Motor Trade Finance reports lower underlying profit, increased market share
Motor Trade Finance reported a 3.4 percent slide in underlying profit but continues to grow market share in a very competitive car lending market.
Profit was $4.4 million in the six months ended March 31 from $2.9 million a year earlier, after an unrealised gain on the fair value of financial instruments totalled $600,000 compared to a $1.3 million loss in the same period a year earlier. Underlying profit after tax, which removes the volatility of unrealised fair value movements, decreased 3.4 percent to $3.7 million. Net interest income rose 7.1 percent to $25.8 million.
The company said sales rose due to a number of factors "including a buoyant economy, record vehicle sales and the release of a non-recourse lending option to MTF originators."MTF originators are made up of a network of 261 dealers that sell motor vehicles in conjunction with financial services, and 43 MTF franchises which only sell financial services.
The company said its market share - as measured by the government's PPSR registry, registrations, rose to 12.9 percent in the six months to the end of March versus 11.4 percent in the prior period. Its total assets increased 5.0 percent or $31.6 million on the back of significantly improved sales. Assets under management totalled $645 million as at March 31.
Operating expense, excluding bad debt, as a percentage of assets under administration remained consistent at 2.7 percent for the period while administration expense decreased 9 percent.
Communication and processing expense increased 22 percent due to targeted multimedia advertising campaigns, delivery of loan origination training and compliance programmes, and the provision of improved and more efficient technology, it said.
It noted that bad debt of $500,000 versus $600,000 in the prior period "remains low."
In November it announced a partnership with Turners Ltd to provide a non-recourse offering to its originators, which allows MTF franchisees and deals to sell vehicles to people with higher credit risk. A pilot was launched in early December with a progressive roll out from January once the lessons from the pilot were applied. The uptake has "significantly exceeded expectations" with sales exceeding $25 million since Dec. 1, it said.
Looking ahead, it said the economic outlook continues to remain uncertain, with New Zealand susceptible to volatile international events. However, record new and used car sales, driven by low credit cost and manufacturers fighting for market share, are forecast to continue in the short term and MTF has "positioned itself to take advantage of this buoyant market," it said.