Future Energy Source Company Limited (FESCO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Errol McGaw, Founding Director of Future Energy Source Company Limited, FESCO. And I'm honored to be your moderator for the proceedings of this general meeting. On behalf of the Board of Directors, it is my distinct pleasure to welcome you to FESCO's 2024 Annual General Meeting of shareholders. It is a privilege to have the confidence of our shareholders, and we take this opportunity to celebrate another successful year with you. Almost 12 years ago, 5 friends who are also service station operators, Trevor Barnes, may he rest in peace; Junior Williams; Hugh Coore; Lyden “Trevor†Heaven and I decided to execute a sheer dream, a dream which became a reality with the founding of Future Energy Source Company Limited, a Jamaican fuel marketing company. By listing on this Jamaica Stock Exchange, we have been able to share the fulfillment of this dream with you and with your support, which has been significant. Before listing, our turnover was nearly $6 billion. But after 3 short years of listing in 2021 because of you, our value to shareholders, we have more than quadrupled that number. And I'm happy to announce that for the year ended March 2024, our turnover was over $28 billion. Yes, indeed, it is an achievement that is worthy of congratulations. And I'm proud of you and I salute you. Our product offerings expanded in 2024 financial year to include liquefied petroleum gas, LPG, if you wish or cooking gas as it is commonly called. Whilst we are navigating our recent entry into this very competitive sector and managing the depreciation of the LPG assets, we have already gained almost 6% of that market. FESCO has experienced remarkable growth and we are both grateful and proud. We're grateful to God, grateful to our customers, dealers and shareholders. And we are proud of our dedicated staff and our astute and hardworking Managing Director. To our shareholders, staff and guests at The Jamaica Pegasus Hotel and online via the JCSD’s e-AGM platform, it is truly a pleasure to reflect with you on our economic performance in the financial year ended March 2024. Ladies and gentlemen, I would now like to introduce our company Secretary, hard working on dedicated Mrs. Kayola Muirhead. And I ask now that Kayola, please confirm, that the required quorum of 2 members present in person, which include members online or by proxy has been met.

Good morning. Yes, Director McGaw, we have a quorum.

Thank you very much, Kayola. That requirement having been satisfactorily met, I now call this meeting to order at 10:36 a.m. and I invite Director, Eaton Parkins, to open officially with prayer.

Good morning, everyone. Let us pray. Our mighty father, creator of the universe. I want to give you thanks for life, for love, for family, for friends, for shareholders, for the directors. As we join to deliberate on the business of FESCO, this is our third Annual Shareholders Meeting, I want to ask for your blessings on these proceedings, guide our thoughts, guide our expressions. May whatever we discuss and deliberate on here today be to the blessing of the shareholders, wider community. And we look forward to whatever we do, be into your honor and your glory. For those who are on their way, guide them here safely. And when we finish our deliberations, guide all of us safely to our various destinations. These and other mercies we ask in your precious name, Amen.

Thank you very much, Director, Eaton for your prayers and for offering the blessings. Ladies and gentlemen, the audited financial report and the annual report inclusive of the financial statements and the reports of the directors and the auditors for the year ended March 31, 2024, were earlier circulated to all members. At this point, I would like to introduce Mr. Wayne Strachan of the Firm: Baker Tilly, the company's auditors, and I invite Mr. Strachan to read the independent auditors report, which begins on Page 51 of the annual report. Mr. Strachan?

Thank you, Chairman. Good morning, everyone. I look forward to the day when we'll take this report as read. But just bear with me for the next few minutes as I go through every single page of our independent auditors report. Independent auditors report to the members of Future Energy Source Company Limited, report on the audit of the financial statements. Our opinion: In our opinion, the financial statements give a true and fair view of the financial position of Future Energy Source Company Limited as at 31st March 2024, and of the financial performance and the cash flows for the year then ended in accordance with international financial reporting standards, IFRS, and comply with the requirements of the Jamaican Companies Act. What we have audited. Future Energy Source Company Limited financial statements comprise: Statement of financial position as at 31st March 2024, statement of comprehensive income for the year then ended, statement of changes in equity for the year then ended, the statement of cash flows for the year then ended and the note to the financial statements, which includes a summary of significant accounting policies. The basis of opinion. We conducted our audit in accordance with International Standards on Auditing, ISAs. Our responsibilities under those standards are further described in auditor's responsibilities for the audit of the financial statement section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence. We are independent of the company in accordance with International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants, IESBA Code. We have fulfilled all of ethical responsibilities in accordance with the IESBA Code. Audit scope. As part of designing our audit, we determine materiality and assessed the risk of material misstatements in the financial statements. In particular, considered where management made subjective judgments for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all our audits, we also address the risk of management override of internal controls, including, among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. How we tailored our company audit scope. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the company, the accounting processes and controls and the industry in which the company operates. In 2024 audit, our 2024 audit was planned and executed having regard to the fact that the operations of the company remain largely unchanged from the prior year. The company's businesses are organized into two segments being wholesale and retail petroleum products and liquefied petroleum gas. These entities maintain their own accounting records and report to the company through the completion of reporting packages. In establishing the overall company's audit strategy and plan, we determined the type of work that was needed to be performed on the component by the engagement team. Key audit matters. Key audit matters are those matters that are in our professional judgment were of the most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in performing our audit thereon, and we do not provide a separate opinion on these matters. Key audit matters. IFRS 9 financial instruments is complex, and requires the company to recognize expected credit losses, ECL on financial assets. The determination of ECL is highly subjective and requires management to make significant judgment and estimates, particularly regarding significant increase in credit risk and forward-looking information. The combination of significant management estimates and judgment increases the risk that management estimates could be materially misstatements. And if you look at note 4(a), 5(i) and 11 of the financials, you'll see those areas that are referred here. Okay. How our audit address those key audit matters. We perform the following procedures. We obtained an understanding of the model used by management by the calculation of expected credit losses on receivables. We performed tests on the completeness and accuracy of the data used in the model to the underlying accounting records on the sample basis. We also involve our financial risk modeling specialists to evaluate the appropriateness of the company's impairment methodologies including the criteria used for determining significant increase in credit risk and independently assess the assumptions and compliance with the new requirements of IFRS 9 financial instruments. We involved all financial risk modeling specialists to evaluate the appropriateness of economic parameters, including the use of forward-looking information. We tested the company's record and aging of trade receivable, and we assessed the adequacy and disclosure of key assumptions and judgment as well as compliance with IFRS 9. Based on our audit procedures performed, no adjustments to the financial statements were deemed necessary. Revenue recognition, and that's the next key audit matter. The main activity of the company comprise retail and wholesale trading activities in the petroleum and automotive products. This includes the sale of fuel, lubricants and a leasing of fuel equipment. It also utilizes its FESCO trademark and allows dealers to use its trademark in exchange for direct compensation. Revenue is posted to the general ledger by means of a monthly manual journal entries, and significant volume of numerous small value items are invoiced. Therefore, we assessed there to be a higher risk of material misstatements associated with the timing and the amount of revenue recognized. So how the matters were addressed in our audit? Our audit procedures in response to this matter includes, we assessed the revenue recognition policy applied by the company and for compliance with IFRS 15 revenue from contracts with customers. We tested the design and implementation and the operating effectiveness of relevant controls such as a review of monthly sales journals and the daily sales reconciliation. We evaluated whether sales transaction on either side of the financial position date as well as the credit notes issued after the financial position date are recognized in the correct period. We compared a sample of items to supporting documentation to verify that the sales transaction are recorded appropriately. We performed a cash revenue reconciliation by using cash receipts from the monthly bank statements and the opening and closing receivables for the year. We performed a cash to revenue recognition by using cash receipts from the monthly bank statements and the opening and closing of the receivables for the year. We evaluated the completeness of sales listing by agreeing to the general ledger. Other information. Management is responsible for the other information. Other information comprises the annual report but does not include the financial statements and other auditors report thereon, which is expected to be made available to us after the date of this auditors' report. In our opinion, the financial statement does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appear to be materially misstated. When we read the annual report, if we conclude there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of management and those charged governance of the financial statements. Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with IFRS and the requirements of the Jamaican Companies Act. And for such internal controls as management determines is necessary to enable the preparation of the financial statements that are free from material misstatements, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the company's ability to continue as a going concern, disclosing as applicable, much as relating to going concern and using the going concern basis of accounting unless management either intends to liquidate the company or to cease operation or has no realistic alternative, but to do so. Those charged with governance are responsible for overseeing the company's financial reporting process. Auditors' responsibilities for the audit of the financial statements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatements, whether due to fraud or error and to use an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but not a guarantee that an audit conducted in accordance with ISAs will always detect material misstatements when there's audit -- when it exists. Misstatements can arise from fraud or error and are considered material if individually or in aggregate, it could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the ISAs, we exercised professional judgment and maintain professional skepticism throughout the audit. We also identify and assess the risk of material misstatements of the financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud may involve collusion, forgery, intentional omission, misrepresentation or the override of internal controls. We also obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate to the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether material uncertainty exists relating to events or conditions that may cast significant vote on the company's ability to continue as a going concern. If we conclude that the material uncertainty exists, we're required to draw to the attention in our auditors' report, to the related disclosure in the financial statements or if such disclosures are inadequate to modify our opinion. Our conclusion are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the company to cease to continue as a going concern. We evaluate the overall presentation, structure and content of the financial statements, including the disclosure and whether the financial statements represent the underlying transactions and events in a manner that achieved fair presentation. We obtained sufficient appropriate audit evidence regarding the financial statements of the entities or business activities within the company to express an audit opinion on the financial statements. We are responsible for the direction, supervision, and performance of the audit, and we remain solely responsible for our audit opinion. We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit. We also provide those charged governance with a statement that we have complied with relevant ethical requirement regarding independence and to communicate with them all relationships and other matters that may reasonably thought to bear on our independence and where applicable, related safeguards. From the matters communicated those charging governance, we determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore, the key audit matters. We describe these matters in our auditors' report unless law or regulations preclude public disclosure about a matter or when in extreme rare circumstances, we determine that a matter should not be communicating in our report because adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements. As required by the Jamaican Companies Act, we have obtained all information and explanation, which, to the best of our knowledge and belief, were necessary for the purpose of our audit. In our opinion, proper accounting records have been kept, so far as appear from our examination of those records, and the accompanying financial statements are in agreement therewith and give the information required by the Jamaican Companies Act in the manner so required. The engagement partner on the audit resulted in this independent auditors report is Wayne Strachan. Sign, Baker Tilly, Chartered Accountants, Kingston, Jamaica, 5th of August 2024. Thank you.

