Eppley Limited has formed a new consumer finance subsidiary as it continues to grow its proprietary portfolio and asset management platform.

The subsidiary called “Eppley Consumer Finance Limited” was incorporated on December 24, 2021 with company number 111671 according to Companies Office of Jamaica records. Although the ordinary share segment lists no issued shares, the shareholder details list Eppley as the sole shareholder with 1,000,000 ordinary shares. Its core activity was listed as other business activities.

Eppley Vice-Chairman Nicholas Scott, General Manager Justin Nam and group Chief Financial Officer Jacquelin Watson are listed as initial directors of the company on its incorporation date. Perry Wright was registered as a director on July 5, 2022, while Eppley directors Melanie Subratie, Sharon Donaldson, Alexander Melville and Paul Barnaby (PB) Scott ceased to be directors on May 27.

Eppley is a private credit lender that also offers lease receivables and insurance premium financing. It’s unknown whether or not this new subsidiary will be licensed as a microcredit lender by the Bank of Jamaica (BOJ) pursuant to the Microcredit Act 2021, but the subsidiary wasn’t listed in the company’s 2022 audited financial statements.

Eppley’s consolidated private credit loan portfolio decreased by 15 per cent from $1.12 billion to $1.21 billion as it bolstered its cash position by 56 per cent to $1.03 billion. While its asset base marginally improved from $5.52 billion to $5.61 billion, its lease receivable portfolio marginally declined to $1.70 billion while its insurance premium financing portfolio dropped from $105.22 million to $16.39 million.

“We have and are originating new loans and leases at higher rates than before in line with the current environment. We have prepared for this and funded ourselves for an environment like this. We thrive in environments like this and we get to be more selective. We have a lot of dry powder and cash on our balance sheet precisely to be able to deploy into more attractive opportunities in an environment like this,” said Nam at the Eppley investor briefing held in February.

Eppley’s net interest income improved by 37 per cent to $137.97 million as its interest cost remained stable while interest income topped $438.36 million. This is against the backdrop of the BOJ increasing its policy rate from 2.50 per cent to 7.00 per cent in 2022 which has pushed the cost of variable rate debt and new debt to higher levels.

Nam also added, “We have demonstrated consistent growth across different cycles, and I think we are well positioned with the fact that our assets are typically shorter than our liabilities. So, this gives us an opportunity to reprice, and this should actually continue to benefit Eppley and its leasing business as our net interest margins should increase going forward.”

Eppley’s borrowings stood at $4.11 billion with the bulk of it being $2.66 billion in preference shares listed on the Jamaica Stock Exchange (JSE). These preference shares are fixed rate with the Jamaican dollar listed components set between 5.0 to 7.75 per cent with the United States dollar preference share at 6.00 per cent. Its 5.0 per cent preference share representing $300 million is due by August 18 with $1.21 billion in other preference shares due in December 2024. Three of these preference shares trade at premiums on the JSE.

Apart from its credit portfolio, Eppley’s asset management income increased by 29 per cent to $283.34 million as its assets under management spread across the Eppley Caribbean Property Fund Limited – SCC, Caribbean Mezzanine Fund II Limited and Capital Infrastructure Group Limited topped US$120 million.

“The asset management business is critical. That provides stable, predictable, recurring cash flow for us and it’s been very good to help us to grow our business. We think it’s an opportunity to scale, but it’s combined with our proprietary portfolio which has really positioned us well to have two prongs of the business that are performing well at the same time with cash flows derived from real assets such as equipment, motor vehicles, real estate, from critical infrastructure as well that investors can see,” Nam explained on the asset management business’ value to the business.

Eppley’s net profit decreased five per cent from $251.63 million to $238.80 million as its share of profit from joint venture fell from $21.58 million to $2.94 million.

Eppley’s shareholders equity marginally improved from $1.09 billion to $1.10 billion with its book value coming in at $5.70. Its stock price declined three per cent to $37.24 in the first quarter with its price to earnings ratio coming in at 31.06 times.

While Eppley’s funds are seeking funding for their various projects, Nam asserted that the company itself wasn’t in the market to raise funds at the time and was using the briefing to better engage investors. Vice-Chairman Scott also reiterated that the tender offer in the Development Fund (CPFD) was to demonstrate the willingness to put its capital in its own strategies and be aligned with investors interests.

Over the last year, the ATL Pension Fund, Coldharbour Partners Inc and Ravers Limited reduced their positions in Eppley with Barita’s Capital Growth Fund taking a top 10 stake of 1,170,830 shares. Stony Hill Capital Limited is the largest shareholder in Eppley with 48,097,800 shares or 25 per cent.

Eppley celebrates its 50th anniversary on May 29 when it was incorporated as Orrett and Musson Investment Company Limited. July 29 will mark 10 years since it’s been listed on the JSE. Eppley benefitted from the first five years of tax remissions on the JSE’s Junior Market before graduating to the Main Market at the end of 2018 and being approved as a venture capital company which means it incurs no tax for a decade.

“At Eppley, we have a clear belief in what we do, and investors should know what that is. We’ve built a business to address inefficiencies in the Caribbean financial markets. That’s our North Star, that’s our mandate and what we do every day,” the vice-chairman closed.