August 17, 2020
Reported in US$ (except where it is indicated otherwise)
Proven Investments Limited (PROVEN) for quarter ended June 30, 2020, reported interest income of $3.09 million, a 55% decrease when compared with the $6.88 million reported for the same period in 2019.
Interest expense for the three months amounted to $2.21 million, 16% lower when compared to the $2.63 million booked for the prior year. As such, net interest income for the first quarter witnessed a decline of 79% to total $880,244 relative to the $4.25 million reported for previous year.
Dividend income amounted to $3,769 an 88% decrease from the $32,513 recorded in 2019, while fees & commission income notably decreased by 56% to $1.48 million relative to $3.71 million in 2019. Also, net foreign exchange booked a gain of $381,191, 43% lower than $667,752 booked twelve months earlier.
Other income moved from $998,477 book for the first quarter of 2019 to total $1.34 million for the corresponding quarter of 2020, a growth of 34%. Proven booked a 3% decrease in pension management income to total $782,625, down from $804,516 booked for the prior year’s corresponding period. Gains on securities trading closed at $372,683 compared to $642,055.
Consequently, net revenue decreased by 51% to total $5.24 million compared to $10.77 million recorded for 2019.
Operating expenses declined by 43% for the year to total $4.59 million relative to $7.99 million in 2019. Of this, administrative and general expenses recorded a 45% decrease to close at $4.17 million relative to $7.56 million documented for the first quarter of the prior year. ‘Depreciation and Amortization’ increased 1% to $440,260 (2019: $437,422), while the Company booked an IFRS 9 provisioning of $11,672 compared to $6,597 booked 12 months earlier. Proven highlighted, “IFP operations are entirely focused on fee based off balance sheet activities, and as a result 90% of its revenue is derived from fees and commission which contributed 47.6% to the overall Fees and Commission reported by the Group for the quarter ended June 30, 2020.”
Consequently, operating profit for the quarter declined 77% to $647,604 (2019: $2.78 million). Notably, share of profit of associate amounted to $1.54 million for the quarter relative to $1.46 million in 2019. ‘Preference Share Dividend’ fell 53% to $211,974 (2019: $450,491).
Profit before tax amounted to $1.98 million versus $3.79 million booked for 2019 corresponding period. Taxation decreased year over year by approximately 54% from $348,209 in 2019 to $160,845. As such, Net Profit amounted to $1.82 million, a 47% decrease when compared to the $3.44 million in 2019.
Net profit attributable to shareholders for the quarter amounted to $1.41 million relative to $2.44 million documented in for 2019. The company noted, “the year over year decline in NPAO emanated primarily from a decrease in Net interest Income and the Fees and Commission Income line items; which are directly associated with the fall in Asset Under Management valuations due to the downward pressure on asset prices, as well as a loss of income from the reduced holding in Access Financial Services. Additionally, a shift in focus aimed at mitigating the impact of the pandemic and managing risks during a challenging operating environment was deemed prudent over the period thus impacting overall performance. PIL also successfully executed on its Business Continuity Planning strategy during the quarter which was concentrated on enhanced monitoring and reporting, liquidity, and capital preservation along with other prudent strategic initiatives targeting continued growth of the business and the protection of our stakeholders.” Additionally, Total comprehensive income for the quarter amounted to $9.98 million (2019: $4.30 million).
Earnings per share (EPS) for the quarter amounted to $0.0023 (2019: $0.0039), while the twelve months trailing EPS amounted to $0.0463. The number of shares used in our calculations is 625,307,963. Notably, the stock price for PROVEN and PROVENJA closed the trading period on August 14, 2020 at US$0.24 and $34.67 respectively.
Management mentioned that, “PWL continues to focus on its strategy to grow its off-balance sheet wealth and advisory management business by offering innovative investment solutions to clients. The company’s diversification of its revenue streams and reduced reliance on the repo business resulted in non-interest income accounting for over two thirds of its revenue. PWL is also focused on improving its operating efficiency aided by leveraging technology and FinTech such as its Proven Wealth App, IPO Pro and Global Trading Platform.”
Balance Sheet at a glance:
Total Assets as at June 30, 2020 amounted to $603.42 million (2019: $640.24 million), a decrease of 6%. The decline resulted in a 53% decline in ‘Loan Receivables’ to $27.32 million relative to $57.81 in 2019. Investment securities also contributed to the decline with an 8% contraction to $285.94 million compared to $311.81 million in 2019. The Company also recorded decrease in intangible assets, investment properties and resale agreements. However, the movement was tempered by an increase in ‘Investment Associates’ of $40.70 million or 51% to $120.53 million (2019: $79.83 million). Proven stated, “The year over year shift in the composition of Total Assets mainly emanated from a reduction in Investment Securities, Loan receivables and Intangible Assets. The reduction in Investment Securities holdings was deliberate to optimize the risk return dynamics taking into consideration the flat yield curve and credit spread risk. These portfolio rebalancing initiatives also enabled an improvement in the overall liquidity positioning which was aimed at bolstering PIL’s ability to successfully navigate the uncertainties associated with the COVID-19 pandemic. This also provided sufficient cash resources to take advantage of opportunities that may arise due to depressed asset prices.”
Shareholders’ Equity totaled $108.58 million relative to $92.71 million booked June 2019; as such book value per share now amounts to $0.17 (2017: $0.15). Proven noted, “The change is attributed to more than a two-fold increase in retained earning arising from core growth and net impact of activities associated with selected Portfolio Assets. The dislocation of asset prices due to COVID-19, negatively impacted the Investment revaluation reserve resulting in a loss of US$5.25 million compared to a gain of US$5.24 million during the same period last year. However, this represents an improvement from the $14.86 million loss recorded as at March 31, 2020.”
Analyst Certification -The views expressed in this research report accurately reflect the personal views of Mayberry Investments Limited Research Department about those issuer (s) or securities as at the date of this report. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.
Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.