VM Investments Limited (VMIL) says dividends its shareholders received last month, the first since 2021, is a show of its financial resurgence. The company paid out $0.032 cents per share or a little over $48 million on July 9 to those who were on record as owning the company’s shares as late as June 28, 2024.

“We have strengthened our capital in the business since last year. And then this year we had a solid Q1 based on mainly our private equity investments. And when we, in the future, see that, you know, we would be able to pay out a dividend to our shareholders without impacting our capital or, you know, compromising our capital requirements,” said Brian Frazer, deputy CEO of VM Investments and VM Wealth Management, in an interview with the Jamaica Observer.

Frazer added that VMIL felt it was timely to resume dividend payments, showing profits while maintaining capital ratios. In discussing the company’s dividend payout strategy with the Business Observer, Frazer cited a commitment to consistency while navigating uncertain market conditions when asked if shareholders can expect consistent dividend payments in the future.

“Well, that is what we’re working towards… We believe we’re still in a tough market condition… Once we start seeing a settling of the market and a lowering of interest rates, then you will see consistent profits returning… From that point onwards, you can see more consistent dividend payments across the industry,” he told the Business Observer.

He emphasised that VMIL’s commitment to benefiting all shareholders aligns with the interests of VM Group, its majority shareholder, with an 80 per cent stake.

“Our directors are constantly looking at ways to pay back to our shareholders… We want to be in a position to do so consistently, which is what we’re pushing for,” Frazer reassured.

For the first half of 2024, VM Investments Limited (VMIL) saw an increase in its total operating revenue, reaching $1.41 billion. According to its unaudited second-quarter results, the growth was primarily driven by gains from investment activities, which soared to $915.26 million, representing a 172.67 per cent increase.

“We would have seen some trading activities in terms of our private equity, but if you look at the first quarter results, you’ll see that a significant portion of the increase was from the sale of our private equity investment, which was Cari-Lend,” Frazer stated to explain the cause of the revenue increase.

In giving a closer examination of VM Investments Limited’s first-half 2024 results, Frazer revealed that private equity activities played a pivotal role in driving revenue growth. A quarter-on-quarter analysis shows that the bulk of the revenue surge occurred in Q1, with a substantial portion attributed to the Cari-Lend sale. While Q2 saw some revenue growth, a year-on-year comparison indicates modest gains. However, a Q1-to-Q2 comparison highlights the significant impact of the private equity sale on VMIL’s revenue.

VM Investments also reported a 39.33 per cent increase in interest on investment income, while interest on loans declined due to portfolio rebalancing in line with its updated credit policy. Interest expense rose 3.18 per cent, primarily driven by high interest rates. Despite these challenges, VMIL’s net interest margin (NIM) remained “commendable” at 3.70 per cent, according to its Q2 report.

“Net interest income improved quarter over quarter and year over year… We saw improvement in our investment income, but in terms of interest costs, it’s still pretty much remained high,” Frazer noted.

He attributed the improvement to adjusted asset returns, enabling higher interest income on loans and investments. However, he acknowledged that interest costs remain a significant challenge. Interest costs doubled between 2022 and 2023 but have remained flat since then. Despite this, VMIL adapted and capitalised on high interest rates to generate higher returns from its investment portfolio over the last year. While the company expands its rental income through the Private Sector Organisation of Jamaica partnership, it will convert its 39 Hope Road offices into a new commercial hub with rental spaces from which it will generate additional revenue. Its primary focus remains on private equity growth. Recent investments include Home Choice, a distribution company, and Cari-Lend, a fintech venture.

“We’re open to different opportunities once they’re consistent with our investment policies as well as the return that we’re expecting from this area. So we’re open to different investment opportunities, private investment opportunities,” Frazer told the Business Observer.

The financial industry has faced significant headwinds in recent years, with VM Investments Limited (VMIL) not immune to the challenges. High interest rates have compressed net interest margins, forcing companies to seek alternative revenue streams. However, Frazer was optimistic that once interest rates start reducing, bond prices will rise, yielding greater fixed income gains, net interest income will improve as liability rates outpace asset rates, and the European portfolio will show improvement. He shared that the stagnant stock market, unchanged for two to three years, is also expected to rebound as interest rates decline. Until then, VMIL will focus on opportunistic investments in private equity, real estate, and other areas to diversify revenue streams. Asset management, with its consistent income despite market volatility, remains a key growth area.