Underperforming UDC warns of another poor result

New Zealand's biggest issuer of debenture stock, ANZ-owned UDC, is set to report another "disappointing" full year result next month, having lost share in key markets during a period of phenomenal growth for finance companies.

UDC has more than $2 billion of debenture stock on issue, a significant chunk of an investment market estimated at $10 billion to $14 billion.

While the level of UDC's outstanding debentures has remained steady over the last two or three years, the rest of the market has been moving in leaps and bounds, growing by as much as 20 per cent a year.

UDC's lack of growth has been reflected in its bottom line.

In the September 2005 year it reported a 2.4 per cent decrease in net profit to $41 million. Yesterday, Malcolm Tillbrook, who was appointed general manager in March to oversee a turnaround in the business, told the Business Herald the company's 2006 performance would be worse. UDC will report its annual result with parent ANZ next month.

"Certainly the financial result over the last three years would be, by anyone's measures, disappointing in an environment where the market did, in fact, grow," said Tillbrook.

He conceded that the biggest factor was the loss of market share in the plant and equipment financing division, which accounts for 70 per cent of UDC's business. Vehicle financing makes up the balance.

Tillbrook attributed the loss to changes in the business model three years ago. effectively making its sales force independent operators.