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Saturday, July 5, 2025

Major changes at Barita Investments

by

51 days ago
20250513

At an ex­tra­or­di­nary gen­er­al meet­ing of Bari­ta In­vest­ments Ltd (BIL) held on Jan­u­ary 20, 2025, share­hold­ers ap­proved the trans­fer of ma­jor­i­ty own­er­ship of BIL from Cor­ner­stone Fi­nan­cial Hold­ings Ltd (CFHL) to a new en­ti­ty, Bari­ta Fi­nan­cial Group Ltd. BIL will re­main list­ed on the JSE.

Ef­fec­tive March 28, 2025, Ja­maica’s Na­tion­al In­sur­ance Fund (NIF) bought 50 mil­lion shares (4.1 per cent of the to­tal) in BIL for a to­tal of J$3.67 bil­lion. That pur­chase in­creased NIF’s stake in BIL from less than 1 per cent to 4.84 per cent.

Let us step back and re­view BIL’s re­sults for the year end­ed Sep­tem­ber 2024. Un­less oth­er­wise in­di­cat­ed, all cur­ren­cy ref­er­ences in this ar­ti­cle are to Ja­maican dol­lars.

As­sets ex­pand

To­tal as­sets grew by 11 per cent from $128.2 bil­lion to $142.3 bil­lion (TT$6.19 bil­lion).

Loans, which are typ­i­cal­ly se­cured against clients’ in­vest­ment port­fo­lio and prop­er­ty, in­creased from $11.1 bil­lion to $13.35 bil­lion. The Ja­maica-de­nom­i­nat­ed loans fell from $11.1 bil­lion to $10 bil­lion while US dol­lar loans surged from ze­ro to $3.33 bil­lion.

In­vest­ment se­cu­ri­ties moved from $106 bil­lion to $108.55 bil­lion, of which the pledged amounts ex­pand­ed from $83.7 bil­lion to $89.6 bil­lion. Pledged as­sets rep­re­sent col­lat­er­al against re­pur­chase agree­ments with cus­tomers and fi­nan­cial in­sti­tu­tions.

In­vest­ments at fair val­ue through prof­it or loss (FVT­PL) rose from $17.7 bil­lion to $21.5 bil­lion and most­ly com­prised quot­ed eq­ui­ties and unit trusts and oth­er funds. In­vest­ments at fair val­ue through oth­er com­pre­hen­sive in­come (FVO­CI) grew from $98.8 bil­lion to $103.1 bil­lion; this group­ing is pri­mar­i­ly pop­u­lat­ed by lo­cal, for­eign gov­ern­ment and cor­po­rate bonds. Amor­tised cost in­vest­ments most­ly in­clude se­cu­ri­ties pur­chased un­der re­sale agree­ments; this cat­e­go­ry fell from $7.2 bil­lion to $5.4 bil­lion.

Se­cu­ri­ties pur­chased un­der re­sale agree­ments swelled from $564 mil­lion to $5.77 bil­lion and is col­la­terised by Gov­ern­ment of Ja­maica se­cu­ri­ties.

In­vest­ment in its as­so­ciate, Der­ri­mon Trad­ing Ltd im­proved from $2.28 bil­lion to $2.31 bil­lion and rep­re­sents a 20 per cent stake in that com­pa­ny.

Ac­counts re­ceiv­able surged from $2.87 bil­lion to $7.32 bil­lion. Net re­ceiv­ables from clients jumped from $1.71 bil­lion to $5.66 bil­lion while with­hold­ing tax climbed from $989 mil­lion to $1.5 bil­lion. Fur­ther, pre­pay­ments edged up from $113.4 mil­lion to $115.7 mil­lion, how­ev­er, oth­er re­ceiv­ables dropped from $54 mil­lion to $45 mil­lion.

Boost­ed by the com­put­er soft­ware work-in-progress, in­tan­gi­ble as­sets surged from $21.5 mil­lion to $402 mil­lion.

Prop­er­ty, plant and equip­ment de­creased from $943 mil­lion to $836.8 mil­lion as net ad­di­tions of $34.3 mil­lion were over­whelmed by de­pre­ci­a­tion charges of $140.6 mil­lion.

In­vest­ment prop­er­ty in­creased from $225 mil­lion to $235.9 mil­lion. That move­ment re­flect­ed a pos­i­tive fair val­ue ad­just­ment of $5 mil­lion and work-in-progress of $5.9 mil­lion.

Cash and bank bal­ances fell from $1.97 bil­lion to $1.42 bil­lion. Even so, bal­ances de­nom­i­nat­ed in US dol­lars climbed from $443 mil­lion to $1.12 bil­lion.

Li­a­bil­i­ties swell

To­tal li­a­bil­i­ties climbed by 15.3 per cent from $92.8 bil­lion to $107 bil­lion.

Se­cured in­vest­ment notes de­clined from $5.94 bil­lion to $2.52 bil­lion. These rep­re­sent short-term loan oblig­a­tions at in­ter­est rates rang­ing from 3.5 to 8.45 per cent.

