INVESTORS reacted negatively last Wednesday to the disclosure that Proven Investments Limited (PIL) did not declare a dividend at its board meeting on June 24.

The company, which pays a quarterly dividend in United States dollars (USD) and Jamaican dollars (JMD), cited uncertainty surrounding financial markets and prudency in creating a cushion to withstand further market volatility and support the adequate capitalisation of its regulated entities. This is the second time since listing in July 2011 that PIL hasn’t declared an ordinary dividend.

Proven’s USD stock price halted down on Thursday at 9:31 am to US$0.2207 on 159,101 units. While it traded back up to US$0.2497, it ended the day down 13 per cent to US$0.2247. Though it was down three per cent for the quarter, it still remained up nine per cent year to date.

However, co-founder, president and CEO of Proven Management Limited (PML), Christopher Williams explained that the company is fine, and that it was a decision based on both financial prudence after a roller coaster fourth quarter (Q4), in addition to the cost to pay dividends. PML is the investment manager of PIL.

PIL saw a US$28.9-million reduction in its investment reserve during Q4 which largely stemmed from its associate companies. PIL’s audited financials were released on Thursday, which was past its May publication time due to a delay in completing the audit.

“Yes, we wanted to be safe. Also, our first quarter ends in a matter of hours and we will have to pay another dividend and pay for cheque leaves and other associated fees. So, we decided to wait until the end of our first quarter — as we have another board meeting at the end of July — and just declare one dividend at that time. It’s just not cost effective to pay a dividend so late after the financial year has ended and look back at it again in 30 days’ time. That’s a basic prudent decision,” Williams explained in a call with Jamaica Observer’s Sunday Finance.

The last time the company did not declare a dividend was in November 2011, more than a decade ago. It declared one of its largest dividend payments to date in February of US$0.0041 or $0.6444, totalling US$3.11 million, which was paid on March 9. It paid 24 per cent more in dividends for its 2022 financial year (FY), totalling US$6.2 million for a three per cent trailing dividend yield.

PIL’s asset base climbed 69 per cent to US$1.14 billion ($175.58 billion), with the group’s consolidated cash balance and loans receivable growing to US$286.15 million and US$207.38 million, respectively. Total liabilities grew to US$974.71 million while equity attributable to shareholders declined to US$142.64 million arising from the decline in other comprehensive income during the fourth quarter. The USD stock ended the week at US$0.2336 and $36.18.

PIL acquired controlling interest in Fidelity Bank, Cayman (to be renamed Proven Bank), Heritage Education Funds International, and Roberts Manufacturing Company during its 2022 FY. While it acquired goodwill in Heritage and Roberts, PIL recognised a gain of US$4.56 million on its Fidelity acquisition as it purchased the bank below its net asset value. The audited notes mentioned that the seller was winding down operations in the Cayman Islands and was motivated to sell. This is PIL’s second bargain banking acquisition after BOSLIL Bank Limited in March 2017 when it booked a US$8.03-million gain.

When asked about Fidelity following the acquisition and 100-day plan, Williams described it as “excellent”. Fidelity contributed US$2.04 million to revenue and had a post-acquisition loss of US$828,000.

“We obviously bought Fidelity at a good time because we got a lot of cash and interest rates have jumped. Because the portfolio was largely liquid and [due to] the jump in interest rates, we’ve been able to pick up good yields and reinvest the cash. We’re able to invest at higher yields and widen net interest income,” Williams explained.

PIL recorded a 58 per cent improvement in net operating revenue to US$36.79 million, with net profit attributable to shareholders rising nine per cent to US$12.54 million. Its associate companies contributed US$15.78 million to the bottom line.

“In terms of our private equity portfolio, we’ve seen strong performance from JMMB, Roberts, and Access. All three are performing very well. Roberts is benefiting from the significant demand for food supply and Access’s loan performance is at record levels. We’re very happy with the performance,” Williams discussed.

It recognised a US$23,000 loss on the disposal of its 20 per cent stake in Dream Entertainment during the year. It recorded a US$830,000 impairment in its associate Access Financial Services (AFS) and a US$353,000 impairment on its Cayman subsidiary International Financial Planning (IFP). IFP recorded a US$0.8-million net loss compared to a US$0.4-million net profit in the prior year. While the Cayman Islands was under strict COVID-19 restrictions for most of the FY, new leadership has been added to steer the business back to profitability. AFS saw a 65 per cent improvement in net profit to $437.89 million while JMMB Group’s net profit attributable to shareholders rose by 52 per cent to $11.44 billion.

When asked about his thoughts on the rise in interest rates, Williams said, “I don’t think we can get away from the JMD interest rate uptick. The international interest rate boutique means that investors in Jamaica now have a more attractive option to convert their money to USD and invest in a global USD instrument. So, you have to make the JMD instruments a little bit more competitive and so you have to move JMD interest rates to dissuade the desire to switch from JMD to USD for better yields.”

Williams indicated that Proven Wealth Limited (PWL) is considering increasing interest rates on some of its products but that the rising interest rate environment is also an opportunity for the business to invest in higher-yielding instruments. PWL’s net profit declined by 36 per cent to US$1.8 million but its asset base grew 17 per cent to US$104.2 million.

Williams is looking forward to the 2023 FY as the VIA at Braemar and The César real estate projects are being successfully delivered to clients which will result in profit recognition for Proven Properties Limited (PPL). PPL has already started sales at Sol Harbour in Ocho Rios, and 85 per cent of the joint venture Lagoons project in the Cayman Islands is sold out. PIL injected US$3.57 million into PPL during the year.

“We see Proven as a private equity platform. We started it 12 years ago with the vision of developing a funding mechanism for entrepreneurs across the Caribbean region that would allow them to move and execute their projects in a nimble manner. We want to deliver a consistent dividend yield and be seen as a nimble growth company,” Williams closed.