Barbados continues to find itself floundering in a challenging economic position. This current state of affairs means that investors continue to make decisions to ensure their fiduciary responsibility to protect shareholder interest is protected. It i no secret a saturated domestic investment market in Trinidad has driven T&T investors to look ‘outside‘ to maximize return on investments. One company which has led the T&T charge is Neal and Massy (N&M).
N&M has posted its 2013 Annual Report (153 pages). It is an interesting read but it will take a few hours. The report confirms what we know, the extent to which the Trinis dominate the local business landscape. A few observations about the 2013 Annual Report submitted by resident researcher Due Diligence.
At page 45 of the report the company reports a modest increase in profit from Barbados operations to TT$231 million. Comments about the Barbados Group are:
The Barbados government recently announced that it has signed an MOU with Butch Stewart’s Sandals to manage the former Almond Beach Village property. BU family member Due Diligence has submitted the following research to inform debate.
Neal and Massey buys control of BS&T in 2008, and by 2012 has acquired all the shares of BS&T; and in May 2012 had the shares BS&T delisted.
“Neal and Massy Holdings Ltd’s (N&M) request to have its Barbados Shipping & Trading Company Ltd (BS&T) delisted from the T&T Stock Exchange (TTSE) was made as a result of the T&T-based conglomerate acquiring all 100 per cent of its shares. So said Gervase Warner, chief executive officer, N&M Group. “Last September we made an offer to the BS&T shareholders for the rest of the outstanding shares, and now that BS&T is 100 per cent owned by Neal and Massy, it becomes a subsidiary of Neal and Massy. “Now that we acquired all of the outstanding shares of BS&T…there was no opportunity for anyone to trade shares anymore.” BS&T’s delisting means change, Warner said. “What you can expect is that Neal and Massy would be a little more prominent in Barbados than it has been in the past. We will continue to respect the fact that BS&T has a long history and heritage in Barbados. “It is 100 per cent-owned by Neal and Massy, the parent company, there are no organisational changes above and beyond what we have already done.”
Hotel mongul Butch Stewart has his eyes on Almond Beach Club
One of the unforgiving characteristics of this Democratic Labour Party (DLP) government has been its reluctance to communicate to a public which yearns for information. Surely if there is one group in society who has a right to know how its government is treating with issues, it is the taxpayers. Prime Minister Fruendel Stuart’s taciturn nature has indelibly labelled the legacy of his Cabinet. On the eve of a general election it is unlikely public perception will change.
Of the myriad of issues which this government continues to wrestle -thrown up by the global economy – ordinary citizens have the capacity to understand that this is a difficult time to govern. Surely one way the Stuart government can allay the anxiety of citizens is to feed them relevant information. A reasonable assumption must be that disseminating information to the population is a prerequisite of a democracy.
One of the many issues which is of concern is the status of the sale of Almond Beach Village. Since April this year it was reported that several buyers were short listed by the owners Neal & Massy and a decision was promised in weeks to inform the winning purchaser. It is several months later and we are still waiting. Given the significant contribution to GDP which the Almond Beach property generated, the Opposition and others had suggested to government at the time that it was a company which should have been labelled too big to fail. The public was advised by Minister Richard Sealy the government would play its part to pave the way for a smooth sale of Almond Beach Village. It appears that Sealy has been emulating Stuart because he has been very silent of late.
Message from the Board of Directors of Almond Resorts Inc – Published in the Nation and Barbados Advocate today.
Shareholders were asked to approve the sale of Almond Beach Club to Fairweather Holding Company, but it appears they were only acting as a nominee for Lazy Lagoon (Barbados) Ltd. Is this a nearly formed company and where is it registered? I have tried searching the CAIPO Corporate database but cannot find it.
Who are the shareholders of Lazy Lagoon (Barbados) Ltd and what is the commonality with Lazy Lagoon Limited which is as associate company of the Goddard Group (33 per cent shareholding) or Lazy Lagoon Holdings Limited an associate company of Neal and Massy Holidays Ltd (44.5 per cent shareholding).
Christopher Sharon, Deputy CEO of First Citizens Bank
The woman who is leading First Citizens’ acquisition of Butterfield Bank says she knows there is anti-Trinidad sentiment in Barbados right now. But Sharon Christopher, the lawyer and deputy chief executive officer of First Citizens Group said the company wanted earnestly for the local public to trust the institution and accept it was not here to deprive Barbados of anything – Nation Newspaper
On June 07, 2007 BU posted a blog titled Is Trinidad The Hegemonist Of The Caribbean? The oil rich nation simply does not have the investment capacity in the domestic market to satisfy investors. A few islands in the Caribbean, Barbados especially, represent a receptive climate for asset picking. A passive business class, an accommodating government scared to offend its Caricom partners, and a people willing to toss away their identify all combine to make Barbados a play ground for T&T investors.
The truckload of T&T investors who have descended on Barbados create the opportunity for Barbadians to comment because they do not believe there has been a willingness on the T&T side to accommodate Barbados. The fishing agreement comes to mind. Most recent is Neal & Massy’s willingness to close Almond Beach Village (ABV) without a fight and in the process deposit 500 workers on the breadline. As a consequence of N&M’s mismanagement of ABV other investors are now fighting over the opportunity to purchase the property.
Are tourist arrivals influenced by Capital markets?
Almond Beach Village (ABV) deposited hundreds of employees on the breadline yesterday. There is no need to rehash all that has been stated in recent weeks except to express commiserations with the employees of ABV. There is the saying that behind every grey cloud is a silver lining and BU remains bullish given the ‘quality’ of suitors vying for the St. Peter property.
