MTF annual profit slips on financial instrument write downs

Motor Trade Finance annual profit slips on financial instrument write downs.  

Motor Trade Finance [NZDX: MTFHC], the auto finance firm, reported a 25 percent drop in annual earnings as a loss in the value of financial instruments offset gains in a growing loan book. 

Profit fell to $6.1 million in the year ended Sept. 30, from $8.2 million a year earlier, according to the Dunedin-based firm's annual report, as it recorded a unrealised loss on fair value of financial instruments of $1.7 million, against a gain of $1.7 million a year earlier. Net interest income rose 11 percent to $45.4 million. The lender issued $415.5 million in new loans, up from $320.1 million a year earlier.

New Zealand car sales are headed for a record of more than 124,000 in this calendar year, in part buoyed by stronger economic confidence and as a higher local currency pushes down prices, which has helped fuel demand for auto loans to finance those purchases. 

"The past two years have provided substantial sales growth in an economy buoyed by a lift in consumer and business confidence," MTF said. "We anticipate growth to continue, perhaps at levels that are more subdued. MTF will target growth in quality lending on motor vehicle assets, through expanding its car dealer and franchise distribution and by retaining existing customers." 

In July, MTF rebuffed a takeover offer from Heartland New Zealand, in part because of the NZX-listed bank's request for information relating to MTF's dispute with the Commerce Commission concerning its loans with motorcycle finance Sportzone, for which Heartland wasn't prepared to enter into confidentiality agreements. At a special meeting in August shareholders rejected seven out of nine resolutions which sought more information about the Sportzone dispute and its appeal against the Commission.

The Commerce Commission had alleged breaches of the Credit Contracts & Consumer Finance Act and the Fair Trading Act relating to fees charged in 39 loan contracts originated by Sportzone between May 2005 and July 2008. Sportzone had an agreement with MTF allowing the defunct motorcycle business to write credit contracts for buyers of motorcycles.

In the year, MTF's operating expenses rose 15 percent to $15.6 million, which included $4.4 million for administration expenses, of which $1.1 million was for its proceedings against the regulator and $400,000 for its special meeting. 

Ordinary dividends will total 11.2 cents per share, up from 4.4 cents a year earlier. Total distribution relevant to the period will be $2.6 million, up from $1 million a year earlier, representing 50 percent of underlying profit, the company said.

MTF has $40 million of perpetual preference shares listed on NZX's debt market, which last traded at $74 per $100 face value, and pay annual interest of 6.26 percent.

(BusinessDesk)