Download - Marac Finance Interim results presentation
1
MEDIA & BROKER PRESENTATION
27 February 2009
Interim Results to 31 December 2008
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AGENDA
• PGC Performance and Highlights
• Sam Maling (Chairman)
• Individual Business Performance
• Brian Jolliffe (Managing Director) and Alan Williams (Chief Financial Officer)
• Financials
• Alan Williams
• Summary and Outlook
• Sam Maling
• Questions
3
PGC PERFORMANCE AND HIGHLIGHTS
4
HALF YEAR HIGHLIGHTS
• Businesses record solid performances in difficult times
• MARAC net profit before tax of $11.0m
• Perpetual Trust net profit before tax of $2.4m
• PGG Wrightson net operating profit before tax of $21.0m, but loss after “one-offs” result in a loss to PGC of ($6.9m)
• PGC fully commits a $25.0m underwrite to MARAC for property loans
• NPAT is a $17.0m loss
• Interim Dividend of 5 cents per share declared
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DIVIDEND
• Fully imputed Interim dividend of 5 cps (last year 10 cps)
Dividend per share(cents per share)
8 9 105
232120
0
5
10
15
20
25
2006 2007 2008 2009
Interim Final Special
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INDIVIDUAL BUSINESSES PERFORMANCE
Brian Jolliffe
7
MARAC’S BUSINESS PERFORMANCE
8
MARAC
• Net profit after tax $7.8m
• Finance receivables down slightly to $1.366bn
• New business opportunities still evident in the current market
• Arrears and Impaired Asset expense rises
• Funding position and liquidity strengthened
(Includes MARAC Finance Limited, MARAC Insurance Limited, MARAC Securities Limited, MARAC Investments Limited and Nissan Finance New Zealand Limited)
9
NET PROFIT AFTER TAX
• $7.8m down 45%
• Net operating income down just 7%
• Operating costs below last year
• Impaired asset expense major contributor to reduced result
Net Profit After Tax($000's)
7,785
27,915 26,252
24,173
0
5,000
10,000
15,000
20,000
25,000
30,000
2006 2007 2008 2009
First Half Second Half
10
NET OPERATING INCOME
• Down just 7%
– Smaller balance sheet
– Reduced fee revenue
Net Operating Income($000's)
58,669 62,880
73,455
33,670
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2006 2007 2008 2009
First Half Second Half
36,132
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FINANCE RECEIVABLES
• $1.366bn down 4% in the six months
Total Finance Receivables($m's)
1,1661,325
1,423 1,366
0
400
800
1,200
1,600
Jun
2006
Jun
2007
Jun
2008
Dec
2008
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FINANCE RECEIVABLES
• Receivables mix similar to June 2008
• All segments show small reductions
• Reflects focus on existing customers and credit
000
100
200
300
400
500
600
700
800
900
1000
Jun 2006 Jun 2007 Jun 2008 Dec 2008
Motor Leasing Marine Commercial Property Ascend
Consumer Business
Total Finance Receivables($m’s)
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CONSUMER DIVISION
• Sales of motor vehicles are sharply lower than last year (new car registrations down 13%, imported used down 34%)
• Some key competitors have exited the market
• Greater share of a smaller market now occurring
• Increasing car prices benefiting lease fleet
(Includes Motor Vehicle, Leasing, Marine & Leisure and Insurance)
Strategy
• Wider business opportunity from “new” dealers being solidified
• Credit focus continues
• Improved interest margin
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BUSINESS DIVISION
• Clear signs of slowdown evidenced in the small business market
• Good opportunities are still being seen but we remain cautious
• Property is all about the market risk
(Includes Commercial, Plant & Equipment, Property Finance and Ascend Finance Division)
Strategy
• We remain focused on existing customers and new quality opportunities
• Credit focus continues
• Improved interest margin
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PROPERTY DIVISION
• Investment loans total $110m and over a broad spectrum of properties
• ‘Development Loans’ total $250m or 19% of MARAC’s balance sheet
• 88% are secured by first mortgage
• Little new business has been undertaken
• Limited development risk remains
• PGC has provided an underwrite of $25m for impaired loans
• Market risk and uncertainty is the challenge
