Asset management business doing well and is very profitable
Investment company Eppley Limited has managed to grow its profits by 50 per cent despite a fall-off in interest income.
The company, which is listed on the main market of the Jamaica Stock Exchange, returned after tax profit of $165 million in the first nine months of 2020. This is 50 per cent above the $110 million earned in the same period last year.
Profits grew significantly despite a reduction in interest income, which decreased mainly due to the termination of a few large factoring arrangements recorded in 2019 that expired this year. In addition, the shift in the composition of the company’s investment portfolio also contributed to the significant jump in profits.
Eppley, located at 58 Half-Way Tree Road, Kingston 10, is primarily involved in the business of investing in credit products including insurance premium financing, lease and loan financing. Profitability growth was driven primarily by the expansion of Eppley’s asset management business, which is the equivalent of approximately US$78 million of capital for investors at the end of the second quarter.
This is done mainly through Eppley’s Caribbean Property Fund and the Caribbean Mezzanine Fund. The asset management fees and the dividends are received from subsidiaries and affiliates and are reflected in the company’s financial statements as other operating income.
STABLE INCOME STREAMS
According to company directors, “these income streams are stable and recurring and enhance the quality of Eppley’s earnings and the resiliency of our business”.
Given the positive returns for the nine-month period, the board of Eppley has approved a dividend of 3.72 cents per share.
The dividend is payable on December 15 to ordinary shareholders on record as of November 30, subject to the discretion of the board. Eppley has stated that it expects to maintain this dividend policy in future periods.
Eppley is admitting that its finances have been hurt as a result of the impact of COVID-19 but emphasised that it remains well capitalised. According to Eppley, “its proprietary portfolio is diversified, carefully underwritten and continues to perform”.
Said Eppley: “The asset management business adds earnings largely insulated from credit or market risks. We expect to spend the remainder of 2020 carefully deploying our excess liquidity and continuing to grow our asset management business.”
Eppley produced earnings per share of $0.86 in the first nine months of 2020, a 27 per cent return for shareholders so far this year. At the end of the quarter, the net asset value was $4.71 per share.
PROPRIETARY INVESTMENT PORTFOLIO
At the end of the quarter, Eppley owned a $3.8-billion investment portfolio consisting of cash, loans, leases, receivables and investments in our mezzanine, real estate, infrastructure and asset management joint ventures and subsidiaries. The average income yield on Eppley’s portfolio was 12 per cent.
The company is highly liquid, ending the quarter with $490 million in cash.