By McPherse Thompson, Assistant News EditorTHE Pan-Jamaican Investment Trust has recorded a whopping 80 per cent increase in its net profit for the six months ended June 2003, primarily as a result of the performance above expectation of its insurance and property divisions.
Those divisions produced 72 per cent of the $362 million profit before tax, a substantial improvement over the corresponding period last year, according to Richard Byles, president and chief executive officer, and Maurice Facey, the company's chairman.
In the unaudited financial results published last week, the directors said net profit for the six months totalled $238.9 million, a $106 million increase over the $132.9 million recorded a year ago.
The accounts of the company as well as others in the Pan-Jamaican Group were prepared on the basis of International Accounting Standards (IAS).
The directors said profit contribution from banking slowed considerably in the three months to June 2003 as the high interest rate regime squeezed margins on the fixed rate Government of Jamaica securities portfolio of Pan Caribbean Financial Services, a member company of the Pan-Jam Group.
With the Bank of Jamaica (BoJ) gradually reducing interest rates over the past two months, however, the Pan-Jamaican management said they expect Pan Caribbean Financial Services to regain its usual level of profitability.
THE ONLY LOSER
Pan Caribbean Financial Services was in fact the only loser in the Group as its half year profit fell 19 per cent from $106.4 million to $86.1 million. This also resulted in an eight cents decline of its Earnings Per Share from 42 cents to 34 cents.
Mr. Byles, Pan Caribbean's chairman, and Donovan Perkins, president and chief executive officer, pointed out that the six-month period has been characterised by tight liquidity, particularly in the second quarter as the BoJ sought to stabilise the currency market, resulting in the highest interest rate environment since 1996.
"Margins shrank during this period as the decision was taken not to re-price loans but to absorb the increased interest costs," they said. However, in noting the BoJ's decision to reduce interest rates, the directors said, "we expect margins to be restored during the coming months."
First Life Insurance Company also performed well, chalking up a 66 per cent increase in profit from $177.7 million to $294.9 million during the period.
Mr. Byles, chairman and chief executive officer of First Life, said the prolonged high interest rates and the depreciation of the Jamaican dollar had no negative effect on the profit performance of the insurance and property divisions. However, on a market-to-market basis, fixed-rate government securities had the effect of reducing shareholders equity by $143 million to $2,932 million.
In the banking and securities dealing outfits, earnings slowed considerably in the quarter, said Mr. Byles. He said the back-office merger and co-insurance arrangements with Life of Jamaica were working well and meeting the company's expectations.
In the Group's trading division, Hardware & Lumber saw satisfactory growth in sales, which was particularly strong in the True Value stores. However, the directors said some one time IAS adjustments dampened net profits during the review period.
The out-turn was a $15.7 million increase in net profit, compared to $10.8 million during the corresponding period last year.
Mr. Byles, H&L's chairman, and Anthony Holness, managing director, said the results were impacted by a substantial charge for foreign exchange losses resulting from the depreciation of the Jamaican dollar as well as provisions relating to IAS. Sales for the review period totalled $880 million, a $131 million increase over the same period last year.
According to the directors, retail sales continued to drive the performance of H&L and its subsidiaries in respect of revenue and gross profit margins. "Wholesale turnover showed growth above inflation for the period," the directors said, pointing out, however, that "intense competition in the hardware trade, coupled with depressed market conditions in agriculture, continue to adversely affect gross profit margins."
An extraordinary general meeting of H&L will be held next Wednesday, August 27, at which shareholders will consider resolutions to increase the company's share capital and recommending its merger with Rapid Sheffield and Agro Grace, both outfits of Grace, Kennedy & Company. Earlier this year, Pan-Jamaican Investment Trust and Grace, Kennedy signed an agreement to merge their hardware stores.
