Equiticorp Finance lifts profit

Press, 13 September 1988, Page 26

Equiticorp Finance lifts profit

Equiticorp Finance Group, the wholly owned banking arm of Equiticorp International, has lifted audited net profit, after minority interests, to S27M in the 15 months ended June 30. On an annualised basis the latest result represented a 42 per cent lift on the 515.2 M earned in the financial year ended March 31, 1987. Extraordinary gains of $1.5 million boosted the group’s total profit to $28.5 million. Provision for tax was $2.9 million, down from $8.5 million. At balance date total assets of the finance group stood at $1,468 billion, compared with $944 million at March last year. Shareholders’ funds, excluding minority interests, increased from $lOO.l million to $171.5 million. The latest result represented a return of 14.1 per cent on average shareholders’ funds (down from 20.2 per cent). Earnings on average total assets were also down from 2 per cent to 1.4 per cent.

The directors said although the profit in dollar terms showed a worthwhile increase, the declines in earning rate reflected the general reduction in return being experienced in the financial sector.

They forecast margins and earning rates would recover in the present financial year. Of the total assets, Australian operations accounted for 70 per cent. This reflected the growing importance the company

attached to that market.

In the latest accounting period the group broadened its Australian base when it bought Associated Midland, Ltd, from Midland Bank and State Bank of Victoria.

The purchase was the major reason for the increase in total assets. The company had now been renamed Equiticorp Finance, Ltd.

Although it made a worthwhile contribution to the June 30 result, the directors said the real benefits would be felt in the present year. Following a review of all receivables and investments the directors of Equiticorp Finance Group have increased provision to cover doubtful debts by $l4 million to ' $25.4 million.

In addition, $14.3 million has been written off as bad debts. The directors said the write-offs and provisions were much higher than previous years, but reflected the economic downturn which has been experienced in world financial markets, including New Zealand. In the present year there would be less emphasis on expanding the asset base. Instead,. the company would concentrate on developing its capital markets, corporate advisory and money market undertakings in both New Zealand and Australia.

An office had been established in Hong Kong to service clients and undertake capital markets transactions in the Pacific basin.