Dolla Financial Services is seeing a honeymoon run of performance since being listed on the Junior Market of the Jamaica Stock Exchange 11 months ago.
The micro-finance company posted another commendable quarterly performance with total income for the March quarter surging by 110 per cent to close the period at J$297 million, an increase of J$156 million year-over-year (YoY). Dolla recorded net interest income before expected credit losses (ECL) of J$249 million for the first quarter, representing an increase of J$120 million or 93 per cent YoY.
This increase was driven by positive growth in loan sales throughout the period, which is also reflected in the loan portfolio growth. There was a big 282 per cent increase in interest expense, which amounted to J$49 million, up by J$36 million YoY.
The management team led by CEO, Kadeen Mairs and company Chairman Ryan Reid explained, “this substantial increase in interest expense is largely driven by the recently issued J$1.17 billion bond, which was effectively deployed since its listing. The bond was also used to consolidate existing debt at higher interest which was a cost saving strategic move by the company.”
Operating expenses jumped considerably
Operating expenses for the quarter totalled J$131 million, inclusive of expected credit losses (ECL), which represents an increase of $67 million or 104 per cent YoY. The increase was primarily attributed to increased marketing costs, as Dolla boosted its brand presence significantly over the year.
Staff costs also saw a significant movement as Dolla increased capacity to support the company’s growth. ECL for the period increased by J$2 million or 30 per cent YoY. This is a result of the growth in its loan book as well as a marginal increase in non-performing loans.
Earnings Per Share (EPS) for the quarter is down to $0.06, coming from J$2.25 in March 2022. The management explains that this movement is reflective of the higher income but is also a function of the significant increase in shares issued from the Initial Public Offering (IPO) back in June last year.
Dolla’s efficiency ratio stood at 44 per cent a one-point decrease from the 45 per cent reported in March 2022 and remains relatively low compared to the sector average.
Big rise in loan receivables
Dolla recorded a big jump in its loan receivables net of ECL, which totalled J$2.3 billion for the period ended March 31, 2023, an increase of J$1.4 billion or 161 per cent relative to March 2022. The management credits this to the company continuing to reap the results of positive customer sentiments and market engagement activities, which has increased demand substantially.
In addition, the positive effects of Ultra Financier, a subsidiary entity, are also a function of the monumental growth, as Dolla is able to untap value from a much larger market space. As of March 2023, business loans accounted for 80 per cent of the total loan portfolio with personal loans accounting for the remaining 20 per cent.
Secured loans also represent 80 per cent of the total loan portfolio, while unsecured loans accounted for the remaining 20 per cent. This represents an increase in the secured portfolio by 14 per cent.
Non-performing loans rising
The management continues to employ the collateralized loan strategy to ensure the quality of the loan portfolio is maintained while keeping ECL within single digits. Non-performing loans (NPLs) increased from 5.1 per cent to 9.7 per cent YoY.
While NPLs have jumped, the company is emphasizing that the overall arrears remain within budgeted expectations given the economic climate and the size of the portfolio. The management asserts that “NPLs also remain on the positive end of the sector average.”
Dolla recorded total liabilities of J$1.7 billion for the first quarter, an increase of $1.2 billion or 206 per cent year on year. The increase is directly related to the increase in funding of debt during the past 6 months.
Loans payable increased to $1.5 billion from $453 million year on year due to the $1.17 billion bond issued in Q4 2022. Shareholders’ equity stood at J$794 million as of March 31, 2023, representing a 113 per cent or $421 million increase YoY.
The increase continues to be due to the $250 million received from the issuance of shares from the IPO in June 2022 as well as the increase in profits throughout the period.