Fri | Oct 30, 2020

COVID overcomes PanJam profit

Published:Friday | May 22, 2020 | 12:20 AM
Paul Hanworth, chief operating officer of PanJam Investment Limited.
Paul Hanworth, chief operating officer of PanJam Investment Limited.

PANJAM INVESTMENT Limited, whose quarterly earnings are usually counted in hundreds of millions, even billions, reported one of its most dramatic quarters in March with a profit of what for that company can be described as a measly $12 million, less than $5 million of which is ­attributable to shareholders.

And it only made a profit because it utilised some $228 million of tax credits to offset a pre-tax loss of $216 million.

In the comparative period in the prior year, the property and investment ­conglomerate ­produced profits of $895 million.

What’s more, PanJam ­recorded earnings of $3 billion in the quarter ending June 2019, in what a two-decade review of its earnings reports show to be a ­record high for profit in any three-month period for the conglomerate.

It took less than a year for the company controlled by the Facey family to go from a record high to new low, mostly due to investment losses that in turn can be linked to the financial pressures and business and economic fallout from COVID-19.

PanJam also reported negative revenue of $202 million in the quarter, the sum of the $1.08 billion of losses on investments and the $880 million of revenue from property and other ­income streams.

Associates underperform

There was also a decrease of $305 million in PanJam’s share of earnings f­rom its associated companies, which fell from $889 million in the 2019 ­quarter to $584 million in the current period.

Chief Operating Officer, Paul Hanworth, said PanJam’s earnings from Sagicor ­accounted for most of the fallout, having declined by $265 million in the quarter.

Along with various assets, the conglomerate has a 30.2 per cent stake in Sagicor Group Jamaica, its most lucrative investment; as well as holdings in New Castle Company Limited, owners of the Walkerswood and Busha Browne lines of sauces and seasonings; Caribe Hospitality of Jamaica Limited, which holds the Courtyard Marriott Hotel in New Kingston; tour company Chukka Caribbean Adventures; BPO firm Outsourcing Management Limited; managed/virtual office provider Williams Offices Caribbean Limited; and consumer lender Term Finance.

“We think these are good, well-run companies in solid industries. We like the companies, the industries and the management, and we believe that it will create value for PanJam in the long run,” said Hanworth.

“As it has worldwide, ­equity prices have fallen substantially and we have to get our numbers in line with the market and reflect that in our report for the particular quarter. For December it was big and positive, while for March it was negative; but critically, we have to note that whether income or loss, it was ­unrealised,” he added.

PanJam assesses its investments along three lines: ‘good companies’, with ‘competent management’ in ‘good sectors’.

“If one or more of those criteria were to change, then we would possibly have a relook at our portfolio, but for now we’re very happy with those particular ­companies that we’re invested in and we’re not selling, because we’re in it for the medium to long-term,” Hanworth said.

Asked about the impact of the recent Bank of Jamaica request for financial ­holding companies to withhold ­dividends to large shareholders for a year, Hanworth said it did not affect PanJam’s March ­results as the decision was taken in April.

Hold on dividends

Sagicor Group had been due to pay dividends on May 6, of which PanJam would have received a substantial share of the $1.24 billion to be paid out, but it and other large shareholders will have to wait about a year to collect.

PanJam itself has decided to hold off on paying dividends, while hinting that it would be making new investments, and that an announcement was imminent.

“We’re containing our expenses, going as far as to take pay cuts,” said Hanworth. “We have a strong balance sheet, and we’re looking to make investment decisions in the short to medium term that will inure to the benefit of our shareholders. We are holding off on dividends because we want to keep our powder dry,” he said.

Regarding the apparent slowdown in the Rok Hotel project in downtown Kingston, Hanworth said the project is still on but was affected by difficulties in sourcing construction material from Spain, which was hard-hit by the COVID-19 pandemic, and that the depletion of the project’s workforce through lockdowns and curfews also served to slow its progress.

The December deadline is likely to be missed, but the $5-billion price tag has not changed by much, he added.

“No doubt, those delays will set us back a lot. We cannot be definitive in our projections right now since we’re still in the midst of the pandemic, but rest assured, we are committed to the project and we want to open the doors by next April, or certainly for the summer,” Hanworth said.