The United Suriname Holding Company, referred to by its Dutch initials VSH in this analysis, was established in 1958 and currently operates through nine subsidiaries and three associates that are involved in the shipping, trading, real estate, manufacturing, financial services and hospitality industries.
We start by reviewing its operations for the year ended December 2014.
Changes in Financial Position
Total assets rose by 9.7 per ���cent, moving from Sr$209 million as at the end of 2013 to Sr$229.4 million last December. This is equivalent to about TT$436 million.
The largest component was its investment in its associate, which represents its 24.63 per cent ownership in Assuria; this sum advanced from Sr$71.2 million to Sr$84.8 million. The company's share of profit was Sr$11.31 million, which was reduced by a profit distribution of Sr$3.68 million and boosted by an adjustment to the revaluation reserve of Sr$5.95 million.
The value of plant, property and equipment closed at Sr$57.3 million from Sr$55.1 million. New purchases of Sr$19.7 million were offset by depreciation charges of Sr$6.1 million and further reduced by disposals of Sr$0.6 million and transfers of Sr$10.8 million.
Intangible assets rose from Sr$571k to Sr$810k. New investments added Sr$39k while amortization charges consumed Sr$152k.
Financial assets rose from Sr$15 million to Sr$16.76 million. The largest component was its investment of 163,020 shares in N.V. Hotelmaatschappij Torarica, which was valued at Sr$11.73 million for both periods.
On the other hand, its investment in Surinaamse Brouwerij N.V. rose from Sr$1.99 million to Sr$3.41 million. The third largest investment was in Self Reliance N.V., which value climbed to Sr$830k from Sr$494k.
Despite the rise in revenues, the value of inventories was stable, at Sr$25 million, for both periods.
Trade and other receivables rose to Sr$28.4 million from Sr$26.1 million. The largest component, trade receivables, increased to Sr$21.7 million from Sr$19.3 million as at December 2013.
Cash and its equivalents rose to Sr$16.4 million from Sr$15.98 million. These balances are denominated in three currencies. The largest portion of Sr$7.9 million is denominated in US dollars while Sr$6.8 million is in local currency and the remainder of Sr$1.7 million is denominated in Euros.
VSH's major long-term liability is deferred tax of Sr$12.15 million. Its short-term trade and other payables of Sr$25.75 million was slightly greater than the 2013 balance of Sr$25.1 million.
Total borrowings stood at a modest Sr$4.1 million. The long-term portion was Sr$1.9 million while the current portion was Sr$2.2 million. Most of this debt relates to its subsidiaries, VSH Foods and Consolidated Industries Corporation (CIC), in which it holds a 56.01 per cent and 59.44 per cent stake respectively.
Total provisions and commitments fell from Sr$5.99 million to Sr$5.34 million last December. These relate mostly to medical and pension obligations, deferred maintenance, redundancy, product warranty and disposal of waste. At as the end of 2014, the current portion was Sr$880.5k while the long-term portion was Sr$4.46 million.
Equity improvements
Total equity advanced to Sr$181.3 million from the 2013 year-end balance of Sr$162.2 million.
Both issued capital and capital in excess of par value remained steady at Sr$19.863k and Sr$240.425k respectively.
Retained earnings rose to Sr$93 million from Sr$75.7 million. This mostly reflects after-tax profit of Sr$20.15 million reduced by dividends of Sr$2.98 million. Meanwhile, revaluation reserves increased to Sr$72.9 million from Sr$69.2 million.
After allowing for non-controlling interests of Sr$15.1 million, shareholders' equity improved to Sr$166.2 million from Sr$145.3 million.
With 1,986,338 shares outstanding, each share has an intrinsic value of Sr$83.67 (December 2013: Sr$73.13).
Income and Profits
Total revenues advanced by 5.4 per cent to reach Sr$68.1 million from the comparative 2013 result of Sr$64.6 million.The shipping division produced revenues of Sr$20.8 million, which was 21.2 per cent greater than the Sr$17.2 million delivered in 2013. The largest segment, industry, delivered revenues of Sr$37.16 million; that result was Sr$2.68 million or 6.7 per cent lower than the 2013 figure of Sr$39.84 million.
Total costs of Sr$52.56 million was 4.7 per cent greater than the Sr$50.21 million incurred in 2013. Here, the most notable change was personnel expenses, which climbed by 12.2 per cent or Sr$2.77 million to Sr$25.54 million from the previous year's Sr$22.77 million.
