Apr 2007 Financial News

SFC Releases Year End Results

Apr 16, 2007

Results for the Year Ended December 31, 2006
All figures quoted in Barbados Dollars unless otherwise stated

For the Year Ended December 31, 2006, Sagicor Financial Corporation (SFC) reported Earnings Per Share (EPS) of $0.51. This was up on the previous financial year by $0.05 or 10.43 per cent. Additionally, it is important to note that FY2005 included one time gains arising from business combinations and acquisitions of approximately $25.10 million or $0.10 per share. If these one time gains were excluded the EPS for FY2006 would have been up by an outstanding 41.67 per cent or $0.15.

Premium Revenue for the period under review amounted to $937.41 million and was up on the corresponding period by $188.70 million or 25.20 per cent. While Reinsurance Premium Expenses stood at $182.16 million up by a significant 63.10 per cent or $70.47 million when compared to FY2005. Thus, Net Premium Revenue ended the period at $755.24 million, an increase of 18.56 per cent or $118.23 million on the comparable period in 2005.

Net Investment Income for the twelve months amounted to $471.03 million and was up by 13.39 per cent on the comparative figure of $415.42 in FY2005. The year 2006 was a year of consolidation for the Group and as such all acquisitions made in 2005 have now been fully integrated and are now contributing to the overall performance of the Group. Consequently, Share of Operating Income from Associated Companies stood at $5.46 million and was up by a notable 57.07 per cent or $1.98 million on the corresponding period for FY2005. Fees and Other Revenue for FY2006 totaled $87.12 million up by $10.16 million or 13.21 per cent on the previous financial year. As a result, the Total Revenue for FY2006 amounted to $1.32 billion compared to $1.16 billion in FY2005- an increase of 13.89 per cent.

While the Revenue for the Group has shown significant growth over the period, SFC continues to have high expenditure, with Benefits and Expenses amounting to $1.12 billion for FY2006- an increase of $154.24 million or 16 per cent on FY2005. As such, Income from Ordinary Activities stood at $201.07 up by a small 3.41 per cent or $6.64 million.

The Effective Tax Rate for the period under review was 13.84 per cent compared to a Tax Rate of 12.37 per cent in FY2005. Thus, the Net Income for FY2006 ended the period at $173.25 million up by a marginal 1.68 per cent or $2.87 million on FY2005. However, if the one time gains are excluded from the comparative results in FY2005 the Net Income from recurrent operations for FY2006 would actually be up by 19.30 per cent. Additionally, the Net Income from recurrent operations attributable to shareholders would have improved by an exceptional 40.50 per cent over FY2005.

For the year ended December 31, 2006 the Group’s total assets stood at $6.73 billion up by 5.15 per cent on FY2005, while Total Liabilities amounted to $5.64 billion compared to $5.44 billion in the corresponding period last financial year. SFC’s Total Equity stood at $1.08 billion at year end after surpassing the $1 billion mark for the first time in the Group’s history.

The Board of Directors has approved a final Dividend of 7 cents which brings the total Dividends paid for 2006 to 13 cents compared to 12 cents for FY2005.

Currently SFC is trading at a price of TT$13.05 on the local market. In light of the current results we are forecasting an EPS of $0.55 (TT$1.75) for FY2007. At this forecast and the current price, SFC is trading at an attractive price to earnings multiple of 7.46 times. Additionally, using a multiple of 10 times and the forecasted EPS of $0.55 (TT$1.75), we are estimating a return of approximately 34 per cent or a target price of TT$17.50 on the current price. Thus, based on this analysis we continue to recommend a BUY on this share.

Gia Singh
WISE Equity Research Team