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Proven reports rare loss, holds off on dividends

Proven Group Limited will hold off 0n paying a dividend for its September quarter after posting a rare loss and dip in capital.

The decision was made against the backdrop of the quarter’s break-even profit position, the company said, while assuring shareholders it would be “returning regular cash dividends to its shareholders as soon as conditions improve”.

The company last paid a dividend of nearly 17 cents per share in September and before that over 64 cents per share in March.

The group, formerly known as Proven Investment Limited, recorded a net loss of US$593,000 of which US$33,800 was attributable to owners, on net revenue of US$13.2 million.

This compares with US$5.6 million of profit, US$4.4 million was attributable to owners, on revenue of US$11.15 million for the September 2021 quarter.

Proven’s capital dipped by US$43 million to close the September quarter at US$123.5 million, from US$167.1 million a year earlier.

Proven Group is in the business of investments, banking, pensions and real estate, and it holds positions in companies such as Access Financial Services, JMMB Group Limited and food manufacturer Roberts.

Proven said the flat results came largely from an “adverse shift” in investment revaluation reserves from the impact of “rising interest rates and market volatility on asset prices” and that a significant portion of the adverse shift was attributed to Proven’s share of JMMB’s revaluation reserves.

That’s due to the entities accounting for investments generally under the equity accounting method which marks the value of investments based on market movements. As context, the benchmark interest rate set by the Bank of Jamaica increased 12-fold in a year to 6.5 per cent. It was done to reduce inflation which dipped in September to 9.3 per cent but rose to 9.9 per cent in October. The higher benchmark rates resulted in squeezed margins for Proven in some lines of its business. Rising global inflation also resulted in reduced margins for the Roberts investment in Barbados.

Proven’s cash position grew to US$170.8 million from $159.5 million a year earlier. This increase, however, obscures a series of charges related mainly to the acquisition of a bank, which led to a US$59.7 million in net cash outflow from operations compared to US$25.4 million cash generated from operations a year earlier.

In the financial year, Proven received regulatory approval to acquire Fidelity Bank Cayman, which was renamed Proven Bank Cayman Limited. The bank made a net loss in September, mainly as a result of a change in accounting rules – IFRS 9 – in relation to provisions, along with one-off integration costs and professional fees, Proven explained. It held total assets of US$295 million.

“The provisions were accompanied by substantial growth in the PBC loan book, which will eventually lead to increased interest margins in the second half of the financial year,” Proven said.

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