With the dynamic changes in the economic environment, Eppley Limited is narrowing its focus on its asset management platform as it diversifies its income and asset base across the Caribbean.

The Jamaican private credit company formed the Capital Infrastructure Group Limited (CIG) and Capital Infrastructure Managers Limited with Jamaica Producers Group Limited in 2021 but announced their first project last year in conjunction with Vinci Construction Grands Projets SAS in the form of Rio Cobre Water Limited. That US$77-million ($11.9 billion) project to be developed through Rio Cobre Water recently received two National Environment and Planning Agency (NEPA) approvals from the NRCA board decisions. The environmental licence for the wastewater treatment facility and construction and operation of a water treatment plant in Content district, St Catherine, were approved.

“Our objective is to grow the asset management business. We believe we bring a lot of value in taking what we do on a day-to-day basis to that business, and we can give excellent returns to investors in the asset management business. The markets change all the time and capital comes from different pools depending on how the market is, and our overarching objective is to continue to grow assets under management,” said Eppley Chairman Paul B Scott at the company’s annual general meeting at 58 Half-Way-Tree Road on September 25.

When asked if CIG would look at opportunities similar to the past bid with the JP Group to operate an international airport in Barbados, Eppley Vice-Chairman Nicholas Scott confirmed that would fall under the scope of the joint venture. He noted that there were several projects which were in the origination stage but didn’t provide any timelines.

Eppley’s recently formed subsidiary Eppley Consumer Finance Limited received a microcredit licence earlier this year which would cover financing options to consumers defined by the Microcredit Act. Eppley’s insurance premium financing segment has shrunk $105.22 million in 2021 to $13.76 million at the end of June 2023. Scott noted that the consumer business would have generated less than $10 million in profit last year.

“All of our consumer finance, whether it be loans or insurance premium financing, is an area of our business that really is not the main driver now. So it’s not that we sat down and made a risk capital decision. It’s that the big opportunities that are driving our business are on the leasing side, asset management and asset administration side,” the vice-chair added.

Eppley owns a fleet of vehicles which it rents or leases to manufacturing, distribution, and industrial businesses, while it also manages CIG, the Eppley Caribbean Property Fund Limited SCC, Caribbean Mezzanine Fund II Limited, whose assets under management total more than US$120 million.

Eppley’s lease receivables stood at $1.64 billion at the end of June, while its loans receivable stood at $1.01 billion, a 17 per cent decline relative to the $1.21 billion in December. Asset management income jumped 20 per cent to $147.87 million in the first six months, while net interest income was slightly compressed from $81.71 million to $69.24 million due to a slight increase in interest expense and decrease in interest income.

“Our loan business has a period of time where there’s lumpiness, in terms of how capital is deployed into different opportunities. The pipeline has been more geared towards leasing opportunities of late. We expect that to continue, and it’s a very healthy pipeline which will be supported by the cash you see on the balance sheet,” explained Eppley General Manager Justin Nam.

Eppley’s six months consolidated net profit tripled from $109.96 million to $351.52 million largely due to the one-off $229.12 million gain on bargain purchase related to the purchase of a majority 45.04 per cent interest in Eppley SCC – Development Fund (CPFD). Net profit attributable to shareholders was $356.85 million after adjusting for the non-controlling interests. CPFD experienced a BDS$339,104 ($25.43 million) during the second quarter.

Vice-Chair Scott confirmed that Eppley used part of its consolidated $1.10-billion cash balance to pay off the 5.0 per cent preference share which matured in August at a face value of $300 million. Eppley currently has an estimated $1.83 billion in bonds and preference shares maturing in 2024 with interest rates between 6.00-7.50 per cent.

When asked about the company’s capital management strategy, PB Scott said, “Eppley is very, very careful to manage the liabilities so that there’s significant time to deal with maturities. As a result of that we’re starting from now, working on all the maturities that are coming up in the next 12 months. We have a strategy for everything that comes up. At any time, if you look at the balance sheet on any quarter, there’s always a significant amount of cash buffer on our balance sheet. We always like to have the option to at least address maturities and we size maturities to ensure they’re digestible.”

Eppley’s total assets jumped 20 per cent in the first six months to $6.82 billion, largely due to the consolidation of CPFD’s assets on its books, including $905.76 million in real estate assets. Total liabilities increased eight per cent to $4.85 billion, with equity attributable to shareholders increasing 12 per cent to $1.23 billion.

Eppley’s share price closed Thursday at $32.52, a day after it hit a 52-week low of $27.55. This leaves the stock down 16 per cent year to date, with a market capitalisation of $6.23 billion. Eppley paid a $0.052 dividend on September 15 totalling $10.01 million. Eppley’s dividend payout ratio was 93 per cent in 2022.

“We plan to continue to grow assets under management, we continue to be very prudent with approach to lending, we plan to be disciplined in our approach, and we plan to return as we have in every other year the vast majority of our earnings in the form of dividends,” the Eppley chair closed.