Durrant Pate/Contributor

PROVEN Group’s three overseas acquisitions in the 2021/2022 financial year are now paying dividends, resulting in a marked increase in net revenue of US$49.64 million, based on audited financial results for the year ended March 31, 2023.

This represents an increase of 28.2 per cent when compared to the US$38.73 million recorded in the previous financial year. Proven attributes this revenue expansion primarily due to the acquisitions of Roberts Manufacturing, PROVEN Bank Cayman (previously Fidelity Bank Cayman) and Heritage Education Fund International for which a full 12-months’ results are included in the 2022/23 financial year’s results.

However, net profits for the year were negatively impacted by the material impairment of investments in associated companies and intangible assets, in addition to a significant reduction in the share of profits from associated companies. The impairment was mainly due to reassessments of the carrying value of Access Financial Services Company Limited (reduced by US$6.61 million) and Proven Wealth (Cayman) Limited (reduced by US$3.21 million).

Impairments may be reversed in the future

While management accepts that these are appropriate current values, it accepts that the impairments may be reversed in the future with improved results from these subsidiaries and associated companies. The primary revenue sources making up the positive performance for the year included net interest income totalling US$17.37 million for the year under review versus US$5.08 million in the prior year.

This increase was mainly due to the addition of US$14.63 million in net interest income from PROVEN Bank Cayman in the full year’s results. The audited financial results for the year shows that the higher interest rate environment globally has contributed to widening spreads across the banking subsidiaries of the group, with this trend continuing into the first quarter of the 2023/24 financial year.

Pension fund management income grew by 5.5 per cent year-over-year to US$3.52 million, resulting from marginal growth in the assets under management, which was tempered by the general decline in most asset values with the exception of real estate. Gross profit on manufacturing operations increased to US$9.97 million for the financial year versus US$8.53 million last year.

The current year’s results contained the full twelve-months from Roberts Manufacturing, whereas last year’s results only included the ten months from the closing of the acquisition. The gross margins for the current financial year declined by 2.7 per cent from the rebased prior 10-month period result.

After 21 months of investment in management and new equipment, the management reports that Roberts Manufacturing is poised for a solid operating and business performance in the coming year. The management reports that it is “further encouraged by the first quarter’s results for the 2023/24 financial year, which reflected notable increases in many revenue lines.”

Net revenue increased by 17.3 per cent to US$17.74 million compared to US$15.12 million in the prior year, accompanied by net profit growth of 59.34 per cent to US$2.78 million, compared to US$1.74 million for the same prior year quarter.

US$10.1 million impairment

The major line item affecting net profits for the financial year resulted from the extraordinary impairment of the carrying value of investments in associated companies and intangible assets amounting to US$10.1 million, compared to an impairment of US$1.2 million in the prior year. This impairment was mostly derived from the assessment on the group’s carrying value in Access Financial Services Company Limited, which was reduced by US$6.61 million, as well as a reduction in the carrying value of PROVEN Wealth (Cayman) Limited of US$3.21 million.

Although this impairment has had significant impact on the performance of the group for the 2022/23 financial year, PROVEN “believes that the current carrying value of these investments is a better reflection of the accurate intrinsic value of these entities at the present time and anticipate that this impairment will be reversed in future periods, with the expected improvement in results from these subsidiaries and associated companies.”

Net loss attributable to shareholders for the full financial year 2022/2023 was US$4.86 million compared to the US$11.97 million earned in the prior year. The decrease in the share of profits from and the extraordinary impairment of associates and intangibles assets, were primarily responsible for this disappointing result.

Despite challenging economic and market conditions, the group maintains a positive outlook for the upcoming financial year.

According to the management, “the Group is currently well positioned to extract much more consistent value from its varied revenue lines with; (a) the expected revenue growth from interest spread expansion and the upward re-pricing of the Group’s income earning assets; (b) improved gross margins in the manufacturing business; (c) further expansion in assets under management and wealth management activities; (d) the completion and sale of additional real estate development projects, such as AVISTA at Bloomfield and; (e) the improved performance of the portfolio of associated companies.”