On the other hand, the most notable decline was shown in the "provisions" line; this line item contracted to Sr$217.9k from the previous level of Sr$1.6 million. Some of the most prominent changes were: uncollectable receivables (2014: Sr$669k; 2013: Sr$1.39 million); pension (2014: minus Sr$503k; 2013: zero); redundancy (2014: Sr$72.4k; 2013: Sr$154.5k).
These changes saw profit from continuing operations register at Sr$15.57 million. This result represented an improvement of Sr$1.17 million or 8.1 per cent over the 2013 result of Sr$14.4 million.
The share of profit from its stake in Assuria climbed by 17.7 per cent to Sr$11.31 million from Sr$9.61 million. Assuria's ownership of a 44 per cent stake in De Surinaamsche Bank N.V. (Suriname's largest bank) also indirectly benefits VSH.
In addition, its profit on investments rose to Sr$918.7k from Sr$740.1k. Mainly, this represented the improved results from its 12.3 per cent stake in Hotel Torarica, which operates three hotels.
These changes saw pre-tax profit register at Sr$27.8 million, which was 12.3 per cent greater than the Sr$24.75 million earned for 2013.
At the after-tax level, profit came in at Sr$22.2 million versus Sr$19.6 million for 2013.
After allowing for minority interests, the profit attributable to shareholders came in at Sr$20.15 million; this was 14 per cent greater than the Sr$17.68 million recorded in 2013.
These results translated into 2014 EPS of Sr$10.15 compared with Sr$8.90 for 2013.
Segment Performance
The strong showing for the shipping segment was driven by increases in both break bulk/project cargo shipments (up by 4.3 per cent in terms of tonnage) and cargo handlings (2.8 per cent greater twenty foot equivalent units (TEUS). Also, the number of vessels handled rose to 258 from 239.
Despite these positives, operating profit fell by 4.3 per cent to Sr$7.8 million; in 2013, the figure was Sr$8.2 million. This decline was attributed to three factors: higher personnel costs, expenses related to software development and terminal expansion.
The steel company produces prefabricated steel structures and supplies the construction industry in Suriname and the Caribbean. Operating income fell to Sr$5.2 million from Sr$7.7 million. Weakened market conditions, especially in the second half of the year, saw this company produce a loss of Sr$395k versus a 2013 profit of Sr$1.52 million.
These results are combined with the detergents and food business, which all form the "industry" segment shown above. Compensating for the loss at the steel business, both the food and detergents companies registered improved performances.
VSH Foods produces and distributes margarine, butter and shortening. Sales increased by less than 10 per cent, while favourable commodity prices helped profits, which surged by 76 per cent to reach Sr$3.37 million from 2013's Sr$1.92 million.
Consolidated Industries Corporation (CIC) manufactures industrial and household detergents and plastic packaging materials. Income declined by less than 1 per cent to Sr$23.1 million. Nevertheless, profit improved by 7.7 per cent to Sr$4.23 million from Sr$3.93 million.
The other revenue segment combines several miscellaneous items. For example, income from terminal and agency services generated Sr$1.17 million (2013: Sr$845k) and income from previous years contributed Sr$363k (2013: Sr$345k).
Historical performance, Dividends and Share price
Over the past five years, VHS has exhibited reasonable growth in many areas. For example, starting from 2010 revenues of Sr$48.8 million, this metric grew by 39.5 per cent over this period to reach Sr$68.1 million last year.
Profit from continuing operations grew at a less robust pace, expanding by only 28 per cent from Sr$12.16 million in 2010 to 2014's Sr$15.57 million.
However, an increasingly significant factor in VSH's performance has been its ownership of 24.63 per cent of Assuria N.V. This measure, grouped under other income, jumped from Sr$5.1 million in 2010 to Sr$12.23 million in 2014; this translates into growth of 139.8 per cent! The bulk of this figure relates to Assuria.
During calendar 2014, VSH paid four quarterly dividends of Sr$0.10 each. Based on the 2014 results, a final dividend of Sr$1.25 was also paid, thus bringing the total dividend for 2014 up to Sr$1.65.
In 2015, the quarterly dividend has been increased to Sr$0.15. These are payable in June, August and November 2015 and February 2016.
As at December 2014, the share price closed at Sr$50.50; this reflects a modest improvement over the December 2013 price of Sr$46.00. Based on a dividend of Sr$1.65 and a share price of Sr$50.50, the yield is 3.27 per cent. On September 17, 2015, the share price had advanced to Sr$70.00; this suggests that its half-year results, likely to be released this month, have been or were expected to be better than expected.
Even at this higher share price, VSH's shares were still priced below its book value of Sr$83.67.