The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange (BISX) has declared the first dividend in its near-20 year history, its chief executive joking yesterday: "This has made my job harder."

Keith Davies, BISX's chief executive, told Tribune Business that the first capital return to shareholders, which is due for payment this week when the 2018 first quarter ends, provided further proof that the exchange had completed the journey from 'life support' to "a healthy company".

He said the dividend would likely boost confidence in BISX and the wider Bahamian capital markets, as it showed the exchange was 'for real' and now sustainable following initial woes that required the Government - through the Central Bank - to lead a shareholder 'bail-out' in 2003-2004.

Mr Davies suggested the payment, which provides confirmation that the exchange is generating consistent profits, would force shareholders who had previously 'written off' their BISX investment to "reverse" this treatment and "take a second look" at its activities.

He emphasised, though, that he was "absolutely not" satisfied with BISX's progress to-date, and is now targeting growing its 100 listings to "several hundred and then several thousand".

While declining to provide details on the "key initiatives" BISX is currently working on, Mr Davies said he had not lost sight of his ambition to advance capital markets technology to the point where it could offer 'straight through processing' for securities trades in the Bahamas.

"When you do something like this that's positive, guess what? You have to do it again next year," the BISX chief executive said of the dividend declaration.

"The purpose of any company is to make money, increase the value of the company and return value back to the shareholders. If anything, this made my job harder, which is welcome, because it shows we're doing the right thing.

"Like any good shareholder, they'll want you to do it again and again and again. We have to duplicate our efforts thus far and better them in the future. For me, it's laser focus. I guarantee you in the future we're going to get a call saying: 'When's my next dividend?'"

Mr Davies declined to provide the value of the payout, both in terms of cents per share and total amount, on the grounds that BISX is a privately-owned company. However, the declaration indicates the exchange has come a long way from when its survival was questionable, requiring a capital injection from both the Government and existing private shareholders to secure its future.

"I said to someone once: 'One of my crowning achievements will be the payment of a dividend'," Mr Davies recalled. "The person burst out laughing as if it was never going to happen. That was someone was not affiliated with the exchange, and was a critic of the exchange.

"That happened years ago. If you don't have a vision, goal and a plan, I can see how someone would laugh. That's not the case here."

BISX was formed in 1999, and launched its live trading platform in May 2000 with nine listed companies. It was instantly plunged into heavy losses, though, after ramping up its activities for business that never materialised. Having committed to expensive salaries and other costly liabilities, the 'red ink' swiftly mounted.

"We came from a high point starting in 1999," Mr Davies recalled. "There were very high expectations, and a lot of things said, and a lot of people involved in the beginning. Things didn't go as planned, and we began to experience financial difficulties.

"We can point many fingers at many different parties, and complain about a lot of things. That doesn't solve the problems you have." Some of the criticism was directed at the then-Ingraham administration for allegedly failing to deliver on promises to list government debt, the most highly-valued and deepest security in the Bahamian capital markets, on the exchange.

As a result, BISX was forced to adjust its business model to one where the exchange developed by 'incremental steps', expanding its business and trading platform according to market needs and demands - not what it thought were the needs and demands.

"We really had to change the platform, change our focus and, as I said then, get back to basics," Mr Davies told Tribune Business. "The market was not sustainable given that a lot of things had to happen, and a lot of promises made had to happen, and they didn't.

"I changed the model to be more inward looking and organic in nature. We grew as the market grew, and put things in place when they were needed or required. That has proven successful. We had to take a step back and do the things necessary to make it viable, and make the hard decisions. We had to live lean."

Mr Davies joked that BISX had to become agile "before the term was ever coined" in relation to its business, only implementing initiatives when the Bahamian capital markets were ready for them.

"It's very difficult to get ahead when you're treading water, trying to keep your head above," he said. "We're now stroking in a particular direction, moving forward and taking small, incremental steps and doing the things we need to do.

"Having said that, am I satisfied with the current status? Absolutely not. You become complacent when you're comfortable. We've now achieved something [the dividend], and have got to maintain it, sustain it and make it grow.

"I can't go into them right now, but there are a few key initiatives that we're working on that will hopefully drive us, and drive the market, in a positive direction."

Mr Davies said BISX had to "continually prove ourselves", and win investor and market trust by delivering new, innovative products and service delivery mechanisms that produced faster, cheaper and more efficient trading.

Pointing out that the exchange had grown to around 100 listings, once investment funds, corporate bonds/preference shares and government debt were added to the 'Main Board' equities, the BISX chief executive told Tribune Business: "Is that enough?

"No. I'm not happy with that number. That number needs to be several hundred, several thousand. As I always tell people: We have heavy lifting to do. The work hasn't ended; it's just started.

"Our capital markets are still not developed as they need to be. Technology-wise, we need to have more linkages, and my goal of straight-through processing has not been reached for a variety of reasons."

Mr Davies said this would allow seamless, simultaneous transfer, registration and settlement of securities transactions, adding that BISX needed to work with the Central Bank, its broker/dealer members and the Bahamas Central Securities Depository (BCSD) to make this happen.

With the Government as BISX's largest shareholder, owning more than 40 per cent via the Central Bank, Mr Davies suggested the exchange was an example of a public-private partnership (PPP) that worked given the absence of interference by successive administrations.

While BISX has faced, and continues to endure, criticism from capital markets observers on issues such as a lack of liquidity, inefficient trading mechanisms and stock prices that are not based on fundamentals, some of these issues are outside its control.

And Mr Davies yesterday suggested that the dividend declaration would likely make some shareholders and capital markets players 'take a second look' at the exchange.

"Some shareholders said they'd basically written off their investment, but if you pay a dividend it's entirely unlikely companies in their books will have zero on it," he told Tribune Business. "I suspect those companies not actively involved in what we've been doing will take a second look."

Mr Davies paid tribute to BISX's staff, many of whom are long serving, together with the support of the exchange's chairmen, Ian Fair and current incumbent, Andrew Strachan, for their role in the turnaround.