Aug 2007 Financial News

SFC Releases Half Year Results

Aug 28, 2007

Results for the Half Year Ended June 30, 2007
All figures quoted in Barbados Dollars unless otherwise stated

For the Half Year Ended June 30, 2007, Sagicor Financial Corporation (SFC) reported Earnings Per Share (EPS) of 19 cents, which was flat when compared to the EPS for the same period in fiscal 2006. Q207 on Q206, the EPS was down 1.69 per cent from 11.8 cents to 11.6 cents, while Q207 on Q107, the EPS was up a substantial 56.76 per cent from 7.4 cents.

Net Premium Revenue for the Half Year period amounted to $386.52 million, up 6.95 per cent or $25.13 million on the corresponding period in the last financial year. Net Investment Income rose by a bigger margin of 11.88 per cent or $30.97 million to $291.66 million. Thus, Total Revenue ended the period at $678.18 million, up 9.02 per cent or $56.10 million on the same figure for HY06. Q207 on Q206, Total Revenue was also up moving from $319.96 million to $345.88 million. However, quarter on quarter, this figure was up by a smaller margin of 4.09 per cent.

Total Benefits and Expenses for the Half Year amounted to $590.84 million, up 10.22 per cent or $54.78 million. Benefits amounted to $363.37 million for HY07 compared to $332.44 million for HY06, an increase of 9.30 per cent. While Expenses were up 11.72 per cent from $203.61 million for HY06 to $227.47 million for HY07. The Chairman has noted that Administrative Expenses increased by 10 per cent due to the impact of some non-recurring cost associated with certain strategic initiatives, including the listing on the London Stock Exchange.

For the Half Year Period under review, Income from Ordinary Activities rose by a marginal 1.53 per cent from $86.03 million to $87.34 million. The Effective Tax Rate for HY07 was 17.02 per cent compared to a Tax Rate of 15.47 per cent. Thus, Net Income ended the period at $72.48 million, up a marginal 0.34 per cent on the same figure in the corresponding period for fiscal 2006.

On July 02, 2007, SFC entered into an agreement to acquire the Lloyds insurance syndicate known as Gerling at Lloyds Limited. The syndicate underwrites property and casualty insurance business primarily in North America and Europe.

The Chairman expects that the performance of the Group in the second half of the financial year for 2007 will be stronger than the first half, which is consistent with previous years. Also, the Board is confident that the financial objectives for 2007 will be achieved.

The Directors have maintained an Interim Dividend of 6 cents per share representing a dividend payout ratio of 31.6 per cent of earnings for the half year.

SFC last closed at a price of TT$13.81 on the local exchange. At this price and a Forecasted EPS of TT$1.75, this share is trading at a price to earnings multiple of 7.89 times. Additionally using a multiple of 10 times and the forecasted EPS of TT$1.75, this share has an expected return of approximately 27 per cent on the current price or a target price of $17.50. Thus, based on this analysis we continue to recommend a BUY on this share.

Gia Singh
WISE Equity Research Team