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Pyne Gould confirms return to profit

Thursday 26th August 2010

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Pyne Gould, which is trying to merge its finance unit with two rivals to set up a listed bank, confirmed its return to profitability, and said it's reviewing its dividend policy.

The company reported net profit of $22 million, or 4 cents a share, in the 12 months ended June 30, compared to a loss of $54.4 million, or 55 cents a year earlier. It first flagged the results last week.

The lion's share came from a revitalised Marac Finance, which reported earnings of $12.9 million, with $2.6 million coming from its trustee services, and $2 million from its asset and funds management arm. Pyne Gould boosted its provisioning for impaired assets to $31.8 million, saying the property market deteriorated more than expected.

Having said it won't pay a dividend this financial year, the company is now reviewing its policy and will update shareholders at its October 29 annual meeting.

"Though there is still some way to go in executing our strategies, we have made excellent progress, and this is evidenced by our performance - in particular exceeding the forecast," chairman Bruce Irvine said in a statement. "While legacy issues do remain through an exposure to property development, these are being progressively dealt with through a managed exit process."

The Christchurch-based company underwent a $272.5 million capital raising last year to cope with a slump in the property market and collapse of the finance sector.

It restructured its businesses to take out underperforming loans from Marac and put them into a distressed asset unit run by cornerstone shareholder George Kerr. The Real Estate Credit Fund, which took on the impaired Marac assets, realised $10.9 million from the original $90 million portfolio in the year.

Since then, Marac has renewed its bid to form a bank, and is working through due diligence with partners Canterbury Building Society and Southern Cross Building Society, with a goal to merge the lenders next year.

The company said its strategy to form a bank will have short-term capital expenditure costs, but is expected to deliver stronger returns over the long-term.

Pyne Gould's Perpetual Group is repositioning itself into two brands: Perpetual Portfolio Management which offers funds management and trustee services; and Kerr's Torchlight Investment Group, which manages assets and investments and makes counter-cyclical investments during periods of low liquidity.

The shares dropped 2.3% to 42 cents in trading today, and have declined 10% this year.

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