Durrant Pate/ Contributor

Sterling Investments has seen muted revenues for its combined three quarters ended September 30, 2024, in which its performance was flat compared to the same period in 2023

Total revenue for the period under review approximated that of the corresponding period in 2023 at J$139.7 million. This was the combined result of lower total interest income but higher gains on the sale of debt investment securities.

The audited financial results show that lower interest income reflected the one-off impact of the non-payment of interest on a structured note security. The management anticipates that interest income will increase in subsequent financial years as liquid resources are fully optimized/deployed. 

Modest increase in expenses

Total expenses increased from J$60.5 million in the first nine months of 2023 to J$67.9 million for the just-ended period. Notable movements included a decline in interest expense, reflecting the Federal Reserve’s 50 basis point reduction in the benchmark interest rate. 

However, other operating expenses increased from J$32.8 million to J$45.6 million on account of higher audit fees. This is an industry-wide trend that is outside of the company’s immediate control. 

Unrealized fair value losses moved from negative J$4.7 million in 2023 to J$836,000 in 2024 reflecting improved market prices. For the combined three quarters, total profit moved from J$79.1 million in 2023 to J$71.8 million in 2024, representing a decline of J$7.3 million. 

This was primarily the result of the higher expenses and the muted revenue explained above. However, total comprehensive income increased from J$20.8 million during the combined three quarters to J$175.8 million for the period under review. 

Significant increase in fair value of debt instrument securities

This is as a result of a significant increase in the fair value of debt instrument securities. This figure moved from negative J$51.9 million in the first nine months of 2023  to J$109.5 million in 2024 

Sterling Investments recorded total assets as at September 30, 2024, of J$1.9 billion, roughly 12% above the balance a year ago. This was the result of an increase in the prices of the assets within the portfolio.

At the same time, total liabilities declined by 15% to J$402.7 million compared to J$472.5 million as at September 30, 2023. This was primarily the result of declines in the margin loan payable. 

Total equity increased 22% to J$1.5 billion as at September 30, 2024, compared to the J$1.2 billion recorded as at September 30, 2023. This was primarily the result of an improvement in the revaluation reserve driven by higher bond prices. 

According to the management, “this has provided credence to management’s prediction in the first quarter of 2023 that the depressed asset prices at the time were a natural part of the economic cycle and would remedy themselves in due course”.

As for the outlook, management anticipates, “future interest rate cuts by the Federal Reserve will continue to drive capital appreciation in the existing securities within the portfolio. However, this process is unlikely to be linear and punctuated with periods of volatility and price declines”.