Home' Trinidad and Tobago Guardian : June 22nd 2017 Contents JUNE 22 • 2017 guardian.co.tt BUSINESS GUARDIAN
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AHL spends to grow its exports
Lower bulk rum sales, one-off
charges and additional expendi-
tures to help penetrate export
markets pulled down Angostura
Holdings Ltd (AHL) results for
Let us now review AHL's results to December
Changes in financial
Total assets expanded by 1.5 per cent to $1.4
billion from $1.37 billion.
Property, plant and equipment declined
marginally to $357.4 million from $359.6 mil-
lion. Disposals of almost $18 million exceeded
additions of $14.4 million, while depreciation
and other charges further reduced the ending
Among the new additions were a carton erec-
tor and an unscrambler for miniature bottles,
both located in the packaging section.
Retirement benefits assets fell to $348.7
million from $355.2 million. The composition
of the plan was 26 per cent in equities, 58.5
per cent in debt securities and 15.5 per cent
in other short-term securities. In 2015, these
figures were 50 per cent, 41.8 per cent and 8.2
per cent respectively.
Also, in 2015, the managed fund owned 11.7
per cent of AHL's ordinary shares; this entire
investment was sold during 2016.
Inventories declined to $214 million from
$227 million. Before provision for obsoles-
cence, the value of finished goods rose to
$45.3 million from $41.8 million. Both work
in progress and raw and packaging materials
declined; the former fell to $106.7 million from
$117.4 million while the latter settled at $65.5
million from $70 million.
Trade and other receivables fell by $82.5
million, moving from $274.4 million down
to $191.9 million. The only component that
increased was taxation recoverable, which
closed at $10.7 million from $9.0 million. The
portion that was denominated in US dollars
declined to $67.7 million from $107.7 million.
Short-term investments climbed from $29.3
million to $98.5 million. As the table shows,
AHL generates significant amounts of foreign
exchange; after allocating sufficient for its own
uses, the excess is invested in these instru-
ments to generate additional income.
Cash and cash equivalents improved to
$182.7 million from $125.3 million. Helped
by its reduced investment in receivables and
inventories and a refund of corporation tax, net
cash generated by operating activities climbed
to $213.9 million from $124.9 million.
Investing activities consumed $80.7 million
while $86.5 million was used in financing ac-
tivities and an exchange rate adjustment added
$10.7 million to the year-end balance.
Total liabilities declined to $463.0 million
from $493.7 million, reflecting a contraction
of 6.2 per cent.
Short-term borrowings dropped to $30.0
million from $50.6 million, all of which related
to trade revolver facilities.
Trade and other payables are also short-
term and they declined to $65.5 million from
The largest drop was shown under provi-
sions, which fell to $4.8 million from $31.3
million; most of this reflected the settlement
of an outstanding legal matter with a former
Accruals rose to $24.6 million from $19.8
million while trade payables fell to $25.2 million
from $30.0 million.
The largest component, retirement bene-
fits obligations, slipped to $293.9 million from
Total equity increased to $932.4 million
from $880.7 million. Retained earnings ad-
vanced to $714 million from $662.3 million.
The opening figure was boosted by the current
period's profit of $121.9 million but lower by
other comprehensive income of $4.4 million
and dividends to shareholders of $65.9 million.
Other reserves were unchanged at $99.9 mil-
lion. This comprised a revaluation reserve of
$91.1 million on land and buildings and a capital
reserve of $8.8 million. The share capital was
also stable at $118.6 million.
Excluding treasury shares, the weighted
average number of shares outstanding was
205,820,000 for both periods; consequent-
ly, the book value of each share improved to
$4.53 from 2015's $4.28.
Income and profit
Total revenue declined by $28.9 million or 4.5
per cent to $620.5 million from $649.4 million.
Most of this fall was concentrated under the
commodity or bulk rum trade segment.
The cost of sales fell by 6.4 per cent to $249.1
million from $266.0 million. This change saw
gross profit register at $371.4 million from
Selling and marketing expenses climbed to
$135.9 million from $116.5 million; this increase
reflected the additional expenditure needed
to help grow its sales of premium rums in se-
Administrative expenses also increased to
$62.5 million from $54.4 million. These move-
ments resulted in an operating profit of $173.0
million, which was 18.7 per cent lower than the
$212.7 million recorded for 2015.
Finance costs fell to $1.2 million from $1.4
million, while finance income rose to $0.6 mil-
lion from $0.2 million; consequently, profit
from continuing operations registered at $172.4
million from $211.5 million.
