The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sunshine Holdings is projecting its net income will increase by 36 per cent over the next three years to more than $9 million, with BISX-listed FOCOL Holdings driving much of the improvement.

The private holding conglomerate, in the offering memorandum for its active $20 million preference share issue, projects that the Shell operator’s contribution to its results will recover “to at least $2.67 million” in the year to end-July 2015.

This, the document seen by Tribune Business says, will come from FOCOL’s “greater vertical integration resulting from elimination of a ‘middle man’ in the purchasing chain, and by further increases for all of fiscal 2016 and beyond as a result of the planned changes”.

Sunshine Holdings is the largest investor in FOCOL via a 23 per cent equity stake, and the BISX-listed operator’s 2014 performance was a prime factor in its revenues dropping below ‘eight digits’ for the first time in five years.

Sunshine Holdings’ top-line, which had hovered between $11.288 million and $13.218 million over the previous four years, dropped by almost 15 per cent to $9,633 million largely due to government tax increases.

The preference share document referred to a “reduced contribution” by FOCOL Holdings in the year to end-July 2014, which resulted from increased Business Licence fees and increased competition.

“For example, Sunshine Holdings’ revenues from FOCOL Holdings fell by some 43 per cent for the period ended July 2014,” the offering document said.

“For fiscal year 2014, FOCOL paid more than $3 million in license fees compared to approximately $1.4 million for the fiscal year 2013.”

The $9.101 million bottom line projected for 2017, up from the $6.672 million forecast for this year, would give Sunshine Holdings its highest annual profits for seven years.

“The projections indicate that Sunshine Holdings is expected to remain profitable, with profits growing from $7 million to $9 million by fiscal year end 2017, with operating margin above 38 per cent,” the offering document said. “Net operating cash flow is expected to be greater than $1.4 million for all three years.

“The overall revenue position of Sunshine Holdings has remained fairly stable despite the challenging economic environment. Profitability, despite being down from five years ago, has remained fairly stable over the past three years.”

Tribune Business revealed yesterday how Sunshine Holdings, which is chaired by businessman Franklyn Wilson, had told CIBC FirstCaribbean International Bank (Bahamas) to “test the waters” in the capital markets via a $20 million preference share issue.

The proceeds will be used to “restructure” the holding conglomerate’s balance sheet, exploiting the ‘low interest rate’ environment to refinance/replace existing debt with capital raised at lower cost, thus boosting cash flow.

The Sunshine Holdings offering is a private placement, meaning it is targeted only at select institutional and retail investors - the likes of pension funds, insurance companies, investment banks and high net worth individuals. Members of the Bahamian public should not try to get involved.

The documents seen by Tribune Business project that Sunshine Holdings will generate more than $5 million in cash flow in each of the next three years to pay dividends and principal redemptions to all preference share classes.

Apart from FOCOL Holdings, Sunshine Holdings’ main interests include 100 per cent equity stakes in Arawak Homes, and its Sunshine Insurance (Agents & Brokers) and Sunshine Finance affiliates. It also holds the greatest indirect stake in RoyalStar Assurance, the property and casualty underwriter, at 36 per cent.

Assessing its various interests, the conglomerate said its boutique lender, Sunshine Finance, had grown its credit portfolio 2.74 times’ (274 per cent) in the five years to end July 2014.

Its ‘first demand’ home mortgages had increased by 174 per cent over the same period, and the offering document added: “Sunshine Finance’s prudent strategy has resulted in growth in net profits from $604,000 in fiscal 2009 to $1.77 million for fiscal 2013, and a further increase to $2.96 million for fiscal 2014.”

Sunshine Holdings added that further profit opportunity lay in Luxury Homes Bahamas, its 81 per cent-owned affiliate that holds the 104.4 acres of land on New Providence’s southern shores immediately adjacent to Treasure Cove, opposite St Andrew’s School.

RoyalStar’s $38,.73 million cumulative profits between 2005 and 2012 were “significantly in excess” of those produced by its closest competitors, Bahamas First at $20.18 million and Insurance Company of the Bahamas (ICB) at $19.41 million.

As for FOCOL, the Sunshine Holdings offering document said it was diversifying revenue streams by recently entering into the fuel shipping industry.

The BISX-listed operator had also acquired Shell’s aviation business at the Lynden Pindling International Airport (LPIA) and invested more than $4.5 million in boosting propane storage and distribution capacity.

FOCOL was also positioned for growth via sites it owned at Yamacraw, Adelaide, Carmichael, East Street South, Prince Charles Drive/Soldier Road and the Charles Saunders Highway.