Despite strong growth in many of its business units, ANSA McAL Ltd (AMCL) recorded marginally softer revenues and slightly lower profits in 2014. These results were primarily influenced by lower sales in Barbados and more challenging results in its financial services sector.
We will now review AMCL's performance for the year ended December 31, 2014.
Changes in financial position
Total assets rose from $12.23 billion to $13.12 billion last December, reflecting an increase of 7.25 per cent.
Long-term assets grew by 9.1 per cent to $6.5 billion from the 2013 level of $5.96 billion. The largest component, investment securities measured at amortised costs, closed 2014 at $1.92 billion; this reflected an increase of 36.5 per cent over the 2013 balance of $1.41 billion.
Here, all categories of investments increased: government bonds rose to $494.6 million (2013: $328.8 million) while state-owned company securities ended at $802.2 million (2013: $653 million) and corporate bonds moved from $427.4 million to $626.4 million.
Also, investments classified as current assets, increased to $1.61 billion from $1.2 billion, or by 33.6 per cent. The largest advance was noted in the value of equities, which jumped by more than 68 per cent to $1.01 billion from $600 million as at year-end 2013.
Total loans and advances increased marginally to $2.13 billion from $1.97 billion. The long-term portion advanced from $1.36 billion to $1.43 billion while the current portion rose to $701.9 million from the 2013 level of $608.7 million.
These loans and advances are classified as personal, commercial and professional & other. Only the commercial sector exhibited a decline, moving down from $604.5 million to last year's $416.2 million. The professional and other sector rose by 35.4 per cent to $965 million from the 2013 level of $712.8 million. Loans to the personal sector advanced by 16 per cent to $752.6 million from $649 million.
Plant, property and equipment declined marginally to $1.65 billion from $1.71 billion. This contraction was mainly due to the current year's depreciation charges of $198.6 million exceeding additions of $184.3 million.
Total liabilities increased by less than 7 per cent to $6.66 billion from the previous level of $6.25 billion.
Total customers' deposits and other funding instruments increased to $2.83 billion from $2.71 billion or by 4.4 per cent.
Here, the only category that exhibited an increase was deposits from private companies, estates and financial institutions; these balances moved from $872.7 million to last year's $1.07 billion. Deposits sourced from individuals fell to $1.05 billion from $1.11 billion. Funds acquired from pensions, credit unions and trustees declined to $709.4 million from the previous level of $722.9 million.
Deposits due within one year rose to $2.55 billion from $2.39 billion. On the other hand, deposits maturing beyond one year fell to $275.6 million from $314.8 million.
Equity improvements
Total equity advanced to $6.45 billion from the previous level of $5.98 billion. Of this total, shareholders' equity increased to $5.77 billion from the previous year's $5.29 billion.
The largest component, retained earnings, climbed to $5.17 billion from $4.73 billion. The most significant movements saw profit for 2014 of $685.9 million boost retained earnings while dividends to stockholders of $224 million reduced the brought forward figure.
With 176,192,841 shares outstanding, each share has a book value of $32.75 (2013: $30.05).
Income and profits
Total gross revenue declined marginally to $7.16 billion from $7.24 billion in 2013. Despite this fall, inter-segment revenues increased to $1.05 billion from $1.02 billion.
The increases in inter-segment sales were most pronounced under the "media, services and parent company" and "manufacturing, packaging and brewing" segments.
Third party revenues also fell to $6.1 billion from the previous year's $6.22 billion.
Cost of sales consumed $3.79 billion (2013:$3.80 billion) leaving a gross profit of $2.32 billion (2013: $2.42 billion). This figure was enhanced by other income of $258.6 million (2013: $221.9 million). The other income line was boosted by miscellaneous income, which rose from $26.5 million in 2013 to $82.3 million.
Staff costs and administrative and distribution costs, the two largest items, also increased. The former rose to $580.5 million from $558.5 million while the latter moved from $626.5 million to last year's $635.5 million.
