Despite the microfinance sector being impacted by the novel coronavirus pandemic and higher delinquency, ISP Finance Services Limited is still committed to growing the loan book via acquisitions and organic growth.
This was confirmed by ISP CEO Dennis Smith at the company's virtual annual general meeting held last Thursday. ISP signed an agreement with Mundo Finance Limited last October which gave it the right to purchase loans from a medium-sized loan portfolio. Mundo Finance was launched in August 2017 with NCB Capital Markets Limited owning a 50 per cent stake in the business. It offers lease financing, insurance premium financing, trade financing, consumer credit and other lending facilities.
“We're presently looking to grow our portfolio in terms of acquisitions. We're still in discussion around that basis, but as soon as we're able to announce it, we will. There are things in the pipeline that we can't speak to at the moment, but we're certainly hoping to bring to fruition the closure well within the first quarter. The last quarter was so busy that we were not able to complete some negotiations that we're very much involved with now. We're constantly looking for mergers and acquisitions,” Smith told the Business Observer.
ISP's loan book has grown from $225.45 million in March 2016 to $630.50 million at the end of September 2021. It listed on the Jamaica Stock Exchange on March 30, 2016 where it raised $200 million. With microfinance institutions set to fall under Bank of Jamaica guidelines from the Microcredit Act 2021, ISP is aiming to acquire some of the smaller players who will be exiting the space due to additional compliance costs. It is also expanding its new telesales department to improve its client reach.
“As to the impact of regulations that are forthcoming, we believe there will be great opportunities for acquisitions. We're putting ourselves in a position to take advantage of that time. We are certainly always looking for ways and means to be innovative. Our intention is not to invest in block and steel, but where we can form strategic alliances or partnerships, we will always examine them,” Smith added.
Even with a $232-million promissory note coming due at the end of quarter three to Victoria Mutual Wealth Management Limited, Chairman Clifton Cameron believes the company's cash flow should be enough to cover these future liabilities.
“Essentially, I believe the company's cash flow is very healthy. The profit generated in the last couple of years allows it to meet its obligations on a timely basis. So, there is no need for any particular plan in order to meet our obligations on an ongoing basis,” said Cameron.
Smith confirmed that the company's board is examining the illiquidity surrounding the company's stock and is looking at ways to resolve the issue. The top ten shareholders, directors and management own 98 per cent of the 105 million units of ISP.
ISP's nine months operating income improved by 22 per cent to $289.66 million while net profit only grew by five per cent to $53.29 million due to the inclusion of a $5.79 million taxation charge. ISP's total assets stood at $799.38 million while shareholders equity closed at $462.02 million.
“Our focus was mainly trying to ensure we could stabilise our situation and not allow any kind of erosion. We're looking forward to focusing on growth because we anticipate that COVID should be in its last year, hopefully. We can assure our shareholders that we're continually looking to increase our footprint and our growth in the business,” Smith closed.