Correction & Clarification
The story titled ‘LIME shareholders face long wait for dividends’, published in the Financial Gleaner of September 20, 2013, incorrectly reported EBITDA projections as US$137.7 million this fiscal year. The correct figure is US$26 million. We regret the error.
THE LAST time share-holders of Cable and Wireless Jamaica (C&WJ) received any dividend payment was in 2008, and it seems as if they have a lot more waiting to do before they receive their next cheque.
Managing director and CEO for LIME Jamaica, Garfield Sinclair, said the company will not be making any payments to shareholders until certain targets are met.
"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 and guests in attendance at the company's annual general meeting at The Knutsford Court Hotel, New Kingston, last week.
EBITDA is essentially earnings before interest payments, tax, depreciation and amortisation are subtracted for any final accounting of income and expenses. It is often used to analyse and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.
For the last financial year ending March 31, 2013, Sinclair said, the company was able to report EBITDA of 12 per cent of revenue or US$20.5 million (J$1.78 billion). This, he said, is slightly better than the US$20.4 million the company had projected at the beginning of the year and significantly better than the eight per cent reported in the previous year.
For the current year, Sinclair said, the company is targeting an EBITDA ratio of 15 to16 per cent of revenue or US$137.7 million. This is a 20 per cent improvement over last year. He said this is to be achieved mainly from increased revenue from growing the business in the mobile and broadband services.
"We need EBITDA to be at least 30 per cent of revenue to be operating efficiently. Unfortunately, right now we are at 12 per cent," he said.
Sinclair takes comfort in looking at "the numbers going in the right direction", but concedes that "we still have a long way to go to get to the 30 per cent".
"I know the question is when are we going to get there, but the idea is that is where we need to get. We need to get it to the 30 per cent. We can't think about anything before we get that," he said.
"We would have to get the benchmark first before we can even think about paying dividends," he added.
Sinclair gave a noncommittal response to a suggestion that based on the history of the improvement in EBITDA shareholders can expect to receive dividends in five years.
"It would appear to be a five-year trajectory from where you sit, but the fact of the matter is that we have some specific targets for when we are going to achieve those. I can't exactly share that with you today, except that that is the target we are focused on and we are moving in that direction," he said.
"If we are able to manage ourselves more aggressively in the direction that we need to manage them, you will admit that eventually we will pick up the pace to reach the target, and that is want we want to do. What I don't want to do is set an expectation here and then you see a headline in the newspaper that Cable and Wireless is to pay dividend in 15 years or 17 years, or anything like that. I don't want to commit to that," he said.
However, shareholders were less than optimistic that the company would reach its targeted 30 per cent and was even more doubtful that the company would ever return to making profits.
Minority shareholder Orette Staple accused the management team of being complacent and accused them even further that their objective is to continue making losses.
Sinclair's responded, "This is absolutely is not true" and trying to reinforce to shareholders that "we are trying our absolute best".
The shareholders said they are holding management responsible and hope that they come up with creative and innovative ways to turn around the company.
As at March 31, 2013 the total number of shareholders invested in C&W Jamaica was 24,047.
The shareholders still remained unimpressed, highlighting the "emphasis of matter" in the auditor's report for the second consecutive year.
This is an option that was used by the auditor so as not to qualify their opinion in light of continued losses and also during the year ending March 31, 2013. For 2012, the company reported loss of J$20.24 billion and in 2013 J$4.92 billion.
According to the auditors, "These conditions indicate the existence of material uncertainty that may cast significant doubt about the company's ability to continue as a going concern".
The auditors further noted that "until such time as the company returns to profitable operations, the company remains dependent on its ultimate parent company for continued financial support. The directors have received a letter from the ultimate parent company indicating that financial support will be provided for the foreseeable future".
Based on records from the Jamaica Stock Exchange the last time the company paid dividend to its shareholders was on February 18, 2008. This was the second tranche of the three cent per share that was declared on October 19, 2007. The first payment was made on November 26, 2007.
The last payment before 2007 was September 8, 2006 of four cents per share.
The records also show that the company's dividend payment was J$504.53 million in 2008, J$672.7 million in 2007 and J$672.7 million in 2006.