The new year has just begun, and not a moment too soon for me. 2010 is not a year I will remember positively from a national economic point of view.
Rather, it was the year when our nation experienced a slow-to-the-boil emotional turmoil which culminated in the tragic passing of a leader still new to his job and in the prime of his life.
The personal tragedy of our late Prime Minister occurred against the background of an economic disaster looming but about which nothing was done, as the Government remained transfixed, at the policy level, by the terminal illness of David Thompson, and did its best to merely run in place even as economic events overtook it.
Perhaps better could not have been done under the dire and unprecedented circumstances, the previous two passings of prime ministers while in office having been sudden and unexpected.
In a move that was as inevitable as its timing was unintended, only a few hours before Mr Thompson finally succumbed, the ratings agency Standard & Poor’s lowered Barbados’ credit rating to just one notch above junk bond status, warning the nation that our debt would indeed be classified as junk if firm moves were not made to put the economy on a more credible path to solvency.
Within a few weeks a new minister of finance was announcing new ways to improve income generation at the Treasury Department, including raising the Value Added Tax, and tightening some expenditures, notably on free university education and the drug formulary.
Meanwhile, how the recession has impacted the public companies trading on our stock market over the past year is beginning to be seen, as they are required to publish financial reports.
Financial pain
Among the first to report is Barbados Shipping & Trading (BS&T), as its year ends on September 30. Its financial highlights for 2009, published in the Nation last week, show that at long last the group has bitten the bullet on some of the companies which have been gushing red ink for many years.
But these strategic moves have come as a result of a year which could be described as a financial “annus horribilis”, to borrow a phrase made famous by Queen Elizabeth in respect of her own experiences of 1992. In her review of that year, the queen noted: “1992 will not be a year on which I shall look back with undiluted pleasure.
In the words of one of my more sympathetic correspondents, it has turned out to be an Annus Horribilis.”
The queen’s year from hell was caused mainly by the marital woes of her children; those of BS&T were by some of its long-struggling subsidiaries, notably Warrens Motors and Bahamas Supermarkets Ltd in whose parent the group had bought a 40 per cent stake some years ago, as well as continuing losses from its associate hotel companies under the Almond Group umbrella, notably the one in St Lucia which owns Almond Morgan Bay.
So while the group’s overall income before tax increased by $1.5 million or nearly three per cent over the previous year, “after accounting for losses in our hotel associates as well as losses in respect of discontinued operations”, according to chairman Gervase Warner and managing director Anthony King, the group’s net income for the year was only $6.6 million, giving it an earnings per share of 2.2 cents.
Now that is low, even by the lowly standard of returns characteristic of locally traded stocks.
In fact, according to the chairman and managing director, the losses incurred by the group cost each shareholder just over 34 cents this past financial year.
Low returns
Not to rub it in, but by my math, since it is not in the published statement (maybe they were too shy), that is a return of less than one per cent. Of course, the group is not going to make its shareholders feel that pain: it is paying 12 cents per share on shares which last traded at the historically low $7.58 per share (back in October), or 1.6 per cent per share, instead of what each share actually earned, which was less than one third of a per cent (0.29 per cent).
I believe you can get close to 2.5 per cent by putting your money in a savings account at your favourite bank.
It should be noted that in its previous year’s annual report, BS&T was still trying to salvage Warrens Motors, noting that “higher efficiency and productivity in after-sales services will be the focus of the dealership in the coming year”, after “cost reductions” had been implemented “throughout the business”. Fat lot of good they did.
Warrens Motors has gone out of business, its brand names going to Simpson Motors and Quality Motors, in the latter case the BMW brand arriving in the showroom where its former top salesman has been selling the Audi for some time now.
Ah, sweet irony.