Yes. Thank you very much, Mr. Strachan. Ladies and gentlemen, the notice convened in the meeting to be found on Page 2 in the annual report has been circulated to members, and I now move that the notice be taken as read. Seconded by Director, Eaton Parkins. Thank you very much, Eaton. I wish to confirm that the proxies to be exercised at the meeting must have been lodged with the company, at least 48 hours before this general meeting. We have received approximately 3 proxies representing 22.67% of the issued stock of the company. I also take the opportunity to remind you that our Articles of Incorporation are available for viewing on our website. ww.fescoja.com under the Corporate Guidance -- Governance tab. I would now like to introduce our directors. The first 4 directors, I will mention are in this meeting retiring by rotation and offering themselves for reelection. I'd like to introduce, first of all, Mr. Eaton Parkins. Eaton serves as the lead Independent Director of the Board and the Chair of the Audit Committee and the Special Projects LPG committee. He's a certified Public Accountant, having a BSc in Accounting from City University of New York, and an MBA from the University of South Florida in Tampa. He is the financial services professional with expensive experience in management, consulting, regulatory reporting, financial and cash management, corporate finance, operations, cost analysis, auditing, internal controls, marketing and pricing strategy and new business development. Eaton began his career at Price Waterhouse, Chartered Accountants, Kingston, Jamaica and has held senior positions, management positions at several financial institutions in the U.S. Secondly, on my right here is Director, Hugh Coore. Hugh is the Founding Director of FESCO and the Vice Chairman of FESCO. He had a very long and active career in the petroleum industry, being the owner and the operator of a petroleum haulage company and several service stations, including the FESCO branded dealer-owned dealer-operated service station in Saint Catherine known as FESCO Angels and FESCO Ferry on the Mandela Highway. Hugh served as the Director of the JGRA for 15 years and is the Director of Cornerstone Financial Holdings Limited. He is also a kiwanian. Mr. Junior Williams. Junior is a Founding Director of FESCO, with over 40 years of marketing experience, varying from being a marketing representative, marketing consultants and marketing manager in the public and private sectors, including the marketing and sales of consumer and industrial products. At Esso Standard Oil, Junior worked as a marketing representative and at Petcom as their marketing manager, where he was instrumental in establishing the Petcom brand. Director Williams received extensive training in petrol retailing, site development, marketing at Petro-Canada. Director Williams is also trained in market research in England and marketing and trade development in Holland. Last among the directors retiring and offer themselves for reelection is Errol McGaw. I'm a Founding Director of FESCO with over 46 years of experience in the petroleum industry. I spent 2 years as a refinery process technician, then 10 years as a marketing executive as Esso's Standard Oil, Exxon. And over 34 years as own operator of Petromac Servicentre Limited located in Stony Hill Square, also known as FESCO Stony Hill, which is a dealer owned and dealer-operated station. In addition to having extensive training, having worked in the industry for so long, I also have a Bachelor of Science Degree with a major in Marketing from the University of Oregon, USA. And I have served on the Executive Committee of the JGRA in the various capacities over the years. The rest of our 10 Board of Directors include Ms. Belinda Williams, who provides a wealth of knowledge on marketing, communication and general corporate affairs; Mr. Harry Campbell, who provides expert knowledge in information technology and product management; Mr. Vernon James, who serves as Chair of the Human Resources and Remuneration Committee and the Executive Committee; Ms. Gloria Declou, who serves as the Chair of FESCO's Corporate Governance Committee; Mr. Lyden Trevor Heaven, our Chairman, went to make a trip on short notice and he apologizes for his absence. Our key adviser to the Board is our mentor, Mr. Lissant Mitchell. Shareholders, I would like to acknowledge also our staff members of the leadership team includes Mr. Omar Morgan, Operations, Security and Information Technology; Mr. Howard Coxe, Business Development Manager; Ms. Rowena Nelson, Accounting; Ms. Annette Lewis, Human Resources; Ms. Rose Allen, Administrative Manager; Mr. Kareem Gordon, Marketing and Logistics; Mr. Stefan Lyn Shue, Engineering, Operations and Safety; Mr. [indiscernible], General Manager of LPG; Mr. Stefan Ebanks, Head of Business Development and Marketing. At this point, we would now like to welcome our Managing Director, Mr. Jeremy Barnes, Jeremy, for the presentation of the Directors report and the management discussion and analysis. Welcome, Jeremy.

