May 18, 2020
In United States dollars (except where it is indicated otherwise):
Sygnus Credit Investments Limited for the nine months ended March 31, 2020, reported Interest Income of US$3.88 million 59% increase on the US$2.44 million recorded in 2019. For the quarter, Interest Income rose 44% to US$1.41 million (2019: US$978,580). Interest expense for the nine months ended March 31, 2020 amounted to $472,002 (2019: nil). While, for the quarter ended March 31, 2020, interest expense closed at US$355,266 (2019: nil). Management mentioned that, “during Q3’20, growth in core revenues was adversely impacted by (i) temporary timing differences between interest expense associated with new debt, and interest income generated from the deployment of that debt into investments and (ii) early exit of a large investment, resulting in lower interest income due to a shorter investment period.”
The Company also reported Fair Value Gains of US$159,053 for the nine months ended March 31, 2020 (2019: US$101,299). Management noted the performance of Fair Value Gains, “higher interest rates and widening credit spreads due to the corona virus pandemic (“COVID-19”).”
Other income closed at US$30,892 (2019: US$40,944). For the quarter, other income totaled US$23,892 versus US$10,000 recorded in the same quarter last year.
The Company booked no Net Foreign Exchange Gains for the nine months period ended March 31, 2020 (2019: US$126,301). As such, Sygnus reported nine months total revenue of US$3.60 million compared to US$2.71 million last year. For the quarter, Sygnus booked total revenue of US$930,491 versus US$1.24 million for the quarter ended March 31, 2019.
Total Expenses for the period amounted to US$2.32 million, a 198% surge relative to US$780,339 recorded for the corresponding period in 2019. Total expenses for the quarter amounted to US$1.29 million relative to US$241,022 for the same quarter of 2019. Of expenses for the nine months ended March 31, 2020:
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- Management fees amounted to US$716,837 (2019: US$526,959).
- Other expenses for the period amounted to US$98,046 (2019: US$44,173). Audit Fees rose 31% year over year from US$11,787 in 2019 to US$15,388 for the nine months of 2020.
- Accounting fees rose 62% to US$36,308, from US$22,358 in 2019. Advertising and promotion rose to US$19,705 (2019: US$3,127), Directors Fees and Related Expenses, rose 15% to close at US$26,320 (2019: US$22,869). Bank charges amounted to US$6,848 (2019: US$4,495).
- Commitment fees totalled US$47,349 (2019: nil), “primarily driven by one-off commitment fees relating to the establishment of bank credit lines and higher fees relating to listing, registrar and software subscriptions,” as per SCI.
- Net foreign exchange loss closed at US$1.02 million (2019: nil). SCI noted, “During Q3 2020, SCI converted a total of J$1.2 billion to USD, representing resources from a JMD debt issuance and other sources, to finance new investments. This one-off set of transactions were primarily responsible for the loss during Q3 2020. The movement in foreign exchange gains and losses reflect SCI’s exposure to Jamaican dollar assets, which may fluctuate based on movements in the JMD/USD exchange rates. SCI does not have a foreign currency trading business.”
- Impairment allowance on financial assets amounted to US$302,873 (2019: US$60,257). Notably, Management stated, “The higher ECL was partly driven by a much larger portfolio of private credit investments, which grew by 51.7%. The Q3 2020 ECL primarily reflected a charge of US$131.2 thousand for 1 Portfolio Company, whose private credit investment terms will be changed during Q4 2020, to better align its business prospects with the current COVID-19 economic environment. This Portfolio Company has been placed on non-accrual until the restructured terms have been agreed and finalized. The ECL charge taken during Q3 2020 or portions thereof, may be reversed in future periods.”
- Corporate service fees totalled US$19,192 (2019: nil). Moreover, “ these fees reflected accrual expenses for a new contract with a related party covering the provision of accounting and other corporate services. These fees were accrued for the month of March 2020 and will be reflected going forward.”
- Irrecoverable Withholding Tax and Professional Fees amounted to US$2,958 (2019: US$38,553) and US$11,765 (2019: US$45,761), respectively.
Profit for the nine months ended March 31, 2020 amounted to US$1.28 million, relative to US$1.93 million in 2019, a 34% decrease year over year. For the quarter, the Company booked a loss of US$355,846 compared to a net profit of US$1 million for the same quarter of 2019. According to management, “This loss primarily reflected volatility in the JMD/USD exchange rate on one-off purchases of USD equivalent to J$1.2 billion from JMD debt proceeds and other resources.”
Total comprehensive income for the nine months ended March 31, 2020 amounted to US$1.28 million, relative to US$1.93 million in 2019. For the quarter, total comprehensive loss closed at US$355,846 compared to a total comprehensive income of US$1 million for the corresponding quarter of 2019.
As a result, Earnings per share (EPS) for the period amounted to US0.6924 cents (2019: US1.0464 cents). Loss per share for the quarter amounted to US0.1931 cents relative to an EPS of US0.5428 cents in 2019. The twelve months trailing EPS amounted to US0.7585 cents. The number of shares used in our calculations amounted to 184,311,300 units. Notably, SCIJA and SCIJMD closed the trading period on May 18, 2020 at a price of J$13.06 and J$15.48 respectively. Both SCIUS and SCIUSD closed the trading period on May 18, 2020 at US$0.02 and US$0.13.
Management indicated, “SCI made new investment commitments valued at a record US$10.4 million for a third quarter during Q3 2020, which exceeded the US$6.47 million for Q3 2019. Investments were originated in the Telecommunication Services, Construction, Manufacturing and Entertainment industries, in leading firms with strong growth prospects and free cash flow generation. There were 4 Portfolio Companies exits during Q3 2020, three of which were regular scheduled exits, and one of which was an unscheduled early exit valued at US$10.3 million. This large exit was primarily driven by COVID-19 developments, which temporarily delayed the use of funds by the Portfolio Company. The early exit was mutually agreed between SCI and the Portfolio Company, and is an example of the type of flexible financing solution provided by SCI.”
Balance Sheet Highlights
As at March 31, 2020, Sygnus’ total assets amounted to US$60.59 million, a 56% increase on 2019’s assets base of US$38.79 million. This was due to an increase in ‘investments’ to US$45.60 million (2019: US$29.56 million) and ‘Other receivables’ which closed at US$10.33 million (2019: US$484,707).
Total Stockholders’ equity as at March 31, 2020, closed at US$36.98 million, relative to US$37.46 million for the corresponding period last year. This resulted in a book value per share of US$0.201 compared to the value of US$0.203 as March 31, 2019.
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