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St Laurence builds its cash reserves

St Laurence Mortgages has deliberately built up its cash holdings both to provide it with the ability to take advantage of opportunites that might present themselves and also as a defence mechanism, chief executive Paul Chapman says.

Friday, July 7th 2006, 6:28AM

by Jenny Ruth

The collapse of National Finance 2000 and Provincial Finance has focused attention on the sector which has seen explosive growth in the last few years.

St Laurence is clearly trying to differentiate itself from companies which may be in difficulty.

"The public could be excused from thinking all finance companies are the same. We believe we’re different from most finance companies," Chapman says.

The company had $82.4 million in cash in its balance sheet at March 31 compared with $17.2 million a year earlier.

Chapman acknowledges that the economic climate has favoured his company "and we’ve made good hay while the sun has shone." The company, which is part of the wider St Laurence Group which has more than $1 billion in assets under management, saw total assets jump 53.6% in the year ended March to $226.5 million.

Total assets slipped to nine times equity of $20.5 million from 11.3 times a year earlier.

Chapman says holding so much cash will negatively impact shareholders’ returns but that the company believes the benefits to debenture holders outweigh that consideration.

St Laurence Mortgages net profit more than doubled to $5.4 million in the year ended March from $2.5 million the previous year.

While some finance companies debenture sales are believed to have dried up in the wake of the collapses, Chapman says his company’s funds flow remains strong, aided by his company’s "B3" rating by Rapid Ratings which remains in force until October. Rapid Ratings has withdrawn from the New Zealand market due to lack of interest.

Chapman says his company is "bitterly disappointed" by that withdrawal and also by the fact that about 11 or 12 other finance companies were rated by Rapid Ratings but chose not to publish them.

St Laurence is currently talking to Standard & Poor’s and Grosvenor, which is looking at introducing a qualitative ratings system, but has made no decisions yet.

Its accounts show debentures on issue at March 31 were $201.4 million compared with $128 million a year earlier.

« Keep grey list for funds: ExpertSovereign takes regulation bull by the horns »

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