The Chairman of National Enterprises Ltd (NEL) Ingrid Lashley has contended that the company would not be best served by a long term diversification strategy.
In the company’s annual report, Lashley argued: “Diversification is inimical to the company’s long-term strategic direction.”
According to Lashley, the events of calendar 2019 and 2020 to date have made for changes in NEL’s way of doing business and overall lifestyle “that is unrivalled in modern times.”
She indicated that when the company changed its financial reporting to reflect the market value of its investments and investee companies, it could not anticipate that in so doing, the market would reveal such significant weaknesses in the diversification of NEL’s portfolio that would require NEL’s revision immediately in order to recover.
As an alternative to diversification, Lashley posited that “an investment strategy that is defined in variety and well-placed interconnectivity of the investment portfolio will allow for softening of the impact of industry-related troughs and highs and ensure that the overall return to our shareholder is consistent in its regularity and increasing in its value.”
Early in September, NEL declared a loss of $327.5 million for the fiscal year ended March 31, 2020, compared to a profit of $12.5 million in the comparable period last year.
In the company’s then financial statements, Lashley said the loss was largely due to the decline in the value of NEL’s investment in Telecommunication Services of T&T Ltd (TSTT) of $127.5 million and NGC NGL $175.3 million.
According to Lashley, although the International Monetary Fund’s (IMF) T&T forecast for 2020 is a 4.5 per cent contraction of the economy, as is broadly the case for the global economy, T&T’s health scorecard reads better than most in terms of COVID-19 cases and casualties.
She added: “The economic implications, however, are likely to be significant in a world where energy demand remains challenged, creating an outlook of heightened uncertainty over the coming months.”
Lashley noted that both the company’s annual meeting and publication of audited financial statements for the fiscal year ended March 31, 2019, were delayed by factors associated with late submission of the audited financial statements of one of its investee companies and the need to establish the fair market value of its investments to accommodate the change in financial reporting.
The NEL Chairman posited that the combination of the accounting change and the circumstances that have arisen outside of the company’s control, have made for turbulence that would require a focused and diligent approach to the organization’s planned diversification efforts.
Lashley added: “We will reset and renew our determination for improvement going forward.”