Dunedin-based Motor Trade Finances has survived the two most difficult years in its 39-year history, and has come through in good shape, managing director Angus Bradshaw says.
"We believe we are well prepared to face another year of challenge and uncertainty," he said when releasing the company's annual profit.
MTF reported an after-tax profit of $8.8 million for the year ended September, compared with a profit of $3.7 million in the previous corresponding period.
New loan sales fell nearly 35% to $288 million, compared with $442 million in the previous period, as motor vehicle sales slowed.
Assets fell 14% to $536.4 million because of lower sales, Mr Bradshaw said.
"We expect assets to reduce further through the coming year, in a depressed motor vehicle market, as transacting shareholders are encouraged to be more selective in new loan origination."
Ordinary share capital of $22.3 million reflected the capital structure approved by transacting shareholders on October 29, 2008, to convert from a co-operative to an investor-owned company, he said.
Capital, as recorded in the balance sheet, totalled $63.5 million, including perpetual preference shares, giving an improved capital percentage of 11.8%.
At the time of writing the annual report, MTF was managing ledgers totalling $12 million ($2.5 million last year), where it was believed the company might be at risk, Mr Bradshaw said.
There had been no material additions to managed ledgers since the the end of the financial year, and the amount being managed was down from the $18 million reported at the half-year.
Provisions for expected losses was $4.7 million, including $3.3 million for specifically impaired assets.
MTF had written off $1.9 million of loans that it had not been able to recover from borrowers or shareholders.
"Because of our experience in this recession, we have tightened lending criteria with the primary focus on our traditional business of used motor vehicles.
"In our view, vehicle sales will remain depressed until at least the middle of 2010, resulting in reduced opportunities for finance sales."
Personal property security registrations, the best measure of vehicle finance activity, fell from 296,000 in 2007 to 217,000 in 2009 - a drop of 27% - as the recession took effect, Mr Bradshaw said.
The traditional source of finance for MTF, through vehicle dealerships, was under threat, as more used motor vehicles were traded public-to-public.
Dealer share of change of ownership was now below 30%, with public-to-public sales recorded at 70%, he said.
Finance sales through dealerships would need to be complemented with sales direct to the public, and MTF Direct was delivering tangible results in that direction.
There were 14 MTF Direct franchises delivering more than 20% of monthly sales.
New franchisees would be appointed as suitable candidates presented themselves and the market provided opportunity.
The dealership would remain an important source of new business, Mr Bradshaw said.
There was still considerable uncertainty in the world economy, and MTF would continue to treat lending with caution, until there were real indications of economic recovery.
"As long as the US economy remains uncertain, we can expect the markets for New Zealand primary production and tourism to remain volatile, and this will feed into consumer confidence, which must be restored before we can expect any meaningful improvement in economic activity," Mr Bradshaw said.
