Despite JMMB Group Limited (JMMBGL) reporting a $11.85-billion consolidated net profit, Sagicor Financial Company Limited (SFC) rescued JMMBGL’s bottom line after it reported a $12.62-billion (US$81.59 million) impairment which was largely attributed to Niquan Energy Trinidad Limited.

Niquan is a Trinidadian company that operates a gas-to-liquid (GTL) plant in the twin island republic which was set to supply a gas product to Petrotrin for 25 years. However, following an explosion in April 2021 and restarting operations in May 2022, Niquan faced another hurdle when Stated-owned Trinidad and Tobago Upstream Downstream Company terminated gas supply contract in August 2023 over a US$21-million debt. The gas was never turned back on, even after mediation through Lord Neuberger of Abottsbury, which lead to the company terminating 75 employees in April and creditors seeking to wind up the entity.

A Trinidad Guardian article revealed that Niquan’s debt had jumped from US$313.4 million in August 2023 to US$450 million in March 2024. Caricris downgraded Niquan to CariD, ttD and jmD on May 16, which is indicative of a default. Other Jamaican investors in Niquan’s 11 per cent debt instrument include JN Mutual Funds, Proven Wealth’s unit trust and VM Wealth’s unit trust.

“This would have been mainly attributed to an early start-up, greenfield transaction in the energy sector which was rated investment grade by Caricris, an allowable asset, and a result, got wide regional support from financial sector. This investment, in spite of challenges, was able to produce, but ran into supply contract difficulties and has not been able to continue operations and service its debt obligations. JMMB has taken the prudent decision to impair this asset while the management of the energy company in parallel with noteholders explore paths to partial or full recovery to this exposure,” noted JMMBGL CEO Keith Duncan on Thursday who explained the impairment provision which jumped from $1.56 billion in the 2023 financial year (FY).

JMMB Group’s net interest income and other revenue saw a four per cent contraction from $23.49 billion to $22.45 billion due to higher interest expense during the period. A 14 per cent rise in operating expenses due to different one-off costs pushed JMMB Group’s operating profit from $3.58 billion to an operating loss of $345.23 million.

However, a $20.29 billion share of profit from Sagicor Financial Company resulted in a profit before tax of $7.32 billion compared a restated loss before tax of $957.33 million. A $4.53 billion tax credit, largely from its Jamaica Money Market Brokers Limited (trading as JMMB Investments) subsidiary, pushed it to record a consolidated $11.85 billion net profit relative to a restated $689.56 million net profit in 2023. JMMBGL’s 2023 net profit was $6.28 billion, but was restated due to the transition from IFRS 4 to IFRS 17 which changed the accounting for SFC.

JMMBGL currently owns 33,213,764 ordinary shares or 23.62 per cent of SFC up to March 2024 and is set to receive a larger dividend this year following the move by SFC’s board to increase the dividend to US$0.06 per quarter, which translates to a US$1.99 million dividend. SFC is now valued at $44.87 billion relative to the $34.40 billion acquisition price in December 2019. JMMBGL board members Duncan, Dr Archibald Campbell and Dennis Harris were re-elected to SFC’s board of directors at the June 13 shareholder meeting.

Following these headwinds in 2024, JMMBGL has devised strategies to bring the Jamaican business line back into profitability. This will be driven by rebalancing its investment portfolio and seeking to improve efficiencies across the group. Future developments will include consolidating some of the Jamaican financial subsidiaries into JMMB Investments with JMMB Fund Managers Limited set to be the first entity on the block. JMMBGL has also revised its investment policy statement to establish limits in relation to capital to limit future losses to the size of Niquan.

JMMBGL also set aside $526.62 million on restructuring costs for its staff in its 2024 financials. A voluntary separation programme has seen 47 approvals so far with any additional restructurings to be completed by July.

“In JMMB Jamaica, we’ve done rigorous work around the development of our productivity and profitability strategy. We sat down as a team and we devised a strategy to ensure that JMMB Jamaica and specifically, JMMB Investment business line would be brought back on a profitable path and we’re now seeing the results of that work. We’re in execution mode and we’re very comfortable that we’re on a good path going forward,” the group CEO added.

JMMBGL will be piloting electronic onboarding in Jamaica and Trinidad which will seek to make it easier for clients to open accounts and cut down on paper use. Also, JMMB Real Estate Holdings Limited is set to develop 9 Garelli Avenue and 7 Haughton Terrace into a multi-storey development in short order following NEPA’s approval. JMMB completed its Liguanea development where they are currently seeking tenants for the three floors they plant to lease.

“We plan a multi-storey office complex in New Kingston and we’ll strata that building and dispose of that one on a floor by floor basis. We’re very excited about this project. It’s a 45,000-square-foot (sq ft) complex with supporting infrastructure. We have completed designs and are awaiting approvals from the relevant authorities,” stated Tracy-Ann Creary, JMMB corporate development manager.

Total assets were up four per cent from a restated $649.16 billion to $675.10 billion with the largest assets being $320.18 billion in investment securities and $198.94 billion in loans and note receivables. Total liabilities were up two per cent to $620.53 billion with deposits topping $200 billion and repurchase agreements and notes payable declining to $308.88 billion and $52.25 billion, respectively. Four preference shares totalling $10.36 billion are set to mature in March 2025.

Equity attributable to shareholders improved 43 per cent from a restated $37.14 billion to $53.02 billion which translates to a book value of $27.11.

JMMBGL’s stock price swung eight per cent downwards on Wednesday from $24.33 to $22.34 on 1.26 million shares traded, with an intraday low and new 52-week low of $22.25 and a market capitalisation of $43.69 billion. The stock was trading at $23.38 on Thursday, which would leave it down 10 per cent in 2024. JMMBGL declared a $0.25 dividend totalling $488.89 million to be paid on August 12 to shareholders on record as of July 4. JMMBGL has only repurchased 75,000 ordinary shares under its share buy-back programme to date.