The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas shareholders suffered a collective $14.371 million net loss for 2015, driven by a one-off $20.5 million accounting ‘write down’ associated with its US operations.

The BISX-listed communications unveiled a more than-$25 million year-over-year swing ‘into the red’ for the 12 months to end-December 2015, as a ‘goodwill impairment’ at its recently-acquired Florida business came into play.

That ‘one-off’ $20.499 million charge accounted for around 80 per cent of the ‘bottom line’ reversal, with the other decisive factor being a 63.3 per cent year-over-year increase in preference share dividends.

With some $189 million worth of preference share debt issued over the past two years, Cable Bahamas’ dividend payments to these investors rose by more than $4.2 million - from $6.696 million in 2014 to $10.936 million last year.

Barry Williams, Cable Bahamas senior vice-president of finance, did not return Tribune Business phone and e-mail messages seeking comment over the past two days.

However, despite the net loss and major reversal from the $11.379 million net profit generated in 2014, last year’s financials appear to give shareholders no cause to panic.

Cable Bahamas has sharply increased the amount of debt (bank financing and preference shares) on its balance sheet to fund both its $100 million worth of US acquisitions, and their expansion, and its mobile growth opportunity at home.

The company is effectively investing for projected future gains and shareholder returns tomorrow, and these have yet to materialise.

In the meantime, increased payments associated with the new debt financing are weighing on Cable Bahamas’ financial performance. The key now is for the company to execute, and deliver the expected profits increase and returns from these investments.

Cable Bahamas’ financials confirm that the ‘goodwill impairment’ related entirely to its Florida-based business, Summit Vista, into which all four of its US acquisitions have been folded.

Goodwill refers to the premium that Cable Bahamas paid to acquire these businesses, over and above the valuation of their physical assets. Pointing out that it tests the value of ‘goodwill premiums’ every year, the company determined that it should be impaired in relation to its US operations.

“Based on the valuation, the recoverable amount of the assets of Summit Vista was determined to be $153.8 million, and as a direct result, an impairment loss of $20.499 million was recorded,” the financial statements, audited by Deloitte & Touche, confirm.

No ‘goodwill’ write-down was incurred anywhere in Cable Bahamas’ operations in 2014, thus explaining the size of the dramatic swing into loss last year.

However, a closer inspection of Cable Bahamas’ financials shows that Summit Vista effectively suffered a $10.37 million operating loss in 2015, a result that was worse than the $5.731 million worth of ‘red ink’ incurred by the company’s US business in 2014.

Putting that $10.37 million loss together with the $20.499 million goodwill write-down, Summit Vista suffered a $30.869 million loss for the 12 months to end-December 2015.

The financials also showed that Cable Bahamas’ core non-Freeport business, featuring its cable TV and Internet businesses, produced a second consecutive annual loss in 2015.

This, though, was much reduced from 2014, with the ‘red ink’ for this segment down by 43.1 per cent - from $4.749 million to $2.7 million this time around.

Cable Bahamas’ biggest profit centre remained its Caribbean Crossings infrastructure business, which continued to churn out a steady annual profit of greater than $7 million.

Its Freeport operations, too, remained consistently above the $6 million net income line in 2015, with the Systems Resource Group (SRG) fixed-line voice communications arm delivering a $4.752 million ‘bottom line’.

Other interesting takeaways from Cable Bahamas’ financial statements were the $40 million letter of credit (LOC), which the company has ready to pay to the Utilities Regulation and Competition Authority (URCA).

The LOC is “in relation to the mobile spectrum license auction”, which Cable Bahamas won with a bid of $62.5 million, thus indicating that this instrument is to cover a portion of that price.

The financials note that the LOC has been included in Cable Bahamas’ ‘cash and cash equivalents’ on the balance sheet, thus explaining why the company’s year-end cash position more than doubled to $63 million.

Without the LOC, Cable Bahamas’ cash position would potentially have fallen by $7.74 million year-over-year.

Elsewhere, the financials revealed that Cable Bahamas’ recent rights offering to ordinary investors raised $23.5 million, a sum equivalent to 76.8 per cent of its $30.6 million fully subscribed target.

“On March 4, 2016, the company issued 3,916,667 ordinary shares through a rights offering to all shareholders of record as of January 26, 2016, for $6 per share,” the financials confirmed.