Good morning, everyone. Can you hear me clearly? Can you? Sorry, can you hear me clearly? Okay. Great. Again, thanks, everybody, for making to today, and I welcome all shareholders and stakeholders online. I'll take you through our management discussion and analysis for the year ended March 2024. All right. At FESCO, our vision is to become -- is to be Jamaica's most customer-centric, dealer-centric, community-centric fuel distribution marketing company, providing customers with superior service and super experience where value and convenience matters. Our mission is to improve the experience of our community by enabling convenient and seamless access to our goods and services, enhance communities in which we operate and provide above-average returns to our shareholders as measured by return on invested capital. We observe the highest standards of integrity, safety and productivity in the conduct of our business. We utilize the best technology where available. We enhance customer value and customer experience. We pursue and engender profitable and fair relationships with customers, dealers, staff and suppliers. And we foster, develop and support the Jamaican economy through our program of local investment and reinvestment, charitable initiatives and employment enhancement. Wow, over the years, we have really expanded. From just simply fuel distribution, we have added, innovated with regard to blend stock. So we E10 87 plus, which is a minimum octane of 88. We have Futron 90 plus, which is a minimum octane of 93, all available at our service stations under our canopy. In addition to that, we distribute our brand of FYC Water. Our FUTRLUBE chemicals and coolants, our FUTROIL lubricants and we're authorized dealer for motor oils for CASTROL. As you're aware, for the calendar year and the reported period, we started our LPG division, which we call -- proudly call, FESGAS. And within FESGAS, we distribute both the retail and commercial customers. So we distribute cylinders in various sizes from the 20 pound to the 100 pound to the retail customers. And then for commercial customers, we deliver propane via our bobtails and our trailers to various sizes of restaurants, industries, manufacturers and bakers. In addition to that, we have entered the forklift market, and we do distribute LPG to the heavy industry sectors, including construction, manufacturing and hardwares. So really proud of what we have done so far on the gas station side of the business. We're really proud of what we've been able to do in the last few months, sorry, in LPG and are really proud of the team at FESGAS. For the year, the company was able to achieve its main targets, and those main targets were: one, create brand awareness of FESGAS and establish an accretive and sustainable LPG business. As indicated in our -- in the auditor's report for the year, FESGAS wasn't profitable. However, when you look at the trailing 3 months, what we're able to achieve was 5% market share, which is tremendous. Again, we started the business in April. We established additional clients in October and to be able to establish and get 6% market share is tremendous. And I'd like to add to that for this year, for the first 6 months of the year, FESGAS division is EBITDA positive. What that means? It sounds technical. What it means is that it's generating more revenue and profits than its cost with the exception of depreciation. So it is cash flow positive, and we're really proud of efforts of the team with regard to both launching and establishing this business. We've been able to increase our service station network footprint and increase fuel sales measured in liters. For the year, we established 3 additional service stations, Port Maria, Maypen and Kitson Town. We're able to increase profitability specifically relates to operating profit, operating cash flow and total comprehensive profit. In fact, you will see that our total comprehensive income for the year was almost $1 billion. It was $956 million, which we're really proud of. We're able to execute significant CapEx, which in the main does not yet reflect in revenues or profits for the company. So we made these investments that will pay off in the future. Additionally, we're able to continue to expand our community outreach programs, our social initiatives as we have made various sponsorship specific groups in education, sports and entertainment and health. Again, we're a Jamaican company. We're part of the community, we're for the community and will always have been and we always will be. Market share. So when it came to the public in 2021, we had about 4.65% market share in transportation side of the business. We're very happy to announce that for the calendar year ended December 2023, we're now up to 9.5%. That makes us the largest local marketing company and the fourth largest transportation fuels market in the country. And as I mentioned just before, in just 12 months, we're able to scratch out almost 6% market share for LPG, which we are very, very proud of. And again, with the team management, board, everybody responsible for that launch. We thank again the customers for patronizing our business. They have taken to the product. They like the aesthetic, they like the service and they like the price. And again, just really want to appreciate all the people out there including all our stakeholders who have supported us in various ways from our banks in financing, our legal, all the professionals, project managers, et cetera, that we employ from time to time. They have really helped us in our execution, and I'm really grateful for all your help. So as indicated there, for the year, we're able to generate an above of -- in excess of $120 million in transportation fuels. And that's a significant increase, as I said, from where we were when we came public, and it represents 18% growth year-over-year. When you look at the market itself, the market grew by 4.2%. So again, we're outpacing the market with our growth. Next, well, one slide back. When you look at the map of where we are, again, we're somewhat underrepresented. You can go back to the previous slide on the map, please. Okay. Sorry, thanks. So we're still mainly mostly rural, but we're establishing locations in the Kingston and Saint Andrew area as promised in our IPO. We do not yet have a strong presence in the carpet area with Beechwood Avenue, we have in Stony Hill and exiting the carpet area by Mandeville. Coming up in this financial year, we started construction of our service station on Spanish Town Road. It will not be open in this current financial year, but we'll build later, and we're really, really excited about that. But for the year under consideration, we're able to open 3 additional service stations. Our footprint is now at 21 service stations at IPO, we're at 14, 7 stations in the last 3 years. And we're really, really proud of that. Again, our footprint is relatively low compared to the majors. And as time goes by, we will add additional stations. Our operating diversity. So when we became a public company, what we really did was fuel distribution and chemical and water distribution. Now as you can see, as at the year ended September -- sorry, year ended March 2024, we do fuel distribution. We're a haulage contractor. We still do water and chemical distribution. We operate service stations at Kitson Town, Beechwood Avenue and also, we operate filling plants, LPG at Naggo Head and at Bernard Lodge. And up to September or now to the October -- November 2024, we've added additional service at Kitson Town and Though we don't operate these sites we also added additional LPG fill-in sites both in Discovery Bay and in Stony Hill Saint Andrew. For the financial year, we're pleased report that the company has achieved its best year and released a gross profit, almost $1.4 billion, up 56% or $0.5 billion. Operating profit of $595 million is up 5% from $566 million the year before. EBITDA is at 778 million, which is up 30% or $183 million, and total comprehensive income of $956 million is up 67% or $385 million. Shareholder equity, which again, is a really strong number. We're now above $2 billion in shareholders equity for the year ended March 2024, shareholders' equity was $2.3 billion. All right. So for the year, the company had its best year with regard to total comprehensive income of $956 million, which comprise both net profit and a revaluation gain of our real estate assets. Net profit for the year was $410 million. It has slipped from $570 million in the previous year. However, both $570 million and $410 million were significantly higher than our IPO projected numbers. So actually, we're ahead of schedule, we're actually ahead of our year 5 schedule for profitability, and that was achieved, as again, I said from last year and the previous year. So really, really sat down and thought a lot about where we wanted to take the business. What opportunities, where we wanted to be from a profit standpoint, we're ahead of schedule. And being ahead of schedule, we didn't decide to rest on those laurels. So it took a big step last year or the current year under consideration. We made significant investments in CapEx, as I said, we're embarking on our second company owned company-operated stations, those investments as I said don't reflect in the numbers yet as it relates to revenues or profit, but it reflects in our interest cost, our drag, or costs like that. But that decision, as I said, was made possible because we're ahead of schedule regarding profitability. So we're able to use those retained earnings and make bigger investments and bigger steps, which we believe will pay off in the years to come. The slippage in net profit year-over-year is primarily driven by about 4 expense items. One, interest expense, which is of about $164 million. You borrow money you have to pay interest on it. Depreciation, which went up about $145 million, advertising expense and launch of new businesses was about $31 million and taxation, don't ask me how you calculate tax, but it so that -- it should be or should account for $25 million in taxes. Revenue or turnover. Our esteemed moderator mentioned that for the year, we did $28 billion in revenue. That's a very substantial amount. And as indicated in our segment, basis about $590 million of that was from LPG. Again, LPG kicked on in the main about from October last year. It's a product that is half the price of gasoline or transportation fuels. It's also 1/10 -- the market size is about 1/10 the size of the transportation fuel market. So on revenue contribution basis, now and in the future, it will be not as significant as on the revenue side, but the margin is obtainable because it's not just a distribution business, it's a brick and bulk our manufacturing business, it's a distribution and retail business. So it's a business with stronger margins and essentially, that's why we participate to that space. In addition to that, it diversifies our product offerings and diversifies the markets in which we participate. Gross profits. I hear this every day. Both from the stakeholder community and within the boardroom. What's our margins? And why do we have these margins? But our margins are growing, and that's the key element there. We keep our margins low because we want the motor and public to have affordable gas. All right. So it's a balancing act. If I raise the margins, the customers may have to pay more for gas. I want people to be able to afford gas. So what we've decided to do as a company is concentrate more on the amount of liters we sell than trying to push up the margin. So increasing the velocity of transactions. What that enables us to do is to generate greater gross profits and then from generating those gross profits, then we try to keep our operating expense ratios low. And as you know, as you have seen from FESCO over the years, we've been able to do so and generate profits every year which benefits our shareholders and stakeholders. So for the year, we're able to grow gross profit margins from 3.3% to 4.84%. Again, we thank the team for all the work they did in that part of the business. Next slide, please. Operating expenses. And you going to ask why? How the expenses go from $307 million to almost $800 million in 1 year. It goes that way because you have now opened or started LPG business, which is now manufactured distribution and retail. You opened 2 additional service stations and all that comes with staff costs and electricity, all asset costs including insurance, depreciation, et cetera. So an important metric for us is to really look at the operating expenses relative to your gross profit and to do so not just in the short term but also in the medium term. So what you'll find is that, as I said, advertising went up, depreciation went from $28 million the previous year to $173 million. Now to build out assets and to build out LPG business is very capital intensive. Depreciation schedule doesn't necessarily reflect the full useful life of an asset. So some of the depreciation is brought forward. And as I said, we are proud to report that as at the 6 months ending September 2024, the FES -- well, obviously, FESCO is EBITDA accretive but the cooking gas LPG side of the business is also EBITDA positive. So if you add back the depreciation, it's generating profit and cash flow for the company. Right. So when you look at operating expense ratios, typically, for our company, if it's below 70, it is excellent. Between 70 and 75 is good, and there are warning flags once it's over 75. Now the nature of your business matters. Again, we're moving from our distribution to retail. So there's -- over the years, as you see once we move from those pure distribution to retail, you're going to incur more costs and your operating expense ratio will increase. But again, with all of that, with all the early stage business costs with moving from more distribution to retail. Again, we've been able to control our operating expenses. That does represent about 57% of our gross profit. So again, we are significantly efficient and that reflects in the profit numbers for the company. Next, and what I think most people want to hear is what's the outlook for the company, right? This year will be a year of significant investment for the company in CapEx, in both transportation fuels and LPG. We forecast in excess of $1 billion for this financial year. The revenue as it relates to the CapEx for FESCO Oval, in particular, will not be in this financial year. So we'll be making these investments, but you'll see the revenue impact, you will see the profit impact once that station is open and is scheduled to open at around September 2025. So the construction of FESCO Oval is about 25% complete. So it's a long way to go. But the team, we're very proud of the project manager, the contractor, the various subcontractors, the engineers, architects, our own engineers, et cetera, that are part of this team and monitoring the project and it's going according to plan, and it will be something to marvel once it is open. In addition to that, we are acquiring and deploying LPG assets, again, we have hit some strong market share numbers and that side of the business is very capital-intensive and requires a storage tank for virtually every customer. So if you want to buy FESGAS for your home, we need to be able to have a cylinder to provide that gas in. So as we grow in that space, we need to acquire additional assets. So for every home we want to get into we have to buy 1.25 cylinders, and the reason we are [ selling as a ] 0.25 cylinder but we have to buy a cylinder for every customer. In addition to that, we are developing -- we're doing developments of DODO service stations. And again, if any stakeholder out there that wants to find a partner to develop their property into a service station, you can access us through our investor's e-mail or contact me, but it's something that we do on a daily basis that we help individuals and companies develop service stations, and we're in the midst of doing that. I can't give you a much update on that until those projects are live, but where we're in some developments is for DODOs and in addition to that we have expanded our distribution network for LPG. So now we have 5 filling plants, within -- 5, we're constructing the fifth one as we speak. So in less than 18 months, we've really -- the team has really been out there expanding in the LPG space. From a risk and opportunity standpoint, Hurricane Beryl and heavy rains that have been associated with the months of October and November has significantly impacted travel and productivity. I believe there was even an article today from the -- what was it, was it PIOJ that stated that there's going to be -- the Planning Institute that it has affected GDP for the last 2 months, I think, about 3% with all major industries. There's a slowdown in economy because of these weather-related events. So it's a real occasion and we're -- we continue to assess and prepare accordingly. Economic, we continue to monitor the downturn in agricultural, tourism, leisure and manufacturing, I think, was added in that. So we continue to monitor that along with market interest rates, though they are coming down they are still high. And the pass-through from the BOJ rates to the commercial rates have not yet taken full effect. So we continue to monitor that along with inflationary pressure, upward staff cost pressure because the truth is the staff are really feeling on the inflation side. So you have to -- we have to continue to monitor that. There are industry-specific risks as it relates to margin contraction forces and consolidation. So we'll continue to monitor that. In an interest rate high environment, absolutely on a slowing economy, you definitely have to manage your credit risk. So we continue to assess, evaluate the credit we extend to customers amid this environment. On the operating side, we're pleased to announce that we have opened FESCO Hayes in April. We're also pleased to announce that we've increased our FESGAS distribution, so you able to get your FESGAS via 7Krave market. That's available in Kingston and Saint Andrew for now. We'll be extending to put more in the near future. Those announcements will be made. But essentially, the same way you can click and order your KFC on 7Krave you can click and order your cooking gas -- your FESGAS cooking gas through the 7Krave market. We have inked a deal with Auto Don to distribute our future brands in their -- through their network of B2B network of resellers of auto parts, et cetera, we're hopeful and proud of them, and we are also hopeful that will be a good deal. And so far, it has proven to be so. We're doing the construction as we speak for FESCO Oval. And while doing all we continue to be a good corporate citizen. What to expect beyond 2024, you should expect new service stations. We've indicated that you should expect at least 4 service stations by December 2026. You should continue to expect LPG growth in both retail and commercial, and we'll always continue to innovate and diversify our operations. Performance Snapshot. So where are we as we speak? So between April and September, we've added 1 service station and added 2 filling plants LPG. And actually, we've added our third or adding our third, as we speak. We've attained gross profits of almost $870 million, net profit of almost $319 million and the book value of equity has surpassed $2.5 billion. A very important number for us is EBITDA, which is $570 million, which is really the cash profits at the company, which indicates how much money you can use to service our debt and also to expand what you can use to reinvest in the company. From our mission, it clearly says that we have a program of investing and reinvesting in the country. And that's what we've been doing. So as we earn, there's room for us to grow, and we have chosen to pursue those growth opportunities because they are high ROI growth opportunities. And we really, really want to see, which is the next slide, thank you.

