Ascendant Group Limited today reported consolidated earnings for the year ended December 31, 2013 of $4.9 million, or $0.39 per share, compared to $11.5 million, or $1.07 per common share, for the same period in 2012 – a decrease of $6.6 million or 57.6%. Book value per share declined 1.8% to $30.62 in 2013versus $31.18 per share in 2012. This was due to the dilutive effect of 120,349 new shares issued during the year and the payment of dividends in excess of net earnings.

On 18 March 2014, the company’s Board of Directors announced a full review of Ascendant Group’s dividend policy, as the company seeks to balance the deployment of its capital to support significant re-investment required for the next generation of electricity infrastructure. The review is taking place in consideration of the difficult economic conditions in Bermuda and the associated challenges. Ascendant Group provides energy and infrastructure solutions through its wholly owned subsidiaries Bermuda Electric Light Company Limited (BELCO), Bermuda Gas & Utility Company Limited and AG Holdings Limited.

The continuing impact of the challenging Bermuda economy on revenues, coupled with energy conservation by customers and significant increases in costs incurred to maintain aging equipment, pension expense and rising healthcare costs, had a substantial impact on BELCO’s earnings. In addition, metering issues discovered during the year had a significant negative effect on the Company’s electricity revenues.  The combination of the economy and competition resulted in declines in Bermuda Gas’ sales and related earnings in the current year, while improvement in AG Holdings’ results was largely attributed to improved earnings of Air Care Limited with 12 months of that company’s results being recognised in 2013, compared to seven months in 2012, as it was acquired in late May 2012.

BELCO’s net income fell $7.6 million to $5.6 million for the year, as compared to 2012 net income results of $13.2 million. Sales of electricity net of fuel adjustment for 2013 totalled $143.3 million, a decrease of $2.1 million versus $145.4 million in 2012. BELCO’s kWh sales declined 19.6 million kWh, or 3.2%, from 606.3 kWh sold in 2012 to 586.7 million kWh sold in 2013. BELCO’s electric sales have declined 69.4 million kWh, or 10.6%, since reaching a peak of 656.1 million kWh in 2009. This trend of declining electricity sales is the direct result of the contraction of the Island’s economy, as well as conservation measures taken by many customers to reduce their electric energy consumption.

During 2013, the Company commenced a comprehensive audit and validation of demand and commercial meter installations to determine the accuracy and completeness of metered sales from these customer groups. The findings from work completed to date have revealed several issues:

Three customers had not been billed, as the meter installation information was not entered in the billing system (in these instances, customers were subsequently notified and related sales receivables recovered);

A number of customers had been either over- or under-billed due to meter connection or meter multiplier issues.

Operational and organisational changes have already been introduced by the Company to prevent these types of issues from recurring.

It is important to note also that the meter connection issues highlighted in both demand and commercial customer classes are not present in the residential metered customer class. Based on 2013 actual findings and management’s best estimate of liability due to over-billing of both demand and commercial class customers, the Company has reduced its revenue by $2.4 million and accrued a liability of that same amount as at 31 December 2013, for accounts that were over-billed.

Fuel adjustment revenues in 2013 decreased $8.3 million to $95.8 million from $104.1 million in 2012, due to a combination of lower fuel prices, reduced generation of electricity that resulted in lower kWh sales for the Company and an improvement in overall generation efficiency. The average price of fuel in 2013 was approximately $131.47 per barrel, as compared to $135.00 per barrel in 2012, which amounted to $3.3 million of fuel savings. The decrease in kWh sales volume noted above is responsible for $3.2 million of the overall decrease, while an improvement in overall generation efficiency and a decrease of 2.7 million total kWh purchased from the Bermuda Government’s Tynes Bay waste-to-energy incinerator plant was responsible for the balance of the total decrease in fuel costs. The Company does not incur any profit or loss on fuel adjustment; hence, this revenue is offset by identical fuel costs reflected in Operating and Administrative Expenses.

Total operating expenses, including fuel costs, decreased $7.2 million in 2013 to $243.5 million, compared to $250.7 million in 2012, largely due to the aforementioned decrease in fuel costs. However, the decrease in fuel costs was offset by large increases in several expense items, namely:

Costs incurred for the Company’s Defined Benefit Pension Plan rose to $2.6 million in 2013 as compared to $574,200 in 2012 due to a change in investment policy to better match the Plan’s assets with future liabilities. Management is currently considering additional options to further mitigate the risk of the Plan on the Company’s financial position.

The requirement to recognize expected future healthcare costs resulted in an expense of approximately $1.1 million in 2013 versus 2012, due to a change in actuarial assumptions.

The Company established a provision and incurred an expense of $500,000 for the likely settlement of a contingent liability stemming from a dispute with a software vendor over end-user licence fees associated with the implementation of that vendor’s system in 2012.

Additional costs were incurred to maintain BELCO’s aging generating plant in order to meet electricity demand.