Other income fell to $1.9 million from $2.0
million. In 2015, this item was helped by a $1.5
million gain on the disposal of an investment.
In 2016, other income rose to $2.3 million from
$0.5 million while a loss of $0.4 million on the
disposal of fixed assets reduced the current
Dividend income fell to $0.2 million from
$1.1 million. In contrast, foreign exchange gains
climbed to $12.8 million from $0.6 million. Fi-
nally, the legal claim expense of $15.9 million
helped pulled down pre-tax profit to $171.4
million from $218 million.
The effective tax rate increased to 28.8 per
cent from 24.9 per cent; in line with the lower
profit, the actual tax fell to $49.5 million from
Consequently, the after-tax profit declined
to $121.9 million from $163.7 million. That re-
sult translated to basic and diluted EPS of $0.59
versus $0.80 for 2015.
The lower profitability at the branded trade
segment mostly related to the additional costs
incurred to help improve demand and customer
interest in the premium brands.
Local rum sales were impacted by the weaker
economic environment and fell by 14 per cent.
In contrast, international rum sales grew by
6 per cent and bitters sales expanded by 4.7
The decline in both sales and profit at the
commodity trade (bulk rum) segment reflected
a realignment of the customer profile and a
change in emphasis for this segment.
The export figures shown in the table are my
estimates, but based on a reliable source. This
indicates that AHL is a huge earner of foreign
exchange, which accounts for almost half of its
revenues and is essentially debt-free.
One of the constraints to its growth is that
its production capacity far exceeds its ability to
treat with the resultant effluent waste. When
this problem is solved, investors should see a
huge increase in sales.
Q1 2017 results
For the first quarter ended March 31, 2017,
AHL recorded a 10.5 per cent improvement
in revenues to
$112.1 million from $101.5 million, while cost
of goods sold fell marginally.
The branded trade delivered 17 per cent high-
er sales and improved operating profit by 14 per
cent; that result reflected continuing growth
in its international rums and bitters sales.
Under the commodity trade segment, rev-
enue fell by 19 per cent, however, operating
profit expanded by more than 500 per cent;
that result is consistent with the streamlining
and refocussing efforts to date.
Consistent with its continuing market de-
velopment efforts, the selling and marketing
expenses were 17 per cent greater. Interestingly,
finance income exceeded finance costs by a
wide margin while foreign exchange gains were
Although pre-tax profit improved by almost
$1.4 million, taxes climbed by $1.2 million. In
the final analysis, net profit edged up to $16.1
million from $15.9 million. For this period, EPS
was stable at $0.08.
Share price and
AHL's share price closed at $13.97 on De-
cember 31, 2015. During 2016, the share drift-
ed down to a low of $12.54 on May 19; it then
staged a slow recovery and reached a high of
$16.00 on November 10, before eventually
closing at $15.00 on December 30. That im-
provement represented a one year appreciation
of 7.4 per cent.
In 2017, it was traded at $14.70 on January
13, but recently closed at $15.00.
Total dividends were stable at $0.30 for both
2015 and 2016. The final dividend of $0.18 was
paid on April 21, 2017. Relating the total 2016
dividend of $0.30 to the recent price of $15.00,
the yield is 2.0 per cent. That price also reflects
a P/E multiple of 25.4 and price to book value
Those multiples suggest that the company is
in a pre-growth mode and, after certain bottle-
necks are unlocked (see below), it should begin
to deliver more robust results to investors.
debt by CLF
Both CLF and AHL are essentially in agree-
ment as to the quantum of $984.559 million
that the former owes to the latter. In late 2016,
they started formal negotiations to verify fig-
ures and structure a repayment plan. Reliable
information now suggests that a third party
has intervened in the process and insisted on
getting payment from CLF before AHL is paid.
This chain of events highlights both the in-
terrelationships among the various branches
of CLF Group and the excessively slow pace
at which the entire CLF/Clico resolution has
proceeded. It also points to the need for a swift
and equitable settlement for the benefit of all
the affected parties.
When a final agreement is eventually inked,
it is very likely that AHL will get an initial
lump-sum payment along with multi-year
instalments, possibly over three to five years.
This predictable inflow of funds will allow
AHL to jump-start its expansion plans by as-
suming a judicious amount of debt in order to
help finance a strategic acquisition; that action
will help grow its business to a more meaning-
ful and sustainable level. That development
would be consistent with its approved 5-year
Let us see if good sense and goodwill, on all
sides, can prevail.
In next week's article, we will review Unilever
Caribbean Ltd.'s 2016 results.
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