Slump seen as forcing mergers

Lending minnow Dominion Finance says the downturn in the economy will force consolidation in the industry over the coming year.

Disclosing a rise in first-half net profits from $3.87 million to $4.14 million, Dominion chief executive Terry Butler said yesterday: "We will not see as many in the industry this time next year."

Butler said Dominion, which floated on the NZX last year, had looked at several potential acquisitions but, for a variety of reasons, had decided not to take them further. He declined to identify the target companies.

He was confident other opportunities would develop but would not say which firms were most exposed to a downturn.

Observers, including Reserve Bank Governor Alan Bollard, have warned that finance firms exposed to the property market are at risk, especially as the impending slowdown begins to bite.

Dominion lends to a range of industries including property developers. All of its loans are secured against first or second mortgages.

"I think there will be a slowdown, but we will continue to be profitable," Butler said.

Dominion's shares fell 3c to $1.26.

Sales rose from $12.2 million to $14.2 million. The rise reflected strong demand for cash from industry.

Its loan book rose $12.9 million over the six-month period and now stands at $162.9 million. Shareholders' funds increased from $25.9 million in March this year to $27.45 million. At the end of September, it had cash and undrawn bank lines of more than $21 million

Butler said indications for the next six months were positive.

"Inquiries for lending opportunities are still good, but the company has determined to maintain a greater level of liquidity and to manage organic growth to an acceptable level."