Dec 2006 Financial News

BST Releases Year End Results

Dec 22, 2006

Results for the Year Ended September 30, 2006

All figures quoted in Barbados Dollars

Barbados, Shipping & Trading (BST) reported Earnings Per Share (EPS) of 44.2 cents for the year ended September 30, 2006. While this was 48.48 per cent less than 2005’s EPS of 85.8 cents, in 2005, the Company had a one off transaction which substantially enhanced the books for that period.

Revenue increased 8.35 per cent to $735.882 million while the Company’s Trading Profit rose 117.12 per cent to $47.473 million. Though last year’s trading results were impacted negatively by various restructuring charges and fire related losses, the Directors pointed out that this demonstrates good progress with its core businesses which collectively grew their profits at a higher rate than their growth in revenue. However, while the associate companies generally performed better, its recent hotel ventures have not been able to deliver the level of returns which BST expects to begin to realize over the next two years.

Interest Expenses rose 7.51 per cent to $12.346 million while Other Expenses fell 78.10 per cent to $0.548 million. Gain on disposal of investments fell almost 100 per cent as the prior year contained a one-off transaction concerning the sale of a portion of shares held in Neal & Massy while this year no such sale took place. It is also important to note that 2005’s figures in respect of these gains have been restated in accordance with the revised requirements of accounting standard IAS 39 as it relates to “Available-for-Sale Investments”. Changes in the value of such investments are now recognized within BST’s Reserves in the Balance Sheet until the investment is sold. Only at the time of sale will the realized gain or loss be recorded in the Income Statement. Accordingly, the restatement of last year’s income figures removed all unrealized gains. The realized gain on the sale of the shares reflects the gain over the original cost at which the investment was established rather than the gain over the prior year’s closing value.

Profit Before Tax was down 47.23 per cent to $34.642 million however without the gain Profit Before Tax would have been up 339.68 per cent. The effective tax rate rose from 2.99 per cent in 2005 to 11.52 per cent in 2006 while Profit After Tax was down 47.39 per cent to $35.953 million. The notable rise in the effective tax rate was no doubt as a result of the large gain from the previous year.

Given these results we are forecasting year end earnings for 2007 of approximately 50 cents. At this forecasted EPS, BST is trading at a price/earnings ratio of approximately 10.90 times which is attractive considering it usually trades above 15 times earnings. Hence, in light of these results, we recommend a BUY on this share.

Sreshtha Tewari
WISE Research Team