However, year-to-date performance was flat
Sterling Investments posted a strong third quarter performance with revenues surging by 108 per cent from J$23.1 million in 2021 to J$48.1 million for the period under review.
The strong revenue performance for the September quarter is mainly due to an increase in foreign exchange gains. Sterling Investments has reversed the foreign exchange losses of J$23.1 million for the September 2021 quarter to post gains of J$12.2 million for the current September 2022 quarter.
Total operating expenses declined from J$11.4 million in 2021 to J$10.9 million for September 2022. Profit for the third quarter of 2022 totalled J$20.5 million versus J$312,738 for the same period in 2021.
Market movements in the local currency market are the primary driver for quarter-on-quarter volatility. However, the management of Sterling Investments maintains that shareholders will benefit in the medium and long term from the high-quality US$ assets in the portfolio and the steady stream of US$ interest income it produces.
Combined three quarter performance
First nine-months of 2022 (January – September 30, 2022) interest income was flat increasing by a mere 4.4 per cent to J$111.9 million, reflecting continued growth in the income earning capacity of the company. Net interest income increased by 4.0 per cent from J$97.0 million in 2021 to J$100.9 million for the current combined three quarters.
Despite rising interest rates, the Charles Ross-led management team has been able to optimize the cost of funds available to the company. For the nine-month period, total operating expenses declined from J$36.0 million in 2021 to J$34.0 million in 2022.
Unrealized foreign exchange losses for the period amounted to J$20.5 million compared to gains of J$54.6 million for 2021. This was the direct result of an appreciation in the Jamaican dollar against the US dollar.
The combined effect of these movements was a net profit of J$27.7 million for the nine- month period. Given the global decline in stock and bond prices, Sterling Investments’ total asset base declined to J$1.7 billion as at September 30, 2022, down from J$2.2 billion as at September 30, 2021.
This reflected the broad based, systemic downward market movements occurring in the global capital markets. However, the management is reporting that, “the decline has presented a wide array of attractive buying opportunities for the company. However, management is patiently assessing the macro-economic data, credit spreads and liquidity conditions, to appropriately deploy capital”.
Access to affordable funding
The company retains access to affordable funding to permit it to take advantage of market opportunities as they arise. Total liabilities declined by 17 per cent to J$535.5 million as at September 30, 2022, largely the result of a 19 per cent decline in margin loans to J$489 million.
Total equity also declined to J$1.2 billion, also a result of the lower market prices for the assets in the investment portfolio. Management largely views the depressed asset prices as temporary and a consequence of the economic cycle that the world is now experiencing.