Fe­lix Pereira

So far, three com­pa­nies have re­leased their first quar­ter re­sults for the pe­ri­od end­ing De­cem­ber 2012.

These are Re­pub­lic Bank Ltd, Neal and Massy Hold­ings Ltd and Agos­ti­ni's Ltd. One com­mon theme that flows through these re­ports is a sense of qui­et op­ti­mism as each en­ti­ty, in its own way, con­tin­ues to build share­hold­ers' val­ue.

Re­pub­lic Bank Ltd (RBL)

RBL ends its first quar­ter re­view with the com­ment that "the year has start­ed off with the promise of in­creased eco­nom­ic ac­tiv­i­ty which bodes well for the fu­ture."

Dur­ing the quar­ter, to­tal as­sets rose by $2.62 bil­lion to $54.2 bil­lion from the $51.6 bil­lion record­ed as at the end of Sep­tem­ber 2012. Cus­tomers' de­posits in­creased by 8 per cent to $43 bil­lion from $39.8 bil­lion as at last Sep­tem­ber.

Mean­while, loan ad­vances rose 2.5 per cent to $23.9 bil­lion from the $23.3 bil­lion as at the end of its last fis­cal pe­ri­od. Cash bal­ances con­tin­ued to swell; in this quar­ter, they closed at $18.3 bil­lion an in­crease of $1.8 bil­lion from $16.5 bil­lion at the be­gin­ning of the quar­ter.

All three op­er­at­ing seg­ments of the group de­liv­ered im­proved earn­ings. The star per­former was the Cay­man, Guyana and East­ern Caribbean seg­ment, which saw pre-tax prof­its rise by 8.2 per cent to $63.2 mil­lion from $58.4 mil­lion for the com­par­a­tive pe­ri­od in 2011. The Bar­ba­dos group­ing de­liv­ered a 6.4 per cent im­prove­ment in pre-tax net prof­it; this fig­ure moved to $39.8 mil­lion from the 2011 fig­ure of $37.4 mil­lion.

Al­though rep­re­sent­ing the largest seg­ment, the Trinidad com­pa­nies' saw prof­its im­prove by a less ro­bust 6.2 per cent to $431 mil­lion from the $405.9 mil­lion record­ed in the first quar­ter of 2011.

Re­pub­lic con­tin­ued to con­sol­i­date its po­si­tion in Bar­ba­dos and has now at­tained a 96.1 per­cent­age own­er­ship in Re­pub­lic Bank Bar­ba­dos Ltd; full own­er­ship is ex­pect­ed to be achieved dur­ing the cur­rent quar­ter. The pur­chase of ad­di­tion­al shares in the first quar­ter cost $509 mil­lion (US$80.5 mil­lion). Be­cause the car­ry­ing val­ue of the ad­di­tion­al share­hold­ing ac­quired was on­ly $368.1 mil­lion, this re­sult­ed in a charge to its re­tained earn­ings of $140.9 mil­lion.

In a sim­i­lar vein, we should ex­pect that RBL would even­tu­al­ly move to in­crease its small stake in the Ghana­ian bank, HFC Bank of Ghana Ltd, at an ap­pro­pri­ate time. Since this is a new mar­ket, the pace at which it in­creas­es its own­er­ship po­si­tion is like­ly to be mea­sured.

Neal & Massy Hold­ing Ltd (NML)

Al­so in an up­beat mood was the state­ment end­ing NML's first quar­ter re­view, as fol­lows: "The group has an ac­tive set of in­vest­ment op­por­tu­ni­ties that it is cur­rent­ly eval­u­at­ing as it recog­nis­es the need to en­ter new mar­kets to sus­tain growth."

Prof­it from con­tin­u­ing op­er­a­tions moved up to $132.3 mil­lion in the quar­ter end­ing De­cem­ber 2012 from $131.8 mil­lion for the same pe­ri­od in 2011, or by a minute 0.35 per cent. How­ev­er, what made the dif­fer­ence in earn­ings per share was the lack of any charge for dis­con­tin­ued op­er­a­tions. In 2011, this fig­ure con­sumed $0.12 per share, pulling down that mea­sure­ment to $1.24.

