LOM [Holdings] Releases 2014 Interim Results
LOM [Holdings] Limited announced the Company’s interim financial results, saying the company made a $90,605 profit in the first half of 2014 as compared to a loss of $315,834 for the same period in 2013.
In a letter to shareholders, the company stated, “Bermuda’s economy has stabilized and though there is little evidence of any strong uptick in our economic activity to date; there are emerging signs that confidence by foreign investors in Bermuda has improved and that improved sentiment is resulting in activity that should somewhat help the beleaguered construction sector and the general economy.”
The full letter to shareholders is below:
To our Shareholders:
The first half of 2014 has seen continued improvement in global markets and investor sentiment. The major blue chip stock markets are in a sweet spot of very low interest rates, improving economic activity, stable commodity prices and a rising level of mergers and acquisition activity. With slow nominal GDP growth large companies cannot easily grow revenues, however they can borrow money very cheaply, so they are purchasing their competitors and buying the revenue growth.
This rosy picture has been somewhat marred by concerns about the Chinese slowdown and transformation of their economy away from its historic export led growth to domestic growth. However those concerns have not been enough to stop equity markets showing positive returns over the first half.
The junior equity markets continue to remain weak and the optimism among investors, that is so prevalent in the major liquid markets, has yet to spread to the more illiquid junior markets.
Bermuda’s economy has stabilized and though there is little evidence of any strong uptick in our economic activity to date; there are emerging signs that confidence by foreign investors in Bermuda has improved and that improved sentiment is resulting in activity that should somewhat help the beleaguered construction sector and the general economy.
The credit situation in Bermuda remains a concern. Lending in Bermuda remains restrained due to conditions in the local property market. Depressed prices and illiquidity continues to severely impact the Bermuda banking sector’s mortgage loan books. In reviewing statistics from the Bermuda Monetary Authority as of the end of 2013 annualized net charge-off of loan losses and impairments remained at 1.9%, almost the same level of 2.1% in the prior year. More importantly non performing loans [NPLs] rose to 12% of total loans and remained at almost 45% of bank sector capital. Residential mortgages are 54.6% of total loans.
I have pointed out before and it remains a fact that government policy is needed to spur the housing market. As pointed out a year ago, “with property prices down at least 30% over the past 6 years, the banks have serious concerns over their mortgage books and are unwilling to lend; and home buyers feel they are checking into the roach motel – they can get in but not out”. Until such time as property prices start to rise, and the banking sector becomes less concerned over their mortgage loans, they will be reluctant to lend; and without credit expansion the economy will find it difficult to grow.
LOM continues to see a very gradual upturn in business activity. Due to this increased activity and as a result of the cost containments we made over the last year, LOM made a $90,605 profit in the first half of 2014 as compared to a loss of $315,834 for the same period in 2013.
Revenues overall rose 11% and had the following year-on-year changes:
- Management and advisory fee revenues rose 5% to $1.09 million [32% of revenues].
- Broking fees rose 15% to $1.17 million [34% of revenues].
- Fees from corporate finance work fell 47% to $39,899 [1.1% of revenues].
- Foreign Exchange revenues fell 26% to $151,494 [4.4% of revenues].
- Net interest earnings rose 15% to $348,501 [10.2% of revenues].
- Investment Services income rose 11% to $480,169 [14% of revenues].
- Gain on securities held in inventory was $89,627
Costs for the group had the following year-on-year changes:
- Operating costs, ex commission payments, were reduced 1%
- Overall operating expenses fell 2.3%.
- Employee expenses rose 6%.
On other financial measures:
- LOM’s assets under administration were $589 million as of 30th June 2014 as compared to $587 million in assets at the end of 2013.
- LOM remains in a strong financial position with net equity of $16.4 million and no debt.
- LOM holds cash and equivalents of $3.93 million, representing 24% of net equity.
The Board of Directors of LOM have decided not to pay a dividend given current business conditions, however given the discount the share price trades to book value, the Board has decided to increase the size of the share buyback.
Our current share price on the Bermuda Stock Exchange is $2.10 and our current market capitalization is $12.71 million. As of 30th June 2012 LOM’s book value was $2.69 per share.
The Board has given approval for LOM to continue to buy back shares for cancellation for a total not to exceed 200,000 shares. Over the first half of 2014, the Company purchased for cancellation 2,500 shares at an average price of $2.25.
Scott Lines, CEO
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