Home' Trinidad and Tobago Guardian : August 3rd 2014 Contents AUGUST 3 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG13
The investment holding com-
pany, National Enterprises
Ltd, continues to deliver rea-
sonable results to some of its
investee companies face
restructuring and market-dri-
Traditionally, its holdings in various investee
and associated companies have been acquired
based on some type of government decision-
Recently, and to its credit, the company
has taken a more proactive approach and, in
its most recent fiscal period, initiated an
investment programme that is more internally
driven. This initiative was partly financed
using some of its accumulated cash reserves.
Let us now turn to NEL s performance for
its 2013/14 fiscal period and see how it is
attempting to reshape its future.
Contraction in asset values
Total assets declined to $3.59 billion from
$3.82 billion as at March 2013, reflecting a
change of 5.95 per cent. The most significant
driver of this movement was the reduction
in the value of its equity accounted invest-
ments to $2.34 billion from $2.52 billion in
the earlier period.
The table above shows that the value of
its TSTT investment declined by more than
On the other hand, the value of its financial
assets improved by a multiple of more than
4.6 times to $275.7 million from a more mod-
est $59.6 million as at March 2013. In this
case, the most significant change was the
acquisition of a 10 per cent stake in the Power
Generation Company of T&T Ltd for $151.3
The purchase of 1 million shares in the
Clico Investment Fund cost NEL $21.85 mil-
In addition, buying a small stake in the
First Citizens Bank, at various prices, added
$44.78 million to its stock of investments.
NEL s ownership in FCB amounts to 0.51 per
cent of its total issued capital.
Accounts receivable and prepayments
increased by 57 per cent to $146.3 million
from $93.1 million a year earlier. A debenture,
valued at $8.98 million, together with loans
and receivables of $53.41 million comprised
the largest portions of the increase.
Not surprisingly, given its vigorous invest-
ment programme, cash at hand and at bank
contracted sharply to end 2014 at $586.3 mil-
lion from last period s $906 million.
Of this total, $513.6 million was held in
short-term investments while $72.7 million
represented cash in the bank.
Total liabilities rose to $265.9 million from
the 2013 base of $192.3 million. Higher debt
balances was the prime driver of this change.
Bank overdraft and short-term borrowings
increased to $217 million from $131.7 million
a year earlier. The major change related to a
short-term loan of US$16.3 million (TT$105.4
million) from Republic Bank Ltd to finance
the purchase of the Powergen shares. The
fixed interest rate was 1.4 per cent per annum
and the loan was repayable as at March 31,
The major declining liability was accounts
payable and accruals, which fell to $24.5 mil-
lion from $36.9 million as at March 2013.
Both components declined. Trade payables
moved from $15.4 million to $6.9 million,
while accruals closed 2014 at $17.6 million
from $21.5 million a year earlier.
Total shareholders equity fell to $3.24 bil-
lion from the March 2013 level of $3.54 billion.
The primary contraction occurred in the
retained earnings component, which fell from
$1.78 billion as at year-end 2013 to $1.45 bil-
This figure was boosted by lower compre-
hensive income of $173.8 million (2013: $507.1
million). This was reduced by NEL s share of
the actuarial loss of $43.3 million and by a
subsidiary dividend of $4.9 million. However,
the largest contraction of $456 million was
observed in the dividends paid to sharehold-
ers.Each of its 600,000,641 shares now has
a book value of $5.40; this is lower than the
$5.91 as at March 2013.
Revenues and profit
NEL s revenues consist entirely of NFM s;
consequently, we will start the discussion at
the level of operating profit, which rose to
$8.7 million from the previous period s $6.3
NEL s major source of income is the share
of profit, net of tax, from its equity accounted
investments. This line item contracted to
$337.8 million or by 68.1 per cent from the
2013 level of $496.1 million. As shown above,
TSTT was the biggest contributor to this
decline as it reversed a small profit of $11.5
million in 2013 and incurred a huge loss of
$226 million this year.
Tringen also generated a significantly lower
profit. This company s contribution fell to
$192.4 million from the previous period s
In the case of NGCNGL, after-tax profits
were $5.78 million below the 2013 figure of
The only robust performer was NGCLNG,
which saw a 43.8 per cent increase in after-
tax profits. This number moved from $40.8
million in 2013 to $58.8 million this year.
Most of its dividend income of $3.68 million
related to FCB. The purchase of Clico Invest-
ment Fund units will boost dividend income
in the current fiscal period. Meanwhile, its
interest income declined to $7.56 million from
$11.36 million in 2013; this fall was due to its
reduced holdings of income-bearing assets.
Other income, which is not described, rose
from $8.67 million in 2013 to $11.71 million
After allowing for all these movements,
pre-tax profit registered at $190 million from
the previous year s $522.5 million. The after-
tax result for 2014 came in at $181.9 million;
this result is $333 million or 64.7 per cent
lower than the $514.8 million recorded for
The EPS contracted to $0.32 from the pre-
vious year s $0.85.
Contributions from investee
TSTT s poor result was primarily due to
the company making a provision of $694.6
million from restructuring costs, which
includes a major VSEP provision. There is
an expectation that, with lower operating
costs, the company will quickly return to an
acceptable of profitability.
Tringen s profitability was negatively
impacted by lower ammonia prices on the
world markets. In addition, it suffered from
gas curtailment issues during 2013. Signif-
icantly, it has an immediate need in 2014 to
finance an Energy Efficient Improvement
Project (EEIP) at its Plant 1.
These factors reduced its ability to make
dividends to NEL; these distributions were
cut to $115 million from $213.3 million pre-
In 2013, NGCNGL used some of its retained
earnings to pay an excessively large dividend
of $201.46 million. Less favourable market
conditions and a lower profit restricted its
2014 dividend to "only" $123 million.
Meanwhile, NGCLNG turned in a better
performance in 2014, which allowed it to pay
a slightly more generous dividend.
Although NFM s results have improved, its
contribution to the overall NEL picture
remains very modest.
Share price and lower dividend
In August 2013 NEL shares traded at $16.00.
Since then, it has steadily advanced and peaked
at $19.05 on June 12, 2014. Following the
announcement of its audited results, the price
has slipped, closing recently at $18.00 with
bids to buy coming in at lower levels.
Lower earnings and dividends have hugely
impacted the dividends that NEL shareholder
received from the 2014 fiscal year. This change
resulted in dividends being lowered to $0.46
from $0.73 for the 2013 period.
Using a price of $18.00 and a dividend of
$0.46, the yield is 2.56 per cent.
In the short term, the company s perform-
ance will continue to be impacted by variations
in the prices of commodities, such as, natural
gas and ammonia. In addition, the speed at
which TSTT can recover will play a major
role in its economic fortunes.
TSTT estimates that it will earn upwards
of $100 million in the current fiscal period.
Assuming that this target is achieved or
exceeded, and in the context of its five-year
plan, what are the chances that this ailing
"giant" will be able to pay a significant div-
idend to NEL?
Last week, the Telecommunications
Authority of T&T Ltd (TATT) published a
notice showing that TSTT s joint venture
partner, Cable & Wireless, has filed an appli-
cation to set up competing telecommunication
What does this suggest about Cable &
Wireless technical and financial commitment
How will the relationship between C&W
and TSTT change and affect TSTT and, by
On a more positive note, NEL s horde of
cash remains substantial, even as it prepares
to pay $138 million in dividends on August
21. After this payment, its cash balance should
still exceed $448 million.
Quite likely, it will continue to seek out
new investment opportunities to help build
a significant income stream away from its
current holdings of investee companies.
Results from TSTT and Tringen
squeeze NEL's performance
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