Digicel share sale nets €20m for O’Brien
Denis O’Brien cashed in €20 million ($28.4 million) from his Digicel phone business this year, by selling some of his shares in an associate company to the main group.
Documents filed with a $500 million bond issue from Digicel show that O’Brien sold down his stake in Digicel Holdings (Central America) Limited (DHCAL) in March, April and again on October 1 this year. DHCAL runs the Digicel operations in Honduras and Panama, but it has not formed part of the main group, which began in Jamaica.
The documents show that Digicel built up a 43 per cent stake in DHCAL this year, at a cost of around $243 million. This was made up of payments to O’Brien for his shares and the issue of new shares by DHCAL. At least $28.4 million of this went to O’Brien, who has reduced his stake in that company to 51 per cent.
The Honduras business is under pressure, partially due to political instability, and the documents say that, unless there is a significant and speedy turnaround, the Honduras operation ‘‘would not remain in compliance with its debt covenants’’. The Panama business is subject to very strict bank covenants, and further expansion in Honduras may require new funding possibly from the main group, according to the prospectus.
DHCAL made a loss of $76 million in the six months to the end of September, on revenues of $68 million. So far the company has invested $410 million in the Panama and Honduras operations, where it has the third and fourth mobile licences respectively.
Meanwhile, the main Digicel group reported a 31 per cent fall in profit before tax in the six months to September 2009, compared with the same period last year. Pre-tax profit came in at $79.5 million, but this was after taking a $27 million impairment charge on its DHCAL investment and a $30 million loss on its share of the DHCAL losses.
Without the financial hits from its investment in DHCAL, the core group of companies put in a very strong performance, and would have made a profit of $138 million compared with $115 million the previous year. It has grown its customer base to 7.3 million subscribers.
Digicel’s core business had a turnover of $1.7 billion in the 12 months to March 2009, and a record pre-tax profit of $237 million. The core group’s revenues were down 1.8 per cent to $857 million at the half-year stage to September, mainly due to currency fluctuations in Jamaica. Profitability in Jamaica decreased by $21.4 million in the six months to September. The group reduced staff numbers by 340 (over 10 per cent) since 2008 as it continued to manage costs.
Digicel and its subsidiaries have debt of $1.8 billion, including the $500 million raised in the recent bond issue. Around $320 million of that is due to be repaid before March 2010. Digicel’s parent company, Digicel Group Limited, also carries debt of $1.1 billion.
O’Brien and his seven fellow non-executive directors, including PJ Mara and Greg Sparks, shared remuneration totalling $5.5 million in the year to March.
