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Marac profits in turmoil

Finance company Marac has gained from turbulent times in its sector and is expecting to continue growing organically, although it is open to the possibility of making an acquisition.

Tuesday, February 26th 2008, 11:20PM
Marac has reported net profit for the six months to the end of December up 11% to $14m with revenue up 20%, helping parent Pyne Gould Corporation (PGC) to a 23% rise in net profit to $22.1m.

Marac has profited from troubled times in the finance company industry that has seen 14 companies collapse in two years.

Marac probably had greater opportunities in the past year or so than at any other time, PGC managing director Brian Jolliffe said.

On lending side, Marac was receiving more applications almost daily across almost all parts of the business because some other finance companies were not lending any more.

"Whilst we're turning more transactions aside because they don't meet our credit criteria ... we are able to pick and choose those that do meet that criteria and we're able to price them appropriately as well," Joliffe said.

On the funding side, Marac had never relied on one funding source, with wholesale facilities from banks having been a core part of its funding for years.

New funding lines included a $300 million securitisation programme and a new syndicated banking facility that was being finalised.

"That will be bigger than we've currently got and will provide the growth opportunities for the rest of this year, and at greater flexibility."

Joliffe acknowledged money from new investors had "slowed down a little bit".

"Clearly that means that our overall retail debenture book has come back a little bit, but it's still over $600m of funding into the Marac business as at December," he said.

Reinvestment rates remained in the 65-75% range of the past five to six years, following a hiccup in September when they dropped to about 60%.

While Marac traditionally had a greater proportion of growth in its first half, its "pipelines" remained full for now.

"At the moment we're very comfortable with our organic growth strategy," Joliffe said.

"We've said for a long time now that we will look at acquisitions if they meet our strategic requirements. To date none have."

During the first half Marac's finance receivables rose 11% to $1.48 billion, with consumer loans accounting for about a third of that, and business loans the rest.

Impaired asset expense was $1.8m in the latest period compared to $700,000 in the corresponding period a year earlier.

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