Cable and Wireless Jamaica/LIME has claimed $1.5 billion in cash credit from two pension schemes that were restructured by the company last year and has used some of that income to fatten its mid-line income.

The company has booked $892 million as a gain on its profit and loss accounts, boosting operating income - even after a large one-off $677 million restructuring charge - to $1.6 billion.

The restructuring of the company and pension schemes were advanced under Phil Green's management but are now being piloted by Geoff Houston who took over as CEO and president in January, after Green rejoined his family in Asia.

LIME Jamaica referenced a 19 per cent reduction in headcount since September 2008 saying the job cuts were linked to its newly renamed 'One Caribbean Transformation Programme', to reposition LIME as a regional operation with tentacles in different markets.

Approval gained in march

Approval for the restructuring of the main pension scheme was obtained back in March from the Financial Services Commission, the company said.

"Pension restructuring reflects an $892 million net gain on the settlement and curtailment realised through the restructuring of the two defined benefit pension schemes," said a company statement co-signed by directors Houston and Andrew Cocking.

"In addition to the exceptional income statement credit the restructuring allowed a cash refund of J$1,500 million to be paid to the company. The pension credit in relating to the ordinary running of the schemes was J$941 million and the charge in respect of the new defined contribution scheme was J$180 million."

LIME Jamaica ended the current period for the year ending March 31, 2009 still in a net loss position, at $367.6 billion in the red and $302.8 million after tax credits, but that figure marks a very sharp turnaround from a year ago when a $5 billion asset write-off resulted in pre-tax loss of $7.2 billion - the largest reported by a Jamaican stock market company - and a net $4.19 billion loss after tax credits.

Negative earnings

Even minus the one-time charge, LIME Jamaica's operating expenses were well ahead of income, resulting in negative earnings before interest and taxes, or EBIT, of $496 million.

Top line income, however, underperformed the previous period though by less than a billion dollars. Revenue slipped to $21.99 billion compared to $22.89 billion at year end March 2008.

Evidence of LIME Jamaica's strangled hold on expenses and cost of business were evident in outpayments of $5.6 billion, down by $1.2 billion, and cost of sales of $1.95 billion, down from $2.77 billion.

The restructuring also led to a slightly lower wage bill, down more than half a billion to $2.54 billion, and a nine per cent increase in gross margin of $14.4 billion, up from $13.8 billion.

Applying the scalpel

But there was also some evidence that Green/Houston were not just interested in cutting costs, but were judiciously applying the scalpel in an increasingly bitter competitive field with some battles moving from snipes in advertisements into the courtroom.

Indeed it was LIME's largest big ticket item, bar none - its selling administration and marketing or SAM costs - that was left out of the programme of fiscal discipline notwithstanding the attendant $7.37 billion price tag racked up in 2007/08 and again in 2008/09.

Some of this year's $7 billion would have financed what LIME calls its 'enhanced retail presence', a project that involved re-imaging six retail outlets as 'lifestyle stores', refurbishing 80 per cent of all retail outlets and adding 3,900 locations where customers can top up on phone credit.

The company's balance sheet has also improved. Fixed assets that were valued at $25.7 billion a year later are worth $27.5 billion, among total assets of $37 billion.

LIME has also cut its accumulated deficit from $4.6 billion to $3.86 billion, and its capital base has grown to $15.4 billion.

business@gleanerjm.com

'Pension restructuring reflects an $892 million net gain on the settlement and curtailment realised through the restructuring of the two defined benefit pension schemes.'