Sygnus Credit Investments Limited (SCIJMD) Q1 FY2026 Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today. Please allow a brief moment for people to join before we start. Those who just joined, we're waiting a few minutes for everyone to have an opportunity to join early before we begin. So just a few more minutes. Good morning, again, everyone. Thank you for your patience. I'd like to warmly welcome you all to Sygnus Credit Investment Limited's earnings call. Today, we'll be discussing the results for the 3 months ended September 30, 2025. My name is Damani Reid. I'm a member of the Investment Management unit at Sygnus Capital Limited, and I'll be your moderator for this morning's presentation. All the information that is presented here should be read in conjunction with the MD&A and financial statements, which can be found on both Jamaica Stock Exchange and the Sygnus Group's website. Additionally, if you have any questions during or after the presentation, please share them using the Q&A option in the Teams chat and we will have a discussion segment after the main presentation where you'll have the opportunity to have your questions answered. Now without further ado, I would like to welcome our presenter for today, Mr. Jason Morris, Co-Founder, Executive Vice President and Chief Investment Officer at Sygnus Capital, who will be walking us through the presentation this morning. Over to you, Jason.

Thanks, Damani. Good morning, everyone. I hope you are doing well. I know that these are some very pensive times for Jamaicans, both within Jamaica and outside given what happened in late October with the passing of Hurricane Melissa, which has exacted substantial devastation on the Midland Island and in particular, on the Western side of the Island. And our prayers go to those who would have suffered during the Hurricane and those who would have lost their lives. Our condolences goes out to those person's families. As part of -- so even though this is an earnings call for SCI, SCI operates has substantial or significant operations through its investment manager in Jamaica. And of course, a part of SCI's portfolio is also to entities that operate in Jamaica. And as a result of this, obviously, the Sygnus Group and SCI as part of the Sygnus Group has committed to provide assistance to those who would have been affected to help in the recovery. Every contribution makes a difference. And so Sygnus overall is -- has committed an initiative where we are seeking to raise USD 375,000, of which Sygnus and its affiliate entities, including SCI will be contributing or has already effectively contributed USD 100,000 from that amount. We have another one of our partners who is also a client of SCI, who would have contributed USD 120,000, so we are going through this process of trying to really see as an investor who invests within the community of Jamaica, how we can play our part and our role to ensure that we contribute to the recovery process. I think this needs all hands on deck, so to speak. When this presentation is posted online, for those who are so minded, there's a link that kind of explain what our strategy around providing assistance is. So you can follow up on that at a later date. Now to get into SCI's presentation proper, we are evaluating the results for the first quarter ended September 2025. I just want to highlight 6 things, as you all know, that would have influenced or represent an outcome of the financial results. The first one is that from a financial performance perspective, SCI would have generated an annualized return on equity during the quarter of 16.7%. And this is higher than the minimum threshold that we are targeting of 10% for the period. Second thing I want to look at is the Puerto Rico business. As you would have stated maybe for the past 6 quarters running that as the business is scaling, Puerto Rico is a very important part of the growth and expansion that SCI is currently at the very beginning of. And since Puerto Rico would have been reorganized or transformed back on July 1, 2023, the company has generated cumulatively $10.33 million in net profit, which by and far exceeds multiple times the amount of net profit generated in all -- in the entirety of all the years prior to this reorganization. So that just speaks to the growth trajectory of the company, which on average is on track to do in or around a minimum of $4.5 million per year in net profit. That's what it has been doing so far. So that's a good performance, and we expect this to actually scale over the next 18 to 24 months. The return that SCI has been generating since the reorganization on the Puerto Rico business is 20.8% return on invested capital. And this is a solid justification for why SCI would have done the acquisition in the first place and why SCI subsequent to doing the acquisition would have increased its equity stake in the business, own 95.58%. And in upcoming periods, SCI will continue to invest in the business because simply put, the business is generating a substantially higher return on the dollar per investment in Puerto Rico than in SCI proper itself. So that's a financial transaction that makes a lot of sense. In terms of deployment, overall, the platform would have deployed $17.84 million for the quarter. And this, of course, includes both SCI and Puerto Rico with Puerto Rico being responsible for the majority of the deployment. Later on in the presentation, we show you what SCI itself actually did. And in terms of investment exits, would have exited $22.39 million during the quarter, and the majority of the exits were due to SCI. SCI did about USD 19 million plus. And I'll show you that in a separate slide later, when we're focusing on SCI proper. And SCI would have since inception only crystallized 0.2% on an annualized basis in terms of losses. So moving on to the financial performance for the quarter itself. Total investment income would have increased by 3.1% to $ 5.25 million versus $5.09 million for Q1 last year. And this, of course, would mark a new high. So this is the highest level of total investment income that would have been generated. And a couple of points to note about the total investment income and the drivers of that. Net interest income would have increased quite substantially up 37.9% to $3.18 million versus $2.31 million last year. And however, the Puerto Rico credit fund investment income, which would be generated from the profits generated from Acrecent at the bottom of the pyramid would have been $1.91 million. So it's an increase, but it wasn't as high as the $2.67 million generated for the similar quarter last year. And when we get to the slide that details out the revenue performance of ---contributing performance of the Puerto Rico business to SCI, you'll see that effectively market multiples would have been the main driver of why $1.91 million this time versus $2.67 million for the similar period last year. And the company will have generated slightly less net profit than the similar period last year, even though the business would have generated a substantial increase in total investment income of 18.2%, which is a new record. I think they would have taken some impairment allowance on a legacy asset, which is what would have basically prevented the company from really reporting a brand-new record in terms of net profit. But we expect that as we go through the next 3 quarters, more than likely, we'll be able to get to the end of the year by beating last year's results comfortably. Net investment income was $4.01 million for SCI up 4.5% versus $3.83 million last year. And of course, net profit came in at $3.18 million, down 35.5% versus $4.92 million for the similar period last year. However, if you recall, in Q1 last year, the net profit figure would have included $1.01 million in fair value gains, which at the time, I had said that the substantial increase in fair value on the private credit investment companies that are carried as fair value to the income statement can be very volatile. I think last year this time, what happened, the Fed would have reduced interest rates I think, for the first time in a very long time, and the market began pricing in substantial future reductions in rates and that caused the value of those assets to skyrocket, which at the time, I said that more than likely, this figure is going to reverse at some point during the year, which it eventually did, I think, in the quarter following. So even though we have $3.18 million, the $3.18 million versus the $4.92 million last year, the $3.18 million is a better quality of earnings because of that big jump that we saw in the fair value. Last year, which this year is actually a $495,000 fair value loss. So net-net, there's a $1.5 million swing any difference between the fair value recorded last year for the same quarter versus the fair value recorded now. And of course, that is what was a major driver for the difference in profit. Also, we have had some recognition of impairment allowance relating partially to stage 2 asset, but also partially to forward-looking assessment of the effect -- early forward-looking assessment of the effect of Hurricane Melissa on ECL. At the time that we are doing the assessment, we're preparing the financial estimates. So net-net earnings per share was $0.55 versus $0.85 last year and dividends per share that was declared during the quarter and paid subsequent to the end of the quarter was USD 0.0017 versus USD 0.0028, which amounted to USD 1 million versus USD 1.6 million for the similar period last year. Moving on to just some highlights that we want to -- won't spend a lot of time going through the actual details here. I mean that has been provided on the financial statements, but I just want to highlight a few things. You can see the net interest income that I was speaking about, which is a new record. And if you look at interest income, you can see