PanJam takes $5 billion hit as a result of COVID-19

Real estate development and private equity company PamJam Investment Limited took a big $5-billion hit last year, as a result of the negative impact felt from the coronavirus pandemic.

This pulled down shareholders’ profit to $3.5 billion coming from $8.3 billion in 2019, while resulting in a more than 50 per stock drop in earnings per stock, which ended the year at $3.31 down from the $7.85 earned in 2019.

The hit from COVID-19 was mainly felt in PanJam’s tourism-related investments such as Chukka Caribbean Adventures and the Courtyard by Marriott in Kingston given that international travel was significantly curtailed after March 2020, when the first COVID-19 case was detected in Jamaica.

As a result, Courtyard by Marriott Kingston and Chukka Caribbean Adventures both continue to see diminished business activity due to the pandemic.

In their just released 2020 report to shareholders, the board explained that, “in the first quarter, our investment income was hit hard by unrealised losses as a result of the market downturn. Our securities portfolio retained its value thereafter and we recorded investment income of more than $600 million in the second half of 2020. Our associated companies saw varying levels of impact from the pandemic.”

The board points out that in recent years PanJam’s strategy of increasing its exposure to Jamaican assets has paid off handsomely in 2019 and prior years, but COVID-19 has had an adverse impact on the Jamaican economy and asset prices, including securities and businesses which are heavily reliant on travel and tourism. The value of PanJam’s shares in associated companies such as its 30.2 per cent equity stake in Sagicor and other holdings in a number of diverse private entities has seen a decline of $1.1 billion or 22 per cent, driven by lower results from Sagicor Group Jamaica.

Chairman and CEO Stephen Facey and his deputy CEO, Paul Hanworth, reported that, “on a more positive note, the profitability of Sagicor Group Jamaica core insurance business lines exceeded their 2019 performance, despite lower overall results, and our share of profit from New Castle (Walkerswood) increased by 34 per cent.” They were quick to point out that PanJam’s liquid resources have remained strong in 2020.

However, the company’s cash flow was impacted by the recommendation from the Bank of Jamaica to all financial holding companies not to pay dividends to shareholders owning more than one per cent of ordinary shares. As such, PanJam’s 2020 dividends from its shares in Sagicor have been converted into short-term, interest-bearing promissory notes.

“Our strategy ensures that there is balance in times of crisis. Of note, our real estate assets have continued to demonstrate real resilience,” Facey and Hanworth advised shareholders. On another positive note, PanJam’s property segment’s registered a 20 per cent improvement in year on year profits for 2020, driven by a gain on the disposal of our property located on Bamboo Avenue, Kingston. This has resulted in net profit attributable to shareholders of $3.5 billion, representing a decrease of 57 per cent on the $8.3 billion made in 2019.

Property income decreased by four per cent to $2.1 billion coming from $2.2 billion in 2019, reflecting improved rental income of $1.8 billion but reduced property revaluation gains of $0.3 billion coming from $0.5 billion in 2019. Higher other income of $0.4 billion was driven principally by gains from the sale of its Bamboo Avenue property in Kingston.

Total operating expenses amounted to $1.7 billion, down from $1.8 billion in 2019, a decrease of four per cent. This resulted primarily from deliberate cost containment measures implemented during the year.

Finance costs increased to $0.8 billion, up from the 2019 posting of 0.7 billion, as a result of higher average debt balances supporting our downtown Kingston development project. Performance by Outsourcing Management (trading as itelbpo) and New Castle (Walkerswood) exceeded expectations, with both companies increasing profits in 2020.

As at the end of December 2020, PanJam held cash and cash equivalents of $1.6 billion and maintains conservative leverage which, when combined, would enable the company to raise financing in order to capitalise on attractively priced investment opportunities that may arise.