Home' Trinidad and Tobago Guardian : April 5th 2015 Contents APRIL 5 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
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The publication of Angostura
Holdings Ltd s results for
2014 on Friday, March 27,
2015, coincided with an
important press release
from the Central Bank
relating to some positive
developments for Clico
One consequence of the release was that
Clico s ownership of 32.5 per cent of AHL would
be transferred to the government (perhaps, on
a temporary basis) in order to fulfil part of the
$7 billion interim settlement. A valuation of
those shares would have to be done.
A subsequent press conference by the Minister
of Finance clarified that it was not the govern-
ment s intention to hold on to the AHL shares
(and that of two other companies) indefinitely.
He further indicated that it was possible that
those shares could form part of another "NEL-
type" entity. No firm decision has yet been
taken on that possibility.
Previously, there was some speculation that
both CL Financial s 45 per cent and Clico s 32.5
per cent stake might have been combined and
sold to one entity, either local or foreign. For
example, this package might have been (and
probably still is) of great interest to the ANSA
McAL/Carib Brewery group. We seem addicted
to using state-ownership to "solve" many prob-
We will start with a review of AHL s results
for the period ended December 31, 2014.
The company s financial position continues
to improve with total assets climbing by 13.4
per cent to $1.05 billion from the restated 2013
level of $924.2 million.
The company s continuous investment in
new plant and machinery saw the value of prop-
erty, plant and equipment move from $321.1
million to $347.3 million. Additions of almost
$42 million comfortably exceeded current year s
depreciation charges of nearly $20 million.
Retirement benefit assets improved to $64.7
million from the previous level of $53.6 million.
Mainly, this reflected that the value of the plan
assets grew at a faster rate than its pension obli-
The bulk of the pension plan s assets are rep-
resented by an insured managed fund contract,
which Clico manages. Approximately, 18.7 per
cent or $62.69 million of that fund s value rep-
resents the value of AHL s shares held in the
Using the closing price as at December 31,
2014 of $13.50, this corresponds to ownership
of about 4.64 million shares in AHL.
Current assets rose to $636.3 million from
2013 s $544.4 million.
Trade and other receivables of $241.6 million
comfortably exceed trade and other payables of
$106.6 million; as at year-end 2013, the respective
figures were $194.2 and $109.9 million.
In addition, the company s hoard of cash and
equivalents grew from $148 million to last year-
end s $173.4 million. For both periods, these
balances exceeded its total borrowings of $114.8
million and $110.1 million respectively. Essentially,
the company is described as being debt-free.
Shareholders equity improved to $775 million
from the previous level of $657.9 million. The
main contributor to this change was the increase
in retained earnings, which closed 2014 at $556.6
million; at year-end 2013, this figure was $452.2
The major positive movement in retained
earnings came from the current year s profit of
$153.4 million and was reduced by dividends to
shareholders of $53.6 million. In addition, this
item was further boosted by a positive prior
year net adjustment of $9.3 million, which elim-
inated a previous provision for inventory evap-
With 205,820,000 shares outstanding, each
share has a book value of $3.77 (2013: $3.20).
To this value we should add a further $4.78,
which is the per share value of the $984.6 million
owed to AHL by its parent company, CL Finan-
This calculation suggests that the "floor value"
of AHL s shares is $8.55 ($3.77 plus $4.78). We
will return to this point later.
Sales and profit
Total revenues improved by a modest 1.35 per
cent to $672.2 million from $663.2 million in
The gross profit margin declined to 59.6 per
cent from 60.3 per cent in 2013. Consequently,
the gross profit rose to $401 million from the
previous year s $400 million.
Both selling and marketing and administrative
expenses declined. In the case of the former,
the movement was from $124.2 million in 2013
to $117.8 million last year. In the latter s case,
the reduction was from $70.6 million in the
earlier period down to $62.9 million in 2014.
These changes saw operating profit for 2014
come in at $220.2 million. This represents an
improvement of 7.3 per cent over the $205.2
million recorded for 2013.
Net finance costs in 2014 fell to $2.9 million
from 2013 s $9.05 million.
This resulted in profits from continuing oper-
ations coming in at $217.3 million, reflecting an
improvement of 10.75 per cent over the $196.2
million reported for 2013.
In 2014, the loss on revaluation of land and
buildings ($10.9 million) and foreign exchange
losses of $1.2 million pulled down pre-tax profits
to $207 million.