that interest income increased by about $1.2 million which far outpaced the increase in interest expense. And this would have been driven by a number of private credit instruments, which SCI would have actually exited during the Q1, September quarter. Also see we are highlighting the Puerto Rico credit fund investment income and the difference between last year and this year. Other thing to look at there is the fair value loss of $495.4 thousand versus the gain of $1.01 million, which I spoke about on the other. I can see that the difference between those 2 things is $1.51 million. And that's the reason why I'm saying from a quality of earnings point of view, even though net profit is lower, the quality is a better quality because it doesn't have a lot of that volatility. In fact, the volatile revenue item is actually an unrealized loss. And of course, I spoke about the impairment allowance of $497,000 versus $52,000, and I spoke about what would have driven that. Stage 2 assets undergoing restructuring, a little bit delayed in completing the restructuring and so we took additional impairment allowance, which is a prudent thing to do. So moving on to look at the contribution of Puerto Rico. By now, those of you who are regular earnings call would know the playbook here. Acrecent Financial Corporation is operating entity at the bottom of the Pyramid that's a company where the investments are made. You can see that it made $1.48 million for Q1 this year versus $1.58 million for Q1 last year. So a small difference. And as I said before, the company will have taken an impairment charge of about $400,000 plus on our legacy assets, which not something that we expect to repeat in upcoming quarters. And therefore, we would expect that we'll catch up and surpass the trajectory of our last year's financial results, ceteris paribus, all other things being equal. So you can see that when you translate this net profit up to the holding company, which is -- which owns Acrecent 100%, that $1.48 million is still $1.48 million. And then that's not consolidated any further. We' have to do a fair valuation of that $1.48 million. In other words, if someone were to come to us and say, we want to buy this asset that we have, want to buy your shares of Acrecent, then what we are pricing it at currently based on the profitability for the quarter, based on the market valuation of companies that operate similarly all over the world, primarily in U.S. and Canada, the value of that $1.48 million would translate to $1.91 million. And similarly for last year, the company would have had $1.48 million at the HoldCo. level SCIPRF, that translated to $2.67 million for the same quarter last year because the market multiples were higher. And for those of you who are not here for the first time, you will recall that maybe 18 months ago and 2 years ago, this very same calculation was actually resulted in a loss. I think in the 2023 period, Q1, the same -- we generated a profit, but the figure that went through SCI's income statement actually generated loss. And I would have been stating for a very long time for maybe 6 quarters in a row that I expect market multiples to normalize. And once market multiples normalize, we would start to see the benefit flow through to the financial statements of SCI, which is what we are seeing now. Second point I want to make, which is very important, is that SCI expects to start earning cash dividends from the Puerto Rico business. And this dividend payment -- the first dividend payment, we expect to begin by December -- by the end of December -- by the end of the year -- calendar year December 2025 and to continue on a consistent basis going forward as long as the company continues to make profit. And obviously, the more profit the company makes going forward, the more that dividend will be. So like I've been saying for quite a number of quarters now, the real figure to watch here is that, okay, once the company is making a certain level of profit, that cash is going to come back flow up to SCI. And therefore, this will actually enhance obviously, shareholder returns and the benefit that shareholders can expect from the company. We won't spend a lot of time on the next 2 slides. From an efficiency and management expense ratio point of view, efficiency, which is from an efficiency point of view for every dollar of revenues generated, how much of that goes out as operating expenses, is now 23.7%, which is very low. It's well below the threshold 40% benchmark to international best practice. And so the business is being quite efficient as to how it converts revenues, how much of revenues is lost to operating expenses. Similarly, from a management expense ratio, which is operating expenses divided by the assets under management, again, you want this ratio to be kept low. And what we promised shareholders from -- before IPO during private placement was to keep this below 2.85%, again, in keeping international best practice. And you can see that we have -- we are consistently below that over the past 4 years. And we are now at one of the lowest levels we have been for some time during Q1. From a balance sheet perspective, shareholders' equity was $75.35 million, down marginally by 2.2% versus $77.02 million in Q1, but higher than the ending figure at the end of the financial year, higher than the audited figure of $73.17 million. And the main driver why shareholders' equity would have gone down slightly. Again, it has -- really has to do with that big swing in the fair value that I spoke about on an earlier slide. So effectively, would have paid out $2.6 million in dividends from the similar period from Q1 last year to Q1 this year in terms of being recognized in the financial statements, the $1.6 million in April and then $1 million that was recognized at the September quarter for the October dividend. However, the net profit that was made was $3 million much versus the $4.9 million that was made for the similar quarter last year. So because we didn't make as much profit as last year, obviously, it means that retained earnings -- the change in retained earnings would have been a smaller change, and this meant that the shareholders' equity would have gone down marginally. But with that being said, overall equity that SCI has as a company is now $106.89 million. If you -- and you get the figures if you adjust for the fact that SCI has some perpetual preference shares, which when you are doing covenants or check-in ratios, you need to add this -- the perpetual preference share to the shareholders' equity to get effective what's the total equity base of the company. You're talking about $106.89 million for a company that began operations nearly 9 years ago. That is pretty phenomenal, I'd say. And this is important in the context of, okay, we would have gone through COVID-19 in 2020, which lasted with us for maybe 2.5, almost 3 years. And now Hurricane Melissa, we are facing a little bit of issue in Jamaica, not a little bit of issue for Jamaicans, right? It's a big massive issue, but for the purposes of earnings call presentation. It's not a major, major issue for SCI. I mean we have exposure and I have a slide that I'll get to -- go through what the expected impact on SCI. But I just want to make the point here that the company's balance sheet is quite healthy and strong. And in managing the balance sheet risk in a particular way, and we got through COVID-19 environment, we also managed this pretty decently, I would think. Total assets on the balance sheet, $217.31 million, which is up 6.9%. And from a dividend yield perspective, just looking at shareholders' equity again, the current yield as of the share price at November 17 is 6.1% from an IPO price level is 4.7% and from an APO level is 3.9%. Of course, that 3.9% is below our 5% threshold. I'll speak more about that when I get to the outlook section. Of course, we don't intend to remain there, right? But I'll address that in the outlook section. Balance sheet KPIs, again, looking at the balance sheet of SCI, debt to total assets. So we measure a couple of KPIs, which are benchmarked against international best practice. Debt to total assets, our limit is to be less than 0.5x. We are at 0.44x. So below the threshold. Asset coverage ratio, we expect to be above 1.5x. We are at 1.94x. And the reason why we are below 2 because if you go and look at the audited financial statements, our asset coverage ratio was actually 3.05x, which is almost, well, twice what the target threshold is. And what really happened here is that during the Q1 quarter, we exited a lot of investments as $19 million [indiscernible] , right? We have gotten back as cash. And that cash is actually sitting on the balance sheet and are sitting in credit lines that we would have used some of that cash to pay down close to the end of the quarter. So we haven't redeployed that cash as yet. And because of that, it means that we have less assets to use in the complication of asset coverage ratio. And for those who don't know what asset coverage ratio, it is basically looking at how many assets do you have on the balance sheet that you could convert cash and use that cash to then pay down debt in our worst-case scenario. So it's always important for us to maintain like a ratio above 1.5x because that says that we have enough assets that we could convert the cash to pay down our debt, which is why, as you'll see on the next metric with net debt to total equity, we are not heavily -- we are one of the lowest levered financing entities in this space at 0.9x leverage. And what this really means is that, again, we don't have a lot of debt on the balance sheet, no matter the economic scenario, we can withstand it, which is the same thing that we said when COVID-19 came about in 2020 because we are managing the company with a very low debt level, then we can navigate any type of environment. And the reason