JMMB eyes unsecured credit, indebted ventures to drive growth - Moves to Phase III of multi-market strategic programme
In a tour de force lasting close to five hours on Wednesday, JMMB Group CEO Keith Duncan and country managers in the Dominican Republic and Trinidad & Tobago laid out their plans to improve the group's efficiency ratio from current levels of 72 per cent back to the near 50 per cent it was before the company began is expansion drive in 2012.
Efficiency is measured as the ratio of operating cost to revenue, and the higher the ratio, the less efficient the company at managing its costs.
From a group comprising six companies in 2012, JMMB Group has grown to 14 companies, resulting from acquisitions and start-ups. Annual operating expenses for the group climbed over the period from $3.2 billion to $11.4 billion at year ending March 2018.
The costs to run the current operation has affected key metrics, Duncan said at the company's annual general meeting on Wednesday, but he also reported to shareholders that JMMB was poised to reverse the current dynamics, principally through standardisation of IT platforms across the banking and investment operations and across markets; and by adding new business lines.
He said the funding raised from new preference shares was primarily being used to improve efficiencies, as the company exited its expansion and consolidation phases and ramped up its growth plans.
The financial conglomerate issued four new preference stock priced in JMD and USD this year, and redeemed two in August, leaving eight of its prefs issued over time still trading on the stock exchange.
Green light for preference share increase
On Wednesday, shareholders, by special resolution, gave the board the go-ahead to increase preference shares in issue by four billion units and to use the funding raised as it sees fit.
In February, JMMB raised $9.13 billion from four tranches of cumulative redeemable preference shares, the largest preference offering for the group to date. A JMMB subsidiary in Trinidad also tapped the market for the first time, successfully raising TT$160 million.
New business lines to be added, Duncan said at the AGM, included revamped small and medium-sized business products across markets and the introduction of products to increase financial inclusion, which Duncan said was an untapped market for JMMB Group.
The group will be targeting MSMEs that are heavily indebted, and pumping equity in their operations to alleviate their debt burden and taking stakes in the ventures.
The options for exiting the investments, he said, included initial public offerings of shares in the ventures.
This week, the group launched a new microfinance product in Trinidad & Tobago, which Duncan said on Wednesday would be expanded to JMMB's markets in Jamaica and Central America, after the T&T model had been tested and its outcomes studied.
The microfinancing business is being operated through subsidiary JMMB Express Finance (T&T) Limited. Its CEO Elson James, declined to disclose the investment made by JMMB, but said it should begin to show positive returns "within a two-year time frame".
The estimated value of the T&T consumer financing market, James said, was around TT$20 billion to TT$32 billion.
Duncan told the Financial Gleaner that micro sector lending was already positively impacting profitability.
As to group outlay on capital initiatives for the current fiscal year, he said Wednesday that capex would be in single-digit millions, an "insignificant figure" compared to the spend in recent years.
In its last fiscal period, JMMB Group's capital expenditures totalled $583 million, comprising mainly investment in information technology infrastructure, physical plant, land and building, its communication department said.
JMMB Group is one of Jamaica's largest financial companies, with businesses spanning commercial banking, securities trading, stock brokerage, unit trust, and mutual funds, pension fund management and insurance brokerage.
Last year, the company made a net profit of $3.6 billion on revenue of nearly $16 billion. Its balance sheet assets were valued at $292 billion, inclusive of a cash hoard of nearly $28 billion, while off-balance sheet funds under management were just shy of $358 billion.
On Wednesday, shareholders also approved the special resolution to delist from the Barbados Stock Exchange (BSE). Group Chairman Archibald Campbell said the JMMB Group stock had traded just 21 times in four years on the BSE, transactions that valued less than BDS$4 million.
The stock will continue to trade in Trinidad and Jamaica.