almost two months, Guyanese of all walks of life have been chanting the
praises of Banks DIH Limited and its Management. Cotton banners have
appeared around the country proclaiming Banks DIH Guyanese and not for sale.
Full page advertisements have appeared in the press and television/radio
hosts have had something to talk about. A major public corporation in Guyana
was under threat of take-over by a company from another Caricom country.
Guyanese nationalism was on proud display. The irony was that under the
Investment Act passed in 2004, the potential bidder is deemed a domestic
investor. That law won the backing of the Private Sector Commission (PSC),
whose Deputy Chairman at the time was no other than Banks DIH executive Mr.
Ramesh Dookhoo, who was the key player in the Committee set up by the PSC to
review the draft legislation. Purely coincidentally this writer as an
adviser to that Committee had opposed such a provision unless there was
reciprocity! Clearly no good deed ever goes unpunished in Guyana while no
one is ever held accountable for thoughtless or courageless acts.
of the 2004 Annual Report for the year ended September 30, 2004 "Continuing
the Legacy" was not dissimilar to the public campaign in which company
personnel had taken to the streets of Georgetown. Just another of those
ironies so common to life is that the Ad campaign is managed by a
Trinidadian company and the Annual Report is printed not in Guyana but you
know where. This week Business Page examines the annual report which will be
tabled to the company's shareholders at the Annual General Meeting scheduled
for January 15, 2005 which is roughly two months earlier than it has been
held in the past three years. Timely reporting it seems is more a matter of
corporate convenience rather that good accountability.
Annual Report includes the financial statements of the company as well as
the group which is made up of the company, Citizens Bank Guyana Inc., a 51%
subsidiary, Caribanks Shipping Co. Ltd., (100%) and an associated company
B.B Farms Inc. (40%). Caribanks was again reported as being a dormant
company but the directors have given no indication of its plans for this
accounting practice requires that companies provide shareholders with
information to show the profitability of the business segments but the
directors have chosen three segments for reporting, namely Food and
Beverage, Commercial Banking (obviously Citizens Bank) and Others
representing less than 1/2% of the group's revenue. Given that the Annual
Report of Citizens Bank is publicly available, the Directors are doing an
injustice to its shareholders by not providing proper segment information
for the company's "Food and Beverage" business.
again the Annual Report excludes a cash flow statement of the Company,
denying members the opportunity to ascertain how funds are managed by the
Chairman in his report states that "considering the challenging economic
environment within which all businesses operate, the Group's excellent
performance is highlighted by the fact that Profit before Taxation increased
by $481.3 million or 46.5% from $1.036 billion to $1.518 billion." To the
untrained eye and those familiar with the half-year results published by the
company earlier in the year, this was a dramatic turnaround from the
sluggish performance of the past five years or more. Indeed in what appears
to have been an effort to forestall any take-over action, these dramatic
numbers were released to the press long before the Annual Report was
available to the shareholders and not surprisingly the Report was
anticipated with some eagerness and not a little skepticism.
skepticism was not without some merit. During the second half of the year
the company changed its depreciation policy which resulted in lower
depreciation charges while revaluing its assets at the year end with the
result that profits relative to previous periods were better and net assets
increased. The change was mainly with reference to Plant and Machinery and
Furniture, fittings and equipment. Note 27 states "the effect of the change
on the current year results is a reduction of expenditure of $202,016." The
total for the Group reduction is in fact $202,016,000 but readers may not
interpret the narrative information in the same way that they would
interpret financial information.
without accounting for the change in depreciation are illustrated below:
decrease in depreciation is almost equal to the increase in profits. The
reality is that the loudly touted improvement of 46% in profits has nothing
to do with better performance but the simple matter of changing the
company's policy on depreciation.
be a measure of the company's situation that an 8% increase in net revenue
only translated to a 1% increase in real and sustainable profits. By
comparison, profits after tax of Citizens Bank Limited increased by 43.8% on
a net income increase of 10.8%. Next week we will examine the Annual Report
of the Bank in more detail.
