The two top executives of Massy Holdings Ltd—its chief executive officer, David Affonso, and its chief financial officer, James McLetchie—have admitted that the claims and allegations made by the group’s former executive vice president of business integrity and group general counsel, Angélique Parisot-Potter, hurt the company’s brand. But they maintain that the company’s operations remain unscathed.
Asked whether Massy, as a brand, has been hurt by comments made by Parisot-Potter at the company’s 2023 annual meeting on December 18, 2023, Affonso said, “I think there has been some impact from that, certainly. I don’t think there is any denying that. That may have been the intent of it, quite frankly. But yes, there has been some hurt from that.”
Affonso said he finds her comments at the annual meeting, and subsequently in press interviews and on social media, to be “quite unfortunate.”
“Much of the information out there lacks context, perhaps deliberately so, but we are a business and we move on. We learn from it and we move on. We do not want to dwell there, nor do we think it is our responsibility to dwell there,” the Massy executive said.
Interrupting a question to clarify, McLetchie said, “The brand, or the reputation, pertaining to what is being said about our group and our people, that has been hurt. But the business—how many cars we sell, how much groceries we sell, our customer service—that has not changed.”
Adding to McLetchie’s comment, Affonso noted, “Our business takes place in our portfolios (integrated retail, gas products and motors and machines). We have not lost any customers coming into Massy Stores. We have not lost any car sales. Those business are, in fact, growing.”
Asked whether the brand of the company is important, given the money spent on building it, Affonso said, “Of course it is important.
That is why it hurts. I am just saying that the operating businesses have not, for instance, been boycotted. It has not hurt that side of the business. What it has hurt is the brand of Massy, the reputation. To some extent, our teams and the people who work within the company have had to go through some of what is being said outside, which is unfortunate.”
NiQuan knocks 2024 financials
At the group level, the Massy executives are correct, as the company’s revenue from continuing operations grew by 13 per cent to $11.67 billion for the unaudited nine month financials ended June 30, 2024, from $10.32 billion for the same period in 2023.
Also, the group’s third-party revenue from its T&T operations was 10.80 per cent higher for the nine-month period in 2024, at $4 billion.
On the other hand, the after-tax profits of the Massy group, for the period October 1, 2023 to June 30, 2024, slipped by 9.23 per cent, to $473.21 million from $521.38 million.
And the company’s profit before tax in T&T for the ninemonth period was $297.88 million in 2024, a decline of 8.01 per cent compared to the $323.84 million restated earnings for the same period in 2023.
Asked about the group’s recent financials, McLetchie said, “Last year, we had a record-setting numbers in terms of revenue and profit...and to come above last year in terms of revenue and cash flow, in particular, has been impressive. To be blunt, we have taken a huge but prudent approach to one of the receivables and we have taken that out of our financials. And that is why you get a decline (in the profit numbers).”
He pointed out that if the receivable was excluded from the ninemonth financials, Massy would be up for the first nine months of its 2024 financials, compared to its record-setting 2023 numbers.
Affonso underscored that Massy’s provisioning for the debt owed by NiQuan, the dormant gas-to-liquids company, is responsible for the group reporting reduced profit for the nine-month period.
Massy’s provision for the Ni- Quan receivable was about $175 million in total, with about $120 million taken in its 2024 financial year, plus $55 million in 2023.
“The provision is a receivable that we had with NiQuan, that we had taken part of last year, when we thought there was still hope. It became clear to us by the second quarter of 2024, that it would be prudent for us to provide for the entire receivable,” said Affonso.
The Massy CEO noted that the group also had to make some one-off payments, associated with senior counsel Kerwyn Garcia’s investigation of the Parisot-Potter matter. The cost of that independent enquiry was “several million dollars,” said Affonso.
“If you take out some of those one-offs, you will see that the operating businesses are solid. They are growing,” he said.
About 70 per cent of the group’s profit is earned outside of T&T, said Affonso and Massy has an ambition to be net positive on hard currency earnings by 2030.
Divestments fund acquisitions
The divestment of companies was part of a conscious decision taken by the group to transition from a conglomerate model to a portfolio model. The portfolio model is meant to drive scale, which would facilitate expansion outside of the Caribbean.
In the 1980s, the group, then called Neal & Massy, owned companies over 75 companies that assembled cars, sold insurance, traded real estate and IT products, produced concrete, owned supermarkets and was involved in other ventures. That has been reduced to about 34 companies.
“The conglomerate model was not scalable, if we were going to go international. We went to the portfolio model essentially to develop scale,” the Massy CEO said.
That led the group to focus on the three business areas that it was good at, which resulted in a division of the group into its current three portfolios in 2019: integrated retail (IRP), gas products (GPP), and motors and machines (MMP).
That division meant there were companies that did not fit into those three portfolios. Many of those companies were divested, leading to a war chest, which peaked at about US$300 million, but is now down to about US$100 million. The funds raised by the divestment initiative were used to contribute to the three acquisitions in the 2023 financial year.
Group acquisitive, but cautious
Massy’s three acquisitions in its 2023 financial year were:
• Air Liquide, a manufacturer and supplier of industrial and medical gas, was acquired for $51.5 million with a deferred consideration, effective January 28, 2023;
• IGL (St Lucia) Ltd, was purchased for US$142 million from the Rahaman family in T&T, effective May 17, 2023. IGL is a Jamaican distributor of LPG and manufacturer and distributor of industrial and medical gas;
• The group also acquired Rowe’s IGA Supermarkets, an independent supermarkt chain of seven stores in Jacksonville, Florida, for US$47 million.
The acquisitions were funded roughly 50/50 by debt and equity, with the equity portion of it coming from a war chest derived from the group’s sale of asset, which at peak totalled US$300 million.
Massy has US$100 million left from its war chest.
Of the IGL acquisition, McLetchie said while the company is facing some competition, but the group is “holding on it,” as it expects the Jamaican company’s value to increase in the next couple of years, when an export component is added to it.
Asked to respond to the opinion, expressed privately by some analysts, that Massy paid much more than it should have for IGL, McLetchie said, “I think what the asset is valued for someone is different to what it is valued for us.”
Questioned whether the IGL acquisition was immediately accretive, he said, “We are paying for future earnings and we have to invest in that to make it accretive.”
That capital investment in adding capacity to the manufacturing operations of IGL, which was not quantified, was factored into the leadership business proposal, said Affonso.
McLetchie said the goodwill associated with the acquisition of IGL was about US$80 million.
Goodwill in business is an intangible asset that is recorded when one company is purchased by another.
It is the portion of the purchase price that’s higher than the sum of the net fair value of all of the assets purchased in the acquisition and the liabilities assumed in the process, according to an Investopedia definition.