GFL
31/07/2014 13:54
ANNREP
REL: 1354 HRS GFNZ Group Limited
ANNREP: GFL: GFNZ Group Limited Annual Report - MARCH 2014
Financial Result (12 months to 31 March 2014)
The after tax financial result for the year was a loss of $4.2m vs. a profit
of $0.1m in 2013.
Results by operating segment:
The results per operating segments are as follows:
- Geneva Financial Services (New Business): March 14 pretax profit $0.6m
(March 13 $0.9m)
In the latter part of last year and the first four months of this year,
GFSL's lending programs were constrained as the group's cash resources were
retained to complete the funding arrangements that allowed the Group to exit
moratorium on 1st August 2013. Consequently, lending from April 13 to July 13
averaged 9.6% behind the previous year. This lower lending adversely impacted
both the level of the new business receivables ledger and the profit earned
from this business operation and is largely responsible for the shortfall in
the profit compared to last year. On the 1st August 2013, contemporaneously
with the Group exiting moratorium, GFSL secured a $30.0m securitized funding
facility. The purpose of this facility is to provide the debt funding to
allow the new business model lending programs to expand and it is pleasing to
advise that, while there remain challenges ahead, for the period from 1
August 13 to 31 March 14, lending averaged 31.4% above the previous year.
Successfully expanding lending, while maintaining asset quality, is key
factor in increasing the profitability of this business.
- Quest Insurance Group (Insurance): March 14 pretax profit $0.6m (March 13
$0.4m)
The profitability of this operation is closely linked to the new business's
lending programs. The current year result includes a $0.3m gain arising from
the sale of its AMPL share investment to the property segment that eliminates
on consolidation. Consequently, on a comparative basis the shortfall against
last year is $0.2m.
- Stellar Collections (Old business): March 14 pretax loss $5.5m loss (March
13 $1.2m loss)
As signaled in the profit downgrade announced on the 4th April this year,
forecast future cash collections from these old ledgers have been revised
downwards to reflect both changes in the collections environment and the
nature of the residual receivables as these assets age. This has resulted in
Stellar taking up additional provisioning against these ledgers and is the
prime factor in the loss reported by this business operation. Since year end,
we have further restructured this business to lower operating costs and
following the successful $6.0m rights issue in May 14, approximately $4.0m of
the funds raised have been utilised to re-capitalise this business. These
actions are intended to put this operation into a position where it can
deliver sustainable profits going forward.
- Pacific Rise (Property) March 14 pretax profit $0.3m (March 13 $0.1m)
The property segment produced a profit of $0.3m on the sale and lease back of
our head office.
- Parent Company March 14 pretax loss $0.2m (March 13 $0.1m loss)
The March 14, parent company result includes a one of gain of $1.2m arising
from favourable debt collection settlement terms negotiated with the
companies bankers when GFNZ Group Ltd exited moratorium. This gain is reduced
by the corporate costs associated with governance and corporate services, now
carried by the parent company following the implementation of the group
restructure (as approved by the shareholders) from 1st August 2013.
Balance Sheet:
The group's equity to assets ratio decreased to 21.3%, a direct result of the
additional provisioning on the old ledgers. The Group rights issue settled in
May 2014 and with the additional capital of $6m the equity ratio is estimated
to increase to approximately 35%.
Interest Bearing Repayment Plan:
During the period the group repaid in full all funds owed under the Interest
Bearing Repayment Plan and as a consequence, the group exited moratorium.
This brings the total repayments made to investors since the group entered
moratorium in November 2007 to $169m, including $42m of interest.
Rights Issue:
During May 2014 the rights issue approved by Shareholders on 29 April 2014
settled in full. Under the rights issue the company issued a further 202.2
million shares with Federal Pacific Group taking up 182.8m of these shares
and increasing their stake in the company to 57.4%.
Funding:
As noted above, on 1st August 2013 the group refinanced its operations,
repaying all public and bank debt and exited moratorium. As a consequence,
the group is no longer a Non Bank deposit taker. There are three components
to the Group's new funding as at year end:
a. Geneva (the new business model) has secured a $30m securitisation facility
which was drawn to $18.5m at year end and at the date of this report is drawn
to $20m.
b. A $5.0m loan from Federal Pacific Group Ltd, which since 31 March 14 has
been converted to equity in partial settlement of the rights Issue.
c. A three year $5.0m debt funding package from professional investors. As
this funding package included loans from GFNZ Group Ltd directors, the terms
of these loans were approved by shareholders at a meeting of shareholders on
31st July 2013.
Strategic Direction:
The Group is committed to the consumer finance and insurance market with the
primary focus being on the automotive sector. Obtaining ongoing sustainable
distribution channels for our products is now key to capitalising on this
opportunity.
Summary and outlook:
For the five years and nine months Geneva has been in Moratorium, the board's
primary focus has been to repay our investors while continuing the retain the
key "intellectual property" in terms of lending, insurance and debt
collection processes and skills. On the 1st August 2013, Geneva exited
moratorium with the final repayment to debenture holders, 17 months ahead of
schedule. In Nov 07, when this task was undertaken no one foresaw the Global
Financial Crisis which rocked both the world and New Zealand economies and to
have achieved this goal by repaying $169m, including $42m of interest to
investors is satisfying.
In terms of the future, the primary focus is to enhance shareholder value by
putting each business sector in a position to deliver sustainable profits.
Specifically:
- Expanding GFSL's new business lending.
- Increase the distribution of Quest's insurance products.
- Successfully collect the balance of Stellar's old ledgers and look to take
advantage of opportunities, as they arise and to use these debt collection
skills to create future profits.
To our investors we say thank you for trusting us to manage the moratorium to
your benefit. To our shareholders we reaffirm our commitment to take
advantage of the opportunities in front of us to now focus on creating
shareholder value.
Yours sincerely,
David O'Connell
Managing Director
End CA:00253340 For:GFL Type:ANNREP Time:2014-07-31 13:54:03
(20min delay)