Financial performance
While the gross revenue of the group had a small increase (1.6%) over the corresponding period last year, profit after tax fell by 28 per cent. Profit after tax is only 38.14% of full year audited profits in 2002 and represents a severe setback for the company. Although Regulation 8 of the Securities Industry Act suggests that both company and group financial statements are required, the Report deals only with the group and it is not possible therefore to determine with any degree of accuracy where the critical difficulties exist. Citizens Bank, a 51% subsidiary, is reported to have had a 7% growth in profit after tax following a 37% increase in the year to September 30, 2002.

Net operating cash flows show a dramatic pro-rata decline when one looks at the $1.4B for the full year 2002, $782.3M for the corresponding period last year and $138.7M for the current half year. This must surely be of concern to both management and shareholders especially in view of the ongoing expansion plans and the declining returns from the company’s capital investment programme.

Chairman Clifford Reis, predicts that the ensuing six months period will be “a very difficult and very challenging one,” noting the impact of the removal of the 10% remission of tax granted for beer and related products resulting in increased selling prices. The Chairman also reported that the company had put in place stringent measures to reduce operational efficiency, measures which are clearly yet to produce results.

A few months ago, Chairman Reis was expressing confidence that the group will “maintain an acceptable level of profit,” which Business Page of March 24, 2003 found surprising given the group’s non-bank results for the year 2002.

Perhaps not surprisingly the company is proposing no interim dividend for the half year. In 2002, dividends of $0.27 per share were paid of which $0.12 was paid as an interim dividend in October 2002, one month after the year end.

Compliance with IAS 34 - Interim Financial Reporting
Under ‘Accounting Policies’ it was indicated the interim financial statements comply with IAS 34 - Interim Financial Reporting. Banks DIH Limited chooses to publish condensed consolidated interim statements and selected explanatory notes which are allowed under the Standard. Financial statements of the parent company were not included as part of interim statements which are neither required nor prohibited by the Standard.

In the selected explanatory notes to the Interim Financial Report the company is required to disclose related party transactions. The financials merely disclose the value of inter-company debts with Citizens Bank Limited at the end of the year. Interestingly in the 2002 annual report it was disclosed that loans to “Directors of group companies” amounted to $127.6M, of which there is no mention in the interim statements.

Securities Industry Act 1998
The Report also notes that the interim financial statements comply with the Securities Industry Act 1998. The company published a complete set of condensed financial statements which is beyond the requirement of the SIA which requires only a profit and loss account with comparatives for the previous period.

The SIA requires disclosure of extraordinary and exceptional items and since no mention was made of these it has to be assumed that the group had no transactions of this nature during the six-month period. There was also no mention of the basis of the computation of taxes, a requirement of the SIA.

Changes in directors/associates’ interests
According to the report, there were only three changes in the holdings of the company and its subsidiary, Citizens Bank Ltd. An associate of Audit Committee Chairman Mr Errol Cheong acquired 225,000 shares in Banks DIH Limited while an associate of Mr Christopher Fernandes who co-signed the report with Chairman/Managing Director Clifford Reis disposed of their entire holding of 151,875 shares held at September 2002. Executive Director, Paul Andrew Carto, disposed of 1M of his shares during the six months leaving him with 167,287 shares.

Neither of the substantial shareholders, Demerara Life and Trust Co Guyana Ltd had any change in their holding during the six month period.

Conclusion
Chairman Reis reports on the Bank`s continued “efforts to improve shareholders value by Good Corporate Governance as well as maintaining a high level of Corporate Ethical Standards.” Readers of this column will recall that on March 24, Business Page had commented on corporate governance in the company. In my capacity as a shareholder, I had written the company on the matter. However in my opinion several issues remain unresolved and it is somewhat disappointing that the company abruptly terminated the correspondence. I am sure that the company will deal more fully with the details of the measures to improve corporate governance and corporate ethical standards.