LIME targets US$45 million in operating profit
TELECOMS provider LIME Jamaica aims to make US$45 million (J$5b) in operating profit for its financial year ending 2015, or 80 per cent more year on year.
Hitting that target, however, falls short of guaranteeing dividends to shareholders.
"We plan to do US$45 million, that's our plan, and in our business if you plan to do something, you better do it," CEO Garry Sinclair told more than 200 shareholders at the annual general meeting (AGM) on Wednesday.
Jamaican companies rarely announce targets; and in the previous AGM Sinclair achieved his announced target of US$25 million in operating profit or earning before interest, depreciation, tax and amortisation (EBIDTA).
Hitting the target this financial year, however, "will take a whole heap of growth in mobile and broadband and a 'chunk of growth' in the enterprise business," Sinclair explained in his 75-minute presentation at the Knutsford Court Hotel in Kingston.
The company expects its EBIDTA target to equate to 25 per cent of revenues or five percentage points lower than the stated 30 per cent required for dividend payouts. Investors last received dividends six years ago based on perennial losses at the company.
Sinclair downplayed the negatives and described the local operations as more efficient, gaining market share, and on track to profitability.
He was addressing his fourth AGM as chief executive. This meant that the former investment banker now holds the title of longest-serving CEO at LIME (formerly Cable & Wireless Jamaica) in over a decade.
Gary Barrow, who was appointed in 2000, held that position for three years, then was transferred to a wider group position prior to departing in 2005.
LIME's ultimate parent company, Cable & Wireless Communications, plans to invest more than US$79 million in three years in upgrading the service segments led by faster mobile Internet browsing.
But minority shareholder Orette Staple questioned why a parent would invest in LIME amid continued losses with no dividends. "It is not growing," Staple summed up in his 43 minutes of questions. "And my understanding is that you could have eight more years of no profits."
LIME issued no dividends, but recorded $3.1 billion in interest payments for servicing a $35-billion-related party loan from Cable & Wireless Jamaica Finance (Cayman) Ltd, according to 2013/14 financials.
Staple also questioned why LIME's auditors, KPMG Chartered Accounts, refrained from "qualifying" the financial reports based on the negative equity position of the company for many years. Auditors qualify accounts that lack key information and/or do not follow international standards.
The company recorded $3.5 billion in net losses for its year ending March 2014. Additionally, its negative shareholder equity position worsened to $23.8 billion from negative $19.6 billion a year earlier.
"One of the things that we considered in coming up with this opinion is that we received a support letter from the parent company and looked at the parent company's cash and financial viability. This letter is achieved every year at the date of the reporting. It is not indefinite, but for a period of 12 months. It is in keeping with international standards," stated the auditor representing KPMG. "If a support letter was not available, then maybe a disclaimer would be considered."
LIME Jamaica Chairman Chris Dehring quietly rejected Staple's view of no growth by recounting the growth in annual EBITDA from US$15 million to US$25 million in 2012/13.
"They (C&W Communications) certainly are not agreeing with your assessment as to where the company is going," he said.
Dehring said that while not comparing Sinclair to US President Barack Obama, he woould describe as similar the "inherited" challenges faced by both men.
The company, formerly a monopoly, lost market share to start-up Digicel in the early 2000s with the liberalisation of the market. Over the decade, seven persons held the CEO position, including Errald Miller, Barrow, Jacqueline Holding, Rodney Davis, Phillip Green, Geoff Houston and now Sinclair.