In the 2013 period, pre-tax profits were boost-
ed by foreign exchanges gains ($21 million), gain
on settlement of a financial liability ($44.5 mil-
lion) and a gain on disposal of investments ($83.8
million). These were the main factors that boost-
ed its pre-tax profit to $350.8 million.
At the after-tax level, profits fell to $153.4
million from the 2013 result of $289 million.
This 2014 result translated into EPS of $0.75
In previous reporting, AHL showed segments
as being either "alcohol" or "non-alcohol". This
led to some confusion, since the company s
flagship and most famous product, Angostura®
Bitters, and which contains 44.7 per cent alcohol,
was classified under the "non-alcohol" segment!
In addition, the alcohol segment included both
branded products and non-branded (bulk) prod-
ucts, mainly bulk rum.
In a more logical move, segments are now
classified as being either "branded" or "com-
modity". Naturally, the commodity segment
consists primarily of bulk rum. However, the
branded trade comprises of both manufactured
products and similar beverages produced by
other manufacturers. Perhaps, in a subsequent
version, the branded trade would be divided
into two areas, those that are made by AHL and
those that it distributes for others?
From our table, we note that the gross profit
margin increased from 30.95 per cent in 2013
to last year s 32.76 per cent. The principal gains
were made under the branded trade segment,
where margins improved from 36 per cent to
38.35 per cent.
It was here that the reductions in selling,
marketing and administrative expenses would
have been most pronounced. Probably also help-
ing to improve the picture was its increasing
volumes of trade in non-manufactured prod-
Share price and dividends
AHL s share price closed on January 2, 2014
at $12.47 and drifted down to $10.75 by January
28, 2014. But by December 31, 2014, its price
closed at $13.50. Against the background of the
Methanol sale and probably in anticipation of
a settlement to the long-running saga of CL
Financial/Clico, investors bid up its price to
$16.00 at which level it closed on January 26,
2015. Once again, the price drifted downwards
and it closed on April 1, 2015 at $14.00, with
some buy bids coming in at $11.90.
For 2014, AHL increased its dividend to $0.26
per share (2013: $0.24). At the most recent
$14.00 price, this dividend gives investors a
yield of 1.86 per cent.
Valuations and ownership
We have already derived a "book value" for
AHL at $3.77. To this figure we added the per-
share value of the money owed to it by CLF
and came up with a possible share value of
Another way to value a company is to compare
its dividend yield to that of other companies
operating in a similar type of business. In this
case, we might want to compare AHL s yield
to that of Unilever Caribbean (UCL) and National
Flour Mills (NFM), both food companies.
Using data from West Indies Stockbrokers
Ltd weekly report dated March 27, 2015, we
note the following figures. In the case of UCL,
we have a share price of $64.56 and a historic
dividend of $1.95 giving a yield of 2.97 per cent.
In the case of NFM, its share price was $1.50
and its historic dividend of $0.05 gives us a div-
idend yield of 3.33 per cent.
Interestingly, the book value of UCL was
shown as $8.35 while that of NFM was $1.63.
This suggests that book value may not be the
most reliable or logical estimate to place on a
company s shares. Naturally, there are other
factors that have a greater influence on the
Staying with these comparators for the
moment, we might assume that a food company,
such as AHL, should give us a dividend yield
of about three per cent. On the basis of its most
recent dividend indication, we can derive a
"safe" value for AHL of $8.67 (The dividend of
$0.26 divided by three per cent).
But we do know that AHL has a "special
receivable" of $4.78 per share owed to it. So,
logically, we should add these two figures to get
a possible realistic value of $13.45. At that price,
Clico/Government s 66,971,877 shares are worth
Of course, there are other more intricate ways
of valuing a company s shares, but those are
beyond the scope of this article. We also have
not factored in a credible value for Angostura®
But the question remains, when will CL Finan-
cial be in a position to make this payment?
The March 27, 2015 press conference and
interview did not shed any light on this.
Quite possibly, this payment will have to wait
on the additional sales of specific assets together
with the hammering out of a realistic and polit-
ically acceptable agreement between CL Financial
and the government. We might be looking at
a time-frame of six to 18 months.
In the interim, AHL s ownership will essentially
remain with CL Financial (which is still controlled
by the government) owning 45 per cent,
Clico/Govt having 32.5 per cent and with public
shareholders (including Clico s managed fund)
holding the remaining 22.5 per cent.
Is this ownership structure restricting AHL s
ability to grow revenue and profits at meaningful
After all, the benefits of cost reduction meas-
ures do have their limits!
After the release of its 2014 results...
What's in store for Angostura?
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