THE HOYOS FILE: Massy’s colonies help the Mother Country
MASSY GROUP is looking more to its overseas investment, especially its subsidiaries in Barbados, to shore up an overall decline in earnings caused by the downturn in the Trinidad & Tobago economy.
For the first half of the current fiscal year (October 1 to March 31), Massy reported third party revenue of TT$5 881 billion (the equivalent of about US$884 million), about TT$143 million (or about US$21 million) less than for the same period last year, when sales just passed TT$6 billion. Net profit for the six months was TT$271 million, about US$40.8 million), a drop of about TT$3 million over the same period the year prior.
Clearly, the management is concerned about the decline in half year revenue and profits, although the six-month period saw a rapid fall in the price of oil and gas prices, which have recovered to some extent in the past couple of months.
The worry, however, must be that if the rest of the year does not pick up quite a bit, Massy will be reporting its first fall-off in revenue and maybe profits since it reported a small loss in 2011 on revenue of TT$84 billion.
Revenue over the four years from 2012 to 2015 grew each year, reaching almost TT$12 billion for the last fiscal year, which was 40 per cent higher than in 2012. Net profits similarly moved up every year, from TT$494 million in 2012 to TT$668 million last year.
In his comments on the half-year outturn, chairman Robert Bermudez said: “Contraction in the energy sector, general weakening of the Trinidad & Tobago economy and a one-off maintenance charge (relating to a Point Lisas subsidiary) . . . led to a decline in profit before tax from Trinidad & Tobago by 28 per cent.”
This hit the bottom line, causing earnings per share for the period to decline by eight per cent. But it could have been worse, suggested Bermudez: Fortunately, the group’s overseas investments grew as its home base eroded slightly, helping to lessen the impact of Trinidad’s economic problems on the group.
For example, profit before tax for Barbados and the Eastern Caribbean combined was up by 24 per cent, for Jamaica by 18 per cent, and for Colombia by 40 per cent.
By the way, if you were wondering what the massy Group does in Colombia, the answer is that it sells Mazda, Fiat and other vehicles through its auto dealership there and operates an energy consulting firm. The overseas earnings translated into more TT dollars since the latter’s recent devaluation, said the chairman, contributing 55 per cent overall to profit before head office costs. That’s 12 per cent more than for the same six-months last year.
A look at page 136 of the Massy Group’s 2015 annual report shows that these investments are substantial, contributing 49 per cent – that’s right, almost half – of the group’s total annual revenue for the year.
Barbados and Eastern Caribbean revenue for the group in 2015 was TT$3.6 billion, over half of the homegrown revenue of TT$6 billion and 30 per cent of Massy’s total revenue. By contrast, Jamaica, Guyana and Colombia combined totalled around TT$2.2 billion.
In fact, to find out what the company is doing in Barbados you have to scan the entire annual report as there are over a hundred insertions of the word. Here’s a rough snapshot, by no means the complete picture:
“(In 2015) Our retail and distribution businesses in Barbados experienced flat revenue growth but ten per cent increase in profits due to significant cost reduction initiatives.”
On its insurance investment: “ . . . Gross written premiums in the property line of business declined in Barbados and Trinidad, when compared to the prior year . . . . Net claims incurred exceeded prior year by 49 per cent, driven by poor loss experience in the Barbados automotive insurance portfolio and Dominica hurricane losses. The poor loss experience in Barbados, particularly impacted by the frequency and severity of personal injury claims, accounted for the negative performance of the automotive insurance business.”
On its retail business: “ . . . In Barbados, we refurbished our Six Roads store and had a full year performance at our Haggatt Hall location. We have established that there is cannibalisation in our current store network in the south east of Barbados. This resulted in the decision to close our branch in Sargeant’s Village (JB’s) leaving us with an opportunity to leverage the property at this location which we own, by opening a discounter format store, focusing on limited product range and price.”
On its distribution investment: “Massy Distribution (Barbados) enjoyed another successful year . . . [T]he Company opened a new wine store at the Lanterns Mall in July 2015 [which] has been well received . . . .”
On its card business: “Our private label credit card in Barbados continued to grow impressively, subsequent to re-launch, now standing at over 30 000 active cardholders. It is the largest ‘closed loop’ card within its segment.”
On its finance investment: “. . . In Barbados, (Massy Group’s) consumer finance (division) assumed control of the Western Union Company (Western Union) portfolio in May 2015 and is executing a comprehensive programme with respect to compliance and business development.”
On its ICT investment: “Our Massy Technologies Infocom Operations generally performed well over prior year with our Barbados operation leading the way with 37 per cent revenue growth . . . .”
On its payment platform: “Surepay in Barbados continues to be the market leader in that territory with 37.5 per cent market share. With the upgrade of its technology platform, Surepay will be able to provide a number of new and innovative service in the Internet and mobile space in the near future.”
On its property investment: “. . . Massy Properties (Barbados) Ltd. experienced a decrease in profit this year versus prior year, primarily due to increased expenses and sluggish property sales…[This was] somewhat abated by an increase in rental income from a full year’s operation of the fully tenanted Dome Mall and increased revenue from the real estate division [Massy Realty Ltd.].”
In the next financial year – with the recent completion of phase two of the Dome complex – there will be an additional 18 000 square feet of commercial space available.”