South Canterbury Finance, led by Alan Hubbard, continues to avoid the woes that have afflicted many others in the industry.
To prove its point, the Timaru-based company yesterday reported a record before-tax profit of $70.8 million for the six months ended December, up from $26.1 million in the previous corresponding period (pcp), and announced it had secured additional funding of $125 million from the United States Private Placement market.
The profit was helped by the proceeds from the sale of the Dairy Holdings stake. The core business before-tax profit was $30.4 million, up from $26.1 million in the pcp.
Chief executive Lachie McLeod said no New Zealand finance-year private company had ever obtained seven-year funding from the US Private Placement market.
‘‘South Canterbury Finance has achieved this in a tough market and it is testament to our strong performance, management and Standard & Poor's investment grade rating.
‘‘These private placement funds will bolster South Canterbury Finance's cash reserves and, when combined with our undrawn bank line, will total $450 million of available funding.''
The liquidity position put the company in an enviable cash position among New Zealand finance companies, he said.
The funds would be used cautiously during the next 18 months and would allow the company to continue selected lending, service existing loyal clients and ride through the credit crunch.
The company reported an after-tax profit of $64.4 million ($17.4 million in the pcp).
Total assets at balance date were $1.85 billion. An additional $25 million of new ordinary capital from shareholders lifted total equity to $270.8 million.
Mr McLeod reported strong earnings from all 13 regional finance companies. Operating expenses for the six months remained static.
Cash on hand at balance date was up from $131 million in the pcp to $272 million. Sale of the 32% shareholding in Dairy Holdings realised a profit of $40.5 million.
Strong management, a strengthened balance sheet, diversified lending and the BBB-S&P investment grade rating had enabled South Canterbury Finance to diversify its funding base by more than $400 million in the past six months, he said.
That had been achieved by secured bonds ($125 million), US Private Placement ($125 million) and banking facilities ($150 million).
Mr Hubbard said the company, established in 1926, had survived the depression between 1929-36, World War 2 and all the subsequent credit crises in the New Zealand economy.
The company was on target to produce a pre-tax profit for the June year of more than $90 million, he said.