In the 2012 pe­ri­od, no charge for the dis­con­tin­ued op­er­a­tions was ap­plic­a­ble, which left the earn­ings per share at $1.36; con­se­quent­ly, this al­lowed NML to re­port an EPS that showed an im­prove­ment of al­most 10 per cent over the 2011 fig­ure.

Seg­men­tal re­sults for the quar­ter were mixed as the pos­i­tive per­form­ers were al­most to­tal­ly can­celled out by weak­er di­vi­sions. The au­to­mo­tive and in­dus­tri­al equip­ment di­vi­sion de­liv­ered a 5.2 per cent in­crease in rev­enue, which end­ed at $478.6 mil­lion. This mod­est im­prove­ment in rev­enue was ac­com­pa­nied by a more ro­bust in­crease in pre-tax prof­its, which rose by 15 per cent to $45.9 mil­lion from $39.9 mil­lion in the 2011 com­par­a­tive quar­ter.

Al­so hold­ing its own was the in­sur­ance di­vi­sion. In this case, rev­enue fell by more than 6 per cent to $65.1 mil­lion from last year's $69.6 mil­lion. On the oth­er hand, pre-tax prof­it rose by a strong 42 per cent to reach $12.7 mil­lion from 2011's fig­ure of $8.9 mil­lion.

Mean­while, the in­for­ma­tion, tech­nol­o­gy and com­mu­ni­ca­tion (ITC) seg­ment pro­duced a mar­gin­al de­cline in sales to reach $117.3 mil­lion from the $118.7 mil­lion record­ed in 2011. Prof­it im­prove­ments, how­ev­er, were more ro­bust in­creas­ing by a mar­gin of al­most 31 per cent to $11.8 mil­lion from last year's $9 mil­lion. These im­proved re­sults were helped by the Ja­maican re­sults.

Al­so help­ing the over­all re­sult was the con­tri­bu­tion from "oth­er in­vest­ments", which im­proved from the 2011 fig­ure of $28.2 mil­lion to the $30.9 mil­lion record­ed for 2012.

The in­te­grat­ed re­tail units saw their rev­enue in­crease from $1.42 bil­lion in 2011 to $1.46 bil­lion in the 2012 first quar­ter, or by a mod­est 2.5 per cent. The prof­it pic­ture was more chal­leng­ing as this mea­sure fell to $100.7 mil­lion from 2011's re­sult of $104.5 mil­lion or by 3.6 per cent. Much of this de­cline was at­trib­uted to the re­moval of VAT on some items in Trinidad and, in Ja­maica, costs of new hires and oth­er ini­tia­tives.

The en­er­gy and in­dus­tri­al gas­es units saw de­clines in both rev­enue and prof­it be­fore tax­es. Rev­enue con­tract­ed by $4.8 mil­lion to $193.7 mil­lion or 2.4 per cent. Prof­it fell from $51.7 mil­lion in 2011 to $47.2 mil­lion cur­rent­ly, or by 8.6 per cent. This re­sult was at­trib­uted to the cur­tail­ment of gas sup­ply to the rel­e­vant com­pa­nies. This dis­rup­tion is not ex­pect­ed to re­cur.

Of some con­cern to this group is the re­cent an­nounce­ment by the Ja­maican gov­ern­ment of a new aus­ter­i­ty and debt re­struc­tur­ing pro­gramme. That aside, the group is com­mit­ted to fi­nal­is­ing the sale of its ho­tel prop­er­ties, which should be com­plet­ed by the end of this fis­cal pe­ri­od. Look­ing to the fu­ture, the group is en­er­gised by its new part­ner­ship with Mit­subishi Cor­po­ra­tion, which, in the first phase, in­volves the pro­duc­tion of di­methyl-ether from methanol. Oth­er ini­tia­tives in­clude new ac­qui­si­tions and busi­ness op­por­tu­ni­ties in Cen­tral and South Amer­i­ca.

Agos­ti­ni's Ltd (AGL)

In a sim­i­lar vein to the two pre­vi­ous com­pa­nies, Agos­ti­ni's Ltd quar­ter­ly re­view end­ed by re­mark­ing as fol­lows: "...Gov­ern­ment's in­tend­ed stim­u­lus pro­grammes should im­pact eco­nom­ic growth in 2013. This, to­geth­er with our in­ter­nal ini­tia­tives, are ex­pect­ed to yield pos­i­tive re­sults."

