PAN-JAMAICAN Investment Trust Limited (Pan Jam) saw a slide in profits at the financial year ended December 31, 2010 compared to the year ended 2009. The investment company, which has a 28 per cent stake in Sagicor Life Jamaica, a 20 per cent stake in Hardware and Lumber Limited (H&L) and a 25 per cent interest in the new Walkerswood group, could not reverse the decline, even though its minority-owned companies recorded profit growth for the period.

Sagicor increased profits six per cent over prior year to J$4.6 billion, a 21 per cent return on equity for Pan Jam. H&L reported profits of J$19 million, compared to a loss of $226 million for 2009. While there is no comparative data for the new Walkerswood operation, Pan Jam earned $17 million in profit share from the entity in 2010.

However, these and an increase in property income of J$75 million or six per cent over 2009, could not offset a 67 per cent decline in investment income, and an 11 per cent increase in total operating expenses.

Property income increased following a nine per cent increase in rental income to J$949 million and a J$300-million property revaluation gain. Pan Jam reports that properties under its management had overall occupancy in excess of 98 per cent for the year. Investment income declined as foreign exchange gains recorded in 2009 were not repeated in 2010, a consequence of the revaluation of the Jamaican dollar. This caused $62 million in losses for Pan Jam in 2010. Even so, investments continue to contribute the largest share of results to the operating segments. With net results of $1.1 billion in 2010, investments contributed 70 per cent of the $1.6 billion of results from all operating segments, including property management and rental, which was 29 per cent of revenue.

Interest income fizzled to $49 million below prior year following declining interest rates in both the local and international markets.

However, Pan Jam’s interest coverage remains solid despite the decline in interest income. Considered one of the most important quantitative tests of risks when analysing the company’s ability to pay interest charges on its debt, Pan-Jam’s earnings exceed the debt requirements almost 30 times.

Additionally, even though there was a decline in the return on equity from J$19 in 2009, the 2010 ROE indicates that the management returned $14 on each dollar invested in the company last year, despite the lower interest rates and compressed economic environment.

Property management costs increased 10 per cent according to the published financial report, general and administrative expenses increased $34 million, that’s 11 per cent over 2009. In a report to shareholders, CEO Stephen Facey noted that J$12 million of the increase was pension expenses caused by the lower interest rate environment.

“We are currently examining our overhead structure in an effort to contain increases in overhead costs below inflation levels,” said Facey. He added that while 2011 will continue to present challenges the outlook for the company remains positive.

“Our strong liquidity position and low leverage, combined with our standing as the country’s premier commercial property owner and manager, give us reason to be cautiously optimistic,” said Facey.