Fe­lix Pereira

De­spite ex­pe­ri­enc­ing a small de­cline in its to­tal as­sets, which moved to $11.3 bil­lion from $11.4 bil­lion in 2011, the ANSA McAL Group de­liv­ered im­proved rev­enue and high­er earn­ings per share for its fis­cal pe­ri­od end­ed De­cem­ber 2012. This de­vel­op­ment sug­gests a more ef­fi­cient use of avail­able re­sources.

Rev­enues and prof­its

Ex­ter­nal rev­enues rose to $5.89 bil­lion from the 2011 fig­ure of $5.27 bil­lion or by 11.9 per cent. How­ev­er, this sales im­prove­ment did not ad­e­quate­ly flow through to its op­er­at­ing prof­it, which de­clined to $993.7 mil­lion from $1,027 mil­lion record­ed for 2011. The 2011 fig­ure re­flect­ed an op­er­at­ing mar­gin of 19.5 per cent, while the 2012 out­turn was down to a more mod­est 15 per cent.

De­spite this low­er op­er­at­ing prof­it mar­gin, pre-tax prof­it rose by 5.2 per cent or from $904.8 mil­lion in 2011 to $951.7 mil­lion last year. This re­sult was helped by two sig­nif­i­cant fac­tors. First, fi­nance costs de­clined to $61.3 mil­lion from the 2011 fig­ure of $110.5 mil­lion, re­flect­ing a pos­i­tive change of near­ly 45 per cent. This re­sult­ed from the Group us­ing its high­er lev­els of cash to re­duce its debt ex­po­sures.

Al­so help­ing this pre-tax re­sult was the huge swing in the con­tri­bu­tions made by its as­so­ciates and joint ven­ture in­ter­ests. From a loss of $11.2 mil­lion in 2011, this line item moved a pos­i­tive fig­ure of $19.2 mil­lion; this re­flects a change of $30.4 mil­lion.

The group's joint ven­ture in­ter­est con­sists of a 50 per cent hold­ing in Caribbean Roof Tile Com­pa­ny Ltd, which is a part­ner­ship with US Tiles In­cor­po­rat­ed. Trinidad Lands Ltd, in which the group has a 40 per cent in­ter­est, is one of its as­so­ci­at­ed com­pa­nies. In 2011, the loss in­clud­ed an im­pair­ment fig­ure of $29.5 mil­lion re­lat­ing to Al­mond Re­sorts Inc, which was held via its Bar­ba­dos sub­sidiary.

Af­ter-tax re­sult came in at $744.4 mil­lion, which was 5.5 per cent greater than the $705.7 mil­lion record­ed for 2011.

Non-con­trol­ling in­ter­ests ac­count­ed for $107.5 mil­lion, down slight­ly from $109 mil­lion in 2011. This change saw prof­it at­trib­ut­able to share­hold­ers in­crease by 6.7 per cent to $637 mil­lion from the $596.7 mil­lion earned in 2011. Thus, earn­ings per share came in at $3.69 from $3.46 in the pri­or pe­ri­od.

Seg­men­tal per­for­mance

The group's flag­ship com­pa­ny Carib Brew­ery Ltd is the ma­jor com­po­nent of the man­u­fac­tur­ing, pack­ag­ing and brew­ing seg­ment. In 2012, third par­ty rev­enue, at $2.02 bil­lion, was 4.9 per cent high­er than the 2011 fig­ure of $1.925 bil­lion. This seg­ment's pre-tax prof­it im­proved from $436.1 mil­lion in 2011 to $479.2 mil­lion last year. In ad­di­tion, its pre-tax prof­it mar­gin rose to 23.7 per cent from 2011's 22.7 per cent.

Al­so, this seg­ment pre-tax prof­it rep­re­sents 50.4 per cent of the group's to­tal prof­it in 2012; this per­cent­age is an im­prove­ment from the 48.2 per cent that it con­tributed to the 2011 re­sults.

Al­though the au­to­mo­tive, trad­ing and dis­tri­b­u­tion seg­ment com­mands a rel­a­tive­ly small as­set base of just over $1.2 bil­lion, it gen­er­at­ed the great­est amount of the Group's sales rev­enue. In 2012, this fig­ure was $2.42 bil­lion, sur­pass­ing the 2011 re­sult of $2.21 bil­lion by 9.5 per cent.

High­er de­mand for ve­hi­cles at all price lev­els con­tributed to this im­prove­ment. De­spite this strong sales im­prove­ment, pre-tax prof­its were pro­por­tion­al­ly less; this fig­ure im­proved by on­ly 3.9 per cent to $136.9 mil­lion from the 2011 re­sults of $131.7 mil­lion. This sug­gests that mar­gins might be falling or that costs are not be­ing ad­e­quate­ly con­tained.

Al­most 47 per cent of the group's as­sets are in­stru­men­tal in de­liv­er­ing in­sur­ance and fi­nan­cial ser­vices to its cus­tomers. This di­vi­sion in­cludes Tatil life and gen­er­al in­sur­ance as well as ANSA Mer­chant Bank Ltd.

Rev­enue from this seg­ment ac­counts for less than 14 per cent of the group's to­tal. In 2012, third par­ty rev­enue from this seg­ment was $797.3 mil­lion, rep­re­sent­ing an im­prove­ment of 6.7 per cent over the 2011 fig­ure of $747 mil­lion.

On the oth­er hand, pre-tax prof­its de­clined to $161.3 mil­lion from the $231.7 mil­lion earned for 2011. This low­er re­sult was at­trib­uted to the in­creased pro­vi­sion­ing to their re­gion­al in­vest­ment port­fo­lio.

