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Instant Finance achieves strong profit result

Instant Finance achieves strong profit result

Instant Finance, one of New Zealand’s longest established personal loan providers, has doubled its profit, achieving a net surplus after tax of $2.45 million for the six months ended 30 September 2007 compared with $1.2 million for the previous comparable period. Instant Finance Chief Executive Richard de Lautour is “pleased that the performance for this half year shows that profitability has been restored in line with historical levels”.

According to Mr de Lautour: ‘The profit result was driven by strong lending activity made possible by Instant Finance’s access to substantial wholesale funding resources and confidence in the ongoing level of investor support. A marked decrease in impaired asset expense was also a contributing factor.’

He added: ‘Unfortunately further industry failures over recent months have had an adverse impact on investor confidence and as a result Instant Finance intends to conservatively manage its lending activities in the second half of the year. While this policy will have some impact on profit, the full year profit performance is expected to be significantly up on the March 2007 result.’

The company, which has been in business for over 35 years, continues to maintain a strong balance sheet, with shareholders’ equity of $17.47 million representing 20.7% of total assets. Loan receivables were up 3.6% from $67.39 million to $69.84 million. Total liabilities amounted to $66.80 million.

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The half year unaudited financial statements filed at the Companies Office on 18th December are the first to be prepared under New Zealand equivalents to International Financial Reporting Standards.

Instant Finance operates 18 branches throughout the North Island, has over 19,000 active loans and employs 125 staff.

Mr de Lautour explained: ‘Unlike some in the industry and particularly property financiers, Instant Finance’s loan portfolio generates significant weekly inwards cash flows as all the loans are for relatively short terms and on a full principal and interest repayment basis. Over the next 12 months forecast cash inflows are $59.4 million while outflows are $45.6 million.

‘Whilst all key internal performance indicators are positive it is particularly frustrating that a lack of investor confidence in the finance sector prevents the company from taking advantage of the considerable organic and acquisition growth opportunities presently available.’

Instant Finance has a B3 Investment grade rating from Axis Ratings Ltd, a rating it has maintained since 2004.

Instant Finance has a committed three year $30 million facility from Fortress Credit Corporation. This facility is capable of being extended to $50 million for a further two years at the company’s option.

New Independent Director
Instant Finance is pleased to announce the appointment on November 1st of John Bishop as a second independent director. A qualified chartered accountant with extensive industry experience, John held the position of GM Commercial & Business banking at ASB Bank until 2003.

How the Fortress facility works
In order to borrow money from Fortress, Instant Finance sells loan receivables to IF Receivables Limited (IFR). These loans provide security for the Fortress advance. Fortress lends up to 80% of the net value of the loans transferred to IFR, with Instant Finance retaining an interest-bearing receivable for the remaining 20%, secured by a second ranking security interest. When calculating Total Tangible Assets of Instant Finance for Trust Deed purposes this receivable is only valued at 50% in recognition of its second ranking nature. The IFR receivable is repayable from the gross instalment cash flows received from the loans sold. The interest margin on the loans ensures future cash flows are far greater than the net amount owed.

The loans sold to IFR are selected from across Instant Finance’s loan book to ensure there is no element of ‘cherry picking’ which might favour Fortress over debenture holders. Instant Finance continues to administer and collect repayments on the loans sold to IFR, with the majority of these loan receipts being applied to repay Fortress principal and interest. Once Fortress is repaid, the remaining loan receivables can be used to secure further borrowings from Fortress.


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