Con­verse­ly, oth­er debt fa­cil­i­ties climbed from $8.3 bil­lion to $13.95 bil­lion. Here, the US-dol­lar mar­gin loan fa­cil­i­ty jumped from $4.2 bil­lion to $8.3 bil­lion and the loan from the De­vel­op­ment Bank of Ja­maica swelled from $250 mil­lion to $1.77 bil­lion. Mean­while, the se­cured fixed rate bond was sta­ble at $1.51 bil­lion while the un­se­cured fixed rate bond closed at $2.32 bil­lion from $2.31 bil­lion.

Se­cu­ri­ties sold un­der re­pur­chase agree­ments grew from $76.5 bil­lion to $84.3 bil­lion. Con­tracts de­nom­i­nat­ed in Ja­maican dol­lars in­creased from $23.4 bil­lion to $25.8 bil­lion while agree­ments is­sued in US dol­lars rose from $53.1 bil­lion to $58.5 bil­lion.

Ac­counts payable surged from $1.47 bil­lion to $5.25 bil­lion. Div­i­dend payable jumped from ze­ro to $2.5 bil­lion while client funds ex­pand­ed from $1.1 bil­lion to $2.04 bil­lion and oth­er payables in­creased from $337 mil­lion to $670 mil­lion.

Eq­ui­ty slips

To­tal share­hold­ers’ eq­ui­ty set­tled at $35.3 bil­lion from $35.39 bil­lion.

Re­tained earn­ings de­clined from $6.69 bil­lion to $6 bil­lion. The cur­rent year’s prof­it of $3.82 bil­lion lift­ed the brought for­ward bal­ance while an ad­just­ment to re­tained earn­ings of $40.8 mil­lion added to this fig­ure. Next, div­i­dend paid of $2.04 bil­lion, a pro­posed div­i­dend of $2.5 bil­lion and em­ploy­ee share op­tions ex­er­cised of $3.99 mil­lion low­ered the end­ing fig­ure.

The stock op­tion re­serve in­creased from $22.3 mil­lion to $30.34 mil­lion, rep­re­sent­ing the fair val­ue of op­tions recog­nised. Mean­while, the fair val­ue re­serve im­proved from neg­a­tive $4.54 bil­lion to neg­a­tive $3.96 bil­lion; that pos­i­tive move­ment re­flect­ed the net re­alised and un­re­alised gains on FVO­CI in­vest­ments. Al­so, the cap­i­tal re­demp­tion re­serve and the cap­i­tal re­serve were un­changed at $220.1 mil­lion and $175.99 mil­lion, re­spec­tive­ly.

How­ev­er, im­pact­ed by the net sale of trea­sury shares, share cap­i­tal in­creased from $32.814 bil­lion to $32.830 bil­lion. There­fore, the year-end num­ber of shares out­stand­ing rose from 1,199,835,937 to 1,199,978,571; con­se­quent­ly, the book val­ue per share slipped from $29.49 to $29.42.

Rev­enue and prof­it

Net op­er­at­ing rev­enue grew by 9.9 per cent from $9.09 bil­lion to $9.998 bil­lion.

Dri­ving that re­sult was fair val­ue and re­alised gain on in­vest­ments, which ad­vanced from $4.36 bil­lion to $4.87 bil­lion. Here, re­alised fair val­ue gains surged from $359 mil­lion to $1.42 bil­lion, how­ev­er, un­re­alised fair val­ue gains de­creased from $4 bil­lion to $3.45 bil­lion. The sec­ond largest con­trib­u­tor was fee and com­mis­sion in­come, which ex­pand­ed from $3.4 bil­lion to $3.7 bil­lion. Rel­a­tive to the lat­ter, in­vest­ment bank­ing ac­tiv­i­ties con­tributed $1.2 bil­lion while as­set man­age­ment un­der­tak­ings ac­count­ed for $2.4 bil­lion.

Al­so, net in­ter­est in­come ad­vanced from $581.2 mil­lion to $646.2 mil­lion. The in­ter­est in­come com­po­nent climbed from $6.16 bil­lion to $7.61 bil­lion. Dri­ving that re­sult was in­ter­est on FVO­CI in­vest­ments, which grew from $4.95 bil­lion to $5.85 bil­lion while in­ter­est on loans and ad­vances surged from $754 mil­lion to $1.29 bil­lion. Ad­di­tion­al con­tri­bu­tions were made by in­ter­est on re­sale agree­ments and cash; the for­mer edged up from $448 mil­lion to $459 mil­lion while the lat­ter ex­pand­ed from $4.8 mil­lion to $7.8 mil­lion.

Fur­ther con­tri­bu­tions to net op­er­at­ing in­come were div­i­dends, which grew from $86.8 mil­lion to $117.2 mil­lion, how­ev­er, for­eign ex­change trad­ing and trans­la­tion gains eased from $604.3 mil­lion to $593.9 mil­lion and mis­cel­la­neous in­come set­tled at $60.5 mil­lion from $62 mil­lion.