why I'm stressing on these things is obvious, right, because Jamaica is hurting and people are going to want to know, well, what is likely to happen with SCI's private credit portfolio. So I'm just heading off those questions from earlier today, the company has a very low leverage, a very optimized balance sheet to prepare for any type of situation. Nonperforming investment ratio, 0.6%, well below the 5% threshold level. In terms of investment activity, Portfolio was at $195.71 million. Of course, this includes the equity stake in the private equity business -- the private credit business in Puerto Rico, which is not consolidated all the way up in the SCI. The private credit business in Puerto Rico is that balance sheet is about USD 120 million, but that's not consolidated up, right? Portfolio company investments, $39 million versus $37 million similar period last year. New investment commitments, $4.1 million versus $6.3 million. So we didn't do a lot of business. Normally, I think the September quarter is sometimes lumpy. What I can say to you though is that all the cash that we would have exited and gotten back, all of that cash is already accounted for in terms of new investment commitments, which obviously are being deployed aggressively during this quarter, especially given the ravages of Hurricane Melissa, we are seeing tremendous demand, both from existing portfolio companies, but also from those new clients, new transactions who are looking for capital to provide businesses and services and -- to help in the reconstruction and recovery effort. So even though as a crisis, it's providing new business opportunities for SCI. Portfolio yield declined to 15% versus 15.3%, and we expect that yield is going to continue drifting downwards as we expect Central Bank to eventually reduce interest rates to help with the recovery to the hit that the economy -- Jamaican economy will take. Average tenure is still pretty low below 2 years, 1.5 years versus 1.4, not much change there. And I spoke about the dry powder already, $10.53 million that was on the balance sheet, and we had 8 million [indiscernible] that was off the balance sheet. So on a net basis, the available dry powder at the end of the quarter was $19.01 million. And like I said before, majority of that dry powder has already been pretty much utilized or accounted for, let me say it that way. In terms of getting access to additional dry powder, I will speak more to that in the outlook, but we are exploring quite a number of different financing opportunities with international financing partners. And as well, SCI is seeking to be a sponsor of another private credit business, which will bring new financing from external parties. So we are looking at quite a few. One thing I want to highlight is that during the quarter, SCI would have successfully extended maturing preference shares that would have matured in December -- at the end of December 2025. They were extended for additional 3 years. There were 2 J dollar Class C preference share and U.S. dollar Class D preference share in the amount of $9.97 million and $16.78 million, respectively, in U.S. dollars. Now extended to December 2028, and we did so by getting preference shareholders to agree to reducing rates. The J dollar rates went down by 65 basis points to 9.85% and the U.S. dollar rates went down by 50 basis points to 7.5%. So we will see the benefits of that reduced interest cost in SCI financials as we go through the second half of SCI's fiscal year results in 2026. Now to risk management. I'll spend some moments here just to give you a bird's eye view of what our initial assessment of Hurricane Melissa is. What we have here are the 4 industries that were directly impacted. We have 2 portfolio companies in food distribution business with a value of $10.29 million. In the telecommunications industry, we have 1 portfolio company, a small figure $8.300 in the hospitality sector, 2 portfolio investments of $5.27 million and in manufacturing, 1 portfolio company, $3.62 million. So in sum total, this comes to $20.1 million or 12.7% of SCI's overall -- of SCI's portfolio, right? What we have obviously had initial meetings with all of these companies just to try to get to understand what's their strategy and how they activated their BCP, which all of them have. So everybody have activated the business continuity plan. Many of them have already filed insurance claims and the insurance claim would include parametric insurance, which basic guidance means a set insurance that is triggered and that gives you a particular payout based on certain predetermined triggers. We have property insurance, consequential loss insurance claim that have been filed by companies in respective industries to try and get some cash to assist with their rebuilding efforts. Companies who have also activated or are in the process of activating financing plans to undertake recovery, reconstruction and rebuilding so that they can normalize operations. Of course, on a case-by-case basis, just like what happened during COVID. So we have a playbook that we would have used during the entirety of the COVID-19 pandemic. So we roll that playbook against on a case-by-case basis, SCI, of course, stands ready to provide support as necessary to portfolio companies that reach out to us who need assistance. And this assistance will obviously come in various form. Some companies will need working capital support. Some other companies may require some leeway in terms of not having to make interest payments for a while. And of course, this is what would have happened during COVID, and this is an unmitigated disaster that's no further of these companies. And so we look at that on a case-by-case basis and provide that support. And of course, we [Audio Gap] to do so. And some companies have already reached out to us, and we have already activated some plans -- some of these plans for some of those companies to ensure that they get the support that they need. Of course, we are always forward-looking and not backward looking. And so in our forward-looking assessment, obviously, we are recalibrating this kind of biweekly on a monthly basis just to see what's the update, how things are progressing. Are there any new setbacks? Are companies getting execution according to the plan and then we recalibrate what that effect is on SCI and how -- obviously, how we can help the [ companies ]. The first are our business is just to help companies to get back to normal. Of course, there are many, many people who are suffering in multiple communities. And so businesses have to get back to doing business [Audio Gap] while we help support the communities who are so severely affected because by getting back to normal operations, it means that these are jobs that people can have because people need to be able to rebuild homes. They need children that need to go to school, they need to be fed, et cetera, et cetera. And so the only way that this can work is for everybody to put together, including businesses getting back to normalized operations. So from a portfolio resilience, I want to highlight that 77.6% of the $20.1 million or $15.6 million of the negatively affected -- directly affected portfolio companies are actually what we call sponsored portfolio companies, which basically does mean that these companies are part of a large group or they have more than one sponsors. And what this typically means is that these type of companies normally have better financial firepower as well as organizational support, which gives these companies a substantially better chance of recovering much faster than companies that are not sponsored, right? And therefore, they can react much faster to event risk of this type. And we saw this during COVID-19 pandemic. And I think if you were to go back on SCI's -- on Sygnus' website and look up the earnings call that we have done, and reports that would have released during the COVID-19 pandemic, you would have seen where we would have mentioned the same term about sponsored portfolio companies and the fact that we had more than 3/4 of the companies at the time that were sponsored. And that's one of the things that helped SCI to navigate through the COVID-19 pandemic by actually outside of the one hit that we took at that time, we would have actually hit a record financial performance during that time. So I just want to highlight that. On the other side, right, so that's the risk. On the other side, we -- $7 million or 4.4% of the portfolio companies, obviously, these are Jamaican firms were positively affected by the passage of hurricane just because of the type of business that they are in. So they would have seen substantially increased business activities and our increased demand for these services to be utilized in the rebuilding and recovery efforts. And many of these have already reached out to us for additional working capital to expand their businesses, to bring in new inventory, new raw material, et cetera, to monetize on these opportunities. And we also see substantially strong demand from portfolio companies who either were clients of SCI in the past, we have done business and repaid their facilities 2, 3 years ago, who are now reaching out need additional capital because they want to take -- because they are seeing opportunities to provide business support services to help in recovery and reconstruction post hurricane. And so what we are seeing is that we are seeing a lot of demand for flexible capital due to the passage of hurricane. And in fact, we are exploring a facility with an international financial institution. Hopefully, it comes through [indiscernible] that we could dedicate to rebuilding efforts in Jamaica because in times that this capital is a very precious thing. So we're working on that as well. Hopefully, we can get that approved. And if that is approved, then we will provide that information as soon as