Thank you very much, Jeremy. I know you have been struggling over the last few days with a little bit of illness and you put out quite a bit to be here today to make this presentation to our shareholders. I think Jeremy is doing an excellent job, ladies and gentlemen. And I really do believe that he needs to be. Thank you very much, Jeremy. So ladies and gentlemen, at this point, I now invite for questions in relation to the Managing Director's presentation and the financial statements. First, from the floor, and then online, and we're going to alternate thereafter. So in that regard, I'm going to ask that the persons online, you may submit your questions by firstly selecting the question-and-answer icon that is located on the right side of your screen. Secondly, enter in your questions or your comments in the text box on the lower right-hand side of your screen. And then finally, select the send button located at the right-hand side of the text box. We remind the persons submitting questions to state their names for the record, please. And so we will alternate as we go along. So do you have any questions in relation to the Managing Director's presentation and the financial statements, coming from the floor first? Any questions from the floor?

I'm [ Carrie Tip ], shareholder. I am referring to Page 39. Your long-term debt went down by 12%. 2023, it was $1.7 billion to $1.5 billion. And I noticed that our -- Mr. Barnes went into great detail about the interest expense. Could you -- I mean, I know that it's not possible -- well, it is possible. But what is your average interest rate that you incur as a result of the funds to finance the business and to ask if it was possible in the current -- well, in the past current interest rate hike that was going on, if you would have thought of raising the funds via issued term bond at a lower interest rate?

Thank you for your question. Jeremy, you want to?

Okay. So...

The first part is what is the -- what accounts for the reduction in the long-term debt, the 12%? That's the first part.

Okay. So I'll answer it all in one. In the mean, we have 2 bonds, a bond for $1 billion and a bond for $700 million. The $1 billion bond was raised when interest rates were a little bit lower, and that's 7.5%. And then the second one was raised when interest rates were higher. That one is at 11.75%. In addition to that, we have a mortgage on our Beechwood property. And that was raised a few years ago, and that -- I think the rate on that is 6.75%. So when you look at our weighted average cost of capital, our rates averaged -- for the debt, sorry, not cost of capital. It's about 10.7%. The reason why the long-term debt has gone down, because we're making the principal payments on both the amortized loan and on the bonds. So every -- the bonds are quarterly, so we don't just pay the interest. We pay back principal. So every quarter, our principal payments make our outstanding debt reduce.

Okay. Can we now get a question online, the question online?

Mr. moderator? Yes. We have a question online from [ Ryan Wallace]. Has FESCO considered to enter into the medical gas industry to diversify products -- product offering? And if so, what time line are you looking at?

