Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


GFC survivor, Asset Finance, doubles full-year profit

GFC survivor, Asset Finance, doubles full-year profit as interest income grows

By Jonathan Underhill

Sept. 11 (BusinessDesk) - Asset Finance, a Whakatane-based finance company that survived the global financial crisis despite a business model based on issuing debentures, doubled its profit in the latest year as interest income rose and expenses fell.

Net profit was $1.5 million in the year ended March 31, from $700,792 a year earlier, according to the company's annual report. Operating income rose about 20 percent to $5.98 million, driven by growth in interest income.

The niche lender, which is controlled by interests associated with Whakatane's George family, has a loan book of about $17.9 million, including a $1.04 million allowance for impairment losses, funded through the issue of debentures. As at March 31, the weighted average interest rate it charged was 20.1 percent, while it paid interest on its debentures of 8.2 percent. It targets the higher-risk end of the lending market, with about 60 percent of its book in business loans and 40 percent in consumer loans.

Asset Finance has had a bumpy path in the wake of the GFC, posting losses in 2008 and 2009 and relying heavily on support from shareholders to stay afloat. Its branch network has shrunk to eight from 14. Between April 2012 and December 2013 it was issued with two warnings apiece from the Financial Markets Authority and the Reserve Bank over two related party transactions. They were both been disclosed in company offer documents and were of benefit to the company, Asset Finance said.

The first dated back to 2009 when Clive George, father of current chief executive Blair George, pledged a luxury motorhome as security against a non-performing loan the company had made to a third party, causing the company's related party credit exposure to exceed the legal limit of 15 percent. In 2012, Asset Finance was temporarily stopped from raising money from the public by the Financial Markets Authority over a separate loan where the same motorhome was pledged as security.

The company was also admonished for the way it treated almost $3 million of tax losses purchased in 2010 from a company owned by Clive George and fellow Asset Finance shareholder Dennis Hodgetts. Had the losses been treated as a deferred tax asset as required, instead of a financial asset, the company would have breached its trust deed.

Asset Finance is on notice from the FMA and RBNZ that any further instances of non-compliance will be referred to the state agencies' enforcement teams, according to the company's September 2014 prospectus for the issue of up to $40 million of debentures.

"We had a few lean years and we've had our own problems," said chief executive Blair George. "It was not an easy time. We relied heavily on shareholder support. We’re pleased to have put these historic issues to rest so we can focus on our business."

The RBNZ-licenced Asset Finance as a non-bank deposit taker in March this year. It has a B credit rating with Standard & Poor's, which raised the outlook to stable from negative after the partial recovery of a large loan that was impaired in early 2014. At the time, S&P said the outlook revision reflected stabilisation of the company's asset quality position and "meaningful loan growth", which improved the outlook for earnings.

George says Asset Finance was the first finance company to request withdrawal from the Crown Guarantee scheme, put in place to help protect investors in the face of widespread finance company failures. It survived partly because more of its loan book was principal and interest, rather than the capitalised interest that characterised the failed finance companies that lent heavily to property developers, George said.

That difference meant Asset Finance had "cash flow flowing in every day," he said. The company was now in a position to consider expanding again, with options including adding branches in Auckland.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Westpac: Sets Out Plan To Go Cheque-Free

Westpac NZ has announced details of its plan to phase out cheques, after signalling in May that it would be supporting a move to other forms of payment. Cheques will cease to be available as a means of payment after 25 June 2021. Westpac NZ General ... More>>


NZTA: Major New Zealand Upgrade Programme Projects Go To Tender

Two major New Zealand Upgrade Programme projects are beginning tenders for construction. The New Zealand Upgrade Programme is a $6.8 billion investment to get our cities moving, to save lives and boost productivity in growth areas. The first Auckland ... More>>

Reserve Bank: RBNZ Seeks To Preserve Benefits Of Cash

The Reserve Bank – Te Pūtea Matua is taking on a new role of steward of the cash system “to preserve the benefits of cash for all who need them”, Assistant Governor Christian Hawkesby told the Royal Numismatics Society of New Zealand annual conference ... More>>


Economy: Double-Dip Recession Next Year, But Housing Rolls On

New Zealand's economy is expected to slip back into recession early next year as delayed job losses, falling consumer spending, and the absence of international tourists bites into growth. More>>


Microsoft New Zealand: Microsoft Expands “Highway To A Hundred Unicorns” Initiative To Support Startups In Asia Pacific

New Zealand, 14 October 2020 – Today Microsoft for Startups launches the Highway to a Hundred Unicorns initiative in Asia Pacific to strengthen the region’s startup ecosystem. This follows the initiative’s success in India, where 56 startups were ... More>>

Fonterra: Farmers Taking Another Step Towards New Zealand’s Low Emissions Food Production

They’re hot off the press and intended to help take the heat out of climate change. Fonterra farmers are already among the world’s most sustainable producers of milk and now have an additional tool in their sustainability toolbox. Over the last few ... More>>


Courts: Businessman Eric Watson Sentenced To A Four-Month Jail Term

New Zealand businessman Eric Watson has been sentenced to a four-month jail term in the UK for contempt of court, TVNZ reports. More>>

OECD: Area Employment Rate Falls By 4.0 Percentage Points, To 64.6% In Second Quarter Of 2020

The OECD area employment rate – the share of the working-age population with jobs – fell by 4.0 percentage points, to 64.6%, in the second quarter of 2020, its lowest level since the fourth quarter of 2010. Across the OECD area, 560 million persons ... More>>

Spark: Turns On 5G In Auckland And Offers A Glimpse Into The Future Of Smart Cities

Spark turned on 5G in downtown Auckland today and has partnered with Auckland Transport (AT) to showcase some of the latest in IoT (Internet of Things) technology and demonstrate what the future could look like for Auckland’s CBD with the power of 5G. 5G is ... More>>

Stats NZ: Monthly Migration Remains Low

Since the border closed in late-March 2020, net migration has averaged about 300 a month, Stats NZ said today. In the five months from April to August 2020, overall net migration was provisionally estimated at 1,700. This was made up of a net gain ... More>>

University of Canterbury: Proglacial Lakes Are Accelerating Glacier Ice Loss

Lake Tasman, New Zealand | 2016 | Photo: Dr Jenna Sutherland Meltwater lakes that form at glacier margins cause ice to recede much further and faster compared to glaciers that terminate on land, according to a new study. But the effects of these glacial ... More>>


Dairy: Fonterra Sells China Farms

Fonterra has agreed to sell its China farms for a total of $555 million (RMB 2.5 billion*1), after successfully developing the farms alongside local partners. Inner Mongolia Natural Dairy Co., Ltd, a subsidiary of China Youran Dairy Group Limited ... More>>