that is -- that becomes material nonpublic information to shareholders. Just looking at risk management chart from a balance sheet ECL charge, you will see that the balance sheet ECL ratio would have gone up to 2.4% at the end of Q1, September 2025, still below the 5% kind of target threshold. However, the majority of this increase would have happened at the end of the financial year, we would have taken a substantial impairment charge as I would have discussed during the earnings call for the [indiscernible] because of the ECL that would have taken as a forward-looking -- initial forward-looking assessment for Hurricane Melissa, along with the delay that I spoke about to stage 2 company that is undergoing restructuring. Other point to make here -- I think I would have made this point before that in the history of SCI, we crystallized realized, so what would have been easier in terms of realization is 0.2% of all the capital that we have deployed on an annualized basis since inception. And that nonperforming investment ratio as at the end of the quarter was 0.6%, well below 5% threshold. From allocation per industry, not many changes there. You can see that the company is very well diversified across multiple industries, over 20 industries when you incorporate the portfolio in Puerto Rico. From exposure by region, you can see that Puerto Rico is the majority at 37.5% and there is Jamaica at 26.2%, and I would have spoken about the direct impact on the overall portfolio, which I would have mentioned figure earlier on -- in the presentation that it is 12.7% of the portfolio is directly affected. And then I gave the figure of those who are -- that's negatively and those who are positively effected was about 4.1%. So now to finalize with the outlook. So I want to spend a few moments here. The first big picture item here is that from a strategic perspective, growth opportunity and scale in that business, we have set a new target, which is to get the overall platform for private credit that SCI has to USD 500 million over the next couple of years. I would say between -- another 3 years, we want the portfolio substantial -- between 2 to 3 years, we want to get to USD 500 million in terms of our private credit portfolio. And to get to USD 500 million, we're going to have to do 2 things, obviously. One of the big things that we're going to have to do, we're going to have to expand the private credit business in Puerto Rico to scale that business. And we spoke about the growth in that business and the returns that, that business is generating. And so one of the things that we're going to have to do there is to -- we spoke about the dividend that, that business has started -- well, effective is going to start paying before the end of this calendar year. And so one of the things that we're going to have to do there, obviously, that business has a large credit line of $100 million. We want to expand that credit line initially by an extra $50 million. But over the next, I would say, 18 months or so to get that up to double that, right? And to do that, we obviously have to raise additional capital in that business is either through additional investments by SCI, investing additional equity or raising equity from investors, whether in Puerto Rico or from other markets adjacent to Puerto Rico, such as, for example, the U.S., if the opportunities arise. So that's something that we'll have to look at and take on in order to -- because to get to the Puerto Rico business, like I said before, has about $120 million in portfolio investments. So obviously, we are looking to -- we need to double that if we want the overall private credit portfolio for SCI to be $500 million. The Puerto Rico business need to be like $250 million, and then you have the other side being $250 million in our base case scenario, right, to get to $500 million in terms of portfolio. The actual portfolio that SCI has right now is about $175 million thereabouts when you -- if you take out the value of ---the equity value of [Technical Difficulty], which is about $30 million. So we are working seriously on that, right? And to do this, we'll also have to perhaps look at how the Puerto Rico business do another reorganization of itself to allow for investors to actually raise capital in a manner that is conducive to how investors from the Puerto Rico market would -- are from Mainland want to deploy their capital. So as currently configured, the business isn't configured for investors to actually invest. And so that's one of the work that we are doing at the moment to kind of create that organizational structure so that [Technical Difficulty] institution A, institution B can come and say I want to invest $10 million, $20 million as equity in the business that will then allow the business to use that equity capital to tap increase credit lines and then that's how the business grows and expands, right? So we have started to do that, and we'll provide more information on that as we go through time. Second thing -- so that's the first bullet point. Second bullet point, obviously, is for SCI itself to also grow. And just to go through this, we have targeted $1 billion in portfolio transaction. I think that we are going to get to this $1 billion. We are -- I think we probably -- we're over $500 million currently, getting close to $600 million in terms of transactions that we have executed on. So I don't have any doubt that we'll get to $1 billion, especially with the ambition to effectively look to double the Puerto Rico business over the medium term. We still have to generate a high -- we need to beat that ROE figure of 10% that we spoke about. We have to also grow EPS 20%. I know that we are down for Q1. But like I said, if you strip out the volatile revenue from last year, we'll catch up. And going forward in Q2 and Q3, ceteris paribus, we may get back on track, right? Dividend yield, we need to maintain that an APO price above 5%. Know that Puerto Rico has started to pay dividends once we have a much clearer line of sight of the effect of Melissa, we can look to normalize business -- sorry, dividends. Also, we are -- there are companies on the balance sheet that we are -- that's going to restructure. And once those restructuring are normalized, then we can look to see how both the combination of the Puerto Rico dividend and the SCI dividend can filter through to get back dividend to generate a yield of greater than 5%. And final point under the strategic growth part for SCI is we are constantly in the business of raising capital. And I spoke about this $10 million international facility on quite a number of earnings calls. Hopefully, based on the acceleration of discussions due to the passes of Melissa, that this gets fast tracked and that we are actually working on a fast track program. So hopefully, that gets executed. We are also in early discussions with a number of other financiers who, again, the trigger of Melissa in a sense, is benefiting SCI by maybe some doors that maybe wouldn't have been opened are now opening, obviously, because everybody recognizes that there's a tremendous need for capital to flow directly into Jamaican businesses and to Jamaican entrepreneurs at this time. So we are working on that and looking at multiple -- we are evaluating multiple term sheets for large figures of capital to raise. And I'll provide more information on that once we can. In terms of new business, we are waiting on a business license for a business that we are SCI sponsoring. And this business, we expect over the next maybe 2 or so years, that business could grow to be beyond 50 million and SCI would be a substantial investor and shareholder in it. We have an international financing partner who has already committed $10 million. And so we are just waiting effectively on the business. And once that is concretized, we can make the appropriate announcements, et cetera. So this is one other way in which SCI private credit portfolio can get to the $500 million mark. So we have more than that once it is concretized, and I think we are very close at the moment. Buyback, we haven't activated any buyback during the period, but the buyback program still remains. And once it expires, well, I expect that buyback program is actually going to be renewed once it comes up for consideration by SCI Board of Directors. And fifth and finally, obviously, Hurricane Melissa risk mitigation and portfolio company support. Obviously, our first start is to provide oversight and risk management to ensure that we are managing the risk appropriately. But absolutely, we are just zeroing in on how we can support these entities. Like I said, businesses need to get back on their feet. And SCI as an alternative investor was designed specifically to deploy flexible capital when circumstances dictate that maybe traditional financing won't be available in as much as one would like, right? That's what alternative investments do all over the world. So if you look in the U.S. market, a little bit in Europe, a little bit in Asia, but primarily U.S. market, that's what all the private credit funds do. They are designed to fund middle market companies, medium-sized firms because those firms don't have enough access to capital. And in many instances, the access -- the type of capital that they need does not match with their growth and expansion plans. And I'm pretty confident that in this instance, the same thing is going to apply. And we saw the same thing during COVID, which is when SCI would have done quite a lot of this. I think we went -- I think during that time, we did record -- we deployed record capital. I don't think we have been in that record since just because of what happened in COVID. So we expect a similar type of occurrence happen here, but we also have to manage the risk exposure, and that's what we exist to do. Thank you very much. I hand back over to you, Damani, for some questions.

