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New investments the cause for Sygnus Credit’s low 6-month profit

Sygnus Credit Investments Limited (SCI)increased its six-month core revenues but had lower core earnings and net profits for the period ended December 31, 2020, according to unaudited results.

Net profit attributable to shareholders was lower by 23.1 per cent or US$378,400 to US$1.26 million for the first six months of 2020/2021, relative to US$$1.64 million for the same period 2019/2020.

According to SCI’s management, the results were underpinned by an expanded regional footprint across a record eight Caribbean territories, represented by US$67.04 million in private credit investments. 

The Sygnus Credit Investments management team pause for a frame at the company’s annual general meeting, held at The Jamaica Pegasus in New Kingston, on November 27, 2019. (Photo: Christopher Lewinson)

SCI’s core revenues, or total investment income, grew by 11.4 per cent or US$269.0 thousand to a record US$2.66 million, for the half-year, up from  US$2.36 million for the six months ended December 31, 2019. 

For the second quarter ended December 31, 2020, total investment income grew by 5.4 per cent or US$68,600 to a US$1.35 million. This compares with US$1.27 million reported for the second quarter ended December 31, 2019. 

Core revenues were negatively impacted by significant year-over-year growth in interest expense related to the timing of the use of debt to finance new investments, the company explained.

Second-quarter performance

Subsequent to Q2 2020, SCI has repaid US$11.6 million in debt from its APO proceeds as at January 31, 2021. 

They said that, mainly as a result of the timing of the use of debt, SCI’s core earnings, or net investment income, was lower by 5.8 per cent or US$101,500 to US$1.65 million up to December 31, 2020, versus US$1.75 million for six months ending 2019. 

For Q2 2020/2021, net investment income was lower by 14.1 per cent or US$133.3 thousand to US$812.6 thousand, compared to US$945,900 for Q2 2019/2020. 

“The impact of the global COVID-19 pandemic on the Caribbean region and on middle-market businesses is ongoing, while the trajectory of the regional economic recovery remains uneven and unclear”

For Q2 2020/2021, net profit was lower by 58.1 per cent or US$641.300 to US$462,800 as against US$1.1 million in Q2 2019/2020. 

“A combination of substantially larger interest expenses related to the timing of the use of debt, and unrealized fair value losses related to higher interest rates on fair value instruments, were the main drivers of the lower net profits for 6 Month 2020 and Q2 2020 vs the prior periods,” SCI’s management outlined. 

Earnings per share (EPS) was US$0.36 for the six months ending December 31, 2020, compared with US$0.47 for the same period in 2019/2020. On a quarterly basis, the company earned US$0.13 per share for Q2 2020/2021 versus US$0.32 for Q2 2019/2020. 

Loans and the pandemic

Sygnus Credit Investments Limited team led by (seated) co-founder and Chief Investment Officer Jason Morrison, co-founder and CEO Berisford Grey, and co-founder and director Dr Ike Johnson (File photo)

Higher impairment allowance for the six-moth period increased due to a combination of a larger portfolio of private credit investments, as well as the underlying global COVID-19 pandemic conditions.

“The impact of the global COVID-19 pandemic on the Caribbean region and on middle-market businesses is ongoing, while the trajectory of the regional economic recovery remains uneven and unclear,” management stated.

However, according to the team, SCI’s private credit portfolio remains resilient and is well positioned to navigate the effects of the pandemic. 

SCI successfully closed its additional public offering (APO) on December 30, 2020, which raised an estimated US$27.1 million. 

The company aims to grow its regional private credit portfolio to at least US$100 million within the next two to three years, while generating at least US$8 million in core revenues, management said.