SIL reports 30% increase in six months net profit

Sterling Investments Limited (SIL) for the six months ended June 30, 2020 reported interest income of $57.70 million, a 25% increase compared to $46.10 million booked twelve months earlier. Interest income for the quarter closed at $30 million compared to $24.27 million reported for the same quarter of 2019.

Foreign exchange gain amounted to $64.29 million, a significant increase compared to the gain of $28.84 million booked the prior year’s quarter. Management noted, “The Jamaican dollar depreciated against the US dollar by J$7.44 or 5.61% for the six-month period ended June 2020, relative to the same period in 2019 when it depreciated by J$3.35 or 2.62%. This led to unrealized foreign exchange gains for the six months ended June 2020 of J$64.29 million compared to J$28.84 million for the corresponding period in 2019.”

Also, the Company booked a ‘Net gain on sale of debt investment securities at FVOCI’ of $9.32 million for the period relative to a gain of $1.84 million recorded for the prior year. Net gain on sale of equity investment securities at FVTPL amounted to $304 for the first six month of 2020 compared to nil in 2019. As a result, total income for the six months ended June 30, 2020 amounted to $131.32 million relative to $79.78 million for the same period in 2019. However, total income for the quarter closed at $81.98 million versus $75.11 million booked for the same quarter of 2019.

Interest expenses for the six months ended June 30, 2020 experienced an 18% decline closing at $5.41 million versus $6.59 million for the first six months of 2019.

Other expenses for the period totalled $17.90 million, a decrease of 1% from $18.04 million  reported in the prior comparable period. SIL booked an impairment loss on financial instruments of $1.88 million, 78% greater than $1.06 million posted for the same period in 2019.

Unrealized fair value gain on equity investments securities at FVTPL amounted to $6.46 million in 2019, contrast to a loss of $11.73 million for the period under review. Consequently, total operating expense for the six months rose 92% to close at $36.92 million relative to $19.23 million for the same period in 2019. For the second quarter, there was a total operating benefit of $7.75 million relative to the total operating expenses of $10.65 million incurred for the same quarter of 2019.

Operating profit recorded for the six months closed at $94.40 million relative to a profit of $57.55 million booked in the prior year. Operating profit for the quarter closed at $89.74 million, 39% greater than $64.46 million booked for the second quarter of 2019.

The company booked other loss for the period of $2.97 million, relative to other income of $173,171 booked in 2019. Preference dividend expense amounted to $16.24 million in 2020 in contrast to nil recorded in 2019.

SIL recorded a pre-tax profit for the first six month of 2020 of $75.19 million compared to a profit of $57.72 million in 2019. Tax charges of $775,526 (2019: $594,441) was booked for the period and as such, net profit amounted to $74.41 million relative to a profit of $57.13 million. While for the quarter, SIL recorded a pre-tax profit of $70.31 million (2019: $64.49 million) and tax charge of $488,880 (2019: $146,497), which led to a net profit or $69.82 million (2019: $64.34 million).

Total comprehensive loss for the period amounted to $50.69 million compared to the income of $131.14 million booked for 2019. As for the quarter, total comprehensive loss closed at $55.28 million versus a income of $87.49 million.

This resulted in a six months earnings per share of $0.20 relative to $0.15 in 2019. EPS for the quarter amounted to $0.19 compared to $0.17 booked for the second quarter of 2019. The twelve months trailing earnings per share amounted to $0.32. The numbers of shares used in the calculations are 374,792,612. SIL stock price closed the trading period on August 12, 2020 at a price of $2.87, while SILUS closed the trading period at US$0.0245.

Management noted our, “Capital gains generated from opportunistic asset purchases: Due to the company’s modest use of leverage, it was able to prudently purchase bonds in the market sell off that have since appreciated in value. Higher asset prices: Lower interest rates have led to an increase in the price of bonds in Sterling Investments Limited’s portfolio. This helped to significantly reduce the unrealized losses that were recorded as at March 31, 2020.”

Balance Sheet Highlights:

As at June 30, 2020, the company’s assets totalled $1.67 billion, 12% more than $1.49 billion a year ago. This resulted mainly from an increase in ‘Investment Securities’ which closed at $1.64 billion, 13% higher than the $1.45 billion booked as at June 20, 2019.

Shareholder’s equity as at June 30, 2020 stood at $1.17 billion compared to $1.16 million in 2019. According to Management, “this reflects higher retained earnings but reflects the fact that some asset prices are still below levels as at June 2019..”  The book value per share amounted to $3.11 (2019: $3.08).


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