Profits up 28% at Sterling Investments Limited
Sterling Investments Limited saw total profit rose by just under 28 per cent on the back of a roughly 60 per cent increase in total assets, the company reported in its financial results for the year ending December 2014.
Profits moved from $45.9 million to $58.6 million, while total assets moved from $491.7 million in December 2013 to $787.04 million in December 2014.
Sterling went to the market in December 2013, using the proceeds of the capital raised to purchase United States dollar-denominated fixed-income securities. The company said that provided a sustainable source of hard currency income for the portfolio.
The company's liabilities also expanded from $51.3 million in 2013 to $247 million in 2014. This was driven by an increase in "margin loans payable" from $31.55 million in December 2013 to $223.88 million in December 2014. The additional money boosted capital and permitted Sterling Investments Limited to expand its portfolio and take on additional leverage.
Increased shareholder value
There was a 20 per cent increase in shareholder value, driven by a 116 per cent increase in retained earnings from $42.08 million in December 2013 to $91.21 million in December 2014. Sterling says that although a 12 per cent increase in share capital from $387.47 million to $437.3 million helped, the strong increase in the book value was primarily a result of the strong performance of the US dollar fixed-income securities in the company's portfolio and the retention of profits to sustain growth. Sterling therefore benefited from the 14 per cent devaluation in 2014.
The company says it has an eye on a continued rise in the value of bond prices issued by entities in Europe. It says that with negative interest rates in Europe and quantitative easing they anticipate that bond prices will remain strong, which will give a push to their portfolio. They are also focused on locking in good yields and interest income to provide stability to its shareholders during the anticipated rise in volatility that will accompany any rate hike, since the United States Federal Reserve has explicitly communicated its intent to increase interest rates in 2015.
Sterling also says it has started to concentrate on going short in terms of its portfolio to minimise price risk. It is also actively seeking structured notes and other types of fixed-income instruments that are suitable for an environment of rising interest rates.