Share price, valuation and market capitalisation
January 8, 2005 session of the Guyana Stock Exchange, shares of Banks DIH
Limited were priced at $8, up by close to 100% in just over two months when
the price was $4.20 - less than the $4.80 price which Business Page had
calculated as the effective price following a one-for-four bonus issue. A
bonus share is another of those book entries and like a stock split does not
alter the performance of the company.
higher book profits and possibly with a view to influencing shareholders'
decision on the possible takeover bid, the company is boosting dividends to
$0.40 per share compared to $0.22 in 2003 and $0.27 in 2002. The challenge
facing the directors is sustaining the new level given that in future they
will have to charge depreciation on the revalued amount of the fixed assets.
revalued the company's assets, the directors find a significant deficit
between the assets of the company and the current market's view of the
company. At $8 per share, the market values the company at $7.054B while the
value of the shareholders' equity at September 30, 2004 was $11.055B, a
shortfall of $4.001B or $4.5 per share.
Regrettably, the Governance Disclosures made by the company fall short of
the prior year as information on the Code of Conduct and Ethics has
disappeared from the report. One would have expected the company to increase
commentary on its governance practices given the adverse comments of the
disappointing to note that the company's governance also falls short of the
requirements of Guidelines on Corporate Governance issued by the Securities
Council set up to bring efficiency and transparency to the market for
we criticised the presence of the Chairman/Managing Director on three
sub-committees of the board and commend the company for taking corrective
action. One would hope that executives do not have standing invitations to
participate in the full meetings of the committees.
positive change does not however extend to all aspects of the company's
business. Last year BP broke the news of the use of facilities owned by the
Chairman/Managing Director without adequate disclosure. Since then the
company has made no effort to rectify the situation or even offer a denial.
September 2004 newsletter of the International Financial Reporting
Interpretations Committee (IFRIC), it was noted that IAS 24 (Reformatted
1994) required the disclosure of the remuneration of key management
personnel. While two companies including Demerara Bank Limited made the
disclosures in their 2004 reports, Banks DIH and Citizens Bank have not done
so. Similarly, transactions with entities such as the Demerara Life Group
and the John Fernandes Group once again get no mention.
information indicates that the company continues to lose market share for
its flagship product Banks Beer and as if to rub salt in the wounds, the
Government has announced an increase in the consumption tax from 50% to 60%
from January 1, 2005. This may be counteracted however if those who had
deserted Banks Beer now return to it in their show of patriotism.
continue to worry about the company's Food Division which in the prior year
the Chairman reported as not performing to expectations. His report this
year makes no mention of this Division.
from sales outside of Guyana amounted to $75.5M compared to $74.2M in 2003,
an increase of less than 2%. Excluding revenue from subsidiaries since the
product of Citizens Banks Limited is not exported, overseas sales represent
less than 1% of the sales of the Company. This could be contrasted to the
DDL Group which reported 40% of their sales as export sales in 2003.
Who owns the Banks name?
appears that under agreements which certainly require explanation, the
company cannot export Banks Beer to the Caribbean but what about the rest of
the world? What about its other products? The company's strategy in the wake
of the harsh effects of globalisation is worrying.
Google(r) search for Banks Beer reveals two websites on the top of its list
for Banks Barbados and Banks Canada with the Banks DIH website not even
making the first page. The Banks Barbados website reports that "the brand
Banks Beer is not currently available outside of the English-speaking
Caribbean because of ongoing negotiations regarding the trading name." Who
are they negotiating with? Banks DIH Limited in Guyana? The Directors
locally have not reported any such negotiations.
Canada website notes "Banks Canada now has the exclusive rights to
distribute to the US & Canadian market." The website also states "Banks
Canada would like to introduce ourselves as the "Proud new West Indian
Owners of Hart Brewers Canada in Carleton Place, Ontario, located just a
short drive west of Ottawa" and "for more information on our Company
Directors and Corporate structure, please click on www.banksdih.com."
this happen?! Banks DIH Limited never reported that it has a subsidiary in
Canada so who really owns this company and what is its relation to Banks DIH
Limited. A little web research found that the website is registered in the
name of Alicia Harrison of Banks Canada Limited and Harrison Holdings Inc.
ultimate irony of the possible take-over bid is that it diverted attention
from specific concerns about the company's performance to the more general
and noble issue of what is our heritage. At least for now, no one seems to
care about the real performance of the company; or the independence of
non-executive directors; or such a large body of executive directors who at
the board level are equal but in practice are accountable to the MD as their
effective employer; or about the lack of information on the efficiency and
profitability of the units of the company; or about conflicts of interest
which may operate to the detriment of the shareholders.
year this column wrote "The reversal of the company's fortunes will require
a radical rethinking of the company's strategy and processes. It needs to
make major decisions about the businesses it will divest and those it
regards as core to its being. The problem shareholders face is how to solve
the riddle that those who for years have been part of the problem will
suddenly be transformed into solutions."