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South Canterbury reports strong position

South Canterbury Finance says that some finance companies will struggle with liquidity over the next two to four 4 months.

Thursday, August 30th 2007, 12:36AM
"Some of these companies will consolidate or progressively wind down their loan books, due to the difficulty of attracting investment funds," chief executive Lachie McLeod says. "These companies, many of which are well managed, simply do not have scale or diversity to obtain an investment grade credit rating."

He says larger finance companies that are able to maintain sound liquidity, an investment grade rating and have a sound credit culture, will be in a very strong position, going forward.

South Canterbury yesterday reported its pre-tax profit increased from $39.3 million to $50.6 million for the year ending June 30.

The company has also secured a $150 million funding line to diversify its funding mix. The funding line arranged with BNZ and CBA will rank equally with debenture holders.

McLeod says besides the funding line SCF has $140 million cash in the bank a Standard and Poor's rating of BBB- offer investors security.

He says the rating "has ensured a steady flow of funds throughout the year."

"Despite having to raise interest rates the company's liquidity position remains strong and provides the necessary capital to fund the forecasted growth."

"There are some exceptional finance companies in New Zealand, which are well run and will continue to play a large part in the business development of this country".

Key points from annual results:

  • Total assets grew 20% to $1.635 billion
  • Loan and leasing receivables up 23% up from $1.104 billion from 30 June 2006 to $1.360 billion
  • Asset Quality – bad debt write off down on last year with an increase in provisioning due to forecast changing economic conditions; Bad debt write offs of 0.20% (0.23% 30 June 2006) of gross receivables, Provisioning 0.58% (0.21% 30 June 2006) of gross receivables
  • Debenture book grew 18% or $218m to $1.425 billion ($1.207 billion at 30 June 2006)
  • Equity up $69m from 30 June 2006 to $192m at 30 June 2007.
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