Total property loans at 31 December 2008 of $360m
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CREDIT ARREARS – ALL DIVISIONS
• Deterioration reflects economic conditions
• Normal post Christmas increase is evident
• Flows through to increased provisioning
(Installment Loans)
MARAC Installment Arrears
($m's/%)
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-080.00%
0.20%
0.40%
0.60%
0.80%
1.00%
Total Arrears % (Rt Axis) 0.5%
0.68%
0.50%
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IMPAIRED ASSET EXPENSES
• First half impaired asset expense of $9.3m
• Excluding property (nil in all prior periods) result is $3.0m
• Provision increases driven by arrears and risk grade changes
(Bad debts, recoveries, provisions)
Impaired Assets Expense(first half $000's)
3,0401,753
6591,243
6,297
0
2,000
4,000
6,000
8,000
10,000
Dec-05 Dec-06 Dec-07 Dec-08
Non Property Property
9,337
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FUNDING
Alan Williams
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FUNDING ENVIRONMENT
• Significant changes in the interest rate environment
• MARAC builds liquidity to buffer uncertainty in economic environment
• Government Guarantee produces significant change to the New Zealand funding environment
• Outcomes for MARAC:
• Further funding diversification
• Strong funding inflows
• Increased retail investment book
• Excellent cash reserves
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RETAIL FUNDING GROWTH
• Retail bond oversubscribed
• Retail debenture book increases $133m in the six months
• Government Guarantee and S&P rating assists growth
• Reinvestment rates at historical highs
• MARAC PIE products launched
Retail Funds
200
300
400
500
600
700
800
Jun-07 Sep-07Dec-07 Mar-08 Jun-08 Sep-08Dec-08
($m
's)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Reinvestment Rates
Retail Debenture Book
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WHOLESALE BANK FUNDING
• Utilisation reduced following growth in retail base
• Syndicate with 5 strongest NZ banks
• Pricing locked for next 1-2 years
Wholesale Facilities utilised from Banks($m's)
442
286
392
447413
363
232
0
100
200
300
400
500
Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08
Secu
riti
sati
on
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Funding Sources($m's)
Retail: 690
Bank: 232
Securitisation: 202
Bond: 104Undrawn Facilities: 352
FUNDING SOURCES(31 December 2008)
• Retail growth provided increased liquidity
• Securitisation lower due to limited commercial paper markets
• New source of long term funding from 5 year bond
• Cash and term PIE attracts new investors
Strategy
• Lengthen duration well beyond Government Guarantee period
• Rebalancing of funding mix
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LIQUIDITY
MARAC’s drive to increase liquidity
• Planned processes
• Provides increased comfort for investors
• Gives MARAC options in regards to lending opportunities and changes in funding mix
• Now in excess of $400m
Liquidity($m's)
87114
164
352
0
50
100
150
200
250
300
350
400
Dec-07 Mar-08 Jun-08 Dec-08
24
MARAC SUMMARY
Brian Jolliffe
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MARAC CURRENT BUSINESS POSITION AND OUTLOOK
• Current market is unlikely to improve in the second half
• Some segments show clear opportunities for growth
• Modest balance sheet growth expected
• Credit remains our focus across all ledgers
• Funding will continue to concentrate on longer dated maturities
• Reduced funding costs will lead to reduced lending rates but expected better interest margin overall
Outlook - Second half trading result in line with the first half expected
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PERPETUAL TRUST
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PERPETUAL
• Net profit after tax of $1.6m down 8% on last year
• Revenue down 6% over same period last year
– Corporate revenues up
– Managed Funds and Personal Revenues down
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PERSONAL WEALTH MANAGEMENT AND ADVICE
• Down just 4%
• Trust and Investment Client base growing but offset by a decline in:
- Property values
- Investment values
Personal Client Revenue($000's)
