Aug 2008 Financial News

RBTT disappoints Guardian - Says profits curtailed by returns from RBC offer

Aug 13, 2008

Guardian Holdings Limited continued to strengthen in the first half of the year, reporting more than half a billion dollars in net profit, or $2.65 per share, that was boosted by one-off gains from the sale of its entire holdings in RBTT Financial Group and disposal of its interest in a Panamanian company.

GHL will be distributing a bonus dividend of 25 TT cents per share to shareholders as a result, atop the 15 TT cents interim dividend approved by the board, for a total of 40 TT cents to be paid out at the end of August.

Guardian booked a gain of TT$349.4 million from the sell-off of its 18 per cent stake in Grupo Mundial, which represented more than half the TT$536.6 million the insurance conglomerate booked in net profit at June 30 off revenues of $2.98 billion.

Expectation not met

The Mundial sale proceeds were booked in the second quarter. GHL made TT$486 million in net profit in the three-month period.

The company's performance - which chairman Arthur Lok Jack described as "excellent" - compares favourably to the first half of 2007, when GHL was in the red, booking TT$167.5 million of losses in the six-month period.

Lok Jack said GHL's profits in the current period would have been even sweeter, if the Royal Bank of Canada (RBC) offer for RBTT had met expectations.

"The result would have been even more significant were it not impaired by unrealised net fair value losses of TT$133 million incurred primarily as a result of the subsequent decline in the value of the Royal Bank of Canada shares we received in partial consideration for our RBTT financial shares," Lok Jack said in a statement pegged to the six-month earnings report.

Collar mechanism

The company owned approximately 12 per cent of RBTT.

The offer was priced at TT$40 per share, in a combination of 60 per cent cash and 40 per cent share swap of RBTT stock for RBC shares, but was built with a collar mechanism that tied the final price to the performance of the RBC stock.

At the time of the offer last October, RBC shares were averaging US$54. On Tuesday, the banking stock was trading below US$45, some of it linked to the credit crisis faced by the world's big banks, including their newest troubles - risky auction rate securities.

Plans to sell RBC shares

Lok Jack said Guardian plans to sell its RBC shares.

"The RBC stock is close to the share exchange value, and at the appropriate time it is our intention to dispose of our entire RBC shareholding," he said.

In the past year, GHL has been liquidating portions of its investment portfolio to free up cash to cover some of its losses in the period and retire "costly debt."

GHL is carrying just under TT$20 billion of liabilities, including $6 billion of debt and other liabilities, and TT$12.8 billion in insurance contracts, while shareholder equity rose to $4 billion, balanced total assets of $23.8 billion.



Source:
The Jamaica Gleaner
Wednesday August 13, 2008
http://www.jamaica-gleaner.com/gleaner/20080813/business/business3.html