KEY POINTS:
South Canterbury Finance shrugged off the doom and gloom in the finance sector yesterday as the management team flew to Auckland to deliver some upbeat advice with its annual result.
"When you step off the plane in Auckland it feels like everyone's got pneumonia," chief executive Lachie McLeod
said at the company's first press conference. "We want to restore more confidence."
McLeod announced a net profit before tax for the year ended June 30 of $82.7 million, up 75 per cent from the same time last year.
However, that included a $40 million capital gain from selling a 12.75 per cent share of Dairy Holdings in December 2007.
The normalised net profit of $42.7 million was slightly down from last year's $47.2 million, which McLeod attributed to the cost of carrying cash reserves of $250 million in the bank.
The company - which is controlled by Timaru based multimillionaire Allan Hubbard - also reported a 22 per cent rise in total assets to $2 billion.
The after-tax profit has not yet been announced but is expected to be around 30 per cent less than the profit before tax, hovering somewhere around $58 million.
McLeod's news was positive enough to fly his chief operating officer and chief financial officer to Auckland, where the greatest percentage of its investors are based, to deliver it.
He told the Business Herald that South Canterbury's profits reflected activity in the dairy and cropping industry, and said the boom would eventually work its way up to Auckland.
"You're just going through a patch at the present but the resurgence will come from the south or the provincial areas and will work it's way up it will just be a matter of time," he said.
McLeod highlighted the importance of the finance sector to the New Zealand economy, pointing out that many pivotal projects were funded by robust finance companies.
South Canterbury was different to the many failed finance companies because it had been around 82 years - through the Great Depression and World War II - and boasted a diversified loan portfolio, McLeod said.
Seventy per cent of its loans are in the South Island. Just 15 per cent are across Auckland and Wellington.
Business loans make up 40 per cent of South Canterbury's portfolio, followed by property (27 per cent) and plant and equipment (19 per cent).
McLeod said the company was looking to reduce its property portfolio by $100 million over the next 12 to 14 months.
Debentures now account for 68 per cent of the company's funding but two years ago they overwhelmed the pie graph at 93 per cent.
McLeod said he aimed to reduce debenture funding to 58 per cent next year.
"We are not in an environment to take undue risks," he said.
Despite the huge amount of bad publicity the finance sector has had in the past 18 months, South Canterbury Finance's reinvestment rates maintained an average of 63.7 per cent over the past year.
Chief financial officer Graeme Brown said the rate dropped to 60 per cent over the past month as investor confidence plummeted following further crashes in the sector. But the company was averaging $4.7 million of new funds per week during the 2008 year.
McLeod said South Canterbury's future goals include building investor confidence in the finance sector and improving its investment-grade credit rating from BBB- to BBB.
At June 30, the company had 33,500 debenture holders, 1500 unsecured debenture holders, a total loan book of $1.5 billion and 14,000 lending customers.
PROFIT RISES
South Canterbury Finance
Year to June 30
Total assets
2008 - $2.03b
2007 - $1.64b
Revenue
2008 - $285.8m
2007 - $206.1m
Net profit before tax
2008 - $82.7m
2007 - $47.2m
Normalised net profit
2008 - $42.7m
2007 - $47.2m