To­tal op­er­at­ing ex­pens­es ad­vanced by 8.1 per cent from $4.61 bil­lion to $4.98 bil­lion. With­in that group­ing, staff costs de­creased from $1.74 bil­lion to $1.66 bil­lion. Core wages and salaries rose from $1.1 bil­lion to $1.21 bil­lion while com­mis­sions jumped from $70 mil­lion to $112 mil­lion. Help­ing to re­strict the over­all pic­ture was oth­er staff ben­e­fits, which fell from $169 mil­lion to $119 mil­lion and stock op­tions, which dropped from $160.6 mil­lion to $8 mil­lion.

Next, ad­min­is­tra­tive ex­pens­es de­creased from $2.88 bil­lion to $2.68 bil­lion. No­table de­clines were shown un­der pro­fes­sion­al fees, which halved from $403 mil­lion to $195 mil­lion and com­put­er soft­ware main­te­nance, which fell from $306 mil­lion to $210 mil­lion. In con­trast, the as­sets tax in­creased from $185.5 mil­lion to $256.8 mil­lion and de­pre­ci­a­tion and amor­ti­sa­tion rose from $126.6 mil­lion to $150 mil­lion.

Man­age­ment fees were un­changed at $930 mil­lion, how­ev­er, im­pair­ment of fi­nan­cial as­sets de­te­ri­o­rat­ed from a write­back of $3.6 mil­lion to a charge of $641 mil­lion.

The share of prof­it from its as­so­ciate, Der­ri­mon Trad­ing, dropped from $95 mil­lion to $24 mil­lion, im­pact­ed by rev­enue falling from $18.7 bil­lion to $16.9 bil­lion. Those changes saw the prof­it be­fore tax im­prove from $4.58 bil­lion to $5.04 bil­lion.

The stan­dard tax rate re­mained at 33⅓ per cent while the ef­fec­tive tax rate fell from 25.4 to 24.3 per cent and the tax ex­pense in­creased from $1.16 bil­lion to $1.22 bil­lion. The cur­rent year ben­e­fit­ted from a larg­er cred­it ($1.68 bil­lion ver­sus $0.44 bil­lion) for in­come not sub­ject to tax. Con­se­quent­ly, the net prof­it at­trib­ut­able to share­hold­ers ad­vanced from $3.42 bil­lion to $3.82 bil­lion. Those re­sults re­veal cur­rent ba­sic EPS of $3.17 ver­sus $2.85.

Seg­ment con­tri­bu­tions

Fixed in­come rev­enues grew by 23.4 per cent while the seg­ment prof­it ex­pand­ed by 133 per cent. This seg­ment in­cludes mon­ey mar­ket ac­tiv­i­ties and se­cu­ri­ties bro­ker­ing and huge­ly ben­e­fit­ted from buoy­ant mar­ket con­di­tions.

Fund man­age­ment’s seg­ment re­sults im­proved by 7.5 per cent and re­flect­ed growth in as­sets un­der man­age­ment of its var­i­ous mu­tu­al funds.

The topline at Cam­bio and oth­er im­proved by 6.1 per cent, how­ev­er, im­pact­ed by a six-fold in­crease in ex­pens­es, the seg­ment prof­it de­clined by 25 per cent. This seg­ment in­cludes in­vest­ment bank­ing and stock bro­ker­ing.

Q1 re­sults

De­spite in­cur­ring larg­er for­eign ex­change trad­ing and trans­la­tion loss­es, BIL record­ed 8.7 per cent greater net op­er­at­ing in­come for the trimester end­ed De­cem­ber 2024; that mea­sure moved from $1.32 bil­lion to $1.44 bil­lion.

The com­bi­na­tion of low­er staff costs re­duced ex­pect­ed cred­it loss­es and small­er tax­es helped BIL re­port a net pe­ri­od prof­it of $551.2 mil­lion ver­sus $479.3 mil­lion. That re­sult saw EPS in­crease by 15 per cent, from 40 cents to 48 cents.

To­tal as­sets slipped to $139.6 bil­lion while share­hold­ers’ eq­ui­ty in­creased to $35.45 bil­lion; con­se­quent­ly, the book val­ue per share end­ed at $29.54.

Share­hold­ers’ re­turns

Over its fis­cal year, BIL’s share price on the JSE slipped from $77.34 to $77.10 as of Sep­tem­ber 2024.

This year, the price end­ed at $71.24 on May 7. An­nu­al div­i­dends in­creased from $1.634 to $1.967.

The last price of $71.24 gives in­vestors a yield of 2.76 per cent and re­veals a pre­mi­um of $41.70 or 41.2 per­cent to its De­cem­ber 2024 book val­ue of $29.54. Fur­ther, us­ing trail­ing EPS of $3.25, it ex­hibits a strong P/E mul­ti­ple of 21.92.

In the next ar­ti­cle we will re­view the 2023-24 re­sults of Pres­tige Hold­ings Ltd.


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