VTL to set up finance arms

Listed vending machine business VTL Group plans to set up finance companies in Australia and the United States to raise money to fund the purchase of its franchise brands.

The two companies will raise funds on the local wholesale markets to lend to people buying VTL's 24seven and Shop24 vending machine franchises.

VTL expects to sell about 80 US vending machine franchises under the 24seven brand for an average of US$180,000 ($290,000) each in 2007.

In Australia, VTL sells about 15 franchises a year with an average value of A$200,000 ($244,059) each.

VTL chairman Gary Stevens expected the two finance companies to be registered within the next four months, adding between $6 million and $10 million to the lending book in the first year.

The addition to the bottom-line would not be large in the first year.

"Because, you know, you've got the issues of setting up the business for a start," Stevens said. "It's really a business opportunity in support of our main business and that's the real reason for it."

The new finance companies would be subsidiaries of VTL-owned Nathans Finance NZ, which had assets of $155 million as at the end of December.

"Trying to manage and control a book of loans from New Zealand is quite difficult of course," Stevens said. "It's much more efficient for us to put in place a proper operation in the States and the same thing goes for Australia."

The US accounts for about 85 per cent of VTL's business, with Australasia and Europe making up the rest.

VTL sells franchise blocks of up to 100 machines depending on the revenue stream.

The 24seven franchise brand is based on the familiar stand up machines but the Shop24 units are considerably larger.

"It is an automated retail store, it's a size of a small container and it has 200 products in it," Stevens said.

"It's ideally suited to big sites ... we have them in train stations in Europe, hospitals, all those sorts of things.

"It's exciting huge interest."

VTL shares closed up 1c yesterday at 48c a share.

Nathans chairman Roger Moses said the overseas expansion would support rapid growth of the 24seven and Shop24 franchise brands.

VTL's management system uses mobile phone-type cellular technology to communicate stock levels and takings of individual vending machines.

"Because VTL works closely with its franchise operators and is able to monitor their operations electronically on a day-to-day basis Nathans Finance has not yet had to write off a single bad debt in its five years of operation," Moses said.