7,0187,551
8,721
4,186
-
2,000
4,000
6,000
8,000
10,000
2006 2007 2008 2009
4,356
29
MANAGED FUNDS
• Affected by “market perceptions”
• Especially around Mortgage Funds
• Perpetual’s Mortgage Fund:
- Remains actively managed
- Good liquidity and asset
quality (no arrears)
- Size of fund reduced
• Other funds steady
Funds Under Management($m's)
298
328
307
257
200
250
300
350
2006 2007 2008 2009
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CORPORATE TRUST
• Revenue up 10%
• Spread from new clients, existing clients and special fees
Corporate Trust Revenue
($000's)
3,592 3,7734,319
2,270
0
1,000
2,000
3,000
4,000
5,000
2006 2007 2008 2009
Interim Final
2,056
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PERPETUAL BUSINESS SUMMARY AND OUTLOOK
Current Business Position
• Personal client numbers are continuing to increase but asset values are reducing
• Managed funds are steady, except the mortgage fund
• Corporate Trust is growing both new clients and new issues
Outlook
• A second half expected in line with the first half
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PGG WRIGHTSON
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PGG WRIGHTSON
PGG Wrightson announced their interim results yesterday
• NOPBT was $22.1m, an increase of 32% compared to last year
• Non trading items affected bottom line result – Loss $32.8m
• Market guidance for full year was reaffirmed: $46-51m
• Strategies adjusted to reflect changing world market
• Debt facilities from banks refinanced
34
FINANCIALS
Alan Williams
35
PGC FINANCIALS
• Financial Performance Summary
• Balance sheet remains strong
• IFRS impact
• Underwrite for MARAC
36
Net Profit after Tax ($000's)
7,785
1,647
(6,949)
(2,027)
(17,500)
-20,000
-15,000
-10,000
-5,000
-
5,000
10,000
MARAC Perpetual
Trust
PGG
Wrightson
PGC Costs
“One Off”Underwrite
FINANCIAL PERFORMANCE SUMMARY
• Net after tax loss of $17.0m, last year NPAT of $22.1m
• Larger abnormals in PGG Wrightson than anticipated
• PGC underwrite provided to MARAC
(including abnormals and one offs)
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BALANCE SHEET
• Balance sheet marginally smaller but structure is unchanged from previous periods
• Receivables and investments fully provisioned and tested for impairment
• Increase in derivative and deferred tax assets
• Strong cash holdings and liquidity sound
PGC Balance Sheet
Dec-08 Jun-08 Dec-07
Cash 29 8 14
Finance receivables 1,330 1,419 1,473
Investment in PGG Wrightson 86 101 96
Other Assets 69 44 40
Total Assets 1,514 1,572 1,623
Borrowings 1,249 1,276 1,340
Other Liabilities 40 34 32
Total Liabilities 1,289 1,310 1,372
Total Equity 225 262 251
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IFRS IMPACT
• Impairment testing of all investments completed by PGC
• Methodology for impairment provisioning
• Dynamic
• NPV of expected future cashflows
• Valuation of derivatives
• PGW non cash items
• Write-down of NZ Farming Systems Uruguay
• Mark to market of contracts and defined benefit super scheme
• Provision for SFF
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UNDERWRITE
• PGC has provided an underwrite of $25m for potentially impaired loans at MARAC
• Shows support from the parent during market uncertainty
• Only $13m has been specifically allocated
• $12m is held as an “unallocated collective provision” by PGC
• Uncertainty created by lack of true market in the property segment
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SUMMARY AND OUTLOOK
Sam Maling
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SUMMARY AND OUTLOOKMARAC
• Consumer securing greater market share from a smaller market
• Business outlook is mixed with reduced demand in some segments and continuing property uncertainty
Perpetual
• Growth in personal client numbers and corporate opportunities offset by reduced asset values
PGG Wrightson
• Excellent trading result delivered
• Market guidance separately issued in respect to outlook
OVERALL OUTLOOK – Trading result in second half from MARAC and
Perpetual expected to be in line with first half
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MEDIA & BROKER PRESENTATION
27 February 2009
Interim Results to 31 December 2008