Bermuda Gas’ net earnings decreased $877,789, or 62%, to $535,671 in 2013 from $1.4 million in 2012, due to reduced gas sales, as a result of both the challenging economic conditions and competition. The decline in gas sales was offset to some extent by cost control, increasing appliance sales and improving efficiencies in the Service & Parts Department.

AG Holdings, which was established in October 2012, manages Ascendant Group’s non-utility business operations: Air Care, iEPC Limited, iFM Limited, PureNERGY Renewables, Ltd., and Ascendant Properties Limited. AG Holdings’ 2013 net earnings of $3.1 million represents an improvement of $2.7 million, or 622%, versus $427,676 in 2012. The primary reason for the increase in current year results is attributed to the company’s investment in Air Care. In late May 2012, the company acquired a majority investment in Air Care, which earned $717,063 for the seven-month period ended 31 December 2012, of which $451,779 is attributable to Ascendant Group shareholders. For the 12 months ended 31 December 2013, Air Care earned $3.3 million, of which $2.6 million is attributable to Ascendant Group shareholders.

Ascendant Group Limited is a Bermuda-based, publicly traded holding company that provides energy and infrastructure solutions. Ascendant Group Limited (AGL.BH) is listed on the Bermuda Stock Exchange (BSX).

CONSOLIDATED STATEMENT OF EARNINGS

For the year ended 31 December 2013

 

 

 

 

 

2013

2012

 

 

 

 

 

 

Revenues

 

 

 

 

 

Operating Revenues

 

 

 

$247,673,871

$260,423,540

Other Income

 

 

 

1,884,266

2,897,831

 

 

 

 

249,558,137

263,321,371

 

 

 

 

 

 

Expenses

 

 

 

 

 

Operating and Administrative Expenses

 

 

 

218,376,551

226,199,089

Depreciation and Amortisation

 

 

 

25,122,773

24,477,949

 

 

 

 

243,499,324

250,677,038

 

 

 

 

 

 

Operating Income

 

 

 

6,058,813

12,644,333

 

 

 

 

 

 

Inter

est Expense

 

 

 

 

 

Interest on Debt

 

 

 

754,594

656,600

Other

 

 

 

38,603

66,839

 

 

 

 

793,197

723,439

 

 

 

 

 

 

Earnings before Undernoted Items

 

 

 

5,265,616

11,920,894

 

 

 

 

 

 

Foreign Exchange Loss

 

 

 

395,148

393,373

Change in Fair Value of Held for Trading Investments

 

 

 

(18,292)

(3,843)

 

 

 

 

 

 

Net Earnings for the Year

 

 

 

$4,888,760

$11,531,364

 

 

 

 

 

 

Basic and Fully Diluted Earnings Per Share

 

 

 

$0.39

$1.07

Profit attributable to:

 

 

 

 

 

Shareholders

 

 

 

$4,119,304

$11,266,080

Non-controlling Interest

 

 

 

769,456

265,284

 

 

 

 

$4,888,760

$11,531,364

 

 


Consolidated Balance Sheet

For the Year Ended 31 December 2013

 

 

 

 

2013

2012

 

 

 

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

Cash and Cash Equivalents

 

 

$7,580,325

$4,023,010

Accounts Receivable

 

 

21,569,693

24,519,928

Inventory

 

 

72,698,771

69,133,215

Prepaid Expenses and Other Assets

 

 

23,600,453

16,879,152

 

 

 

125,449,242

114,555,305

 

Non-Current Assets

 

 

 

 

Property, Plant and Equipment

 

 

281,874,805

285,303,089

Intangible Assets

 

 

13,868,916

14,162,173

 

 

 

295,743,721

299,465,262

 

 

 

 

 

 

 

 

$421,192,963

$414,020,567

 

 

 

 

 

CAPITALISATION AND LIABILITIES

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

Customer Deposits

 

 

$495,858

$268,329

Trade and Other Payables

 

 

35,667,601

22,516,269

Future Health Costs

 

 

14,041,937

11,537,089

Redemption Liability

 

 

2,509,081

2,459,088

Deferred Revenues

 

 

566,925

1,092,116

Bank Borrowing

 

 

29,839,636

34,476,610

 

 

 

83,121,038

72,349,501

 

 

 

 

 

Non-Current Liabilities

 

 

 

 

Bank Borrowing

 

 

12,359,198

11,250,809

Redemption Liability

 

 

-

2,509,081

 

 

 

12,359,198

13,759,890

 

 

 

 

 

Capitalisation

 

 

 

 

Capital Stock

 

 

$10,638,061

$10,517,712

Share Premium

 

 

29,901,982

28,703,206

Treasury Stock

 

 

(845,803)

(845,803)

Contributed Surplus

 

 

22,549,745

22,549,745

Retained Earnings

 

 

262,291,905

265,924,888

Non-controlling Interest

 

 

1,176,837

1,061,428

 

 

 

325,712,727

327,911,176

 

 

 

 

 

 

 

 

 

 

 

 

 

$421,192,963

$414,020,567