Our growth over recent years has been outstanding and the half-year under review has been no exception. The business and insurance environment in which we operate has predictably resulted in a significant lift in new lending levels, operating revenues and profitability.
I am delighted to report a significant increase in net profit after tax for the half year of $0.800m, an increase of 73.2% (up from $0.462m for the same period last year). It is significant because in the previous two full years we achieved $0.4m and $1.0m respectively.
Accordingly the Board has approved an interim maiden fully franked dividend of 1.5 cents per share in line with our prospectus forecast. Shareholders registered as at close of business on 5th March 2003 will be eligible to receive the dividend with payment on 19th March 2003.
The first six months as a publicly listed company have been excellent and we have achieved many of the objectives established by management for this financial year.
Operating expenses were higher than expected but necessary to invest in staff and infrastructure to underpin future growth. The maturity pattern of our receivables base changed with longer terms written which has had the effect of stretching out the income stream from an average of 9 months to 10.5 months.
Company policy is to expense and provide 0.5% of our receivables for doubtful debts. This has resulted in taking up a provision of $136k in the first half bringing the total provision in our balance sheet to $233k.
Whilst the increase in our capital base as a result of the IPO provided Alliance with more capacity and as a result, new lending levels for the first quarter surpassed our expectations, however our banking facilities were maximised with all credit lines fully utilised.
We announced in October 2002 that we would be completing a strategic review of our banking facilities and longer term funding arrangements. Following the success of our first quarter, which absorbed our then available credit facilities and the trend in our new business levels this review was brought forward and is now complete.
We are pleased to announce that we now have in place sufficient credit lines to comfortably cater for our business requirements this year and a capacity to potentially write new business of approximately $250m on an annual basis.
The structure of these arrangements will provide Alliance with the flexibility and capacity not previously experienced, and will provide the capability to achieve our strategic business objectives.
During the six months ended 31st December 2002 we also either upgraded or replaced all financial and operational software and hardware. This investment was necessary to cater for increased reporting requirement and data capture to support our new credit lines. This provides the foundation for future growth and it continues to render the business highly scaleable at virtually no incremental cost. It is a vast improvement in the quality of management and financial information available. The capitalised cost of this investment in the 31 December 2002 balance sheet is approximately $144k.
In relation to new business initiatives and of major importance was the signing of a Joint Venture Agreement with IBNA Limited.
IBNA is a buying group of insurance brokers representing over 80 outlets and has representation in every State and Regional Centre throughout Australia but principally sited in the eastern states. Alliance's existing network of over 60 insurance brokers are based in WA.
The IBNA/Alliance fits well with our existing structure and commenced in January 2003. Initial support is in line with our expectations.
New business levels will be driven by our existing distribution channels and customers, the success of the IBNA business, the Laptop Program and the continuing support of our loyal Insurance Brokers. We believe that we now have in place the resources and staff to maintain and improve our service and new business levels.
The Insurance Industry and environment is again expected to experience increases in premium rates during 2003 and 2004 for the commercial classes. Industry research completed by J P Morgan Deloitte Touche Tohmatsu predicts increases of 27% in Professional Indemnity and 19% in Fire & ISR cover during 2003.
Our leasing and other minor products have shown improvement this financial year and the laptop program orders and deliveries have just commenced for this calendar year. The laptop financing market has been very competitive this year and has so far performed well below target. Commission levels are also higher than anticipated and at this early stage we do not expect to reach our laptop prospectus forecast. We are currently half-way through the season and the take up rate or strike rate of parents renting or leasing equipment is down right across Australia. We have therefore revised our profit after tax downwards by $500k to $700k.
As you would by now appreciate the first six months as a publicly listed company has been very demanding and we have now vastly improved our funding capacity and systems which previously restricted our growth.
I would like to take this opportunity to thank our staff for their hard work and outstanding contribution over the past six months, particularly with changing banks and the implementation of new systems and controls.
I greatly value your support as shareholders and look forward to sharing our success with you in the future.
Name of entity Alliance Finance Corporation Limited
ACN, ARBN, ABN or ARSN Half Preliminary Half Year ended yearly final ('current period') (tick) (tick) 72 057 507 507 X 31/12/2002
FOR ANNOUNCEMENT TO THE MARKET AUD000 Extracts from this report for announcement to the market (see note 1).
Revenues from ordinary activities (item 1.1) up 31.3% to 3,522
Profit (loss) from ordinary activities after tax attributable to members (item 1.22) up 73.2% to 800
Profit (loss) from extraordinary items after tax attributable to members (item 2.5(d)) gain/loss of -
Net profit (loss) for the period attributable to members (item 1.11) up/down 73.2% to 800
DIVIDENDS (DISTRIBUTIONS) AMOUNT PER SECURITY FRANKED AMOUNT (cents) PER SECURITY (cents) Final dividend (Preliminary final report only - item 15.4) Interim dividend (Half yearly report only - item 15.6) 1.5 1.5
Previous corresponding period (Preliminary final report - item 15.5; half yearly report - item 15.7) - -
Record date for determining entitlements to the dividend, (in the case of a trust, distribution) (see item 15.2) 05/03/2003
Brief explanation of any of the figures reported above (see Note 1) and short details of any bonus or cash issue or other item(s) of importance not previously released to the market:
