Eppley produces best profit on record
CPFV asset base eclipses $8.7 billionSunday, March 07, 2021
BY DAVID ROSE
Even with interest income stemming from its typical credit offering falling by four per cent to $335.6 million, the growth in Eppley Limited's asset management business saw the company producing its best net profit in its history which rose by 35 per cent to $220.9 million for the financial year (FY) ending December 31, 2020.
The company, which traditionally derives most of its income from insurance premium financing, loans and leases to customers, has focused more in the last two years on asset management with a portfolio of US$80 million ($12 billion) under management.
The main asset which has been driving this increase in asset management fees and management income through Eppley Fund Managers Limited has been the Eppley Caribbean Property Fund Limited – Value Fund (CPFV) that boasts an asset base of BBD $116.1 million (US $57.5 million) at the end of 2020.
This has led to other operating income growing by 72 per cent to $277.6 million for the 2020 FY with Eppley earning Barbados Dollar (BBD)$351,870 ($26.2 million) in the fourth quarter from CPFV on a $85.5 million in other operating income. Eppley's asset management fees should increase further as the Caribbean Mezzanine Fund (CMF) I transitions into CMF II with an expected balance sheet of US$76.8 million following a private placement in December.
Despite administrative expenses growing by 16 per cent to $189.9 million for the 2020 FY, the company was able to recognise a greater share of profit on Retirement Road Holdings and lower impairment charge on financial and contract assets.
A greater taxation charge compared to a tax credit still left Eppley with an earnings per share (eps) of $1.15 versus the $0.85 in the 2019 FY which was boosted by a 17 per cent growth in eps to $0.29.
Total assets for Eppley rose by eight per cent to $4.1 billion as investment securities and lease receivables grew with loans receivable declining by 5 per cent to $1.5 billion. Total liabilities grew by four per cent to $3.1 billion mainly from a five per cent rise in borrowings to $2.9 billion. Shareholders equity rose by 16 per cent to $1 billion largely from a growth in retained earnings and fair value reserves. Eppley declared a $0.83 ($159.7 million) dividend which will be payable to shareholders on April 23. This is the largest dividend paid in the first quarter of the company's history which is accompanied by a return on equity of 24 per cent for the year with a 12 per cent income yield on its balance sheet portfolio.
Although COVID-19 is still lingering for the new year, the report stated, “Eppley remains well capitalised. Our proprietary portfolio is diversified, carefully underwritten and continues to perform. Our asset management business adds earnings largely insulated from credit or market risks. We expect to focus on carefully deploying our excess liquidity and continuing to grow our asset management business in 2021.”
CPFV INVESTMENT VALUATIONS
With a focus on expanding its balance sheet, CPFV acquired two additional properties near the end of its first quarter. These were the Mall Plaza and 693 Spanish Town Road properties, which allowed the company to control 740,000 square feet of prime commercial and industrial real estate space across the Caribbean.
Despite the principals of Eppley not revealing any financial details on the transactions beyond how it was financed, CPFV had a BBD $13.5-million ($1 billion) investment in associated company measured in its cashflow. CPFV purchased a 50 per cent stake in the Mall Plaza property which is controlled by Rock Investments Limited that would value the complex at around BBD $27 million ($2 billion). This would leave the BBD $400,000 ($29.8 million) addition to investment property on the balance sheet to the 693 property which is a joint venture with Norbrook equity partners. There was also a BBD $8 million ($595.3 million) loan received by the company in the first quarter.
Net operating income for CPFV declined by seven per cent to BBD $1.02 million mainly due to the rent relief requests by the company's Barbados retail properties which are experiencing the slowdown in tourism. However, net rental income increased by 11 per cent to BBD $936,200 with net profit only declining by 20 per cent to BBD $996,523 ($74.2 million) mainly emanating from higher operating expenses.
CPFV should begin to reflect the property acquisitions in the second quarter which will significantly bolster the fund's cash flow. CPFV has continued its share buyback programme which saw BBD $174,217 worth of shares purchased over the Jamaica Stock Exchange being cancelled during the quarter.
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