De­spite a 1.1 per cent de­cline in rev­enues to $359.4 mil­lion, AGL earned a high­er op­er­at­ing prof­it; this fig­ure came in at $33.8 mil­lion from $33.2 mil­lion for the same pe­ri­od in 2011. How­ev­er, fi­nance costs erod­ed this gain as these rose to $2.74 mil­lion from $2.39 mil­lion in the com­par­a­tive pe­ri­od in 2011. The rea­son for this in­crease was due to the re­fi­nanc­ing of low­er cost short-term debt by a $50 mil­lion bond is­sue in Jan­u­ary 2012.

Af­ter al­low­ing for mar­gin­al­ly low­er tax­es and an in­crease in prof­it at­trib­ut­able to non-con­trol­ling in­ter­ests, the prof­it at­trib­ut­able to share­hold­ers came in at $22.57 mil­lion. This re­sult was 1.3 per cent greater than the $22.29 mil­lion earned for the com­par­a­tive quar­ter in 2011. Earn­ings per share were un­changed from the $0.38 record­ed for 2011.

The phar­ma­ceu­ti­cal and per­son­al care dis­tri­b­u­tion seg­ment showed in­creas­es in both rev­enue and op­er­at­ing prof­it. Sales im­proved to $222.6 mil­lion from last pe­ri­od's $215.8 mil­lion or by 3.1 per cent. Prof­it mar­gins im­proved from 9.4 per cent in 2011 to 9.95 per cent in 2012; this was re­flect­ed in an im­proved op­er­at­ing prof­it, which moved to $22.15 mil­lion in the cur­rent pe­ri­od from $20.27 mil­lion in 2011.

Mean­while, the food, con­struc­tion re­lat­ed and oth­er trad­ing seg­ment ex­pe­ri­enced chal­leng­ing re­sults as both rev­enue and prof­its de­clined. Rev­enue fell from $147.6 mil­lion in the pre­vi­ous pe­ri­od to $136.8 mil­lion in the Oc­to­ber to De­cem­ber 2012 quar­ter.

Sim­i­lar­ly, prof­it con­tract­ed by 9.8 per cent to $11.7 mil­lion, from $12.95 mil­lion in the 2011 pe­ri­od. Op­er­at­ing mar­gins al­so fell to 8.5 per cent from 8.8 per cent pre­vi­ous­ly.

Good re­sults were record­ed at both Rosco Petroa­vance and Agos­ti­ni Mar­ket­ing. How­ev­er, weak­er re­sults were record­ed at Hand Arnold, where man­age­ment-ini­ti­at­ed changes saw a tem­po­rary fall in per­for­mance. This in­clud­ed the clo­sure of its un­prof­itable wine and spir­its di­vi­sion in Jan­u­ary 2012. Al­so, the com­pa­ny re­con­fig­ured its dis­tri­b­u­tion arrange­ments. This will re­sult in, among oth­er things, the ex­pan­sion of its com­pa­ny-owned Moo! line of milk prod­ucts.

In the cur­rent quar­ter, the sev­enth out­let of Su­per­pharm was opened on Feb­ru­ary 1, 2013 at Mara­bel­la. At least two more stores are planned, con­struc­tion on which could start in the cur­rent fi­nan­cial year.

Re­tail­ing is an im­por­tant pil­lar of the com­pa­ny's fu­ture; so, in or­der for it to de­liv­er sus­tain­able prof­its, phys­i­cal growth must be ac­com­pa­nied by an ac­cept­able and con­sis­tent lev­el of cus­tomer ser­vice.

Con­clu­sion

All three com­pa­nies are pur­su­ing dif­fer­ent strate­gies to im­prove their per­for­mance and de­liv­er bet­ter re­sults to their share­hold­ers. The com­pa­nies' ex­pres­sion (di­rect­ly or in­di­rect­ly) of some mea­sure of con­fi­dence in the lo­cal econ­o­my, to­geth­er with their ex­pan­sion plans, au­gurs well for 2013.

Does it al­so sug­gest the pos­si­ble start of a long-an­tic­i­pat­ed bull mar­ket? (Or, are we get­ting slight­ly ahead of our­selves?)