KEY POINTS:
Dominion Finance says its 36 per cent fall in March-year bottom line profit is a result of moves to create a buffer against softening property market conditions.
The listed company posted a net profit of $8.95 million for the March year compared with $13.9 million for the previous corresponding period and $9.4 million for the September half year.
"While the profit's down we think it's a robust outcome in this current environment," said chief executive Paul Cropp.
While the company's net operating revenue was up 23 per cent and its operating profit before tax, bad debts, provisions and tax was up 26 per cent, it wrote off $10.1 million in bad debts and increased collective provisions to $7.1 million from $2 million at the half year.
"If you look at the business and ignore the provisioning or the proactive position we've taken on bad debts, then the performance looks poor," said Cropp. "If you take the view of looking forward across the business and where we've positioned it, I think it's actually a robust action and is probably leading the market in how people should treat the current position and issues we're faced with."
Cropp said the company did not wish to post a "reasonable profit" in the second half, only to disclose large loan write-offs in subsequent months.
"Our view is we're open and transparent and the market is weak so we should address these issues and be up front with it.
"There is uncertainty in the market, we're not sure if it's bottomed yet and now's the time to be cautious."
Dominion Finance, which is 64 per cent owned by Terry Butler's family interests and 11 per cent by interests associated with Alan Hubbard and South Canterbury Finance, lends primarily on property through subsidiaries Dominion Finance Group and North South Finance. Its loan book stands at $447 million, down 8 per cent on a year ago with about 30 to 40 per cent of lending in the form of first and the balance in second mortgages.
Dominion announced a 1c fully imputed final dividend, well down on last year's 8.48c, saying directors "deemed it prudent to retain cash in the business as a contingency in an uncertain market". However it declared a pro rata tax free bonus share issue on a 1 for 20 basis.
Dominion Finance shares closed 8c lower at 80c yesterday.
