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CYM | Nov 17, 2022

Proven takes hit from contraction in assets prices

/ Our Today

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No dividends declared this quarter

The offices of Proven Investments Ltd.

Durrant Pate/ Contributor

Jamaican investment company Proven Group Limited has taken a big hit from the contraction in assets prices, resulting in a marked decline in net profit for the half year ended September 30, 2022.

Net profit attributable to shareholders went down to US$1.71 million from the US$5.99 million earned in the comparable period last year. This decline in net profit outcome largely reflects the adverse impact on asset prices caused by an increasingly inflationary environment, accompanied by rising interest rates.

Grain price increased over the review period along with the integration of newly acquired companies were the other drivers influencing the performance for the period. Despite these challenging headwinds, Proven remains resilient and is already reaping the results of its strategic initiatives based on the initial third quarter to date performance.

Liabilities growing faster than assets

Proven’s assets expanded to US$1.08 billion as at September 30, 2022, growing by 46 per cent from the US$741 million reported at September 30, 2021, while liabilities increased by 67 per cent to US$933 million as at September 30, 2022, up from US$558 million as at September 30, 2021.

The growth in both total assets and total liabilities resulted mainly from the acquisition of Proven Bank (Cayman) Limited (formerly, Fidelity Bank Cayman). Proven Group’s off-balance sheet assets under management stood at US$736 million, as at September 30, 2022.

Shareholders’ equity closed at US$123.5 million, down from US$167.1 million as at September 30, 2021. This resulted from a US$47.8 million adverse shift in investment revaluation reserves from the impact of rising interest rates and market volatility on asset prices, a significant portion of which is due to Proven’s share of JMMB’s revaluation reserves, which is accounted for under the equity accounting method.

At the Board meeting held on November 11, 2022, the directors decided not to declare an interim dividend for the quarter ended September 30, 2022. This decision was made against the backdrop of the quarter’s breakeven profit position.

(Photo: Facebook @WeAreProven)

Deterioration in investor sentiment

The management says it remains committed to returning regular cash dividends to its shareholders as soon as conditions improve. During the second quarter, Proven observed a general deterioration in investor sentiment over the period, which was supported by the steady rise in global benchmark interest rates amid recessionary fears.

As a result, the group’s second-quarter performance was negatively impacted by non-interest income revenue line items. Accordingly, Proven booked profit attributable to equity holders of US$0.6 million, representing a declined year over year.

Looking ahead, Proven will be focusing on expanding net interest margins by maintaining the close alignment of its asset and liability re-pricing tenures. The management reports that the group has a healthy pipeline of deals, which are anticipated to produce positive results in the second half of the current financial year. Continued focus on improving client experience will be executed through the adoption of an integrated sales process application and the launch of an update to the Proven App, which were among the initiatives embarked on during this quarter.

Segment results

Following a lackluster start to the financial year, BOSLIL Bank Limited registered an improved second-quarter performance, delivering a net profit of US$1.2 million for the period ended September 30, 2022. This resulted in US$0.9 million in profit attributable to equity holders being realized for the period compared to US$1.2 million for the period ended September 30, 2021.

Total assets of the bank increased by six per cent from US$331.1 million as at September 30, 2021, to US$349.2 million as at September 30 2022.

Proven Wealth (Cayman) reported a net loss, which was primarily due to a reduction in fees and commissions reflecting the residual impact of COVID-19-induced shifts.

Heritage Education Funds International made a net profit of US$0.11 million for the period ended September 30, 2022, primarily derived from fee and commission income produced by its core activities.

Heritage generated gross fees and commission income of US$1.4 million. The company continues to make steady progress on the path to transitioning its middle and back-office functions from its previous owners.

It is anticipated that an increase in bottom-line results during the second half of the year once the transitional services agreement comes to an end during the third quarter.

PROVEN Properties Limited continues to make positive strides towards achieving its targeted weighting of capital allocation into the rent/lease recurring revenue model. The subsidiary registered an excellent second quarter, as it was able to book a large percentage of sales from its Braemar Development.

The portfolio of real estate holdings includes five rental income properties and nine development projects at various stages of the development cycle.

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