Somers offers geographic diversification
The Bermuda Stock Exchange has launched its “Own Your Share of Bermuda” campaign to raise awareness of opportunities to invest in the island’s public companies. The Royal Gazette is supporting the effort by publishing weekly features on each of the 13 domestic companies listed on the BSX.
Financial services holding company Somers Ltd is a unique opportunity for Bermudian-based shareholders to spread their investments around the globe, company director Alasdair Younie said yesterday.
Mr Younie said the company, which owns Bermuda Commercial Bank and West Hamilton Holdings, and has a major interest in Australian company Homeloans Ltd and stakes of various sizes in a string of UK financial services firms, was in a good position, despite a $10.7 million loss in the fourth quarter of last year, driven by the weakness of the UK pound in the wake of Britain’s decision to quit the European Union.
The loss followed year to September 2016 profits of $2.3 million.
He added: “It’s unique that this is an investment holding company in Bermuda in a sector where there is lots of change and lots of opportunity.
“We run unhedged positions, so the exposure to sterling was a significant weakness last year, but it’s bounced off the bottom so we would expect sterling not to weaken again and plateau for the foreseeable future.”
The company’s holdings include UK-based companies Waverton Investment Management Ltd, Ascot Lloyd Holdings Ltd, Merrion Capital Holdings Ltd, Private&Commercial Finance Group and Stockdale Securities Ltd.
During the last quarter of last year, Somers completed a deal that gave it a 59 per cent stake in Homeloans in Australia.
Mr Younie added that Waverley, a UK wealth manager with $5.1 billion in assets under management, had “very strong results” last year, attributed to the increased value of Somers’ holding in the company in the annual report to year-end last September, which was issued in February.
Mr Younie said: “A lot of our businesses have a lot of opportunities, so we’re well positioned.
“We also pay a 3 per cent dividend yield and the shares trade at a 25 per cent discount to net asset value, so I would argue the shares are very undervalued.”
He added: “We are a global investment holding company, so we’re not just exposed to Bermuda, we’re exposed to countries all over the world.
“That gives a local investor access to global companies without holding these investments directly.
“The more we diversify around the globe, the more the risk, by definition, is reduced.”
Bermuda Commercial Bank has also undergone a rebirth, with a new CEO, French-born industry veteran Hubert Esperon appointed in September and new, higher-profile offices on Bermudiana Road in Hamilton.
Mr Esperon said earlier this year that he had not ruled out a move into retail banking, while he aimed to diversify the business.
He added: “We clearly need to diversify assets — today, BCB is heavily concentrated in one class of assets.
“A small bank very often has a concentration issue and we need to change this so by definition we will be talking to the board around our strategy to get to the point where we are more diversified.”
But he said: “I want to be a bit careful about saying where we are heading because there are a lot of stakeholders. The bottom line is we need to diversify our assets, therefore going beyond what we’re doing today.”
He said of retail banking: “No decision has been taken. There is a need in Bermuda for a solid banking system for sure. All banks are facing challenges and it’s important that we continue to have a competitive environment that provides the banking support Bermuda needs, together with the right profitability for banks, and I would say that’s what all banks are working on right now.”
Mr Younie added: “We are very pleased with the new CEO and we have new management and new offices. There are lots of opportunities.”
The September results for Somers included record profits of $5.2 million at Private&Commercial Finance Group over the previous 18 months and a 12 per cent increase in business originations.
PCFG has also been granted a provisional deposit-taking licence in the UK and it is expected the company will begin accepting deposits in the second half of this year.
The year-end results to last September showed Somers gained $34.8 million on its investment portfolio, compared to a loss of $3.1 million the previous year.
Total Somers assets stood at $346.9 million, compared to $216 million the year before.
The company said it would pay a final dividend of 26 cents per share, compared to 24 cents in 2015, bringing the total dividend for 2016 to 44 cents per share.
Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Past performance is no guarantee of future results
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