Hubbard injects $40m into SCF
South Canterbury Finance (SCF) founder Allan Hubbard, has injected $40 million of new capital into the business and undertaken to provide further support if required, to counter the impact of any balance sheet write downs of property loans.
Friday, July 3rd 2009, 2:08PM
Based on conservative assumptions a $58 million provision (non-cash) will be taken for non-performing investments and doubtful property assets in the financial year to 30 June 2009. As a result SCF now expects to report a net loss before tax of approximately $37 million for the financial year. Prior to the write-down, a net profit before tax of $21 million was projected.
The group is budgeting a net profit before tax of $18 million to $22 million for the 2010 financial year.
Chief Executive Lachie McLeod says the strength of the group's shareholder, Hubbard, helps set it apart from many other finance companies and provides the resources to maintain the financial stability of SCF through challenging times.
The property market has become more difficult in the last six months and conditions have deteriorated more than anticipated, McLeod says.
As a prudent measure SCF has undertaken a review of its loan portfolio. Non-performing and doubtful loans have been quarantined.
In addition, a legal underwrite agreement with Hubbard will stand as security for any further specific loans that could become impaired over the current recession period.
Property development loans make up only 23% of SCF's diversified lending book.
Hubbard says while the company expected to make an operating profit of $21million, it will be disappointing for the group to report its first bottom-line loss since 1934.
"The prudent actions we are taking to strengthen our balance sheet will see South Canterbury Finance continue to play a leading role in the New Zealand economy. South Canterbury Finance is a sound, profitable business and I am committed to supporting South Canterbury Finance and its 45,000 investors who have loyally supported the group for 83 years," Hubbard says.
Total assets at 30 June 2009 are projected to be $2.3 billion ($2 billion June 2008). South Canterbury Finance has liquidity from a combination of cash and investments in listed bonds up to $228 million.
Net equity is expected to remain steady at $236 million.
South Canterbury Finance is also investigating other external sources of new equity, to continue to strengthen its position over the next six months.
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