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Banks DIH partners with Ambev

Published: 
Thursday, October 26, 2017

In December 2015, the Ambev subsidiary, SLU Beverages Ltd, bought Barbados-based Banks Holdings Ltd (BHL). That transaction impacted Guyanese-based banks DIH Ltd (BDL) in two ways. First, it allowed BDL to record a one-off profit on the sale of its shares in BHL and it also gave Ambev/SLU a stake in BDL. In addition to the beverage business, BDL owns 51 per cent of Citizens Bank Guyana Inc. It also owns 9.7 per cent of the Demerara Life Group and 7.7 per cent of Trust Company (Guyana) Ltd.

Changes in financial position

Total assets increased by 6.6 per cent from G$72.5 billion to G$77.3 billion (about TT$2.34 billion). Property, plant and equipment rose to G$23.4 billion from G$22.8 billion. The largest increase was shown under plant and machinery, which closed at G$8.7 billion from G$8.3 billion; this included the acquisition of a Krones filler for the beer plant and a blow mould machine for the water bottling plant.

Furniture and equipment ended at G$1.3 billion from G$1.2 billion.

Loans and advances, which are entirely located under the banking subsidiary, declined to G$28.6 billion from G$30.1 billion. Mortgages increased to G$10.2 billion from G$9.6 billion. However, term loans fell to G$12.6 billion from G$14.9 billion. In addition, impairment provision increased to G$1.38 billion from G$0.83 billion.

Investment securities declined from G$3.21 billion to G$2.35 billion. The long-term portion fell to G$1.0 billion from G$2.6 billion while the current element rose to G$1.33 billion from G$0.6 billion.

Within the available-for-sale category, the quoted equity component declined to G$0.8 billion from G$2.6 billion.

Inventories were little changed at G$5.2 billion as at both year-ends. The two major shifts showed finished goods increasing to G$667 million from G$579 million while goods-in-transit fell to G$824 million from G$971 million.

Receivables and prepayments declined to G$985 million from G$1.06 billion. Net trade receivables ended at G$613 million from G$676 million while other receivables closed at G$275 million from G$286 million. Finally, prepayments edged up to G$97 million from G$96 million.

Cash and cash equivalents climbed to G$16.3 billion from G$9.6 billion. This improvement was hugely helped by larger bank deposits, lower payables and accruals and reduced taxes. Some of BDL’s assets and liabilities are denominated in foreign currency. In the case of the US dollar, its year-end net asset position was G$4.5 billion while for the TT Dollar, its net assets were G$0.4 billion.
Total liabilities rose by 3.7 per cent to G$41.82 billion from G$40.33 billion.

The banking segment’s customers’ deposits increased to G$35.2 billion from G$31.5 billion. Demand deposits fell to G$6.6 billion from G$7.7 billion. However, savings deposits rose to G$13.7 billion from G$11.3 billion and term deposits advanced to G$14.5 billion from G$12.1 billion. Overall, non-current deposits improved to G$2.3 billion from G$985 million while current deposits settled at G$32.9 billion from G$30.5 billion.

Payables and accruals declined to G$2.9 billion from G$4.3 billion. The trade payables component contracted to G$1.2 billion from G$2.2 billion and the other payables component closed at G$524 million from G$948 million. Its trade payables exceed trade receivables by a factor of two.

Provision for employee benefits declined to G$0.86 billion from G$1.53 billion. This represented the shortfall of the fair value of the underlying assets relative to the present value of the plan’s future obligations.

The reduced liability mainly reflected the increase in the fair value of the plan’s assets, which climbed by 283 per cent from G$277 million to G$1.06 billion. Meanwhile, the present value of its future obligations advanced by 6.4 per cent to G$1.92 billion from G$1.81 billion.

Revenues, profit

Total revenue improved by 3.1 per cent to G$28.8 billion (about TT$873 million) from G$27.9 billion.

The largest component, sale of goods, increased by 5.5 per cent to G$25.5 billion from G$24.2 billion.

Banking income fell by 12.6 per cent to G$3.19 billion from G$3.65 billion while the provisioning ofservices rose to G$56.6 million from G$53.6 million.

Total costs increased by 4.4 per cent to G$23.7 billion from G$22.7 billion. Raw material and related costs fell to G$7.0 billion from G$7.4 billion. However, excise taxes advanced to G$3.25 billion from G$3.02 billion and depreciation expanded to G$2.4 billion from G$2.23 billion. Staff costs climbed to G$4.3 billion from G$3.9 billion.

Interest on banking services increased to G$701.3 million from G$595.23 million. Other operating expenses expanded to G$6 billion from G$5.53 billion. These movements resulted in an operating profit of G$5.07 billion versus G$5.19 billion. Net finance income improved from G$16.2 million to G$26 million, primarily reflecting non-banking interest receivable.

The share of results of associates recorded a small loss of G$1.1 million. However, other income soared to G$1.44 billion from G$79 million. The largest contributor to this result was the gain of G$1.375 billion on the sale of its 6.7 per cent stake (4,358,815 shares) in Banks Holdings Ltd at the final price of B$7.10 per share.There was also a small gain of G$34 million on the disposal of its shares in Desnoes & Geddes (Jamaica) Ltd. In addition, the dissolution of BCL (Barbados) Ltd generated a profit of G$29.2 million. The other significant contributor was dividend income of G$25.3 million (2015: G$71.6 million). These changes saw pre-tax profit register at G$6.53 billion from 2015’s G$5.28 billion.

Helped by the non-taxable gain on the sale of BHL’s shares, taxation fell to G$1.82 billion from G$1.9 billion. Included in the tax bill was property, withholding and capital gains taxes of G$278.3 million.

Consequently, the after-tax profit rose to G$4.7 billion from G$3.39 billion. After removing G$235 million relating to the minority (49 per cent) profit generated by Citizens Bank, the profit attributable to shareholders came in at G$4.47 billion (2015: G$2.94 billion). That result translated to EPS of G$4.47 compared with G$2.94 for 2015.

Dividends, share price

Regular dividends for the 2016 fiscal period were G$0.88; in addition, in February 2016, a special dividend of G$0.60 was paid. That sum amounted to almost 44 per cent of the profit from the sale of its BHL’s shares and brought the total dividend for 2016 to G$1.48. This compares favourably with total regular dividends of G$0.69 for fiscal 2015.

In 2017, the first interim dividend of G$0.27 was paid on May 31, 2017 and the second interim dividend of G$0.27 will be paid today.

Excluding the special dividend of G$0.60, at that price, the yield is 2.51 per cent. That price also reflects a P/E multiple of 7.83 and a premium of 10.3 per cent over its book value of G$31.72.

In next week’s article, we will review the 2016 results of Seprod Ltd.

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