Tobacco Company Limited has joined those public companies which have sought
to hold their Annual General Meeting earlier than in the past. The meeting
will be held well within the time-frame prescribed by law. Business Page
reminds the powers that be that there is a conflict between Section 58 of
the Securities Industry Act, 1998 and the Securities Industry (Disclosure by
Reporting Issuers) Regulations 2002. The act allows a period of four months
for a public company to send to the Securities Council and the members its
annual package while the regulations (which are subordinate to the act)
allow six months. Instead of resolving this conflict, the Securities Council
has been allowing some companies to utilise the longer period.
AGM of the company will be held at the Hotel Tower on Thursday April 11,
2005 at which shareholders would be considering the Annual Report and
financial statements for the year ended December 31, 2004. The report will
be presented by Mr Christian Preuss, Chairman and Managing Director who has
replaced Mr Michael Harris, who readers might remember took great exception
to the Business Page review of the 2003 report.
volume sales have increased by some 18 million sticks and the value of sales
increased by 6.95 per cent, profit before tax fell by $110M which the
Chairman attributed to "the high cost of fuel and depreciation of local
currency." Unlike the previous year when the rate of growth of the Guyana
company outstripped the sales growth of the rest of the group's
subsidiaries, this year it fell well short of the 31% achieved by the
remainder of the group. This is perhaps a measure of the maturity of the
Guyana market referred to in the Managing Director's 2002 report. Bristol
continues to account for 98% of the company's volumes while "the Benson and
Hedges variants recorded a growth of some 15% ...as a direct result of the
implementation of strategic promotions."
profit margin which measures the relationship between the sales value and
the cost of the items sold, fell marginally from 53% to 52 per cent. This
makes the lamentation about the increased cost of fuel, the depreciation of
the local currency and the import costs of the products seem a bit hollow.
Distribution costs have increased by $100 million or 47 per cent, which
appears excessive, while administrative expenses increased by $67M or 27 per
fourteen employees, the company's wage bill has increased from $42M to $55M.
What makes this even more striking is that the Chairman/Managing Director is
based not in Guyana but in Trinidad. Small shareholders like me have no clue
how this company operates and the Annual Report offers no help.
company remains a major taxpayer and its effective rate of tax on profits
declared is once again 48 per cent. Although the earnings per share
decreased by $2.65, dividends of $510M will be paid out this year
representing 49% of after-tax profits for the year compared with 40% in
again, the inter-company charges for royalties and management fees exceed
$300M, and it is hard to understand that the simple device of signing a
contract-manufacturing agreement can justify a royalty charge for a branded
product bought from a sister company. And is it reasonable for anyone to
accept that a straightforward commercial company which operates an "agency
agreement with the company's main distributor" requires management services
costing close to US$1M?
read financial statements?
assets measured by profit before tax as a percentage of average total assets
is 133 per cent, which is several times the group's average. It is not worth
referring to Related Party Disclosures - IAS 24 - but perhaps it would help
Guyanese to compare how some of the multinationals operating here compare
with their home country. This is the table of Directors' remuneration in the
financial statements of British American Tobacco:
the many objections I have heard for non-disclosure of this kind of
information which is a requirement in Guyana is that it could compromise
personal security. Does anyone really believe that bandits read financial
statements in selecting kidnap targets?
year's exchange with the company's Chairman/CEO included comments on the
governance practices of the company and the extent and quality of disclosure
of governance arrangements in the company. The Chairman was very clear that
the company would only comply with legally binding regulations. This I
pointed out was the wrong way to treat governance arrangements, and I had
sincerely hoped to see some improvements this year. I am disappointed -
nothing has changed.
look at the parent company's report proudly states that the "Group
recognises its responsibilities to the countries in which it operates and in
this context notes the OECD Guidelines for Multinational Enterprises in
their current form." I looked at those guidelines and found that they
require enterprises to disclose, among other things, remuneration of members
of the board and key executives, material issues regarding employees and
other stakeholders, material foreseeable risk factors and governance
structure and policies. Since a number of the company's directors are
appointed by the parent, they should explain the reasons why this noble
declaration does not apply to Guyana.
way of a sample, here is how the parent presents the attendance of directors
Indicates not a member of that Committee.
*Corporate Social Responsibility
financial statements of the parent also disclose that the pricing policy
which regulates intra-group sales is "based on normal commercial practices
which would apply between independent businesses." DEMTOCO, however, states
that "acquisition of products are made at prices agreed by the parties,
which are reviewed on six monthly basis." Why is the language different if
the policy is uniform?
content and quality of this report are extremely disappointing. It is like a
copy of the previous year and even the error of the definition of
substantial interest is repeated despite its being pointed out in this
column last year. Another egregious example is the statement in the 2003
Report that "during the year a competitive brand was launched on the local
market..." The paragraph is reproduced in its entirety! Was history
repeating itself? This apparent error makes one wonder whether the number
and holdings of shareholders remain absolutely identical as in 2003. The
weekly trading statements of the Stock Exchange indicate that shares changed
hands during the year but yet not only is the number of shareholders in the
seven bands the same as last year, but so are the number of shares in each
of the company is held by institutional and small shareholders. They have no
voice in the company. The company is clearly being run by British-American
Tobacco for the benefit of its own shareholders. Clearly it has a product
for which there is a real demand. It should not, however, exploit the
weaknesses of the country for the benefit of its expatriate shareholders. In
fact it has an opportunity to set an example and it would be refreshing if
it could take that seriously.