Gary Peart Chief Executive Officer for the Mayberry Group is reporting that the Group recorded a loss of $3.9 million for the second quarter June 2020, when compared to a profit of $293.9 million for Q2 2019. This was attributable to reduced fees and commissions, lower foreign exchange gains, an unrealized loss on investment securities resulting from downward price movements on equities.
Operating Environment
For the quarter, the JSE Main Market Index advanced to 383,755 points compared to a close of 379,242 points for the first quarter of 2020. The JSE Junior Market reported similar improved trends and closed Q2 June 2020 at 2,592 points when compared to a close of 2,404 points for the first quarter of 2020. With this initial rebound of prices in the equities market, Mayberry Group posted an improved Total comprehensive income of J$654 million for the second quarter (Q2) June 2020 compared to a Total comprehensive loss in the first quarter of 2020.
Jamaica’s calendar year to date May inflation rate was 1.7%. On June 29, 2020, the Government of Jamaica maintained its accommodative monetary policy position holding the policy interest rate at 0.5% per annum. The low-interest-rate policy is one monetary tool the Bank of Jamaica (BOJ) has implemented to support its position for a faster expansion of credit to the private sector.
The Jamaican dollar on average depreciated during the quarter reaching an average selling rate
of J$141.01 to 1 USD up from $135.66, at the beginning of the quarter. Further, the Net International Reserves closed at US$2.94 billion which can support approximately 38.2 estimated weeks of imports of goods and services.
The unemployment rate which was at 7.3% as at 31 January 2020 is expected to increase significantly following the economic impact of the Novel Coronavirus (COVID-19). The Government of Jamaica received approval from the Executive Board of the International Money Fund (IMF) for access to the Fund’s Rapid Financing Instrument valued at approximately US$520 million, the maximum under the facility. It is expected that this effort will augment the country’s foreign exchange reserve and in addition meet the balance of payment challenges resulting from the financial impact of the global pandemic. The Government of Jamaica and the BOJ have already
implemented initial measures to facilitate the smooth functioning of the local financial market during this crisis.
Notably, revenues lines that experienced growth during the quarter were as follows: –
• Dividend income of $249.4 million increased by $145.9 million or 141%, Q2 2020 over Q2 2019. The holdings mainly in Supreme Ventures Limited and Jamaica Broilers Group Limited led to the dividends earned for this period under review;
• Overall Net Trading losses were lower by $59.8 million as a lower unrealized loss on investments was recorded when compared to overall Net trading losses of $106.9
million for Q2 2019; Conversely, the following revenues declined:
• Interest Income of $193.3 million in Q2 2020, earned from interest on Repurchase agreements and Bond portfolio, was lower by $47 million, compared to $240.4 million in the corresponding quarter in 2019;
• Fees and commission income of $115.1 million were lower by 57.7% over the corresponding period in 2019, primarily due to the following:
» Equity commission decreased by $25 million; Selling fees debt was lower by $12.3
million and IPO Selling fees income did not materialize for the quarter due to delayed projects in the pipeline. Other revenues under this category that provided a positive offset were namely, Corporate Advisory fees of $46.7 million which improved by $6.4 million, MIL US$ Portfolio Corporate Note grew by $2.9 million and Loan processing fees increased by $3.1 million.
• Net Foreign exchange gains of $45.6 million in Q2 2020 decreased by $106.7 million due mainly to realized and unrealized foreign exchange losses booked during the
quarter, despite higher spreads from the Cambio business which recorded revenues of $96 million, $8.3 million higher than the corresponding quarter in 2019.
• Unrealized loss on investment revaluation of J$62.8 million resulted mainly from the
revaluation of all equities classified as fair value through Profit or Loss (FVPL), on the subsidiary company, Mayberry Jamaican Equities Limited (MJE).
Total comprehensive income for Q2 of 2020 amounted to $654.4 million, compared to $1.7 billion for the corresponding quarter of 2019. This was attributable to a decrease in financial reserves, following price reductions for stocks held in the current equity portfolio. Resulting from an initial price rebound in the equities market, Mayberry Group recorded an improved position for Total comprehensive income for Q2 2020 compared to Total comprehensive losses booked for Q1 2020.
Operating expenses for Q2 2020 decreased by $129.6 million, moving from $482.1 million in Q2 2019 to $352.5 million in the current period under review. Costs for Management and Incentive fees were reduced by $135.5 million. This saving was offset by higher expenditure in core support areas of the business namely Computer Expense Others, which was higher by $11 million.
Assets & Liabilities
Total Assets for Q2 2020 amounted to $27.9 billion compared to $41.6 billion for the corresponding period ended 30 June 2019. The decline in asset balances was primarily due to a reduction in investment securities in quoted equities of $11 billion and Reverse Repurchase agreements of $2.5 billion. In addition, Cash resources were lower by $511 million, Loans and Other Receivables declined by $861.3 million and Deferred Taxation was lower by $67 million. This position was offset by increases in Promissory Notes of $1.1 billion, Other Assets of $39.2 million and Right of use Assets of $123.3 million. This was coupled with increases in Intangible Assets.
Total Liabilities stood at $15.1 billion, a $6.5 billion or 30.2% decrease over the prior corresponding period. For the period, Accounts Payables moved by $5.4 billion to reach $4.2 billion due mainly to a decrease in client balances. Securities sold under repurchase agreements closed the period at $3.2 billion compared to $4.5 billion for the corresponding quarter, due to a reduction in the portfolio. In addition, Bank Overdraft was lower $225 million. This position was offset by higher Deferred Taxation of $136.7 million, Lease Liability increased by $145.8 million and Loans was higher by $99.1 million when compared to the prior year 2019.
Shareholders’ Equity
Mayberry Group’s capital base remained strong to close Total Shareholders’ Equity at $12.8 billion at the end of June 30, 2020. The year over year reduction of $7.2 billion was driven by a decrease in Fair Value reserves. This position was countered by improved Retained earnings of $5.4 billion for Q2 June 2020, up from $4.6 billion in the corresponding period.
Capital Adequacy
Mayberry’s capital base continues to be robust and compliant with regulatory benchmarks. Capital to risk-weighted asset ratio of 17.6% improved from 16.3% for Q1 2020 complies with the established minimum of 10% set by the Financial Services Commission (FSC).
Net Profit attributable to shareholders was $8.9 million for Q2 2020, compared to $264.3 million in the prior year corresponding quarter, resulting in earnings per share (EPS) of $0.01 compared to an EPS of $0.22 for Q2 2019.
The global and local financial markets have experience three full of months of the negative impact of the Novel Coronavirus (COVID-19), and as the impact continues to evolve, the organization will continue to assess the financial landscape he reported