Thank you very much, Jason, for that very informative presentation. I'm sure listeners, investors, analysts alike appreciate the clarity and the context that you've brought to our performance and trajectory. We'll just jump straight into the question-and-answer session as per usual. I already see some very good questions from some usual suspects. [Operator Instructions]. So let's get -- so first question is SCI had USD 10.5 million in cash dry powder and USD 8.4 million in undrawn revolving credit lines at the end of Q1. Do you expect to fully deploy a good portion of the dry powder in the current quarter based on your deal flow and the current economic reality after Hurricane Melissa where funding will be needed to rebuild?

So very good question, right? And I could -- let me see how I should answer. What I would say is that our money has already been committed like fully, so in terms of the actual cash going out the door, as you know, there are some transactions where the funding is on a drawdown schedule. And so you don't get -- you don't send all the cash at once, but the $19 million is fully committed. We actually need new capital. And of course, you know that we have multiple channels through which we can raise capital. And what I can say is that those levers have already been activated and so we have additional capital that is coming in because $19 million is a drop in the bucket relative to the demand that we have seen and that we are seeing. And I'm not talking about from portfolio companies who need working capital support that exist on our balance sheet and they need help from us, I'm talking about just what exists in the market, just like the volume of demand from businesses and entrepreneurs that need flexible capital to just operate and do business. So we have already activated those levers and have additional resources on hand. Well, effectively, certainly [Audio Gap] end the quarter, we have additional resources on hand to meet that need.