Simple and short answer is, yes, we have considered. It's not something on the immediate -- it's not that immediate entry for us, but at the appropriate time, we'll make the appropriate announcements.

Okay. Is there another question from the floor?

I'm [ Muriel Ville ], shareholder. I noticed you are in 12 of the 14 parishes. Noticed no Portland and St. Thomas. The East doesn't have any FESCOs. So my question is do you plan -- have you started to look at that area because St. Thomas is on the up-and-up. So have you started to look at that area? And if so, what's your kind of time line and plan?

We continue to look island-wide for service stations. Is -- are those 2 parishes where we're looking? That is included in where we're looking. No announcement as at today regarding those stations, but all parishes are being considered. And those 2 parishes, yes, they are on our radar.

And just to add, if you know of a location or anyone who might, then maybe you would like to bring that to our attention. We'll be happy to accommodate that. In the interest of alternating the question, we want to take another one from online. Okay. Please go ahead.

Okay. [ Carrie Tip ] again. Page -- shareholder. Page 36, I'm looking at the audit fees, which went up 42.2%. I'd like a comment on that, please. I think that's quite significant. And I mean, I've never been -- I mean, I've been at this game a long time, but 42%, I'm just curious.

So I always encourage our costs to be near 0 as possible. However, in this instance, the operating scope of the company has increased significantly from just distribution assets, include retail, LPG. So the scope and the duration of the audit has increased. So we believe that it's a fair cost for the increased scope and time it takes to do the audit.

Okay. I'd just like to make a comment as a customer of LPG that I ran out of gas. A short anecdote, I ran out of cooking -- I was cooking my dinner and I ran out of cooking gas. Drive down the road. Can't get no gas. See a FESGAS truck and I said to man, I said, "I need gas. I have to finish cooking." He followed me home and within 35 minutes, took out this little machine. And I paid online and I got gas. I was quite impressed, I must say. It was -- you should have testimonials of customers because that was -- I mean I couldn't get any gas. I was cooking, in the middle of cooking. I mean that's irresponsible of me, but it was very good.

Thank you for that.

We'll be contacting you for your testimonial video. And you see the GM smiling beside you. He was very pleased for that plug.

By the way, Mr. [ Lenito ], you probably stand and be recognized. This is our general manager.

The other thing that -- I'm sorry, sir.

No, I was going to say, if you have any questions or complaints, that's the gentleman that...

Okay. So the other thing that I'd like to mention, so this is -- I don't know if this is appropriate. However, FESGAS and FESCO are fossil fuels, and the country has made a significant push towards renewables. I know that there is a difference between the both. Has your company, in terms of putting up these new gas stations, looked at the possibility of introducing when you're building any renewables?

So several of our service stations utilize solar and even beyond energy, some harvest water not for potable use but for irrigation and flushing and cleaning. So to answer the question, yes, we do consider the environment in all that we do.

All right. Thank you very much. Still no questions online. No further questions online. Okay. Please go ahead.

[ Lancel Bloomfield ], shareholder, and I have a million questions. First one, Page 2, Note 19, on the statement of financial income. This is -- Mr. Chairman, your revenue in 2023 was $26.3 billion and your cost of sale was $25 billion. In 2024, your revenue was $28.7 billion, and your cost of sale is $27.3 billion. What is driving this high cost of sale?

Okay. So we sell gasoline, in the mean, less fuel and oil prices are not within our control. So the cost per barrel, the cost per liter of gasoline is not within our control. So as we sell more liters of gasoline and as the gas prices remain where they are, that, in the mean, results in what you see at the top line in revenue and also on the cost of sale.

Okay. Page 45, Note 21. In 2023, your staff costs was $115.7 million. And in 2024, your staff costs has jumped to $281.7 million. What has caused this massive jump in staff costs? And what is your staff complement?

Right. So our staff complement as at today is around 150 and it will continue to grow as we extend and expand our operating locations. Over the year under review, the staff complement increased about net 60 people, which I think it moved around about 80 something to about 140. So as explained earlier, our operations are expanding. So in the past, you just operated from -- even before we operated Beechwood Avenue, we had no -- we didn't operate anywhere than our retail sales. Then went to Beechwood Avenue and operated both our administration office and also retail. From Beechwood Avenue, we've expanded to Kitson Town, and we've expanded to Hayes. And then we have done LPG at Bernard Lodge, Naggo Head. All of these involve people, equipment, et cetera, all those expanding our operations. So the headcount increased. Staff costs will increase. Insurance is going to increase. Security is going to increase. All the attendant costs as related to assets is going to increase. And again, we didn't just -- could not just grow in one business. We're growing in several different kinds of businesses and operate on different levels. So we're not just talking about service station, the pump attendants. Now we're talking about LPG with filling plant operators, right? So our operating scope has increased. We're in the haulage, so we have fleet of vehicles have increased. Prior to IPO, we had one vehicle on the road. Now we have 26. So for our company, that's not growing like linear. We're growing like moving from a marble to a basketball. We're growing in every direction.

All right. Mr. Chairman, Page 46, Note 22, on the operating profit. In 2023, your directors' fees was $3.78 million. And in 2024, your directors' fees has jumped to $12.86 million. What has caused such a massive jump in fees? And have you added more directors to the Board?

Double check that number for me, please.

Your -- it's in here. Your director fees was $3.78 million and in 2024, this has jumped to $12.8 million.

It sounded low actually but -- so generally speaking, when a company is at a younger stage, you can't really compensate directors for the work they put in. As you grow a little bit, you have to compensate them more for the work that they put in.

So have you added more directors to the...

We have not added any more directors to the slate. We have 11 directors -- 12 -- sorry, well, 10 directors. So if you work out the average cost, it's, what, $1.2 million that works out to. Right. So it's about $1.2 million for the year. We have increased the number of meetings. We have increased number of committees, again, because we are growing. We have an LPG Committee. We have Executive Committee because the company is growing, and the level of the work and the time allocated to the company by the directors have increased. Again, we are not compensating them yet at a level that is commensurate to the work that they do because we're a growing company and we're asking them to be compensated at a lower level than they probably would deserve. But at this point in time, the company was fit to move from that very low number to a similarly low number.

All right. I have 2 last questions. Are your cylinders interchangeable with other companies' cylinders?

Yes, they are.

And my last question, what are the plans for dividend going forward?

Excellent question. We do have a dividend policy, which we do adhere to. Our dividend policy is on our website. It's available on our website and specifically points the company...

[indiscernible]

Perhaps. And it's 25% of the net profits for the previous year for consideration, subject to the CapEx needs of the company. Again, we're growing from 14 service stations to 21. We're building a new service station. We're going to the LPG space, all within a context of, one, high interest rates or higher than normal interest rates; and two, a somewhat underpriced capital market. So if we're to sell additional shares, it would necessarily be at the prices that we'd want to sell them at. What is the most efficient financing available in an environment like that when you want to grow? And that is to retain earnings. Having said all of that, the Board has not yet met to consider dividend and when they do, they'll make the appropriate announcements. And that decision will be taken.

Just an observation here. One notes that even for a relatively small company like this, you have 2.5 billion shares. And I'm one of those persons who have an understanding of how the maths work. With small companies, when you are to pay what would be considered a reasonable dividend so the investor can get a return on their money, it doesn't panel because of this huge volume of shares and you end up with some foolishness like 0.000 of a cent. And that has been -- that is becoming a problem in the whole stock market space. How do we address this? Because when you look on your financial loan and you have a retained earnings of $1.5 billion, but -- and everybody getting an increase except the shareholder, the shareholder can only make money -- and somebody said yesterday and rightly so at another meeting -- by only 2 ways, capital appreciation and dividends. And for the last 2 years, you have not paid any dividends. And you have 2.5 billion shares and everybody gets an increase. So when next the Board meet to have a discussion on it -- mic...

We can hear you though.

We can hear you.

When next the Board meet for discussion about dividends, please sit down, put some rational thinking into it and pay us something that is reasonable, so we can get a return to continue on the path of investing in the company.

Thank you very much for your question, Mr. [ Bloomfield ]. Well appreciated.