Most of this re­sult can be traced to the fall in pre-tax prof­it at ANSA Mer­chant Bank Ltd, where pre-tax prof­its fell to $149.6 mil­lion from 2011's $183.6 mil­lion. The group owns 82.48 per cent of AM­BL.

The par­ent com­pa­ny, me­dia and ser­vices, make up the last seg­ment for the group. This group­ing in­cludes Guardian Me­dia Ltd, in which the group's own­er­ship is 56.17 per cent. GML ex­pe­ri­enced a mar­gin­al de­cline in pre-tax prof­it from $49 mil­lion in 2011 to $47.5 mil­lion last year. Even so, this seg­ment re­port­ed a strong 65.7 per cent in­crease in pre-tax prof­it to $174.4 mil­lion from the 2011 fig­ure of $105.2 mil­lion.

Con­tribut­ing to this strong re­sult was the in­clu­sion for the first time of the re­sults of Stan­dard Dis­trib­u­tors Ltd busi­ness­es in Trinidad and Bar­ba­dos, which was ac­quired from the ul­ti­mate par­ent com­pa­ny (An­tho­ny N Sab­ga Ltd) in the ear­ly part of 2012 for $120.00 mil­lion.

In ad­di­tion, the pro­vi­sion­ing for Al­monds Re­sorts, re­ferred to above, which dragged down the 2011 re­sults, was no longer a fac­tor in 2012.

Bal­ance sheet changes

The group con­tin­ued to in­crease its in­vest­ment in fixed as­sets and in­vest­ment prop­er­ties, which grew to $1.8 bil­lion from the 2011 base of $1.7 bil­lion. As the group re­con­fig­ured its debt and their ma­tu­ri­ty pro­file, changes were seen in both oth­er long-term as­sets and cur­rent as­sets. Oth­er long-term as­sets fell to $3.7 bil­lion from the 2011 bal­ance of $4.8 bil­lion. Al­most ex­act­ly match­ing this change was the move­ment in cur­rent as­sets; this bal­ance rose from $4.7 bil­lion in 2011 to $5.6 bil­lion as at the end of De­cem­ber 2012.

On the li­a­bil­i­ties side of the equa­tion, we see that non-cur­rent li­a­bil­i­ties fell to $2.7 bil­lion from the 2011 bal­ance of $3.7 bil­lion. Con­verse­ly, cur­rent li­a­bil­i­ties in­creased from $2.8 bil­lion in 2011 to $3.2 bil­lion as at the end of 2012.

One ef­fect of these changes is that the group's cur­rent ra­tio im­proved mar­gin­al­ly to 1.73 from 1.70 in 2011.

Share­hold­ers' eq­ui­ty in­creased both by the is­sue of new shares and in­creas­es in re­serves. As at the end of 2012, share­hold­ers' eq­ui­ty stood at $4.72 bil­lion up by 10.5 per cent from the 2011 bal­ance of $4.27 bil­lion.

Share price and val­ue

With out­stand­ing shares of 176,192,841 and share­hold­ers' eq­ui­ty of $4.72 bil­lion, each share has a book val­ue of $26.79. Last week, the share closed at $66.77. With cur­rent an­nu­al div­i­dends at $1.10, the price gives in­vestors a yield of just 1.65 per cent. This low yield and sta­ble share price sug­gests that this could be con­sid­ered a growth stock.

ANSA McAL's share price was $55.00 at the start of 2012. At its re­cent close of $66.77, com­bined with its div­i­dend of $1.10, in­vestors have re­ceived a re­turn of 23.4 per cent over a 15-month pe­ri­od.

Year in re­view

In the ear­ly part of 2012, the group sus­tained the fi­nan­cial ef­fects of a lo­cal ce­ment short­age and re­struc­tur­ing costs of re­con­fig­ur­ing its Bar­ba­dos dis­tri­b­u­tion busi­ness­es.

Up to the end of its third quar­ter in Sep­tem­ber 2012, the group re­port­ed flat earn­ings per share of $2.22. This rep­re­sent­ed a sig­nif­i­cant re­cov­ery from the re­sults record­ed as at its half-year re­port, when earn­ings per share was $1.40, down by $0.24 from the $1.64 record­ed for the com­par­a­tive pe­ri­od in 2011.

The re­lease of its full year re­sults for 2012 re­vealed an EPS of $3.69 ver­sus $3.46 for 2011. This means that much of the Group's re­cov­ery was made in the last quar­ter of the year.

Re­cent de­vel­op­ments

As at De­cem­ber 2011, the group owned 47.49 per cent of Con­sol­i­dat­ed Fi­nance Com­pa­ny Ltd in Bar­ba­dos. Dur­ing 2012, it be­gan ne­go­ti­a­tions to ac­quire full own­er­ship of the com­pa­ny. On March 27, 2013, it was an­nounced that its sub­sidiary, ANSA Mer­chant Bank Ltd, had achieved 100 per cent own­er­ship for a price of Bds$53 mil­lion (ap­prox­i­mate­ly $170 mil­lion). This trans­ac­tion would have in­volved pur­chas­es from both the par­ent com­pa­ny (47.49 per cent) and oth­er share­hold­ers (52.51 per cent).

With many of its one-off pro­vi­sions large­ly be­hind it com­bined with a rel­a­tive­ly brighter lo­cal eco­nom­ic pic­ture, the ANSA McAL Group can look for­ward to achiev­ing im­proved earn­ings in the cur­rent fis­cal pe­ri­od.