So a follow-up question to that is stock prices on the Jamaica Stock Exchange have trended down since Hurricane Melissa as investors seek to stockpile cash. And this would have invariably affected SCI stock price as well. Given that the company did not execute any share buyback in full year 2025, which is scheduled to end in June 2026, would the company consider deploying some of this cash to buyback shares in the short term based on the size of our cash balances now?

It's a good question. It's an interesting question, right? So at the moment, to be honest, just based on where we are looking at the business today, speaking to you, the first priority is to deploy capital to business that needed just because even though buying back shares at a steep discount makes a lot of sense from a financial engineering perspective to increase earnings per share. And then when we are paying out dividends for the dividend per share to be substantially higher for investors who are still holding the share because it's more money to be divided among less shareholders. We still think that the first priority is going to be to push as much capital as possible into the Jamaican business that needed. Obviously, we also have businesses across the rest of the Caribbean who -- Christmas is around the corner, et cetera, and people are constantly doing stuff. So SCI is invested across a lot of Caribbean territories. And even though Jamaica has tremendous demand, there's one particular Caribbean country that probably is rivaling Jamaica in terms of sheer size and demand of transactions in terms of appetite, right? So yes, we have to -- dry powder [ transaction ] at the moment. And so I never say never because if the stock price goes to some absolute ridiculous level, then it might make sense for us to based on how many shares we can buyback with the amount of money makes sense for us to do so. So I'm not ruling it out. I'm just saying the first priority is to ensure that the communities that we are living because the Sygnus team is -- majority of the Sygnus team is sitting in Jamaica. So we have to ensure that the communities that we live in and the business that operate there have a very good chance of getting back to normalization as fast as possible. So that's how I'll answer the question.

