Listed Pyne Gould Corp - underpinned by finance division Marac Finance - has delivered a 23% increase in its half-year after-tax profits to a backdrop of 24 months of turmoil in the finance sector.
Its three divisions have all booked increased earnings growth, including its year-old Ascend Finance, which targets lending in regional areas, now holding $100 million in loans, being in profit and forecast for more growth.
More than a dozen New Zealand finance companies have faltered or failed during the past 24 months, as worldwide credit dried up and suddenly risk-averse investors shied away from investing or reinvesting the sector.
However, Pyne Gould Corp booked an after-tax profit for the six months to December up 23% from last year at $22.1 million, highlighting varying forecasts of growth in divisions Marac, PGG Wrightson holdings and Perpetual Trust, which would all contribute to a better result than last year's after-tax profit of $36.7 million, chairman Sam Maling said yesterday.
Marac contributed 60% of the half-year result, from an 11% increase of after-tax profit to $14 million, Pyne's stake in rural firm PGG Wrightson contributing 32 % from a 66% increase on last year at $7.6 and its Perpetual Trust division an 8% contribution from a 19% after tax increase to $1.8 million.
Marac's loan book had increased 11% during the past six months from $1.33 billion to $1.56 billion, equalling its growth for the previous full-year term, while its range of reinvestment had stayed within a historical 65%-75% band, as did its band of bad debts, booked at 0.5% for the six months.
ABN Amro Craigs broker Peter McIntyre said the result went against the grain of the current state of the finance sector woes because of Marac's status in the top 10 finance company list, reiteration of Standard & Poors investment grade BBB- rating and significant backing by banks.
‘‘Marac is very clean on its balance sheet, with no interparty loans or other complicated loan facilities. They have diversified funding; not just relying on debentures or funds from mom and pop investors,'' Mr McIntyre said.
Mr Maling outlined that Marac's response to the finance sector woes was underpinned by its having reacted quickly when funding streams looked like drying up, as finance companies booked losses or went into receivership.
Pyne managing director Brian Jolliffe said diversified lending remained the key, highlighting all Marac's assets were lent and secured in New Zealand and in the present finance sector environment Marac was able to ‘‘cherry pick''.
‘‘Because we have diversified funding, we are not left to the whim of one [lending] market,'' he said of sourcing money to lend.
Marac had raised $300 million in securitisation - the pooling of mortgages and selling them - since August last year and had almost successfully concluded a new lending facility with all the major banks in New Zealand.
Mr Jolliffe said another facility was considered, but could only say it may be domestic or offshore and could not specify how much was being sought.
He said loans to Marac might go up as much as 1% during the second half. While putting pressure on its profit margins and not immediately recoverable, it was expected to be recovered ‘‘over time'', he said.
Strong companies, such as Marac, South Canterbury Finance and Dominion Finance, were well positioned for growth and to make the most of new opportunities.
Marac's interim dividend of 9c last year was increased to 10c for the half to December.
