Somers reports $9.7m loss for year
Weaknesses in the British pound and Australian dollar contributed to Somers Limited recording a $9.7 million loss for the year.
It has a concentrated portfolio of investments in companies principally in Australia, Bermuda and the UK, and it wholly owns Bermuda Commercial Bank Limited.
The company entered into an agreement in February to sell BCB to Permanent Capital Holdings Ltd. Somers is awaiting the necessary approvals from the Bermuda Monetary Authority and the Bermuda Government in order to proceed with the sale.
Warren McLeland, chairman of Somers, said: “Whilst the delay is frustrating, we remain positive that the transaction will complete and thereby release significant capital to enable Somers to reduce its debt and to male investments in new and existing businesses.”
He made the comment as part of Somers’ annual report. The company’s financial year ended on September 30.
While it is waiting for clearance to sell BCB, it has had a busy year, and one which produced strong earnings in some of the companies it is invested, according to Mr McLeland.
Somers increased its level of borrowing during the year. It entered into a new loan facility to fund its investment in PCF Group Plc, a bank listed on the London Stock Exchange, in February.
Somers invested £5.3 million ($6.9 million) as part of a PCF fundraising. It has a majority shareholdings in the bank.
Regarding the increased borrowing, Mr McLeland said: “Given the quality, diverse nature and size of Somers’ asset base, an external gearing level of 12 per cent remains relatively low and within the company’s risk tolerance.
“Whilst the company’s focus remains on delivering strong returns for our shareholders, we recognise that the global economy is facing numerous challenges and as such we will look to repay the company’s related party debt and reduce bank debt as a result of the sale of BCB.”
Macroeconomic factors, including Brexit, resulted in a negative impact on foreign exchange movements from Somers’ investment perspective.
Mr McLeland said that while the financial performance of many of its investments was strong, foreign currency movements in Sterling and the Australian dollar “which reduced in value due to the weakening global economy” impacted the valuation of several of Somers’ larger investments.
Sterling and the Australian dollar weakened against the US dollar by 5.7 per cent and 6.6 per cent, respectively, during the year.
Somers has about 41 per cent of its investments in Australia, 28 per cent in the UK, and almost 27 per cent in Bermuda.
It has controlling stakes in Resimac Group Ltd, an Australian and New Zealand mortgage securitisation business; Waverton Investment Management Ltd, a UK private wealth management business; and West Hamilton Holdings Ltd, a Bermuda property holding and management company.
It also has stakes in UK brokerage organisation AK Jensen; Australian financial services organisation Thorn Group Ltd; and UK law firm MJ Hudson.
Somers’ net asset value per share decreased from $18.15 to $17.10. Its shares trade on The Royal Gazette/BSX Index, currently at $15 per share. Its total assets increased during the year from $407.3 million to $423.1 million.
At the end of September it had $17.3 billion of assets under management.
Looking ahead to the new year, Mr McLeland noted the historically low levels of interest rates around the world, and the weakening of global growth in the face of geopolitical events such as the US-China trade war, Brexit, and protests in Hong Kong.
He said: “We remain cautious going into 2020. Whilst we may be entering the end stages of the current economic cycle, we believe our investments are well placed and expect to be able to take advantage of opportunities that might arise.”
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