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BUSINESS GUARDIAN guardian.co.tt AUGUST 10 • 2017
TSTT helps NEL's 2016-17 improvement
National Enterprises Ltd
(NEL) benefitted from a
return to profitability at
TSTT along with higher
dividend income. Let us
now review NEL's results
to March 31, 2017.
Changes in financial
Total assets improved by 2.4 per cent, mov-
ing from $3.60 billion to $3.69 million.
Equity accounted investments closed at
$2.43 billion from $2.32 billion. The largest
component, TSTT, edged up to $1.13 billion
from $1.1 billion while TRINGEN's value im-
proved to $338.3 million from $279.8 million.
PanWest's value was unchanged at $349.7
million, reflecting the payment of almost its
entire profit as a dividend.
Both NGCLNG and NGCNGL exhibited im-
provements. Despite recording a lower profit,
NGCLNG's value improved to $251.7 million
from $242.3 million. At NGCNGL, profits were
19.2 per cent greater and this helped its value to
improve to $367.3 million from $346.1 million.
Financial assets closed at $437 million from
$410.8 million. The value of its UTC Calypso
Index Fund fell to $43.8 million from $50 mil-
lion while its holdings in First Citizens Bank
closed at $40.5 million from $43.6 million. In
contrast, the value of its shares in T&T NGL
rose to $32.8 million from $30.6 million. The
major addition to its held-to-maturity hold-
ings was an ANSA Merchant Bank loan note
of $33.7 million.
Fixed assets slipped to $165.3 million from
$167.4 million. Primarily, these reflected
NFM's values to December 2016, with small
adjustments to March 2017. Similarly, invento-
ries of $72 million (2016: $78.9 million) mirror
NFM's values as at its December year-end.
Accounts receivable and prepayments de-
clined to $154.6 million from $211.8 million.
The NFM portion fell from $90.9 million to
$85.6 million, however, the NEL-specific com-
ponent shrank to $68.9 million from $120.9
The major contributor to this fall was the
reduction in the value of dividends declared
but not received, which contracted to $17.4
million from $64.7 million.
Cash and cash equivalents narrowed to
$348.2 million from $391.9 million. NFM's
portion, as at its December 2016 year-end,
was $94.4 million (2015: $65 million). Con-
sequently, the NEL-specific portion declined
to $253.8 million from $326.9 million.
Total liabilities edged up to $425.4 million
from $397.5 million.
Long-term borrowings rose to $172.8 mil-
lion from $100.5 million. The current portion
closed at $27.2million from $6.6 million while
long-term component ended at $145.7 mil-
lion from $93.9 million. The entire increase
reflected new NEL-related loans.
A loan balance of $96.5 million relates to
the financing of NEL's acquisition of PanWest
Engineers and Contractors LLC; after re-nego-
tiation, it is now due to be fully repaid by July
31, 2019. Another loan balance of $52 million
relates to NEL's purchase of shares in Power
Generation Company of T&T Ltd.
The third loan has a balance of $24.5 million
(2016: $100.5 million) and represented bal-
ances drawn by NFM for working capital and
Bank overdraft and short-term borrowings
fell to $125.3 million from $168 million. This
decline reflected the restructuring and transfer
of NEL's loan of $60.4 million for the purchase
of PanWest. The remainder of $125.3 million
(2016: $107.6 million) comprised NFM's grain
purchasing facilities from both Eximbank and
Accounts payable and accruals declined to
$60.6 million from $75.1 million.
Here, the largest decline was shown under
the mostly NFM-related trade payables, which
contracted to $29.3 million from $51 million.
Total equity improved marginally to $3.27
billion from $3.21 billion. Excluding non-con-
trolling interests of $124.3 million, sharehold-
ers' equity closed at $3.14 billion from $3.1
billion. Retained earnings increased to $1.34
billion from $1.32 billion. Principally, the
opening balance benefitted from the current
period's profit of $188.7 million while dividends
to shareholders of $180 million lowered the
The translation reserves were boosted by a
credit of $36.4 million to $61.6 million. This
item reflected exchange differences on trans-
lation of foreign operations.
Stated capital was firm at $1.74 billion, how-
ever, treasury shares were now shown at $2.63
million. This item reflects the cost of the NFM
ESOP acquiring shares in NFM.
The weighted average number of shares out-
standing was stable at 600,000,641; conse-
quently, the book value of each share improved
to $5.24 from March 2016's $5.17.
Income and profit
NEL's total revenue, cost of sales and gross
profit are identical to that of NFM for the 12
months ended December 2016. For reasons
specific to NFM, gross profit improved to $140
million from $115.8 million. (Refer to NFM ar-
ticle in the BG dated June 8, 2017.)
