Jul 2007 Financial News

OCM Releases Half Year Results

Jul 25, 2007

Results for the Half Year Ended June 30, 2007

For the Half Year Ended June 30, 2007, One Caribbean Media Limited (OCM) reported Earnings Per Share (EPS) (inclusive of ESOP) of 52 cents, an increase of 1.96 per cent or 1 cent on the comparable Half Year period in 2006. Group Profit Attributable to Shareholders increased by a minimal 2.29 per cent or $0.77 million from $33.49 million in HY06 to $34.26 million in HY07.

Sales for the period under review increased by 8.36 per cent or $16.89 million to $218.94 million. Cost of Sales, however, increased by a larger margin, up a significant 18.04 per cent or $22.64 million from $125.51 million in HY06 to $148.15 million in HY07. Thus, Gross Profit amounted to $70.79 million, down 7.51 per cent or $5.74 million on the same period in the last fiscal year. According to the Chairman, Sir Fred Gollop, the Group did not yield the anticipated incremental revenue from the ICC Cricket World Cup. Also, the Group’s two newspapers suffered substantial newsprint cost increases, but it is expected that renegotiated prices should bring some relief in the second half of the year. Additionally, wage settlements across the Group impacted negatively on profitability.

HY07 on HY06 saw decreases in expenses. Administrative Expenses fell a marginal 1.77 per cent or $0.46 million to $25.51 million while Marketing Expenses declined an outstanding 58.60 per cent or $3.04 million to $2.15 million. As a result, Operating Profit totaled $43.23 million and was down $2.14 million or 4.72 per cent on the same figure in the last financial year.

Dividend Income and Interest Income for the half year amounted to $0.12 million and $3.15 million respectively. Finance Costs rose a substantial 71.97 per cent or $0.19 million to $0.45 million. Ultimately, Profit Before Taxation increased by 2.08 per cent or $0.94 million to $46.05 million for HY07.

The Effective Tax Rate was 25.12 per cent for HY07 compared to 25.10 per cent for the same period in FY06. Thus, Profit After Taxation was $34.48 million, up 2.06 per cent or $0.70 million on HY06.

The Directors have approved an interim dividend of 25 cents per share (25 cents in HY06) payable on August 30, 2007.

The Chairman has also stated that following the signing of the share purchase agreement on April 30, 2007 with Cumulus Media Inc for the acquisition of five radio stations across the Eastern and Southern Caribbean, all appropriate regulatory consents and authorization for the ownership change of the relevant broadcast licenses have been applied for. The necessary approvals are expected during the third quarter.

OCM is currently trading at a price of $20.00. In light of the flat results we are revising our forecasted EPS downwards from $1.60 to $1.40. At the current price and this revised EPS, this share is trading at a price to earnings multiple of 14.29 times. Additionally, using a multiple of 15 times and at the forecasted EPS of $1.40, this share has an expected return of approximately 5 per cent on the current price or a target price of $21.00. We therefore recommend a HOLD at this time.

Nancy Chen
WISE Equity Research Team