Durrant Pate/Contributor

Sygnus Credit Investments (SCI) has closed its 2022 financial year on June 30, 2022 with profit down 23 per cent to US$3.82 million relative to US$5.03 million booked in 2021.  

Pretax profit for the year amounted to US$3.92 million relative to US$5.06 million for 2021. For the June quarter SCI booked pretax profit of US$1.06 million compared to US$2.77 million for the same quarter of 2021.

Taxation for the year amounted to US$96,373, up from the US$30,010 booked in 2021. For the June quarter, net profits amounted to US$991,587 (2021: US$2.74 million).

The management sought to explain the reason for the decline in profit in 2022 saying, “this was driven primarily by the charge-off on one portfolio investment in the Cayman Islands of US$3.85 million, which more than offset fair value gains of US$2.88 million”.

First charge-off since inception

The management added that, ”the effective charge-off on this one portfolio investment represents SCI’s first charge-off since inception and amounts to an annualized loss rate of less than 0.4 per cent on more than US$220.00 million of investment capital deployed over the last 5 years. In other words, despite the current charge-off, the Group’s annualized loss rate was extremely low by global standards”.

SCI’s annualized return on average equity for the 2022 financial year was 5.7 per cent. Interest Income rose 24 per cent to US$10.22 million, up from the US$8.22 million booked in 2021. For the June quarter, interest income rose 15 per cent to US$2.97 million (2021: US$2.60 million).   

However, interest expense almost doubled to US$3.11 million, up from US$1.80 million in 2021. SCI reported fair value gains of US$4.07 million (2021: US$1.42 million).

Fee income amounted to US$42,697 (2021: US$62,786) for the year under review, while fair value adjustment on contingent consideration payable amount to a loss of US$92,580. As such, SCI had year-end revenue of US$11.12 million compared to US$7.93 million.

For the fourth quarter, SCI booked revenue of US$6.40 million versus US$4.02 million for the quarter ended June 30, 2021.

Surge in expenses

Total expenses for the year surged to US$7.21 million, a 151 per cent increase on the US$2.87 million recorded during 2021. Total expenses for the June quarter amounted to US$4.08 million relative to US$933,429 for the same quarter of 2021.

SCI reports that this increase in expenses “was driven primarily by higher management fees and higher corporate services fees related to larger assets under management and performance fees related to unadjusted amounts from the June 2021 audited financial year end results”.

The expenses comprises of:

• Management fees amounted to US$1.93 million (2021: US$1.46 million).
• Other expenses for the period rose to US$659,117 (2021: US$654,817).
• Performance fees amounted to US$50,939 for the period under review (2021: US$349,514).
• Net foreign exchange loss totalled US$405,221 (2021: US$72,988).
• Corporate services fee totalled US$336,363 (2021: US$265,663).
• Impairment Allowance on Financial Assets for the year amounted to US$3.82 million versus US$69,710 for 2021.

On the positive side, SCI highlighted that it “financed new investment commitments valued at US$49.22 million for FYE Jun 2022 vs. US$41.10 million for FYE Jun 2021. Excluding PRCF, new investments amounted to US$28.00 million. In Puerto Rico, AFC generated an all-time high semiannual volume of credit deployment, exceeding US$30.00 million in investment commitments for the first six months to June 2022, a portion of which represented true sales that to generate upfront gains”.

The management reports that, “overall, the group continues to see great demand for private credit investments, especially with regards to acquisition financing, as recovery from the COVID-19 pandemic gathers pace with fully open borders across the English, Dutch and Spanish speaking Caribbean”.

Balance sheet highlights

As at June 30, 2022, SCI held total assets amounted to US$136.79 million, a 56 per cent increase on 2021’s assets base of US$87.87 million. This was due to an increase in ‘investments’ to US$120.91 million (2021: US$80.51 million).

However, ‘Finance lease receivable’ declined to US$1.60 million (2021: US$2.29 million). Total stockholders’ equity as at June 30, 2022, closed at $67.46 million, relative to $66.74 million for the corresponding period last year.

This resulted in a book value per share of US$0.114 compared to the value of $0.113 as at June 30, 2021.