Management highlighted the financial performance for the FY2020. Total investment income increased 39.8% to US$4.5 million (2019: $3.21 million) but translated in a 3.8% decline to US$1.97 million (2019: US$2.05 million). Management also noted that interest income constituted 99.9% of the total investment income for the FY2020. For the first quarter ended September 2020, SCI reported a 19.8% increase in total investment income to US$1.31 million of which 98% was generated from interest income (2019: US$1.09 million) and generated a 51.1% increase in net profits to US$797,800 (2019: US$527,900). Also, as at September 2020, SCI has an asset base of US$69 million and has thus far realized zero credit losses.
Sygnus also noted that, as at September 2020, the Company recorded a value of US$62.3 million for its Private Credit Portfolio and recorded 29 portfolio companies. The company also recorded new investment commitments of US$8.7 million (excluding US$4.0 million undrawn). The average tenor for an investment is 1.8 years with an average yield of 12.0%. Overall, portfolio seasoning constitutes 12 exits at US$39.3 million since inception. In addition, SCI highlighted that each year the company has managed to stay within target for both its efficiency ratio and Assets Under Management threshold, that is 40% and 2.85% respectively. Mr. Jason Morris noted that, “these provide evidence of the company’s efficiency and expense management in relation to the company’s assets.”
Jason Morris, highlighted the strategic approach to enhancing shareholder value:
- Sponsored Portfolio Company Investments (part of a larger group of companies or affiliated company, private equity backing or major controlling common shareholder(s) with significant financial resources):
- More than 2/3 of the number of investments
- Nearly ¾ of total portfolio value
- Q1 Sep 2020: Majority of new investments financed
- Sponsored portfolio company investments enhance value creation for SCI, particularly during disruptive markets, by providing an additional layer of downside protection; better executive management teams capable of navigating a crisis; ability to inject equity into business if needed; typically market leading business with significant market share; robust capital stack (good mix of senior debt, equity and other forms of capital).
- Existing Portfolio relationships (repeat business from group of companies or affiliated company, or major controlling common shareholder that SCI has previously financed.)
- Q1 Sep 2020: 4/5 of new investment commitment financed
- Since inception, over 50% for new investment commitments were generated from Existing Portfolio Relationships. This enhances value creation for SCI especially during disruptive markets via robust pipeline opportunities.
- Scale capital base/portfolio base to US$100 million within the next 24 months to achieve a credit rating and thus leverage more efficiently.
- Focus on risk management
- Strong dividend payments
APO launch
SCI plans to raise US$22 million (J$3.3 billion) upsizeable to approximately US$32 million (J$4.8 million) in equity via its additional public offering. SCI noted that as a means of creating value to existing shareholders, a 10% discount based on the 4-week weighted average price was established to value the subscription price at J$14.7 and US$0.127 per share. Whereas the general public and key investors pool were given a similar discount of 7.5% to a price of J$16.30 and US$0.14 per share. Management also noted that “the shares are priced at 1.3 times its book value.”
The funds raised in this additional public offering will be used to:
- Pay off US$10 million bridge note
- Invest in a robust pipeline of investments valued at approx. US$40 million
Mr. Jason Morris also stated that, “the pipeline investments are mostly acquisition financing with a substantial amount in Jamaican Companies seeking to acquire businesses both outside and inside of the Jamaica.” He also mentioned that, “the pipeline investments are also expected to generate a yield similar to the current average yield of 12%.”
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