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‘Growth Continues for ABS Canterbury’

16 December 2005


‘Growth Continues for ABS Canterbury’

A continuation of significant business growth has led to an 8% increase in net profit after tax to $788,028 by the publicly listed building society ABS Canterbury in the six months ended 30 September 2005.

This compares with a net surplus of $731,000 in the corresponding half year in 2004.

Total operating revenue was up 27.1% to $10,808,000 ($8,502,000).

The chairman of ABS Canterbury, Mr Graham Kennedy, said that as previously signalled, demand continued from both borrowers and depositors, reflecting improving liquidity in the market, coupled with a continuation of economic activity in Canterbury.

ABS Canterbury is well positioned with offices in Ashburton and Christchurch to benefit from the performance of Canterbury’s diversified economy. “The regional economy has continued to perform well with the effects of the forecast slowdown in activity yet to have any significant effect on the Society’s activities,” said Mr Kennedy.

ABS Canterbury continues to face “aggressive competition” in the housing market as the trading banks continue their “margin war” to improve market share. As a secondary effect of that rivalry, there has been an impact on gross profit margins. Mr Kennedy added that, despite the improvement in net surplus, the extent of the increase did not reach directors’ expectations. He said the period included the additional costs of a senior management review of internal systems. “This has been very worthwhile as it has improved the Society’s capacity to handle further expansion, particularly in the Christchurch market.”

ABS Canterbury announced last week its intention to implement a “friendly merger” with the SMC Building Society based in Christchurch.

ABS Canterbury shareholders will vote on the merger proposal in the last quarter of the current March financial year with a targeted implementation date for the merger of 1 April 2006. This means that the expected benefits, net of amalgamation costs, will begin to occur in the March 2007 year.

“The merger with SMC will add approximately $40m to the combined society’s assets and after a planned rationalisation of overhead costs, it is expected to quickly contribute to combined earnings.”

“The merger will accelerate ABS Canterbury’s pursuit of an appropriate critical mass to generate the associated benefits from economies of scale. The amalgamation of SMC’s residential mortgage portfolio is likely to compensate for any slowdown in the market for residential mortgage lending over the coming year.”

Total assets rose by 12.04% during the half-year, compared with 10.74% in the comparable six months, and now comprise $277m, up from $247m at year-end March 2005.

Interim dividends of 7.5 cents per share on ordinary shares and 4 cents per share on preference shares were paid on 30 September 2005, with both dividends fully imputed.

Earnings per share for the half year amounted to 12.2 cents (15.2 cents), the change reflecting the increase in the society’s issued capital to $10.15m (5,500,000 ordinary shares after the issue of 1,500,000 ordinary shares in the successful rights issue during the 2005 financial year).

Shareholders’ equity stands at $21.45m ($16.65m).

Mr Kennedy said directors believe ABS Canterbury has excellent growth prospects over coming years. He said there are plans for a strong Canterbury regional brand to be a feature of the proposed amalgamation with SMC Building Society.

ENDS

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