Geneva Finance loses NZ$7 mln and cuts forecast profit

Geneva Finance, which exited moratorium in April 2008, posted a NZ$7 million loss for the year ended March 31 after writing bad debts to old customers. Geneva also more than halved its profit forecast for the current financial year to NZ$1.5 million after reviewing its loan book and taking into account the global recession. Geneva was one of the first finance companies that failed from 2006 onwards to be allowed to enter moratorium by investors. Its performance has been watched closely by other companies looking to persuade investors to vote for moratorium proposals over receivership. The NZ$7 million loss was well down on the NZ$2.7 million profit initially forecast for the year in the company's capital restructuring plan sent to investors last year. The loss was also down from a forecast made in October of a NZ$4.4 loss for the year. The revised October forecast was because of a 'one-off' provisioning against its old ledger of NZ$6.3 million, and the subsequent loss of NZ$1.8 million of interest income, Geneva said at the time. "Post re-forecast of the NZ$4.4 million loss, the directors determined that it was inappropriate to continue to carry a tax asset with a value of NZ$2.9 million on the balance sheet, as a consequence, this asset has been written off via the P&L (Profit & Loss statement)," Geneva spokesman Kruger Venter told interest.co.nz. Venter said the tax asset was disclosed at NZ$2.9 million in the September 2008 Financial reports, and NZ$3.1 million in the March 2009 accounts. The old ledger was performing within expectations as at March 31, 2009, Venter said, and the bulk of the old ledger was forecast to be collected within 18 months of March 31. "At this juncture there is no further need to provision for the old ledger," he said. The loss followed from a NZ$7.9 million loss the previous year, although Geneva said comparisons of the results could be hindered because of the writedown of the tax asset. Despite the loss over the year, Geneva reported an audited pre-tax profit of NZ$636,000 in the last six months. This was due to the benefits of its improved business model and acquisitions of both Stellar Collections Limited and Quest Insurance Group Limited during the course of the year, Venter said. Geneva said that since it exited moratorium in April last year, it had repaid NZ$48 million in principal back to investors owed NZ$98.4 million all up, and approximately NZ$7 million in interest to all stockholders when it became due. About NZ$1 million of this was reinvested by investors after the May 2008 payment, but the company made a decision not to accept re-investments after that because it had decided not to issue a new prospectus last year, Venter said. However Geneva had issued a 2009 prospectus and was in the position to start talking to investors again and accept re-investments, he said. Part of the restructuring proposal was for investors to swap 15% of their initial principal for shares in the company at just over 36 cents per share for every dollar invested. Shares are currently trading at 9 cents, Venter said. The company reiterated that it had the support of banker Bank of Scotland (BoS), after BoS reaffirmed its NZ$35 million banking facility until April 30, 2011. The NZ$35 million was all in use, Venter said. As part of the capital restructuring process, Geneva said it had closed all of its 22 nationwide branches, meaning all operations were now being run out of its Mt Wellington office. It had reduced staff numbers from about 280 to just over 40, and had reduced overhead costs by NZ$12.7 million in the last year. The full release is here.