When updated ARI financials are posted the country needs to answer the questions – what the hell happened at ABV given the leadership position it had in the market? How did the shareholders allow a property which was profitmaking for most of its existence to collapse? It is important for Barbados which depends almost solely on tourism – a strategic asset – to analyse what really happened to ABV. The fact that it used an all inclusive model is another consideration.
The failure of Almond Beach Village has fuelled feeling in some quarters that Neal & Massey is shedding assets to rebalance the acquisition of BS&T a few years ago. This has caused tongues to wag about whether Barbados has a viable land use policy. It is no secret our land space is known to be approximately 166sq miles. The absence of a robust land use policy should make this a concern for all Bajans at home and abroad.
It is always sad news when a business runs in to commercial trouble, but the Almond Resorts car crash was well telegraphed. It is clear that the so-called all-inclusive business model, although attractive in theory in that it gives consumers a rough guide as to how much they will spend, in practice it is untenable because providers see it as a good area in which to cut costs, stretch revenue streams and, more worrying, they need to fabricate a story of social pathology on the outside to terrify customers in to staying within their walls.
As a model for producing sound cash flow and profitability, the jury is still out; and as for being a model built on fear, that is a matter for governments. Even so, this negative policy not only denies visitors from enjoying the real hospitality of local people, it also gives the operators the freedom to manage the supply of ‘free’ food and drink by conveniently running out of supplies at the most inconvenient times and limiting the other services offered to their captive customers as a central part of business practice.
In tax terms, payments are often made outside the local jurisdiction and drip fed in to the local business as and when required. This means that in terms of the company’s revenue and profit and loss, this can easily be manipulated by the firm’s accountants to the advantage of its shareholders and executives. Almond Beach Village may not indulge in all or any of these practices, but as a 400-bed facility with reported debt of about Bds$100m, something has gone seriously wrong.
The Board of Almond Resorts Inc (ARI) confirmed today at a Special Meeting of Shareholders that Almond Beach Village will be closed at monthend. The news of the closure should not come as a surprise because it was hinted at in recent weeks by senior Neal & Massy personnel. It was confirmed at the meeting today that Scotiabank – after several loans arrangements – pull the plug. There is the good news that the other Almond properties will likely be sold as going concerns.
The closure of Almond Beach Village will be a massive blow to the tourism sector and economy of Barbados. Over 500 employees on the breadline with the official employment rate posted at 10%+ gives good reason for a national response. The shareholders present at the meeting today viewed unaudited financials up to end of December 2012 – huge losses, negative cashflows and deep erosion of shareholders equity makes the decision to close a no-brainer but…
It is interesting Warner (CEO of Neal & Massy) took the time to stress to shareholders today that the aggressive expansion strategy by the Ralph Taylor led Board in 2006 over-leveraged ARI. He qualified his statement by stating no one could have predicted the global economic meltdown which has led to the financial difficulty ARI is experiencing. BU wonders why a short 5-years ago when Ralph Taylor and company made the decision to expand there was no vision to upgrade the existing plant. It was a poor decision by Barbados’ leading hotelier and his other board members.
“Too big to fail’was one of the many emotive headlines appearing recently and relating to the future, if any, for the Almond Resorts group. Of course the statement could be right. 836 rooms spread across three hotels, which gives the potential of a massive 305,140 room nights annually. Even at an average occupancy of 80 per cent, with two persons staying in each suite for 7 nights, that could amount to almost 70,000 long stay visitors per year.
Already for the summer, Barbados has seen a dramatic decrease in airlift with Virgin, British Airways and Air Canada all scaling back and perhaps more to come with American Airlines. Unless other existing properties, whether hotels, condominiums or villas could absorb what amounts to over 1,300 guests weekly, further flight reductions would be almost inevitable.
The question that seems still to be begging is how was the current Almond Resorts situation was allowed to get to this stage?
Arthur Lok Jack, Chairman of Almond (l) Ralph Taylor, CEO of Almond (r)
The Almond Resort saga although in the news is competing with the CLICO, REDjet, and other issues which get top billing because of the political dimension attached to them. That is if we measure based on the court of public opinion. In an earlier blog comment BU suggested that the tourism sector should be managed as a strategic asset. If there is a doubt about the criticality of Almond to the sector there is a simple equation which paints a vivid picture – Barbados Room Stock (6000) minus Almond Room Stock (600) = 5400. Thistranslates to a 10% reduction in the national room stock net of Almond. To extrapolate, conservatively the 10% equates to 1000 direct jobs and after factoring the multiplier, the number grows to 2000 people displaced if Almond were to close its doors. The final piece of the analysis and as important is the need to factor that Almond is a forex generating enterprise which means opportunity cost has to be factored as well.
Why the country has not become emotionally connected to this issue is symptomatic of how displaced as a people we have become in ordering our priorities. Some may cite a lack of vision by today’s leaders to chart a path for the kind of country [avoided the use of the word society which as become so politicised as to lose its meaning nowadays] we want to build.
When Ralph Taylor was appointed Chairman of the Barbados Tourism Authority (BTA) BU joined a few who criticised the appointment. Almond was on the decline then and commonsense should have dictated that the hotel required his undivided attention. On a related point, BU also criticised the appointment of CEO of the BTA David Rice whose background is in hotel operations and not sales. What recommended him for the job appears to be the fact that he is a buddy of Ralph Taylor. [fodder for another blog].