Investment company Pyne Gould Corporation has returned to profitability after being thrust into the red last year by a write-down of its property development book.
The Christchurch company yesterday reported a net profit after tax of $22 million in the year to June 30 compared with a loss of $54.4 million in the previous year.
No dividend will be paid, but the policy will be reviewed.
Chairman Bruce Irvine said the result exceeded the $20.9 million forecast last year and he attributed the turnaround to the $272.5 million recapitalisation last October and rebuilding the business on the core activity of providing financial services to New Zealanders through Marac and the Perpetual Group.
Marac Finance contributed $14.3 million to the group's net profit after tax, Perpetual Group $4.5 million and PGG Wrightson investment $3.9 million.
Included in the result was a $2.5 million gain from the sale of 50% of Marac Insurance to the New Zealand Automobile Association.
Mr Irvine said legacy issues remained from exposure to property, with higher-than-expected property investment impairments of $31.8 million carried by both Marac and a special entity set up by Perpetual, Real Estate Credit Ltd (RECL).
This had previously been forecast at $14.4 million but was higher because of the market deteriorating more rapidly than expected.
Marac last year shifted $175 million of property loans to RECL out of a total portfolio of $374 million. At balance date the residual value of its property book was $147 million and provisions of $10.7 million were provided against forecasts of $5.3 million.
Pyne Gould Corporation's (PGC) managing director Jeff Greenslade said Marac would next year focus on advancing its proposed publicly listed Heartland bank, with the boards of Marac Finance, Canterbury Building Society and Southern Cross Building Society to consider the proposal.
If the boards give their approval the next step will be to get support from members, shareholders and debenture and bond holders.
Net operating income for Marac was $69 million, above the $61 million forecast, while gross financial receivables were $1.1 billion, down $175 million on the previous year and reflecting a decision to reduce exposure to the property sector.
Marac has also reduced its commercial loan book from $511 million to $457 million, but it reported a net operating income of $22.3 million, down slightly on the $23.5 million recorded in the previous corresponding period (pcp) but up on earlier forecasts of $21.9 million.
Growth came from greater margins as credit was tighter, but impairments were also higher at $7.5 million, compared with $5 million pcp.
Marac's consumer loan book also grew, both organically and from the acquisition of GMAC New Zealand's retail book, from $20 million pcp to $29 million.
Perpetual Group subsidiary Torchlight Investment Group now has eight funds under management, worth $279 million, and has raised a further $460 million.
Looking ahead, Mr Irvine said in addition to the Heartland bank proposal, there would be opportunities from finance sector consolidation and lending to small businesses and the rural sector.
