AT the 2001 annual general meeting of Pan-Jam, the Group's chief executive officer, Richard Byles challenged his management team to produce
$1 billion of profits for Pan Jam's shareholders by 2006.
This target would require a 25 per growth in profits each year by all of Pan Jam's subsidiaries. The Group has surpassed the 2002 objective, reporting profits of $425.9 million, an increase of 61 per cent over 2001. For the past five years, Pan Jam has increased profits by an average of 47 per cent each year.
These results have been produced through a series of acquisitions, mergers and divestments that have transformed the group from a sprawling conglomerate involved in everything from beef rearing to tourism, horticulture to manufacturing, to its focus on four core competencies - insurance (First Life), banking (Pan Caribbean), property (Jamaica Property) and trading (Hardware and Lumber). Each of these companies is now a leading player in its industry and contributes to the outstanding performance of the Pan-Jam Group.
In Insurance, First Life, along with its new partner, Life of Jamaica, now holds the number one position for group life and health insurance and pension management in Jamaica. This is as a result of an unprecedented merger of the back office operations and a co-insurance agreement in which they share equally in the risks and rewards of the two companies' group life, health and pension management business. These innovative arrangements will effectively give First Life (and LoJ) the lowest administrative cost structure in these businesses, providing the platform for future growth and profitability.
"All the one-time costs associated with the merger have been included in the 2002 accounts. However, the cost savings have not yet been reflected as the operational merger was just completed in January 2003," commented Richard Byles, CEO of Pan-Jam and Chairman of First Life. First Life's audited results for 2002 showed profits of $519.9 million, 35 per cent more than the $385 million of 2001. Like Pan-Jam, First Life has produced strong profit growth over the past five years, moving from $162 million in 1997, an average annual growth rate of 27 per cent. This year is, therefore, definitely a milestone for First Life as the upcoming one promises increased results and expectations.
The performance of Pan-Jam's Banking Division, Pan Caribbean, has been equally remarkable. Five years ago, profits were $27 million. Over the years, a series of good acquisitions have fuelled banking profits to its current $217 million, up 146 per cent over 2001. In conjunction with greater profits, the bank's capital has grown and Pan Caribbean passed the billion dollar milestone for the first time in 2002.
Last December, Trafalgar Development Bank was renamed Pan Caribbean Financial Services Limited, as the first step in re-establishing and developing the "Pan Caribbean" brand. According to Donovan Perkins, CEO for the company, "we have been a conservative financial institution and that has contributed to our growth, stability and success. However, this conservatism also influenced our marketing mentality." He went on to elaborate that a number of steps are underway to correct this weakness in the current competitive environment. "We are in the process of building a better brand in the marketplace, we have acquired the name rights to the most distinctive building in New Kingston and plan to re-launch Pan Caribbean in the second half of 2003."
In addition to a more aggressive marketing focus, Pan Caribbean last year invested heavily in technology. Anya Schnoor, Pan Caribbean's Senior Vice-President, commented that a critical element of the Bank's competitive strategy hinges on efficiency. "We recently installed Flexcube and hope to leverage this cutting edge banking software technology. The objective is to better serve our customers, and develop more value-added products that are scaleable." Schnoor believes that the battle for customers will become more heated "so we have to have first rate technology to provide our staff with the support to successfully compete."
At Hardware and Lumber major changes also occurred. Five years ago, the profits of H&L were $12 million, which were primarily a result of wholesaling lumber and hardware items to small retailers. "We saw the writing on the wall. The wholesale business remains the bread and butter, but retailing has become our steak," commented Tony Holness, managing director of H&L. In 2002, profits stand at $48 million, which was driven by the H&L True Value retail stores that have built a reputation of being the finest home improvement store network in Jamaica.
Jamaica Property is the quiet "back-bone" of the Group, sailing along with $1.6 billion invested in office and retail property. Widely regarded as the pioneer of modern commercial property, JPCo has left an indelible mark on the Jamaican horizon with landmark buildings like the Scotiabank and Air Jamaica structures downtown, the First Life and CIBC buildings in New Kingston and the Manor Tower and shopping plazas at Manor Park. These properties and others are largely debt-free, and have contributed strong and increasing cash flows that have protected the Pan-Jam Group in times of rapid currency devaluation. According to Stephen Facey who heads the property division, "Although we had a good year with an average 93 per cent occupancy, considerably upside potential remains in Triple A property as real estate market prices drive rental rates, and prices are now about 50 per cent of replacement costs."
Talking about the future of Pan Jam, Byles reports, "my responsibility to shareholders is to create value for them today, and importantly, to preserve and enhance it into the future. Whether by acquisitions, cost effectiveness, mergers, divestment or revenue growth, the method is not the issue, shareholder value is the primary objective driving our decisions."
