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BFIC suffers $0.2m loss but sees hope ahead

Jonathan Kent

Bermuda First Investment Company recorded a loss of $0.2 million in the quarter ended September 30, as its investments lost $0.8 million in value — but its chairman is taking heart from an improving economy.

The company, which invests in Bermuda Stock Exchange-listed companies, said diluted loss per share amounted to 51 cents.

“The share prices of our major investments, KeyTech and Ascendant continued to decline during the quarter,” Michael Collier, the chairman of BFIC, said.

“However, post the quarter end with the announcement of KeyTech's transaction with CellOne and ATN, KeyTech's share price has started to improve.

“There are signs in the Bermuda economy that things are starting to improve and we would anticipate that any improvement will be felt in our core investments.”

BFIC said that at September 30, 2015, BFIC's investments had a total value of $22.7 million and the company had net debt of $24.8 million. The company had unsecured long-term loan notes that it issued to its founder shareholders in October 2012 of $18.5 million.

The quarter follows on a miserable period for the company, which suffered a net loss of $10.5 million in the 2015 fiscal year, ended June 30, after a $12.1 million net loss in 2014, according to its 2015 annual report.

The losses have been driven by slumps in the share prices of major investments including KeyTech and Ascendant, companies whose earnings were hit hard by the recession.

BFIC's principal owner is Utilico Investments Ltd, which owns about 79 per cent of BFIC shares and invests in utilities around the world. Bermuda Commercial Bank has a 15 per cent stake.

Mr Collier, in his statement in the annual report, stated: “Our investments have significant challenges ahead of them as a result of the deep recession that Bermuda is now starting to recover from. We continue to believe that our investments are fundamentally sound companies with strong business models that will benefit from a continued upturn in the Bermuda economy.

“It is important that the Bermuda Government focuses on making Bermuda an attractive jurisdiction to undertake business. Bermuda needs to replace the large number of people who have left the Island since 2008.

“More people in Bermuda will increase the need for key services, such as electricity and telecommunications. In addition, the multiplier effect on the economy with other services such as restaurants and retail stores benefiting from increased traffic.

“However, we are very aware that any upturn in performance in Bermuda is likely to be a long and slow process.”

BFIC believes KeyTech's prospects have improved with US firms Atlantic Tele-Network's $42 million deal to acquire a 51 per cent stake. The transaction, which still has to be approved by regulators, valued KeyTech shares at $4.50 and will reward KeyTech shareholders will a special dividend of 75 cents per share.

“The cash injection will enable KeyTech to significantly reduce its net debt thereby increasing free cash flow to invest in the necessary capital expenditure to grow its products and offerings in both Cayman and Bermuda,” BFIC stated.

“The telecommunications market in Bermuda is likely to be concentrated on two dominant players in KeyTech and Digicel and therefore KeyTech needs to be in a position to offer a multitude of services whilst investing in its superior network.

“Having all of these services under single ownership will enable KeyTech to combine its offering which has significant benefits, in particular to business customers. In addition the ability for customers to receive one bill has numerous benefits to the consumer. We are fully supportive of these transactions and believe that the end result will be a more profitable and stronger company with growth prospects in both Cayman and Bermuda.

“KeyTech remains an undervalued company despite the recent increase in the share price post the announcement of the transaction.”

BFIC added that it was encouraged by increased residential electricity sales at Ascendant's subsidiary, Belco, and added that a response to Belco's request for an increase in the electricity tariff was expected to come before the end of this year.

Economy improving: BFIC chairman Michael Collier sees better times ahead

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Published December 16, 2015 at 8:00 am (Updated December 15, 2015 at 9:05 pm)

BFIC suffers $0.2m loss but sees hope ahead

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