Thanks for that, Jason. So for this next question, you've actually just touched on a little bit of it, but it's a 2-part question, so I'll ask both. So what's the demand been like from Jamaican clients in light of Hurricane Melissa's recent impact? That's part one. And part 2 is, has there been a delay in some planned transactions due to the hurricane impacting the reality of the deal? Or have clients reached out asking for some restructured terms or additional cash to navigate this period?

So a combination of all of the above, right? So first of all, I don't think there is demand, I don't think we have enough capital. Even with the capital that we are raising, I don't think it's going to be enough to satisfy the need. I mean, there's an entire -- for example, entire telecommunications infrastructure, health care infrastructure, education infrastructure, distribution infrastructure, you name it, hospitality, right, et cetera, et cetera that infrastructure severely damaged, right? So obviously, people need capital. And obviously, those businesses pretty much -- they're not generating any cash, right? Our -- [ the part of the ] business that's in that side of the island isn't generating any cash. So obviously, those entrepreneurs need cash to, let me rebuild. Obviously, you will have a situation, for example, where employees can't go to work because they don't have anywhere to live, they don't have any transportation, there isn't electricity. They don't have telecommunications, list goes on and on and on and on, right? And so from that context, obviously, there are going to be portfolio companies that I would have pointed out that are going to need some kind of moratorium and the interest payment, obviously, right? Just like what happened during COVID, I will have to give them a facility to help them to remain current, whichever route we take, they need assistance, right? And there are companies that are -- because of the demand for goods and services that is focused on the most severely affected parishes in the country, then that's just additional bonus for them, right, where they just have people coming and buying food, for example, buying whatever type of material, et cetera. Then obviously, those businesses are getting substantial uplift, and therefore, they need way more inventory, right? And so yes, they need cash to go and buy a lot more inventory and stock it because as fast as inventory coming -- goes out or service that they are providing as fast as they can provide a service, people need more and they need every day because this is going to take a while to recover. So it's a combination of all of the above that we are seeing. And as an alternative investment company, like I said, our whole purpose is to use our innovative skills to structure financing solutions that match perfectly with the need of the client. And so what we are doing is providing an alternative channel to which capital can flow, which will obviously complement the bank financing that all of these clients actually have access to, but it may not be enough or any other form of capital that they have access to. So we are just one other channel, and we have to do our part. And so far, we are seeing the demand, like I said, to put a figure on it, it's going to be -- it's a big figure. What we have seen so far to come to our doors in terms of reaching of our capital, it's a big figure.

Okay. Thanks for that, Jason. I will move to some questions that are querying some aspects of expenses that we would have recognized during the period. The first is what accounted for the sharp rise in audit fees during the quarter? Did the scope of the audit expand?

Exceptionally good question. So the audit fees reflect basically 2 things, right? One of them is that audit costs are going up. And if you look at -- I think if you do an assessment of all the publicly listed companies in the Jamaica Stock Exchange, you'll be shocked to see the percentage of companies who -- audit fees are -- audit expenses are higher one, but 2 who actually report late financials, and I'm talking about like audited financials, right, over the last, say, 18 months is a very, very, very high in number. A matter of fact, they are -- so the audit industry having a challenge where many audit firms, audit teams are being whisked away by more developed countries. And so as a result of that, the cost to having -- the cost to the auditors are higher and obviously, they're going to pass on the cost, right? So that's one. But a more substantive reason as well is the Puerto Rico business, right, is growing and expanding. And there were a number of additional audit scope that had to be done on that business -- that were done on that business in this audit, especially because the first full year post restructuring would have happened June 2024, right? And then this now is like the first full year after getting that initial look at the business. So there were a number of items that were related to that. So overall, those are the 2 items that drove the audit expenses. But in terms of SCI, Jamaican; SCI, Saint Lucian business proper, there was nothing, no audit scope was expanded outside of looking at some items for the Puerto Rico business. And this has to do a lot with, for example, taxes and valuation of the numbers that come from the Puerto Rico business into SCI's financial statements. So there wasn't anything else for a normal regular audit. And as you can see, we would have reported our financials within the prescribed time line for the audit, that is. What was the other question...

Yes. So the next question is the performance fees showed a reversal and reflected a higher charge in the prior period. That's now been reflected in Q1 after the audited financial results. So I suspect this is more of like a yes or no or add further if necessary.

Yes. So basically what happened -- normally however I call unstated and basically, when you do an audit and you do the final calculation, there may be -- you might find -- well, for the performance fee, based on the final net profit, the figure was slightly different. And so basically, there was a -- I don't want to say a correction, a balancing for the figure that would have passed through the income statement in the audit that was not restated, right? And if you look at the previous -- if you look at all the audits, you normally are going to have 1 or 2 line items, which are not material that when the final financials is done, if it doesn't meet the audit threshold for like redoing the financial statements, then you just correct for that figure in the Q1 results, which is a normal course of business for our audited financial statements. So that's why you have that reversal.

