South Canterbury Finance last night reported an unaudited interim net loss of $154.9 million, accentuated by allowances for an extra $180.23 million of impaired costs and bad debts.
In total, South Canterbury Finance (SCF) has allowed for $229 million of losses from asset realisations and allowances for impaired costs.
Announcing the result for the six months to December 31, chief executive Sandy Maier also announced the outcome of initial restructuring, but warned of further asset sales and restructuring to restore the company's financial position.
Southbury Corporation, the parent of SCF, on February 28 fulfilled its commitment to inject $152.5 million of new equity into the finance company following a restructuring of Southbury, indirectly controlled by Alan and Margaret Hubbard.
The transaction saw the sale of 100% ownership in Helicopters (NZ) Ltd and 64% of the shares in Scales Corporation to SCF for $162.5 million, funded through the issue of 317.7 million new ordinary SCF shares to Southbury valued at $152.5 million, plus $10 million cash.
"The transactions were reviewed by independent experts approved by the Crown under the Company's Crown Guarantee, who certified to the Crown that the acquisitions were at fair value and on an arm's length basis," said Mr Maier in a statement.
As a result, SCF now owns 79.7% of Scales Corporation and 100% of Helicopters (NZ).
Southbury chairman Alan Hubbard said both companies were profitable and would boost SCF's earnings.
In the year to June 30, 2009, Helicopters (NZ) reported earnings before interest, tax and depreciation (ebitda) of $30.2 million and net profit after tax of $16.2 million.
Scale's ebitda for the same period was $35.4 million and net profit of $13.6 million.
"The earnings contributions of these two successful companies are now part of SCF, which materially and substantially changes the earning's profile and prospects for the company."
Mr Hubbard said initially the transactions would restore then improve SCF's capital position, which has been hit hard by allowing for bad debt provisions, the recession and depressed asset prices.
The additional $180 million provision for impaired and non-performing assets was the result of asset valuation by SCF's new management team and new auditors, Ernst and Young.
Net equity for the period under review, after the acquisitions and on a pro forma financial position, was $252.8 million.
On that same basis, the company's equity ratio was 11.8%, with total assets of $2.15 billion.
The acquisitions mean SCF has breached financial covenants contained in its trust deed, for which Mr Maier said Trustees Executors has granted a waiver until after the end of this annual financial year.
Mr Maier said SCF had performed well in sectors other than property, due to the flow-on from high milk prices which was benefiting provincial areas, where SCF lending customers and assets were located.
"The underlying trading results show a break-even result for the six months, which is creditable given the significant disruption and costs experienced during this period."
He said investors continued to show faith in the company, with the net inflow of funds exceeding redemptions, and SCF was working with the Treasury on its application to extend its participation on the retail deposit guarantee scheme.
It was also working with Forsyth Barr on ways to strengthen SCF's capital base, he said.