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Sterling Investments grows despite market volatility

Published:Friday | March 4, 2016 | 3:00 AM

Sterling Investments Limited (SIL) generated net profit after tax of JA$71.16 million for the 12 months ended December 2015.

This represents a 21.4 per cent increase over the previous year. The St Lucia-registered international business company that trades on the Jamaica Stock Exchange continues to grow total revenues, which stood at $119.29 million, compared to $96.7 million a year earlier in 2014 or 23.3 per cent year on year. Net interest income, SIL's principal source of income, totalled JA$72.8 million as at December 31, 2015 or 32.3 per cent higher than the corresponding period in 2014.

"This is a very strong showing amid a year remembered for its severe volatility," SIL management said. "Bond trading was particularly challenging in 2015, and careful navigation increased the revenue of the portfolio." Gains on the sale of investments more than doubled from JA$4.9 million in December 2014 to JA$12.4 million in December 2015.

"The company continuously monitors the portfolio with a view to profit-taking when conditions are favourable," management said. Operating expenses for the fiscal year ending December 31, 2015 were JA$21.7 million, or approximately 11.5 per cent lower for the corresponding period in 2014.

"The lower expenses are a result of tight fiscal management. However, the results were negatively impacted by a restructuring charge of JA$9.6 million on a corporate bond. This is a one-off charge and will not recur in subsequent years," the directors explained.

Total equity increased by 28.6 per cent to JA$693.9 million in December 2015, notwithstanding the negative impact of the widespread decline in the prices of bonds and equities. This increase was due to the issuance of new shares in the fiscal year. Retained earnings increased by 58.8 per cent, highlighting the company's continued pledge for growth and value creation for stockholders.

The uncertainty regarding the extent of the increases in US interest rates, coupled with the slowdown in China's growth and the downturn in oil prices, fuelled volatility in 2015 and into early 2016. For example, since the beginning of 2016, the S&P 500 has declined by 8.8 per cent and the Barclays high yield bond index has declined by 4.6 per cent year to date.

"Bond and equity markets are expected to continue to be volatile in 2016 as international markets continue to be plagued by a relative lack of liquidity, low commodity prices and weaker economic growth. Notwithstanding, SIL's portfolio is well balanced and continues to provide a stable source of revenue to shareholders," said SIL.