Dominion Finance posts Cautious Net Profit
Wednesday 14th May 2008
Dominion Finance Holdings posts Cautious Net Profit after Tax of
$8.95m for Full Year
Dominion Finance Holdings net profit after tax was $8.95m for the twelve month period ending 31 March 2008.
The profit was generated by the two operating subsidiaries Dominion Finance Group Limited (DFG) and North South Finance Limited (NSF).
Rick Bettle, Chairman of Dominion Finance Holdings Ltd (DFH) says the board and management continue to take a conservative cautious view and are very mindful of the negative trading conditions being experienced by the finance industry which is now becoming evident across many sectors of the economy. While our profit is down on the pervious corresponding period it is a robust figure in the current environment and reflects the focus on positioning the business for the future.
Net operating revenue was up $7.0m which represents a 23% increase and Net Surplus before Bad Debts, Provisions and Tax was up $6.2m which represents a 26% increase.
Operational costs were up 12% namely from an increase in marketing and special projects related to strategic initiatives for the future. The Company continues to be a market leader with its very low operating costs to income.
Bad Debts written off of $10.1m, this was the result of taking a proactive position regarding loan recoveries.
We included a Collective Provision in our last NPAT forecast. However over the last week the Reserve Bank’s non-support of finance companies was stated again paired with anecdotal commentary on investor sentiment deteriorating and the economic uncertainty or even recessionary views held by many, resulted in the board significantly increasing the Collective Provision to $7.1m. The Collective Provision assists the business to absorb deterioration in asset values.
The average loan is $3.09m and we have a total of 136 loans. The largest single group exposure is in Dominion Finance Group Limited (DFG) for gross of security sharing $26.3m representing 9% of the book. The average loan in DFG is $3.4m with the top five borrowers amounting to 29% of advances. The average loan in North South Finance Limited (NSFL) is $2.5m with the top five borrowers amounting to 35% of advances.
The reinvestment rate for the year was just under 40%. With the demise of Lombard in April, we had our first month below 20%. This has since increased but any further destabilisation is likely to push this rate down again. The number of Investments is 12,970 and the average investment is $21k.
Cash and unutilized facilities at 31 March was $13.3m. Debenture Funding is approximately 60% of Total Assets with the balance a mixture of Equity 11%, Capital Notes 9% and Banking funding facilities of 20%. Assuming the continued lack of investor confidence, we basically need 38% of the loans maturing to be collected to meet the current level of debenture maturity withdrawals.
At the AGM in August DFH Chief Executive Paul Cropp said, “While securing a rating is important, our view is that it is just one part of the picture for a stakeholder to consider and certainly not a saviour.” At the time we signaled our intention to undergo the ratings process by the fiscal year end, we point out that Standard and Poor’s have not provided any rating indication to date. At this point in time the exercise is on hold with a view to recommence the process upon market stabilization.
Our financial accounts are fully IFRS compliant which means the adoption of some unusual representations such as the recognition of interest income even if an advance is considered bad. This has not changed the NPAT but we are conscious of the impression this creates.
The Directors have resolved to declare ;
• A pro rate non taxable bonus issue of fully paid ordinary shares on a 1 for 20 basis. Fractions will be rounded down to the nearest whole number. The record date is 5.00 pm 30 May 2008 and allotment date will be 03 June 2008.
• Fully imputed cash dividend of 1cent per share. The record date is 5.00pm 06 June 2008 and allotment date will be 13 June 2008.
Total number of securities of the class in existence after the issue will be 71,608,778
In commenting on the dividend the Directors deemed it prudent to retain cash in the business as a contingency in an uncertain market against the “headwinds” the finance sector currently face. In making a one per 20 bonus issue, as a non cash payment, the company is recognising and rewarding its many loyal shareholders.
In looking ahead to the full year result, Mr. Bettle said, “we have excellent management and staff, strong shareholder support and business processes. Very simply, if we had greater Investor confidence the business would almost certainly be having its most profitable period. However, based on current information to hand, assets will decrease, operating costs will decrease, but we have taken a cautious view of underlying assets values, so an early indication is for NPAT to exceed what we have reported this year”
• Net Profit after Tax for DFH, the Group holding company for the twelve months ended 31 March 2008 was $8.9m ($13.9m to 31 March 2007) generated from the two operating subsidiaries Dominion Finance Group Limited (DFG) and North South Finance Limited (NSF) – down 36%.
• Total revenue for DFH for the twelve months to 31
March 2008 was $80.8m ($68.7 m to March 2007) – an
increase of 18%.
• Total Assets of DFH as at 31 March 2008 were $447.2 m (March 2007 $487.7 m) – a decrease of 8%.
• Total Liabilities of DFH as at 31 March 2008 were $398.6m (March 2007 were $438.1m - a decrease of 9%. Debentures were $276.1m and $354.8m respectively – a decrease of 22%.
Operating Subsidiaries (For the twelve months ended 31 March 2008)
Dominion Finance Group Limited (DFG)
• DFG Net Profit after Tax was $6.6m ($10.9m to March 2007 ) – a decrease of 39%
• DFG Total Revenue was $55.2m ($46.0m to March 2007) – an increase of 20%
• DFG Total Assets were $293.5m ($315.5m as at 31 March 2007) – a decrease of 7%
• DFG Total Liabilities as at 31 March 2008 $253.3m ($276.7m as at 31 March 2007) – a decrease of 8.5%. Debentures were $197.9m and $244.5m respectively – a decrease of 19%.
Finance Limited (NSF)
• NSF Net Profit after tax was $5.3m ($5.9m to March 2007 ) – an decrease of 10%
• NSF Total Revenue was $25.1m ($22.2m to March 2007) – an increase of 13%
• NSF Total Assets were $124.9m ($140.5m as at 31 March 2007) – a decrease of 11%
• NSF Total Liabilities as at 31 March 2008 were $110.2m ($123.4m as at 31 March 2007) – a decrease of 11%. Debentures were $78.2m and $111.3m respectively – a decrease of 30%.