KEY POINTS:
Pyne Gould Corporation has posted a record result after strong performances from its farming and finance divisions but expects tough economic conditions to limit growth.
Net profit for the year ending June 30 was $44.8 million, up from $36.7 million, on the back of revenue of $239.1 million, up from $194.3 million.
Pyne Gould subsidiaries Marac and Perpetual Trust reported net profit of $27.9 million and $3.7 million respectively, while a 22 per cent stake in PGG Wrightson contributed $15.8 million.
Chairman Sam Maling said the merits of a focused business model, strong corporate governance and experienced management had been demonstrated during the year.
The company had weathered a storm that engulfed many firms and came through virtually unscathed, Maling said.
"The difficult environment continues and is likely to have some effect on profitability in the short term," he said.
"We have a robust but conservative strategy in place and still expect to be able to report a result [for the year ahead] in line with last year."
Shares closed down 3c yesterday at $3.45.
First NZ Capital analyst Jason Familton said finance company Marac seemed to have a good result.
"Obviously they're at the quality end of the finance company spectrum, they've got good diversification of funding sources," Familton said.
"I think probably there's more pressure to come from an earnings perspective from perhaps some further margin contraction and also further impairment charges as well in the coming year so I think that's why they were a little bit cautious around earnings for the next year."
Managing director Brian Jolliffe said the Marac result was particularly pleasing given the backdrop of global and local credit markets and the performance in the wider finance sector.
Retail investors accounted for about 45 per cent of Marac's funding base. A decline in the retail funding book was halted in the third quarter, with a reinvestment rate of about 63 per cent, compared to a traditional level of 65-75 per cent.
Total financial receivables rose 8 per cent to $1.4 billion, with the increase achieved during the first six months.
During the second half, Marac focused on existing clients and passed up some growth opportunities.
The finance company's liquidity was $260 million at July 31, up from $87 million in December.
"This is a much higher level than the company traditionally holds but in the current difficult market environment is considered to be a prudent step," Jolliffe said.
The company's credit arrears ended the year on its benchmark of 0.5 per cent, although there had been a slight increase since balance date, up to about 0.6 per cent.
"I guess we are saying there are some challenges likely to occur, particularly in the economic environment that we're experiencing at the moment, in the year ahead."
The impaired asset expense in 2008 - comprising bad debts, recoveries and provisions for future bad debt - was $5.7 million, compared to $1.1 million the previous year, although this was still comparatively low compared to historical levels, Jolliffe said.
The total provisions for possible future bad debts in the balance sheet was $10.4 million, up from $7.2 million the previous year. He said the company had a more diversified strategy than some other companies both in lending and funding.
