November 07, 2018

For the nine months ended September 30, 2018, Sterling Investments Limited (SIL) reported a 44% growth in total revenue to $138.89 million compared to $93.24 million recorded for the corresponding period in 2017. Management noted, “The company has successfully taken advantage of intermittent market selloffs and higher interest rates in the U.S. to purchase undervalued, high quality securities. The company has also effectively used low cost funding to purchase high yielding assets, thereby increasing the return to its investors. This is reflected in the company’s robust net interest margin of 87.6%. The company remains one of the most profitable on the stock exchange.”  Revenue for the second quarter rose 80% to $56.05 million compared to $31.14 million reported for the third quarter of 2017. Of total revenue:

• Interest income for the nine months closed the period at $62.62 million, up 7% from the $58.55 million for the comparable period in 2017.

Loss on disposal of available for sale securities for the period amounted to $339,777 relative to a gain of $23.23 million twelve months earlier.

Unrealised loss on quoted equities for the period amounted to $1.93 million (2017: Nil).

Foreign exchange gain amounted to $73.54 million, a gross increase of 542% compared to the gain of $11.46 million booked the prior year’s period.

The company experienced an 2% decrease in total expenses for the period to close at $24.77 million (2017: $25.36 million) for the nine months ended September 30, 2018 and a 17% contraction for the second quarter to $8.78 million (2017 $10.62 million). The breakdown of total expenses are as followed:

• Interest expense totalled $7.79 million, 39% above last year’s corresponding period’s total of $5.61 million.
• Other expenses totalled $21.01 million, a contraction of 3% (2017: $21.67 million).
• SIL booked a gain of $4.02 million for impairment on available for sale securities relative to $2.30 million recorded twelve months earlier.
• The Company booked no unrealised gain on derivative relative to a gain of $392,078 for the corresponding period in 2017.

Operating profit recorded for the period closed at $109.12 million relative to $67.88 million booked for the prior year’s corresponding period, a 61% increase year over year. Operating profit for the third quarter amounted to $47.28 million compared to $20.53 million reported for the same quarter of 2017.

Other income for the period grossly improved from a loss of $6,106 booked in 2017 to $103,490.

Preference dividend expense for the nine months amounted to $18.28 million compared to $8.30 million recorded in 2017.

Pre-tax profit totalled $90.95 million, 53% above the $59.58 million reported for the nine months ended September 30, 2017. Tax charges of $545,356 (2017: $581,966) was booked for the period, and as such, net profit amounted to $90.40 million (2017: $58.99 million), a 53% or $31.41 million increase. Profit for the third quarter amounted to $38.65 million relative to $16.03 million booked in 2017.

Total comprehensive income for the nine months amounted to $95.66 million compared to $88.26 million booked for the similar period of 2017.

Earnings per share for the nine months period and third quarter amounted to $1.47 (2017: $0.96)  and $0.63 (2017: $0.26) respectively. The trailing twelve months earnings per share amounted to $1.41.  The total number of shares used in the calculations amounted to 59,370,882 units. Additionally, SIL’s stock price closed at J$20.50 as at the end of trading on November 7, 2018.

Balance Sheet Highlights:

As at September 30, 2018, the company’s assets totalled $1.27 billion, 4% more than $1.23 billion a year ago. This resulted mainly from an increase in ‘Investment Securities’ which closed at $1.23 billion, 3% higher than the $1.19 million booked as at  September 30, 2017.  SIL indicated that, “This was funded by a combination of an increase in the use of margin as well as inflows from the Dividend Reinvestment Programme (DRIP) and Complementary Share Purchase Programme (CSPP). SIL was the first company to introduce these programs on the Jamaica Stock Exchange.”

Shareholder’s equity as at June 30, 2018, stood at $877.73 million compared to $875.82 million in 2017. The book value per share amounted to $14.34 (2017: $14.31).

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