Administrative expenses of $43.7 million
(2015: $41 million) were identical to that of
NFM. However, selling and distribution ex-
penses declined to $42.7 million from $46.2
Here, the NFM portions were $35.6 million
and $38.7 million, respectively.
These changes saw operating profit improve
to $53.6 million from $28.5 million.
Finance costs rose to $14.98 million from $7.3
million. The NFM portion was $10.96 million
(2015: $2.6 million), which left NEL with $4
million (2015: $4.7 million).
Both dividend and interest income im-
proved; the former advanced to $18.6 million
from $10.8 million while the latter rose to $9.5
million from $6.6 million. In contrast, other
income declined to $9.4 million from $15.5
Its most significant and core income stream,
share of after-tax profits from equity account-
ed investments, climbed to $145.9 million from
$65.4 million. The largest swing was shown
under TSTT, which moved from a loss of $153
million to a profit of $25 million.
In addition, NGCNGL reported net profits
advancing to $43 million from $36 million.
The profit contribution from the other three
companies exhibited declines; PanWest fell
to $13 million from $24 million while Tringen
contracted to $58 million from $140 million
and NGCLNG declined to $7 million from $19
These variations resulted in pre-tax profit
improving to $222.1 million from 2016's $119.5
After allocating $21.33 million to taxes and
$21.7 million to non-controlling interests (of
which about $17 million related to NFM), the
net profit attributable to shareholders regis-
tered at $181.6 million versus $90.4 million
for 2016. This result translated to EPS of $0.30
compared with the previous year's $0.15.
TSTT's total assets advanced to $2.57 billion
from $2.18 billion. In addition, its current ratio
improved to $299.3 million from a deficit of
$340.8 million. Total income rose marginally
to $1.48 billion from $1.45 billion. However,
total expenses declined to $1.45 billion from
Consequently, it was able to report an af-
ter-tax profit of $24.7 million versus a loss of
On May 2, TSTT announced that it had
signed an agreement to acquire Massy Com-
munications Ltd for $255 million. Last week,
TSTT confirmed that the Telecommunications
Authority had approved the deal for $40 mil-
lion less, that is $215 million.
The reduction in the final price was attrib-
uted to lower inventory values, as per MCL's
audited accounts. This acquisition gives TSTT
900 kilometres of fibre cable that is connected
to 34,000 households.
In Cable and Wireless's accounts to March
2016, the 49 per cent stake in TSTT is described
as an asset held for sale with an ascribed value
of US$129 million (currently, about TT$871
Effective May 2016, the new owner of C&W
became Liberty Global; in Liberty's accounts
to December 2016 it states that it may not be
able to obtain the fair value of the TSTT shares
due to the nature of the stake. The most likely
reason is that it is "only" 49 per cent.
Deadlines for the sale of 49 per cent of TSTT
have come and gone. Given the fast-paced and
capital intensive nature of telecommunica-
tions technology, it is almost inconceivable
that any serious investor will want to buy the
large minority stake in TSTT; consequently,
some variation or sweetener to what is being
offered may, sooner rather than later, have to
be included in order for the deal to close at a
Tringen's sales dropped to $739.6 million
from $1.04 billion while its net profit declined
to $58.5million from $139.6 million. These re-
sults largely reflect the lower price for ammonia
on the world market, further worsened by the
continuing curtailment of local gas supplies.
From a high point of about US$413.10 per
tonne in 2015, ammonia prices declined to
US$235.10 per tonne in 2016.
In early 2017, there was a price recovery, but
this was not expected to be sustained for the
full year. However, in the coming months the
production and supply of natural gas, which is
the main feedstock for ammonia, is expected
In this same vein, an increasing supply of
local gas should help the results of both NG-
CNGL and NGCLNG.
In 2017, these companies delivered contrast-
ing results, as stated earlier.
Share price and
NEL's share price closed at $10.00 on March
31, 2016. It subsequently advanced to a high
of $11.35 on April 22, 2016, from which level
it drifted consistently down before ending at
$10.82 on March 31, 2017. It closed on July 31,
2017 at $10.48.
Total dividends contracted from $0.50 for
2016 to $0.35 for 2017. Notably, in both fiscal
2016 and 2017 periods, dividends exceeded
EPS. Perhaps, assuming a resurgence in profit
in the current year, dividends will revert to their
subordinate level ie below EPS?
The final dividend of $0.20 will be paid on
August 29, 2017. Relating the total 2017 divi-
dend of $0.35 to the recent price of $10.48, the
yield is 3.34 per cent. That price also reflects
a lofty P/E multiple of 35 and price to book
value of 2.00.
In next week's article, we will review East
Caribbean Financial Holdings' results for 2016.
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