Okay. And just a few more I'm seeing here. So one, with respect to the Puerto Rico business, what's the outlook looking like in terms of performance or demand in that market?

Okay. It's a good question. So Puerto Rico business is actually executing quite a number of very innovative transactions. As you know, Puerto Rico is an economy that has certain tax benefits for like people who are residents we get a substantial tax benefits, right? And for businesses that are executing certain type of transactions, for example, in real estate or construction, you can take advantage of tax credits, which is provided by the government. So we are seeing a number of transactions where people take structuring investments utilizing tax credits as well as Puerto Rico's energy sector has been underutilized for almost 1.5 decades, right? If you remember, Puerto Rico was actually in default for like 15 years. And it came out of that pretty much the same month that SCI went and bought and acquired Acrecent Financial in Puerto Rico in 2022. So because of that, we are seeing a lot of transactions like that and the team over there are actually doing a fantastic job of executing on some of these transactions to fund the real economy. They have done a tremendous job funding schools, hospitals, doing equipment financing, funding renewable energy projects to add to the national grid, et cetera, et cetera. So the demand there is great, which is why I said earlier that we want to double the Puerto Rico business, and I gave a time line for that I would say, let's call it, 2 years. Two years a long time, 2 to 3 years, I would expect it to execute it before that, but I don't want to overpromise and under deliver. So let's say, within 2 to 3 years, that business need to be $250 million to $300 million in terms of the private credit portfolio. And I outlined already the way that we intend to do that, which is to raise equity capital from within Puerto Rico and/or from elsewhere, which can possibly also be on the Mainland and then use that equity capital to increase -- to double the credit line effectively. First goal would be to increase the credit line by about 50% and then second goal to increase it again, so to get it double over, let's say, the next 18 to 36 months, right? And that would give the Puerto Rico business substantial additional dry powder to deploy a lot more investments to get the portfolio to double from where it is today. So yes, we are seeing -- and Puerto Rico debt to GDP now, I think is under 30%, right? Remember, maybe 2 years ago, I said that we expected eventually Puerto Rico is going to get upgraded to investment grade. And I think they are effectively investment-grade economy because the debt ratio is that 30%. So that type of economy and what's happening with tariffs, Puerto Rico has a huge benefit because they are the #1 pharmaceutical producing state, and I'm using state in quotation in the entire U.S., right? It's the biggest pharmaceutical industry in the U.S., Puerto Rico. And so what's happening with tariffs, a lot of people can nearshore to Puerto Rico. And then obviously, because Puerto Rico is effectively a U.S. territory, then there are no tariffs from -- the effect of tariffs from Puerto Rico in the Mainland U.S. is pretty much nonexistent. So we expect Puerto Rico to move from strength to strength. There's a lot going on in the real estate market. They haven't had any real estate developments in 15 years. And so that market has just spun to life over the last 2 years and they have CapEx from the U.S. government about $50 billion or so that's earmarked for the next 5 years to fund infrastructure development. So we expect that economy to grow from strength to strength next 3, 4, 5 years without -- on a continuous basis. So it's a market that we love, and that's the reason why I'm saying that SCI will continue to invest in the Puerto Rico business in investing equity based on the return that we are getting and the fact that, that business is going to start paying SCI dividends. So cash flow will start coming back to SCI, which flow clearly directly back up to SCI shareholders. So we're happy about the business.

Thanks for that, Jason. And so the final question I'm seeing in the Q&A on Teams, [Operator Instructions]. But the final question on the Teams chat is what is the update of SCI with respect to the recovery of the team and hotel asset, which was sold? And will you be calling on external support to settle this recovery?

Like I've said, I think on the last 2 earnings call, this question was asked. And even when we initially did the write-off, I had said that I hope we get back something, but my probability of recovery was pretty close to 0, right? And that's where it remains. I don't think that we're going to get anything to write back. That is just asset that based on the liquidation of it, I don't think there's anything for SCI get unfortunate, but that's how it is. I don't think there are -- I don't think there are many avenues for us to pursue outside of the collateral that was there. So I don't have anything new to add. My view is that that's one of those investments that we don't have to bite the bullet on. We still obviously will pursue any and all options that are available. But just based on perhaps cost and probability of success, et cetera, at this stage, as I'm speaking to you, I mean, this may change, but at this time that I'm speaking to you, I still maintain that probability of recovery is pretty close to 0.

Okay. Thank you for that, Jason. And thank you overall for a very informative and detailed question-and-answer section. I'm sure listeners and investors, as I said, have appreciated the insight that you brought. I would like to give a special thank you to our attendees. Thank you for taking the time to listen to the presentation. And again, thank you, Jason, for taking the time to walk us through. If you have any lingering questions, we encourage you to reach out to us via [email protected] or more directly [email protected]. And I'd also like to remind everyone that the recording for this call as well as the presentation deck will be available on both the Sygnus Group's website and YouTube page. I would also like to encourage you again to read the full MD&A report, which can be found on both the Jamaica Stock Exchange website and the Investor Relations section on the Sygnus Group website. And with that, I'd like to thank everyone for coming, and I wish you a productive rest of the week. Goodbye.