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Motor Trade Finances Limited releases 2007 result

From: Motor Trade Finances Limited (MTF)

Mediapak: Metropak

Motor Trade Finances Limited (MTF) releases 2007 result

MTF transacting shareholders earned $48.6m, through their participation in MTF, in the year to 30 September 2007. This includes distributable profit of $36.8m, and an additional $11.8m in fees and payment waiver premium, paid direct. Although this is down on 2006, last year’s figure included provisions of $3.9m, taken to profit in readiness for adoption of International Financial Reporting Standards (IFRS). Highlights include:

• new business increased by 2.4% to $454.7m
• underlying profit distributable to transacting shareholders increased to $36.4m (last year: $35.7m),
• expense, as a percentage of average total assets, was lower at 1.74% (last year: 1.78%)
• return on assets increased to 8.6% (last year: 8.4%)
• average earnings per transacting shareholder increased by 7%, to $70,000
• profit after tax decreased to $38.6m (last year: $40.0m)

Total assets increased by 3.5%, to $602.0m, in line with the sales growth experienced in the last half of the year.

The balance sheet remains sound, with capital, including perpetual preference shares, of $53.9m and a capital percentage of 9.0%.

All credit measures remain well within target, with arrears levels amongst the lowest seen in recent times. MTF lends primarily on motor vehicles, with credit risk diversified by the large number of relatively small loans spread across a large number of borrowers, throughout New Zealand. All loans are managed and guaranteed by the transacting shareholders. MTF monitors the performance of each transacting shareholder and each portfolio of loans on a regular basis and carries out regular reviews of lending policy and process.

Commercial paper, issued through the securitisation programme, continues to be rated A1+/P-1 (extremely strong/superior) by Standard & Poor’s/Moody’s, a reflection of the quality of paper written by transacting shareholders and of our continuing focus on credit quality. Internationally, the knock-on effect from the US sub-prime mortgage collapse has changed the market for commercial paper, at least in the short-term. MTF has always had facilities in place should commercial investors withdraw from the market, and this has enabled MTF to continue to fund new and existing business for the foreseeable future, albeit at the higher margins that have become the new reality. There are indications confidence is returning and investors are now tentatively re-entering the market. At the date of this report 75% of MTF securitisation requirements are funded through euro commercial paper, with the remainder provided by bank funded bills of exchange.

Looking to the future, we expect credit quality to remain strong, not only because of a strong economy but also because we have the systems and people in place to ensure we manage it well.

On the funding side, we expect that interest rates will increase before they fall, largely because of continued inflation pressure, making New Zealand an attractive destination for foreign investors. We cannot be certain how debt markets will behave, with some commentators predicting more shocks to come.

Although it is still early in the new financial year, new business figures are ahead of last year and we are in a strong position to meet whatever the year decides to throw at us.

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