Jun 2006 Financial News

National Enterprises Limited Releases Year End Results

Jun 30, 2006

National Enterprises Limited reported Earnings Per Share of 81 cents for the year ended March 31, 2006. This was 8.00 per cent more than 2005’s restated EPS of 75 cents. The growth in EPS however was largely as a result of the reduction in the Corporate Tax Rate as the Company’s Profit Before Tax was down 3.34 per cent from $638.683 million to $617.371 million. The effective tax rate in fact fell from 28.17 per cent in 2005 to 20.93 per cent in 2006 resulting in growth in after tax profits of 6.42 per cent.

It is important to note that a change in accounting treatment was necessary for NEL to comply with International Accounting Standards (IAS). Hence, for the first time, National Flour Mills (NFM) was treated as an associate and so, the financial statements of NFM were consolidated into NEL’s accounts. Though NEL also has 51 per cent shareholding in TSTT and TRINGEN, those financials were not consolidated as the ability to exercise control is limited by shareholder agreements with joint venture partners. Hence, the application of equity accounting to these investments was considered appropriate.

Though there was an 8.77 per cent decrease in Cost of Sales, Gross Profit was down 24.59 per cent to $62.174 million as Turnover dropped 10.75 per cent. The Company made an Operating Loss of $6.262 million as Selling and Distribution Expenses rose 16.86 per cent to $25.404 million. Administration Expenses fell 3.59 per cent to $39.588 million and Finance Charges fell 33.63 per cent to $0.444 million.

Interest income fell 16.97 per cent to $2.829 million while Other Income rose 107.88 per cent to $17.520 million. Share of profit before tax of associates fell minimally 1.25 per cent from $607.875 million to $600.284 million.

The Directors have declared a final dividend of 60 cents per share which brings the total dividends paid to 79 cents. This represents a dividend payout ratio of 97.53 per cent. The final dividend is payable on August 16, 2006. At the current price of $8.26, the dividend yield on this share is 9.56 per cent. NEL is currently trading at a price/earnings ratio of 10.19 times earnings.

Sreshtha Tewari
WISE Research Team