[ Carrie Tip ], shareholder. Please go with me to Page 38. We're talking about trade and other receivables. Could you just -- I noticed that there is a -- I mean, I know that we have a massive impact, a massive growth in this company, and I know that things have to settle. But the trade receivables in Note (a), 11 Note (a), you have almost doubled. And I wanted to know if you could speak to that. And it has gone up like almost like 40%, plenty percent from $660 million to $900 million, to almost $1 billion. I know that with a massive expansion that, that is expected. But is there something that can be done to keep this figure from growing any bigger? Is that under control? On Page 38, Note 11, trade and other receivables. This is in-- it's in the financials.

No, no, I get it. So again, sometimes when looking at big numbers, you have to put them into ratios. So that figure represents less than 10-day sales. Now for most businesses, as you know, whether you're trading gasoline to selling to wholesale customers, are you selling [ macro or flow ], there's a time between when the person pays you and when you collect. The calculation, as I say, is within the norm, is about 10 days' worth of sales and is within the policy of the company. Again, our balance sheet is also a snapshot at a point in time, right? So it's not what it's for the entire year. But it's within what is typical.

What is normal. Okay. So may I ask, sir, with respect to get that, some of the companies break it out into 30, 60 and 90 day so that we can have -- I mean, if it was over the 90 day, then I would be very concerned. But as you rightly said, 10 days is no concern at all. So thank you so much for the comments.

Kayola, is there no question online?

Yes, a question in the chat is have you been getting great reviews re LPG.

Yes. I think we got one today.

To be frank, the demand is overwhelming. I mean our only problem is the ability to satisfy the demand because of the cylinders that we have to bring in, so it takes time. So yes, we're very pleased with the operation, and I think there's a lot more room for growth. So sure. All right. Yes, please.

I'm [ Teresa Edward ], shareholder. So I was looking at your interest expense, what is it now, Note 23. In 2024, it went up to $167 million. In 2023, it was only $17 million. But I'm trying -- that is hundreds of percentage increases. What I'm trying to tie back with what is on the balance sheet to see where there was a corresponding movement in the long-term liabilities or the liabilities. But I'm not seeing that. The long-term liabilities actually decrease. I'm trying to figure out how the interest expense was around...

Pardon me, can you repeat which note?

Well, there is Note 23, interest expense. It was $167 million in 2024, and it moved from $17 million in 2023.

Are you talking interest expense?

Yes, interest expense.

Again, as I said, we borrowed about $1.7 billion. 10% of $1.7 billion is $170 million for the year interest.

So that's reflected in your long-term liabilities?

So that's what I'm saying. We paid interest of about $167 million and then our -- I think somebody mentioned earlier what is the long-term debt of the company and you saw it at $1.3 billion. So on the balance sheet side, you will see the long term -- the loan, the debt, the long-term debt. And then you'll see the interest cost right here.

No, what I was trying to look at the movement between the interest expense and the movement on the long-term liabilities. So the difference in the interest expense between the 2 years is huge, but I'm not seeing the corresponding increase in the long term liabilities.

Remember, the way the long-term loan will interchange is when you make principal payments, not interest payments. Interest payments don't change your principal balances. All right. So if you asking why move from $17 million to $167 million, it depends when you took the loan. And two, it's also -- for 2020, the year ended March 2022, we did not start the LPG business. So part of what is in account is your booked expense start in the year that the business starts. We started LPG. For this year, which is April 2023 to March 2024, so you're no longer capitalizing the interest. You're right. You're now booking the expense of it. So you will see, when you took the debt plays a part. When you start the business plays a part. What we're looking for our annualized interest cost, 2024 is a better -- captures it better because you will see that the interest cost for the year is $167 million and debt of about $1.9 billion when you add in amortized loan, et cetera. Not helping?

Nothing. Well, you [indiscernible]

Yes, sir?

You have online.

Sorry, a moment. We have a question online, which we need to take.

[ Beraldo Barnett ] has online question to the MD. Thank you for the insight for the presentation, especially regarding FESCO's growth in the Jamaican market. What initiatives is FESCO implementing to enhance customer loyalty in the industry?

To enhance customer loyalty, I mean, a specific marketing program. We at FESCO believe, as I said, I think, earlier this week, like Walmart, we believe in everyday value and doing stuff every day. So every day when you come and experience our service stations, what you should experience is a clean, safe, aesthetically pleasing service station with great service from our pump attendants. That's our value proposition. And that value proposition has allowed us to expand and grow. So again, if you want good value, you come to our service stations and customers have been repeat buyers. So...

In addition, Jeremy, we have been very involved in a community -- a lot of community activities, sponsorships, et cetera, et cetera.

So if you ask us specifically, do you need to join our club to get a discount from us, no, I think we try to give it at best price to everybody.

I have another question from [ Jason Thompson ]. He has submitted twice. So the first submission is, 2 questions, how does one become a distributor of FESGAS. And two, are there any plans of additional services at gas stations, such as sale of goods? Visited the location on Mandela Highway and was surprised that there was not something of that nature there. Let me repeat the questions. How does one become a distributor of FESGAS? And are there any plans to offer additional services at gas stations such as sale of goods?

I'm not sure about the second question, is that, yes, he can repeat -- send -- resubmit that question. To become a FESGAS dealer, you just simply need to contact our offices and -- or you can just go to our website at fescoja.com of fesgasja.com and they'll give you information as how to submit information to become a dealer.

All right.

[indiscernible]

That's why I said I'm not sure what the question he's asking.

So just say it in what response.

Okay. So for most of our stations, we try to build out a destination with many services. So at Mandela, you have gasoline offerings. I have a wide array of gasoline offerings from E10 87, E10 blend, 87+, 90, Futron 90+, which is a minimum octane of 93. In addition to that, you have Tastee, which -- from patties to [ curry good ] to breakfast, Callaloo Breakfast and yam and banana. You have convenience store, and convenience store is more than convenience. You can get some frozen Viennas -- not frozen Viennas. But you can get Viennas and you can get Frankfurters. You can get ice. You can get liquor, wine.

I'm not sure, Jeremy, that person, that specific...

That's what I'm saying. I don't understand the question. But that station is a destination. I mean you can get Devon House ice cream in that station. I believe if you want to transfer some money, you can transfer your money, too. So I know that's not the question they were asking. So that's why I said it's best if they resubmit the question. I believe you can get 2 ATMs. There are 2 banks available.

I'm sorry. I'm just trying to understand it myself, but I think the question is those things that you can get, like at Mandela, you can get your Tastee patties. You can get that. Is that actually FESCO? Are those independent persons selling those, independent of FESCO just like franchisees or so? That's...

Again -- okay. So our -- remember, we have company-owned and we have dealer-operated service stations, right? We have 21 stations. The ones at FESCO, Future Energy Source Company operates, Beechwood Avenue, Kitson Town and Hayes. And we're also building one now on Spanish Town Road. Every other station is dealer owned, dealer operated.

Yes, sir. Sorry to keep you waiting so long but...

No, it's okay. [ Mark Anthony Barton ] is the name. The question I have is with FESGAS. Does you have conversion issues in terms of the cylinders you receive from new clients or new customers in terms of -- what's the conversion rate actually currently? And how much of the cylinders are reused or might have to be disposed of in terms of compatibility, I should say?

Okay. So generally speaking, there are 3 types of heads for valves, POL valve, which is the 1 for the 100 [ valve ]. We have split it and we have run it. We have all of those sets. So whatever cylinder you have, we have -- whatever value you have, our regulator, we have a cylinder that can work with it, adaptable. No -- I'm not sure of the ratio you're talking about. Let me try to answer it the way I understood it. Most households in Jamaica want cooking gas, have a need for cooking gas, already have cooking gas, right?

Yes, have cylinders. Yes.

Have a cylinder. So most of our customers are going to be conversions. So we have to believe in our existing [ brand ]. So that's virtually everybody. If you want to study the economy or the household, it's just grown by 3%. It's just that 3% of 18 year olds moving out, that probably a new customer to the entire space. So conversion [ present ], most of it is a conversion. If you're saying that the cylinders when a -- no, if they can be reused, a cylinder typically should have a useful life of about 30 years. It will be refurbished and repainted during that time, but a cylinder is supposed to be used many times.

