DFH bucks trend to lift first-half profit by 80pc

The so-called "flight to quality" following the failure of three smaller rivals and the acquisition of North South Finance this year have lifted listed Dominion Finance Holdings' first-half net profit by more than 80 per cent.

DFH's net profit for the six months to September was $7.48 million, up from $4.1 million a year ago.

DFH is the listed parent company of Dominion Finance Group (DFG) and North South Finance, which was acquired at the end of March for about $38 million.

North South contributed $3.1 million in net profit while DFG contributed $5.6 million, a 35 per cent increase on a year ago. The difference between DFH's net profit and the sum of its subsidiaries' results arises from interest payments on $40 million worth of capital notes raised to fund the North South acquisition.

Deputy chairman Terry Butler said demand from borrowers and investors over the period had been "exceptionally good ... considering what has been happening in the marketplace".

The failures of National Finance 2000, Provincial Finance and Western Bay Finance this year saw some finance companies struggle as debenture stock investors became more cautious.

However, Butler said investors had recognised Dominion's strengths as a listed company with "good governance and good directors".

"We predicted we would see a flight to quality and we have seen that."

On the lending side, recently appointed chief executive Paul Cropp said the company had seen good growth, particularly in mid-sized commercial property developments.

Cropp said Dominion supported the majority of regulatory changes for finance companies proposed recently by the Ministry of Economic Development.

However, some smaller, less well-capitalised companies were likely to find the new regime tougher to operate under and may be forced to consolidate.

Butler said Dominion remained "very interested" in further acquisitions. "But we want good companies. We won't be saving anyone's butt."

The leap in net profit comes after many other listed companies reported pressure on earnings due to slowing economic conditions.