Losses reported for nine-month period ended September 30

 By Durrant Pate

Having reported 2019 as its best year ever in terms of revenue and profits, Transjamaican Highway (TJH) Limited is now bleeding financially because of COVID-19, chalking up losses on operations and declining revenues.

TJH, which operates the Highway 2000 East-West wing of Jamaica’s toll roads, returned poor results on its operations and financial position for the nine-month period ended September 30, 2020. Revenues for the period were down 17 per cent to US$32.6 million, coming from US$39.3 million for the same period in 2019.

READ: Toll road operator Transjamaican drives up US$53m in revenue for bumper 2019

For the quarter ended September 30, 2020 the company earned revenues of US$11.2 million, reflecting a decrease of US$2.1 million or minus 16 per cent compared to US$13.3 million for the same period in 2019. In its just released unaudited Interim Financial Statements for the third quarter and nine-month period September 30, 2020, TJH reports that “this decrease resulted mainly from the decline in traffic we have been experiencing as a result of the various measures implemented to help combat the spread of the coronavirus”.

The company’s finances were hit hard by the discontinuation of shareholders’ grant, which allows TJH the right to collect revenues generated from commercial exploitation of the areas surrounding the Toll Road, including gas stations and related ancillary services, electricity and telecommunication cables and fiber optics. This was compounded by foreign exchange losses, resulting from the continued devaluation of the Jamaican Dollar against its U.S Dollar counterpart.

OPERATING EXPENSES CLIMBING

Operating expenses for the last quarter was US$9.8 million, reflecting an increase of US$1.2 million compared to US$8.6 million for the same period in 2019. This increase was primarily due to increases in insurance cost, monthly fixed fees and repairs and maintenance cost but was offset by a reduction in the Operator’s variable fee (tied to the decrease in traffic).

Operating expenses consists primarily of operation and maintenance costs of the toll road, including the Operator’s (Jamaican Infrastructure Operator Ltd) monthly fixed and variable fees and amortisation of intangible assets. For the nine-month period ended September 30, 2020, operating expenses were US$27 million compared to US$25.5 million for the same period in 2019 and were impacted by the same aforementioned factors.

Administrative expenses, which primarily comprise of staff costs, depreciation of plant and equipment and other routine office expenses was slightly down by US$100-thousand for the last quarter to US$200-thousand, compared to administrative expenses of US$300-thousand for the same period in 2019.

30% DROP IN ADMIN EXPENSES

This 30% decrease, according to TJH Chairman Charles Paradis was primarily due to reduction in travel and other expenses arising from the impact of the Pandemic. For the nine-month period administrative expenses were US$0.88 million, reflecting an increase of US$0.04 million compared to administrative expenses of US$0.84 million for the same period in 2019.

This was primarily due to additional expenses arising from the issuance of the secured notes and the Jamaica Stock Exchange listing. Finance costs, which comprise mainly of interest on the long-term loans was slightly down to US$3.9 million for the quarter, reflecting a decrease of US$0.7 million compared with finance costs of US$4.6 million for the same period in 2019.

For the nine-month period, Paradis reports that TJH finance costs was US$13.3 million, reflecting a decrease of U.S.$0.3 million, compared with the amount of US$13.6 million for the same period in 2019. This two per cent decrease was due to debt restructuring, with the company’s existing loans being repaid and the secured notes being issued during the first quarter of this year.

LOSSES CLIMB TO US$2.7 MILLION

For the quarter, pre-tax losses amounted to US$2.7 million, reflecting a decrease of US$3.3 million when compared to modest profit before tax of US$0.6 million for the same period in 2019. This stemmed mainly from the decline in revenues and factors associated with COVID-19.

Loss for the nine-month period was US$8.7 million and reflected a decrease of US$10.8 million, compared to profit before tax of US$2.1 million for the same period in 2019. Net loss of US$3.8 million was recorded for the nine-month period, reflecting a decrease of US$5.9 million, compared to net profit of US$2.1 million for the same period in 2019.

As at September 30, 2020, total assets stood at US$325.1 million, reflecting an increase of US$32.9 million, compared to total assets of US$292.2 million as at December 31, 2019. This 10 per cent increase resulted primarily from an increase in restricted cash and Deferred Tax. As at September 30, 2020, share capital was US$27 million, reflecting a decrease of US$27 million, compared to share capital of US$54 million as at December 31, 2019.

Liabilities as at September 30, 2020 stood at US$270 million, reflecting an increase of US$43 million, compared to total liabilities of US$227 million as at December 31, 2019. This was primarily due to debt restructuring which includes the eight per cent cumulative redeemable preference shares, and the secured notes issued by the company from which the proceeds were used to repay the short-term loans held at December 31, 2019.

COVID-19 IMPACT

According to the TJH chairman, “the consequences of the global health crisis unfortunately continue to be felt seven months after the start of the COVID-19 epidemic observed in March 2020. The various restrictions imposed by governments to contain the spread of the virus are still weighing on travel and therefore on the level of traffic observed on most road networks across the globe”.

Regarding Highway 2000 East-West, Paradis notes that the end of the confinement imposed on the parish of St Catherine (between mid-April and May 1, 2020) further slowed the sharp decline in traffic that had been observed in the second quarter of this year (-34.5 per cent) compared to the previous year). The decline during this third quarter, when compared to the previous year, was 9.3 per cent in July, 7.2 per cent in August and 13.8 per cent in September (i.e. a total of 10.1 per cent for the third quarter 2020).

“Between January 2020 and September 2020, the decrease in traffic over one year was 16.4 per cent. At present, the one-month postponement of the start of the school year and the use of distance learning continues to weigh on the current level of traffic, as does the maintenance of the curfew and the ban on large gatherings,” Paradis explains.

He states that given the uncertainties of this global health crisis and the unknown measures that could occur to contain the spread, it has become increasingly difficult to forecast the company’s performance in the months to come. However, in spite of this unprecedented context, TJH continues to fully meet its financial obligations and has recently declared its first dividend payment since becoming listed.

This is to be paid on December 15 of this year.