Okay. 30 years, that's more than concrete. What about the plastic cylinders?

So we do have some composite cylinders, these are no-BLEVE cylinders. They are a lot safer than steel cylinders. They won't explode. No, they won't explode. We have a video, and I can show you afterwards. We light 100 of them on fire filled with gas. They burn out. It's gas. It will burn, but it won't turn into a missile, as what you say. These cylinders are for -- there's no rust, so you won't damage your tile. It's lighter. You can actually see the levels of the gas. If it is running out, you can actually see it, right?

Okay. A smart cylinder.

Excellent cylinder. In addition to that, they're proving to be longer lasting than advertised. So the manufacturers of them, which is essentially in Europe, what they have been experiencing is that the useful life of them extend even beyond what they are marketed and advertised. It's a newer market, but again, what they're seeing, again, it's a 25, 30 plus years useful life.

Longevity is [ working ].

Yes, as long as you keep it. Sometimes we Jamaicans try to destroy stuff.

But abuse while we use.

I have another question online, Mr. moderator. What guarantees are there that customer service will be paramount in the cooking gas space? Companies have been notorious in offering subpar service in this space. What is going to allow FESCO to stand out? And this question comes from Jason Thompson online.

So all companies from time to time try to improve their service offerings. It's ongoing. We do monitor. The truth is within the LPG space, the distribution comes through many channels. So sometimes we sell to distributors, who then sell to the customer. So we don't interface with the customer. And that level of service guarantee is not something we have control over. Where we do market and distribute directly to the customer, we do have service standards, and we do have customer service churn in both on LPG and the gas side. So we do have a commitment to review, assess, implement and train, and we do as best as possible to maintain a level of customer service.

Once we expand into new areas, of course, the delivery will become a lot more efficient and faster, so yes.

Another question from [ David Rose ]. Could FESCO give some details on the Bernard Lodge application that was approved by NEPA in October? It's for a storage and dispensing facility.

You mean give some clarity on the approval?

Sounds that way.

I mean, that is approved. It's the same facility. It's just a renewal of the license. The license expires.

Maybe he wants to understand what Bernard Lodge is all about. What's the business that's there.

No. Bernard Lodge is a LPG fill-in plant. It's a facility which we acquired from Wilson Beck back in April 2023 to renew licenses. Yes.

All right. Yes, please, go ahead.

Yes, I am not a shareholder, potentially future shareholder. But I wanted to follow up on the question regarding dividends. I'm not sure I understood the response. There are specific benchmarks that have to be met before given that the company has been so profitable and anticipating future growth. And I did not hear a specific response as to what benchmark has to be met in order to provide dividends for your current shareholders.

So the Board will deliver it each year as to whether it's appropriate for the given year to pay a dividend. But -- well, generally speaking, for growth companies, dividend expectation is tempered versus a mature company. So a mature company, there's not much area for growth to pay a dividend. Where a company is growing, there is sometimes a need for capital expenditure, and those deliberations will consider the needs of the shareholders regarding a dividend as well as the needs of the company to finance growth at the best cost of capital. So those deliberations will take place every year. Yes.

Online, Mr. moderator?

Sorry. Yes. You're finished, Jeremy? Okay. yes. Go ahead, Kayola.

So [ David Rose ] has a number of questions. How have negotiations been with other dealers to convert them to the FESCO brand?

I'm sure [ David ], as a friend, would not want me to be talking about negotiations.

What's the next horizon of growth for FESGAS? Will there be greater emphasis for bulk sales or growth in retail sales? Answer that part and then I'll go...

Okay. So that's fairly simple to answer. We just started FESGAS. We're just at 6%. So our opportunities to grow are in both areas, both retail and commercial, and we'll be pursuing both.

Also, when does FESCO project to become profitable with this segment? Could FESCO also include the LPG segment in the quarterly reports?

So I give an announcement, which is that the FESGAS side of the business is EBITDA positive. That mean it earns positive earnings before interest, taxes and depreciation. Will we be providing information on a quarterly basis on a quarterly segment? No, we'll not because it puts us at a competitive disadvantage. And I'm pretty sure our stakeholders and shareholders wouldn't want us to be sharing information that our competitors can use against us.

Well, there is one more from [ David Rose ]. Has FESCO seen any contraction in its volume sold post barrel? Also how was November been looking so far?

Okay. Excellent question. So barrel took place in [ 1 ] July. So for the quarter ended September, as reported, we noticed that we experienced a 13% increase in our volumes. However, in that numbers, you have same-store sales and you also have new stations that weren't here from the year before. Has there been a contraction in the economy? Yes, there has been. There has been a contraction in also October and November would increase rates. Will that pass through -- did it pass through in our renewals in September? No, it didn't because we had increased volumes. We had increased profit spread. Actually, our best quarter ever in the one just ended September 2024. But the economy has slowed, though, and that is indicated in the report made today. If you read a [indiscernible], which the publication was the Gleaner or Observer, the economy has slowed down. So we're monitoring that. We do participate in an essential service. People need energy for transportation, so the demand is relatively inelastic. But if you asking the general question, have we noticed a slowdown -- slowing down, yes. But is it significant relative to other industries? Not as significant.

Not all the character. Yes, go ahead.

Yes. [ Carrie Tip ], shareholder again. On Page 7 of the front part of the thing, I just want -- I'm just asking an explanation. I'm not quite understanding finance cost/income. It's a historical representation from [ 2016 ] income all the way to 2024 and 2023. And I noticed it has a minus 2,000%. Is it that the finance cost went down? Or is it that the finance income was reduced? I'm trying to understand. I'm just asking for an explanation, please.

I mean the number you said, the income or cost, and you're asking for which year?

Yes, is the $8 million an income or a cost and is the minus $155 million -- which is it because I'm not understanding?

It means the costs went up by $155 million. That's what you're asking? Which one -- which...

It's Page 7 and it's line finance cost/income.

That's the interest cost for the year of $155 million. So for the previous year, we had finance income. You put monies on deposits. You earn interest. So that year, our interest income exceeded our interest cost.

So it was $8 million in income?

In income. The next year, which is this year, the cost exceeds the income by $155 million.

Okay. I was just trying to make sure that, that was my understanding. I understand.

So one last question from online. Will any of the other service stations in development be paired with a fast food franchise? It is a very effective model to bring value to the FESCO product.

That person is?

[ Andre Samir ].

[ Andre ], great idea. We'll consider it. We have considered it is part of our model to develop destination service stations. So it is always within the mix of products that we try to offer at our new developments. It all depends on the location, the land available. Yes. But as you know, we do have, let's say, models at Beechwood Avenue.

All right. So [Foreign Language] Go ahead.

My name is [ Jordan James].

[ Jordan ]?

[ Jordan James ], yes, shareholder. So we have a cooking gas distribution in Greendale, St. Catherine. Right. So yes, we have a cooking gas distribution in Greendale, St. Catherine. But we haven't begun selling FESGAS as yet. Right. I'm just asking, how we do go about incorporating FESGAS into the business and how can -- how does FESCO aids with increase in business productivity?

I didn't hear the last part of the question. So I'll ask you to repeat that to the gentleman right beside in blue shirt. He'll be very excited to talk to you about distributing FESGAS. The last part was what?

How does FESCO aids like small distributors like myself in increasing business productivity?

You mean, if you were to sell the gas from us?

Right.

Marketing support.

Go ahead. Go ahead.

Name is [ Joe Lang ], shareholder. So my question really was on the partnership with 7Krave. Is it an exclusive partnership?

I won't go into the commercial terms of the partnership.

My name is [ Rodna Bushe ], a shareholder. Others from the water, I noticed I don't see our brand water in supermarket or retail store.

Yet.

Yet? It's a good -- well, the water, no, I haven't seen them anywhere. So what is holding up that process? Page #45, I see where the expense leaped from $11 million to $50 million.

Which one?

Page 45 of your report, office expense.

Of the auditor's report?

Yes.

Which particular expense?

I think it's the auditor's report -- the financial statement, office expense.

You mean office expenses?

Yes, yes, yes.

