South Canterbury Finance sees 'turning point'

By Gareth Vaughan

Beleaguered finance company South Canterbury Finance (SCF) says both trading conditions and its cash position are improving. The Allan Hubbard controlled SCF said today it produced an unaudited operating profit of NZ$4 million in the three months to March. This included a net interest margin of NZ$1.4 million.

However, the operating result comes before a NZ$3 million hit from investment losses, NZ$1.7 million worth of impairment charges and NZ$500,000 worth of foreign exchange losses. The company said its unaudited total assets as of March 31 stood at NZ$2.084 billion. Equity was NZ$203 million and will rise by NZ$37.5 million as a result of the investment confirmed yesterday by George Kerr's Torchlight Fund into SCF's parent, Southbury Corporation. SCF issued a prospectus last month seeking to raise up to NZ$1.2 billion worth of first ranking debenture stock that will be covered by the Crown Retail Deposit Guarantee and NZ$50 million worth of unsecured deposits that won’t be covered by the guarantee.

The company is currently offering loyalty bonuses for investors as it strives to entice them to extend the duration of their investments. The prospectus shows SCF had total borrowings of NZ$1.89 billion at December 31, 2009 with NZ$1.4 billion of this secured debentures. Of the group’s total borrowings, NZ$1.87 billion were due for repayment within a year and the remaining NZ$14.7 million within two years. SCF has been accepted into the extended Crown Retail Deposit Guarantee Scheme, which runs from October 12 this year, when the current scheme ends, until December 31, 2011.

SCF chief executive  Sandy Maier noted the March quarter had delivered a "substantial turnaround" from the group’s audited NZ$198.6 million net loss after tax in the half-year to December. Maier said the quarter represented a "turning point" from the losses recorded in the previous 18 months. "The Company’s cash position has steadily improved through loan repayments and non-core asset realisations and is now NZ$80 million," Maier said. "Impaired loans are being realised generally in line with carrying values, and no further provisions have been required, but these will of course be re-assessed at year end.” Trading conditions were improving, Maier added, creating "excellent" potential lending opportunities in the business and consumer sectors. The unaudited March trading result excludes contributions from Helicopters NZ and the 80% owned Scales Corporation. Both were acquired by SCF in February.

Read SCF's full statement below:

South Canterbury Finance Limited is pleased to announce that a breakeven trading result has been achieved in the three months to 31 March 2010. The unaudited operating profit for the quarter totalled $4.0 million and included a positive net interest margin of $1.4 million. The operating result is before one-off expenses for investment losses of $3 million, impairment losses of $1.7 million and foreign exchange losses of $0.5 million.

South Canterbury Finance Chief Executive Officer Sandy Maier says the March quarter performance was a substantial turnaround from the South Canterbury Finance Charging Group’s audited $198.6 million net loss after tax for the six months to 31 December 2009 and represents a turning point from the losses recorded by the Company over the previous 18 months. “This is a heartening outcome with many positive aspects for the future of the business. The Company’s cash position has steadily improved through loan repayments and non-core asset realisations and is now $80 million.

Impaired loans are being realised generally in line with carrying values, and no further provisions have been required, but these will of course be re-assessed at year end.” Realisations of past due and non-core assets have generated cash of $202 million since 1 January 2010. “The core business of South Canterbury Finance is again making a positive contribution that should boost the confidence of all stakeholders including eligible investors who have the additional benefit of the Crown’s extended retail deposit guarantee until December 2011,” Mr Maier says.

“Trading conditions are becoming more favourable with improvements in the current economic environment bringing forward excellent prospective lending opportunities in the business and consumer sectors.” The unaudited trading result for the March quarter excludes contributions from Helicopters NZ and 80 per cent owned Scales Corporation both of which were acquired by South Canterbury Finance on 28 February 2010.

“As the core finance business continues to improve, we expect that the consolidation of the results of Helicopters NZ and Scales Corporation will deliver a significant improvement in the overall financial performance of South Canterbury Finance.” South Canterbury Finance’s unaudited total assets at 31 March 2010 were $2,084 million and equity was $203 million. Equity will increase by $37.5 million as a result of the commitment by Southbury Corporation Limited as announced yesterday (20 May 2010).