These changes, along with several smaller ones, allowed AMCL to deliver an operating profit of $1.08 billion versus $1.16 billion for 2013.
Finance costs declined to $40.6 million from $47.4 million in 2013. The largest decrease was noted under interest on overdrafts and other finance costs, which fell to $5.3 million from $10.1 million.
The share of result from associates and joint ventures came in at $26.1 million (2013: $27.2 million). This item mainly represents the company's share of its 40 per cent ownership in Trinidad Lands Ltd and various percentages in ANSA McAL (Barbados) Group.
Pre-tax profit registered at $1.07 billion (2013:$1.14 billion).
Taxation of $263.5 million was $6 million lower than the previous year and resulted in an after- tax profit of $802 million (2013: $874.6 million).
After excluding non-controlling interests, the profit attributable to shareholders came in at $684.9 million (2013: $742 million).
These results translated into 2014 EPS of $3.97 versus $4.31 for 2013.
Segment performance
The largest segment, automotive, trading and distribution delivered a four per cent increase in revenues and contributed almost $71 million more in pre-tax profit. This strong result was largely driven by higher automobile sales.
The manufacturing, packaging and brewing segment delivered marginally lower revenues while its pre-tax profit contribution slid by almost $19 million. An impairment charge of $7.5 million helped restrain this unit's profit contribution.
The insurance and financial services segment endured a $97 million reduction in pre-tax profit contribution. One of the major factors that influenced this lower result was the unrealised losses at its merchant bank subsidiary, which pulled down its investment income. The relevant line item moved from a positive $67.2 million in 2013 to a negative $29.7 million last year.
The media, services and parent company unit is an interesting combination of entities. It is noteworthy that almost 53 per cent of its revenues (2013: 47.3 per cent) related to other group companies. In addition to typical head office services, there is a high level of advertising revenues that are sourced from other subsidiaries.
External revenues from this segment fell by almost $127 million while pre-tax profits contracted by $34 million. Partly explaining this decline was the $14.3 million profit reduction at Guardian Media Ltd, in which AMCL owns a 56.17 per cent stake.
In 2014, Trinidad & Tobago accounted for $4.63 billion or 75.9 per cent of external revenues while Barbados contributed $990 million or 16.2 per cent and other territories $485 million or 7.9 per cent. Only local sales exhibited an improvement over 2013; the most notable decline was in Barbados revenues, which were $1.15 billion in 2013.
Dividends and share price
Dividends paid with respect to both 2013 and 2014 were unchanged at $1.30.
The share price opened on January 2, 2014 at $66.50 and closed on December 31, 2014 at $66.40. The share recently closed at $67.02. At that price, the dividend yield is 1.94 per cent. That share price also reflects a P/E multiple of 16.9 times. Historically, this multiple was as high as 19.25 as at December 2012 and as low as 13.90 as at December 2010.
This share is not as actively traded as it might be. Part of the reason is that the ten largest shareholders, mostly institutions, own 132,206,345 stock units, corresponding to 75 per cent of the total issued shares.
Especially since after 2006, there has been no evidence of a sustained growth in EPS; perhaps, this might change in the current and ensuing years?
Future prospects
Many of the group's subsidiaries are expected to benefit from developments in the local economy during the course of 2015.
Either in the second or third quarter, the media segment should benefit hugely for the general elections campaign, which is expected to extend for at least four weeks. Related to this activity, the brewery company should also benefit from this electioneering activity.
Recently, we have seen Standard Distributors offer a 10 per cent discount to new HDC homeowners. Supporting this initiative, its building-related companies (air conditioners, paint and blocks) should also improve their sales as new homeowners usually spend generously to personalise their newly acquired living quarters.
Despite current economic challenges, auto sales show no immediate signs of screeching to a halt.
The group's subsidiaries in the financial sector should deliver improved results as at least one acquisition is nearing full consummation.
In next week's article, I develop this point further when I explore more fully the results of ANSA Merchant Bank Ltd.