PGC tips firmer annual result

Pyne Gould Corporation (PGC) is predicting an annual result firmer on last year's profit of $30.6 million.

This is despite the global credit crunch putting pressure on margins. The listed Christchurch finance and rural services group yesterday announced a 23 per cent increase in interim net profit to $22.1m, from the same December 2006 half. The interim dividend has been raised from 9c to a fully imputed 10c a share, payable on March 28.

The figures were on the back of all three of its divisions posting increased net earnings. PGC shares rose 12.1%, or 40c, on the news, closing at 370c.

Chairman Sam Maling said the annual outlook was positive despite tight margins, but the company was increasing its prices across the board to counteract that. "Yes margins are tight, but we are moving quickly on that, and we continue to run our business on the basis of first out of bed, best dressed and smartest on the block. It's proving to be a successful formula," Maling said.

Profit at PGC's finance division, Marac, rose 11% at $14m for the six months ended December 31, following a 20% growth in net trading revenue.

Total financial receivables rose 11% to $1.5b in the six months.

Perpetual Trust reported a net trading profit at $1.8m, up 19% on last year's result. PGG Wrightson contributed $7.5m, compared to a contribution of $4.6m last year.

Further growth was also expected in Ascend Finance, a new division set up in February last year.

Managing director Brian Jolliffe said world markets, international credit related issues and domestic finance company sector issues continued to provide challenging business conditions, but it also provided significant opportunities.

Marac was picking up business every day from people who had not considered Marac in the past, Jolliffe said.

However, its retail funding has been affected with new funds slowing although its reinvestment rate was tracking at 70%, in the middle of its average of between 65% and 75%.

Jolliffe said the company was looking at new funding facilities which would enable the company to grow. It was finalising a new syndicated bank facility with all of New Zealand's big banks.

Jolliffe wouldn't say how much the facility would be worth, but it would be more than the existing $462m wholesale funding from banks. It had always been Marac's strategy to rely on more than one income source, so it was not at the mercy of one particular market.

"Wholesale funding into Marac has not been something that has been a backstop, it's been a core of our funding. It's a significant part of the funding mix."

Its funding sources came from retail at 45%, wholesale from banks at 33% and a securitisation of $300m was added in August 2007, he said.

PGC would consider making purchases in the finance sector, where more potential companies were for sale, but only if they met its requirements, Jollife said. We haven't got any specific target at the moment," he said.

Earnings per share, before abnormals, rose from 18c to 23c, and the net tangible asset backing firmed from 229c to 231c a share.

 

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