Right. Remember that -- not necessarily remember. We're operating from several additional locations. Primarily we're at just Beechwood Avenue. We're also at Kitson Town. We're also Bernard Lodge and we're also at Naggo Head. So we have moved from one location to...

Four locations. Okay. Are we expecting to see more branded stuff from FESCO like we have water? Any more products in the pipeline?

Not new products, but as was asked, there are plans to increase our distribution of products and we'll make those announcements in the right time. But yes, we started with some other products within our network of service stations and that there -- we'll announce when we're going to take them out of just being in the service stations and being available at other retailers. So we started with the FUTROIL, FUTRLUBE, and that's partly addressed in the deal with Auto Don. So no, you can go to most auto part dealers and get our FUTROIL. There are also plans to extend our water outside of the service station. But again, we try to do everything to ensure that it's accretive, right? So we have to get it right, the right distributor and et cetera.

My last question, the Spanish Stone branch that is open, where in Spanish Stone exactly it is?

It's not. Spanish Stone but Spanish Town Road.

Spanish Town Road. Yes. Sorry, my apologies.

[indiscernible] Manchester Road is by Clarendon. Spanish Town Road is in St. Catherine.

Okay. My question leading to that, is that a lease or FESCO hold land?

Company-owned.

FESCO-owned property.

So we have [ spectrum roof ] in there, Appleton Estate.

[ Rachel Irving ], shareholder. What do you account for the tremendous increase in advertising and promotion budget at threefold increase from 2022 to 2024?

Excellent question. So we had to establish the FESGAS brand. And then also in establishing that brand, you need to create brand awareness. Who was it? Ms. [ Carrie ]? Right. You are able to identify the FESGAS van because you saw branded FESGAS, right, along the road. To brand each 1 of these 26 vehicles that we have would cost a pretty penny. So we spend the monies to brand these vehicles, and we believe -- in addition to that, you have billboards ads, et cetera. So we had to expand our marketing budget.

$46 million? I'm not feeling it. I'm not feeling the [indiscernible]. I'm not feeling it.

To brand 1 vehicle can cost in excess of -- should I go into the details? No. One example, to brand a vehicle can cost more than $300,000 to almost $400,000.

Sorry, one last question. We have time for one last question.

[ Damian Austin ], shareholder. On Page 45, motor vehicle expenses, that is on the notes of the financial statements, 31st March 2024. You have $30,295,616 compared to 2023, $4 million. Could you explain as to the reason why?

Yes, well, move from 1 vehicle to 26 -- move from 1 vehicle to 26. In addition to that, we do our own -- with the haul now LPG. So the trucks, trailers, bobtails over there from tires to fuel, et cetera.

And there on the same page, and as my last as question, number -- Point 18 under current liabilities, bank draft, the previous year, 2023, none. But 2024, you have about $16 million [ mash-mash ]. Could you explain that overdraft, bank overdraft on the current liabilities? Page 1 after the independent auditor's report.

Right. So we have an overdraft facility that we utilize from time to time. So on that day, we utilize that facility. But as you look at the cash and cash equivalents balances we have significant amount of cash. We don't necessarily break maturities on instruments just to facilitate a short term transaction.

Thank you. Ladies and gentlemen, I want to thank you all very much for your comments, your questions, your observations and your suggestions, very fruitful discussion. And I wish to proceed to the consideration of the resolutions. All right. So I ask that the Managing Director having presented its report, may be found on Page 30 to 32 of the annual report be taken as read. And thank you all for agreeing. Thank you very much. Members on the line may move or second the resolution, by selecting the move or second button located under the vote tab on the right side of the screen. Members online may vote by clicking on the vote tab on the right-hand side of your screen, selecting the resolution for which you are submitting your vote, clicking the vote button and selecting either for or against. Also, you would be asked to confirm your vote. Once you're certain, you submit your vote. Resolution number one. I now ask the Secretary to read the first resolution.

That the audited accounts were ended March 31, 2024, and the reports of the directors and the auditors circulated with the notice convened in the general meeting be and are hereby adopted.

So can I ask a mover? You're moving the vote? Can I have a seconder? Director Eaton Parkins seconds the motion. All those in favor of the motion, I'm going to ask that you please raise your right hand. Thank you. All those against the motion, please raise your other hand. Members online, we're asking you, please remember to follow the online voting instructions. So I now declare the motion carried unanimous. In accordance, this is resolution #2. In accordance with Article 102 of the company's Articles of Incorporation, 1/3 of the directors, not including the Managing Director, referring to Article 120, are retiring by rotation and being eligible for offer themselves for reelection, again, Article 104. They are Mr. Eaton Parkins, Hugh Coore, Mr. Junior Williams, Mr. Errol McGaw. Kayola?

Just letting you know that there are movers and seconders online. I will read the first one that Mr. Eaton Parkins, retired by rotation be and is hereby reelected as director.

Who so moves?

Moved by Ryan Wallace online.

Second the motion, please. Kayola, who is second for the motion?

Daphne Jasdale.

All those in favor of the motion, please raise your hand, please. Any against? Members online, again, need to remember to follow the online voting instructions. I declare the motion carried unanimously.

Next, Mr. Hugh Coore retired by rotation be and is hereby reelected a director.

Who so moves?

Candice Walker online.

Seconder? All those in favor on the motion, please raise your hand. Thank you very much. And against? Any members online, Kayola? So I declare the motion carried unanimously.

Next, that Mr. Junior William, retired by rotation be and is hereby reelected a director.

Can I have a movement for that?

Moved and seconded online.

All those in favor of the motion? Any against?

Moved by David Roles and seconded by Ryan Wallace.

So I declare the motion carried, Kayola, unanimously.

And for 2D, I will read that Mr. Errol McGaw, retired by rotation be and is hereby reelected a director. I'm asking who so moves? Mark Barton moving. Seconding, Ronnie Boucher? Thank you, Mr. Rodney Boucher. All those in favor, please raise your hand. Anybody against? Please raise your hand. I declare the motion carried unanimously.

Thank you, Kayola. Resolution 3?

That the auditors, Baker Tilly Strachan Lafayette trading as Bakertilly, having indicated their willingness to continue in office be and are hereby reappointed until the conclusion of the next Annual General Meeting at a renumeration to be fixed by the directors.

Can I get a motion?

Moved by Director Parkins.

And seconded by?

Who is it seconded by? Muria Daily.

All those in favor of the motion, can you please -- any against?

I'm against [indiscernible].

Can you remind me of your name? Miss [indiscernible], against. Thank you. You also indicated that you're against. Remind me of your name? Rachel Aurview.

So the motion is carried by a majority?

Carried by majority. That the directors be and are hereby empowered to fix the remuneration of the Executive Director.

Could I have a move, someone move to motion? Thank you, Director Ethan. Can I have a second? Who is the seconder?

Daphne Jasdale.

Okay. Thank you very much. All those in favor. Could you please raise your hand? Any against? Thank you very much. Members, I declare the motion carried.

That the total director fees for nonexecutive directors in the sum of f $12,860,000 in the accounts for the year ended March 31, 2024, be and is hereby approved.

Who's so moves? Director Eaton Parkins?

Let a non-director move, please?

Can I have a seconder?

Who moves the resolution?

It's second -- you moved it.

Is there any Mark Bynet?

Barton.

Barton. Mr. Barton.

All in favor?

Who's seconded?

No, I thought Ethan seconded it.

Can I have seconder? We have a seconder online Andre Samir Wilson.

So all in favor of the motion, please raise your hand. All those against? We have 2 against the motion.

The persons against, can I have your name for the record? Victoria Graham, and I saw a second against? Rachel Irving. Thank you.

Okay. Well, ladies and gentlemen, this concludes the business of the Annual General Meeting. I would like to talk...

It was carried by majority.

Carried by majority. Pardon me?

We had 2 persons against.

Yes. We just had 2 persons against. But there was more than 2 persons voting for. Well, let me just congratulate the Board of Directors, the management and the entire staff on the strong performance of the company during the financial year for April 2023 to March 2024. I now at the 12:43 p.m. declare the meeting closed and thank you for attending all, participating in this general meeting. The Board of Directors wishes you every success. And we hope that you will continue to keep safe and healthy. Thank you all very much for coming.