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Cable & Wireless Jamaica posts first annual profit in nine years - EBITDA margin hits dividend trigger set by Sinclair in 2013

Published:Wednesday | June 1, 2016 | 12:00 AMSteven Jackson
Garfield 'Garry' Sinclair, managing director of FLOW Jamaica.

Telecommunications company Cable & Wireless Jamaica (C&WJ), under the helm of Garfield Sinclair, made a net profit of $1.16 billion for the year ending March 2016, its first positive annual results in nearly a decade.

The results released on Tuesday comes as C&WJ, which trades as FLOW Jamaica, boasts of having hit a customer base of one million, from a 16 per cent spike in subscribers in the past year, and a bump in business from the sale of data packages fuelled by rising consumption of social-media platforms.

The company's performance has also hit a performance benchmark announced more than two years ago to trigger a dividend.

Of equal importance to FLOW's financial performance was the perennial exceptional item, which usually hits the bottom line as a multibillion-dollar cost cascading the company into a loss. This time around, however, it actually infused the company with $1.13 billion in cash and lifted it into a profit.

"Despite a turbulent year filled with mergers, integration and heightened competitive activity, our financial performance for fiscal year 2015-16 clearly demonstrated the resilience and effectiveness of our steadily improving business model," said Sinclair in his message accompanying the financials released on Tuesday.

Few shareholders, especially those at the annual general meetings, believed that C&WJ had the ability or the will to return to profitability. Indeed, the company made an $8.8 billion loss a year ago, mainly due to an exceptional item which cost it $6.9 billion.

Then there was the $20.1 billion net loss in 2012 due to a $15.7 billion impairment, and an additional $11.9 billion write-down of its interest in subsidiaries.

The rise to profit in 2016 is effectively a 113 per cent swing out of the deep hole the company continued to occupy up to last year. Profit per share was just under seven cents, compared to a loss of 53 cents at March 2015.

FLOW Jamaica now has the task of increasing its profit going forward in order to remove the $28.1 billion accumulated net deficit of the company.

Sinclair and other members of the board are likely to come under more pressure to pay a dividend to shareholders, as happened in 2013 and again this year, after the company posted a quarterly profit for the December 2015 quarter.

This time, however, shareholders may have a more cogent argument to make. At the company's annual general meeting in 2013, Sinclair said he would not consider a dividend payment until the earnings before interest taxes depreciation and amortisation (EBITDA) to revenue margin surpassed 30 per cent.

That threshold has now been met.

With revenue of $23 billion and EBITDAof $7.23 billion, reported for 2015/16 by C&WJ this week, the EBITDA margin is now above 31 per cent, by Wednesday Business calculations.

"To be frank, we can't contemplate paying a dividend until we get EBITDA to be 30 per cent, and that is my goal," Sinclair told shareholders at the September 2013 meeting, then predicting that the company should be able to share profits with its owners within five years.

C&WJ last paid a dividend in February 2008. The payment was the final of two tranches of a three cent per share dividend, the first of which was paid out three months before.

C&WJ last made a profit of $2 billion in 2007.