A significant increase in earnings from fees and commissions bumped Mayberry Investment Limited’s profit but it was not enough to offset foreign exchange losses that translated into a $11 million net loss for the firm during the three months to June 30, 2010.

The broker, which listed two companies on the Junior Stock Exchange within the quarter — Blue Power Limited in April and Jamaican Teas in June — saw its fee-based income catapult from $6.7 million in the June quarter of 2009 to just over $60 million in the review period.

Mayberry CEO Gary Peart told the Business Observer that the majority of the fees earned came from the financial advisory services offered to these and other companies, including those which did not opt to list.

Brokers are usually are paid a commission based on the amount of stocks, bonds, and other products they sell. As lead broker on the deal to list the companies, Mayberry would have received income from the 22.73 million shares it sold for Jamaican Teas and the 5.73 million shares offered by Blue Power Limited. Peart says however that the majority of the fee income came from the financial advisory services offered to companies.

“When you see only three or four companies listed it doesn’t necessarily mean we have only provided financial advisory services to those companies. The reality is that we probably spoke to 20 companies and carried them to various stages. Of the 20, four have made it public,” Peart said. He said that Mayberry went into Lasco the latest company to go the route of an IPO, as a financial advisor.

“We are pleased with the level of growth achieved so far which is in line with our strategy to diversify and grow our revenue stream,” Peart said. “The growth in fees and commission resulted from the execution of more fee based transactions, advisory services and the growth in net trading gains resulted from more transactions being completed as compared to the corresponding period,” Peart added. Other sources of fee income include equities trading and commission from the sale of CI funds. Mayberry is currently the number one equities trader in Jamaica.

However, as impressive as the listings, an effort to diversify revenue streams may have been, the foreign exchange market proved a challenge to most companies’ income following the revaluation of the Jamaican dollar relative to the US dollar and euro.

Mayberry was no exception to the losses felt in the financial sector caused by the four per cent revaluation against the US dollar while the Euro devalued 12 per cent relative to the US all within a three month period.

“The sharp movement in these currencies coupled with our decision to hold foreign currency securities in our portfolio, resulted in the losses being recorded,” said Peart.

Foreign Exchange loss at $95.5 million was the third largest draw down on the firm’s income statement behind interest expense and administrative expenses which stood at $323.8 million and $126.9 million, respectively.

It was also a major reversal to the gain of $19.5 million in the comparative quarter in 2009.

“We don’t expect to see a continued revaluation and our experience is that at the very worst the dollar will remain stable. Once the dollar remains stable we should return to profitability at the end of the next quarter,” Peart said.

Overall, Mayberry’s profit declined from $16.9 million to a loss of $10.9 million quarter on quarter.

But Peart pointed out that though there is a reduction in the quarter, the overall value of the company has increased from $2 billion to $3.4 billion dollars.

“In terms of value creation the company is actually more valuable now than before. We manage the company on that basis, we don’t manage the company three months at a time. We have a medium to long term outlook and that’s how we manage it,” Peart told the Business Observer.

The lowering of the interest rates for the quarter sent bond prices up and brought Mayberry’s gain on the sale of investments to $50.5 million, a 124 per cent increase over the similar quarter of 2009. Associated company, Access Financial Services Limited, returned $11.9 million in income, a 54.7 per cent increase over the corresponding quarter of 2009, Mayberry’s 39 per cent share of the company valued at $484 million paying off.

“We take this opportunity to encourage other unlisted small and medium sized companies to consider listing on Jamaica’s Junior Stock Exchange as there are significant benefits to companies and shareholders from being listed,” he said.

“Fundamentally we are changing the business model as we move away from the repo book. This is the way of the future. We have to garner more income from fees and commission and gains on equities trading,” Peart told Business Observer yesterday. He disclosed that accordingly, the company intends to launch a new product, the ‘Mayberry Gold’ by September, which will allow investors to purchase fixed income securities outright, thereby reaping the full interest offered on the instrument.

“The average return on the fixed income security is one to two per cent higher than what you get on a repo,” said Peart who noted that financial institutions usually as a consequence of acting as intermediaries, offer just a portion of the interest paid on the instrument to investors.

“We buy the security in your name, investors own the security outright and you earn a higher interest,” Peart explained.

“This will form a part of your portfolio and as part of your fixed income portfolio you can invest in the Mayberry Gold.”

Mayberry aims to earn income from fees associated with managing the securities for clients, while the full ownership by the investor moves the risk off the balance sheet of the company as per the International Monetary Fund’s request.