LIME Jamaica in dire financial situation
(Jamaica Gleaner) Cable & Wireless Jamaica, which trades as LIME Jamaica, is now dependent on its parent for survival after hitting a new record in losses both at the telecoms and of any stock market company in the exchange’s five decades of trading.
Auditors KPMG says the company’s financials are too weak to sustain it, and could lead to a delisting of the CWJA stock.
But LIME is reassuring the market that parent Cable & Wireless Communication will be stepping in to keep the operation afloat while the Jamaican telecoms sector undergoes reform.
LIME Jamaica lost J$20 billion at yearend March 2012, the majority of which related to a near J$16-billion write-down of fixed assets.
Revenue was virtually unchanged, year-to-year, from J$20.8 billion to J$20.4 billion.
It’s the fifth straight year of losses for the company which spent billions to upgrade its mobile and broadband infrastructure to compete against rivals Digicel and Flow. LIME’s capital expenditures have been averaging J$5-6 billion per year, but in the year just ended it was down to J$3.7 billion.
The current losses have substantially weakened LIME’s balance sheet, which now sports negative equity of J$14 billion.
The net loss was nearly 2.5 times worse than the year prior, when the company shed J$6.1 billion.
LIME Jamaica said it wrote down its assets to align their value with the cash they are expected to generate in the future.
The impairment loss of J$15.7 billion wiped out improvements in operating profit, which climbed 21 per cent to J$1.87 billion after restructuring costs.
Consequently, KPMG in its audit report raised concerns about the viability of the company, ultimately owned by UK parent C&W Communications. LIME recorded a 346 per cent shrinkage of its capital from positive J$5.7 billion one year ago to negative equity of J$14.2 billion.
“The stockholders’ deficit is considered a breach of the JSE capital adequacy rules and may result in possible delisting from the Jamaica Stock Exchange (JSE),” said KPMG.
The stock exchange is itself boggled by the size of the loss.
“There has never been a company that has taken such a hit in terms of impairment,” said JSE general manager Marlene Street Forrest.
“Its not in the JSE’s role to comment on a company’s performance, but we continue to watch the performance and I am hopeful that the company will turn the corner,” she told the Financial Gleaner.