Aug 2006 Financial News

Angostura Holdings Limited Releases Half Year Results

Aug 18, 2006

Angostura Holdings Limited (AHL) reported Earnings Per Share of 9 cents for the half year ended June 30, 2006. This was 8 cents or 47.06 per cent less than the corresponding period last year. HYE 2005 results however included a tax credit of $11.958 million arising from the now disposed Cruzan Inc. This tax credit contributed approximately 6 cents to that period’s EPS of 17 cents. Therefore, without that tax credit, the Company’s adjusted EPS would have been approximately 11 cents resulting in a fall of 18 per cent for this half year. However, in 2006, the Company benefited from an unusually low effective tax rate of 4.01 per cent.

Sales for the six month period fell 50.69 per cent from $684.158 million in 2005 to $337.340 million in 2006. The huge drop however is as a result of the disposal of Cruzan Inc whose results would have been consolidated into the Financial Statements for 2005. According to the Chairman’s Statements, Net Turnover within the Trinidad business operation actually increased from $200 million to $337 million (68.50 per cent). The strong growth in its core business was achieved in both its bulk rum commodity markets and its branded cased export business in the United States, Europe and other markets.

While its bulk rum commodity business has seen a turnaround this year, AHL still continued to be challenged by both weak international bench mark pricing and increased costs of molasses on the world markets.

Having regard to the fact that during 2005, the operating profitability of Cruzan Inc. was minimal, Operating Profit decreased 1.92 per cent from $43.746 million in 2005 to $42.907 million in 2006. This was largely as a result of continued marketing investment expenditure in local and overseas markets in an effort to grow and position its brands.

Profit Before Tax fell 15.16 per cent to $18.574 million while Profit After Tax was down by a bigger margin, namely 47.51 per cent to $17.830 million. The large drop was due to the inclusion of the aforementioned taxation credit arising in Cruzan Inc. Without the credit, Profit After Tax would have been down approximately 19 per cent.

During 2006, the Group has been increasing its equity participation in Belvedere SA, a Paris listed company which has at the same time just completed a major Euro 400M acquisition of a French counterpart. AHL is confident that the group will benefit from a greater level of brand presence and penetration throughout Europe as well as dividend flows.

AHL is also cognizant of the fact that the branding strategy being pursued is very costly and affects the level of reported profitability. The Company however expects shareholders will benefit over the medium term.

Given the results, we are revising our year end forecast to 20 cents. At the current price of $4.70, Angostura is trading at a price/earnings ratio of 23.5 times. Hence, at this price, Angostura is considered overvalued and so, we recommend a SELL. Over the past 52 weeks, this share has traded as low as $4.35.

The directors have declared an Interim dividend of 5 cents to be paid on September 29th 2006.


Sreshtha Tewari
WISE Research Team
Friday, August 18, 2006.