase in July. Prices increased at a 1.1% annualized rate in the past three months, indicating that a disinflationary trend was now firmly entrenched, allowing policymakers to focus more on the labor market in their quest to sustain the economic expansion.

(Source: Reuters)

• The U.K. economy continued to flatline in July on a month-on-month basis, flash figures published from the Office for National Statistics showed Wednesday. Gross domestic product (GDP) also came in below the expectations of economists polled by Reuters, who had forecast growth of 0.2%. The country also logged no GDP growth in June.
• Britain’s dominant services sector showed slight growth of 0.1% in the month to July, while production and construction output fell by 0.8% and 0.4%, respectively. Britain’s economic growth was up 0.5% in the three months to July, slightly below economist expectations and the 0.6% recorded in the second quarter ending in June.
• “The economy recorded no growth for the second month running, though longer term strength in the services sector meant there was growth over the last three months as a whole,” Liz McKeown, director of economic statistics at the ONS, said. The U.K. economy has recorded modest but steady expansion almost every month so far this year, having emerged from a shallow recession at the start of the year.
• Lindsay James, investment strategist at Quilter Investors, said the prospect of tax raises could add further caution to consumer spending over the coming months.
• “Tax rises have been flagged ahead of the Autumn Budget, and consumers and businesses may feel rather more cautious heading into the winter months as they await details from the Treasury,” she said. She added that further movement in interest rates anticipated from the Bank of England could help ease wider growth pressures. The central bank is set to meet next week for its latest policy decision after cutting rates for the first time in four years last month.

(Source: Reuters)

• Jamaican growth appears to be slowing in 2024, undershooting prior downbeat projections of 2.4% (previously 2.6%), which raises some downside risk to social stability and, in turn, the popularity of the ruling Jamaica Labour Party (JLP) ahead of next year’s general elections, according to Fitch Solutions.
• Data from the Planning Institute of Jamaica (PIOJ) suggests that growth may have slowed to just 0.1% y-o-y in Q2 2024, following a real GDP growth of 1.4% in Q1 2024. Additionally, the PIOJ’s Q2 report found that July air arrivals were down 7.7% y-o-y, which indicates a slowdown in the tourism sector. The sector accounted for 29% of employment in Jamaica before the pandemic, according to the World Travel and Tourism Council. Against that background, Q3 2024 is unlikely to have brought much relief, given the onset of Hurricane Beryl in July.
• Crime will likely be a central topic in the 2025 elections, given Jamaica's high regional violent crime rate, notes Fitch Solutions. However, data from Jamaica's Constabulary Force indicates that from January 1 to August 31, murders have decreased by 15.8% y-o-y and shootings by 3.0%. Still, a slowdown in economic activity in the coming months may reverse these positive trends.
• Crime levels have been mostly consistent and may even be declining, but are still quite high relative to the rest of Latin America and the Caribbean, which also slightly increases social stability risks.
• Fitch notes that economic activity is likely to slow further than its previous expectations, influenced by the slowing US economy. Given the strong economic ties between Jamaica and the US, Fitch expects that this development could hinder JLP’s campaign in 2025. It went on to highlight that a moderating Jamaican economy can lead to higher crime rate, especially as unemployment increases (5.4% as at January 2024).

(Source: BMI Fitch Solutions)

• Minister of Science, Energy, Telecommunications, and Transport, Honourable Daryl Vaz, has announced that significant reductions in electricity bills are expected for the September billing cycle.
• This follows productive discussions held on September 9^th with the President of the Jamaica Public Service Company Limited (JPS), where it was confirmed that the necessary adjustments are being implemented in accordance with the Office of Utilities Regulation’s (OUR) directives.
• Minister Vaz expressed optimism about the upcoming changes, stating, “After discussions with the President of JPS this morning, he advised me that work began, today, for the September bill cycle. He confirmed that significant reductions should be seen, aligning with the OUR’s instructions and the government’s advocacy. I am hopeful that this month’s results will bring much greater satisfaction to our citizens compared to the previous month.”
• The anticipated reduction in electricity bills reflects the government’s ongoing commitment to address public concerns regarding energy costs, particularly since the passage of Hurricane Beryl in July this year. As the September billing cycle progresses, the government will continue to monitor the situation closely and ensure that JPS adheres to the prescribed adjustments.

(Source: JIS)

• Resilient economic activity, fiscal slippage and rising inflation expectations will see the Banco Central do Brasil (BCB- Brazil Central Bank) begin a modest tightening cycle over what is left of the second half of 2024 (H2 2024).
• Growth came in well above trend at 1.4% q-o-q (3.3% y-o-y) in Q2 2024. What made this print more impressive is that it followed a strong Q1 2024 growth figure of +1.0% q-o-q and came despite severe flooding that disrupted the harvest season in the south of the country in May
• According to Fitch Solutions, the economic strength is partially a reflection of rate cuts pushed through over H2 2023 and H1 2024 and still reasonably supportive fiscal policy, which have helped to underpin domestic demand.
• In terms of fiscal policy, the Lula administration’s budget proposals for 2025 (Fiscal tightening, with the primary deficit set to narrow modestly from 0.6% of GDP in 2024 to 0.4% per Fitch’s forecasts) suggest that it will again fail to comply with the fiscal framework that was unveiled in 2023, with revenue likely to disappoint relative to plan and little effort being made to rein in spending.
• The upshot of these developments is that Fitch now believes that the BCB will perform a policy U-turn in the coming weeks, with a mini hiking cycle that Fitch suspects will begin on September 18. It is expected that the Central Bank will raise the Selic rate from 10.50% to 11.50% by year-end, reversing roughly a third of the cuts implemented over the prior year.
• Going forward, space exists for the BCB to revert to loosening mode over 2025, as tighter monetary policy works to slow domestic demand and, in turn, inflation. However, incoming President Gabriel Galípolo is likely to move cautiously to build up his credibility with investors, who are wary of his ties to Lula.

(Source: Fitch Solutions)

• The new international airport in Barbuda is set to open in less than a month. The government of Antigua and Barbuda has announced that it has received the green light from the Eastern Caribbean Civil Aviation Authority (ECCAA) to commence commercial flights.
• The Cabinet shared that the Chairman and new CEO of the Antigua Barbuda Airport Authority (ABBA), Wendy Francette-Williams, gave them the positive news on September 4, 2024. They were informed that the old airport in Barbuda will close at sunset on October 2, 2024, and the new airport will officially open at sunrise on October 3, 2024.
• The new airport has undergone significant upgrades, with the government investing over US$14Mn. Enhancements include the construction of a 7,100-foot runway and ongoing training for fire service personnel, airport staff, and other key personnel.
• Antigua and Barbuda is poised to emerge as a beacon for high-end tourism in the Caribbean, and the completion of the Barbuda Airport holds substantial opportunities for the island’s tourism industry.
• Overall, the economy is poised to be a leader in tourism in the region, and this by extension will encourage greater foreign direct investment, particularly through construction initiatives. Furthermore, tourism growth will feed directly into domestic economic growth through increased domestic demand driven by higher private consumption.

(Sources: Caribbean Loop News & NCBCM Research)