Instant Finance lifts full-year profit by 11%, sees signs of jobs growth in South Auckland

Thursday 13th August 2015

Instant Finance, which stopped issuing debentures in favour of a wholesale facility and preference shares to fund its loan book in the wake of the global financial crisis, posted an 11 percent gain in full-year profit on growth in interest income and the launch of its MyFinance brand.

Profit rose to about $7.2 million in the 12 months ended March 31, from $6.4 million a year earlier, the Auckland based company's annual report shows. Interest income climbed 5 percent to $24.5 million, helping lift total income by 9.5 percent to $36.6 million. Its interest expense fell 2.6 percent to $6.1 million.

Instant Finance offers personal loans from $200 to $20,000 at interest rates ranging from 19.95 percent to 29.95 percent a year. It funds its loan book via a $60 million wholesale facility, drawn down to $46 million at year end, with Westpac Banking Corp paid out against securitised loan receivables held in a special purpose trust, as well as using $12 million raised from redeemable preference shares and $8 million of shareholder advances.

While its interest rates are up in loan shark territory, Instant Finance touts a high level of customer care and repeat business as evidence it treats its low-income clients, many from South Auckland, with respect. Some 69 percent of its $92.2 million of loan receivables, before impairments, are in Auckland and about 39 percent are past due although not impaired. The company's impaired assets in the latest year include $2.5 million of bad debts written off.

"We operate in the difficult end of the market so we're always up for ignorant people to criticise what we do," said chief executive Richard de Lautour. "We genuinely believe we provide our customers with a helping hand. We have an unbelievably loyal customer base."

He said the company's "huge customer base" in South Auckland didn't benefit from New Zealand's so-called rockstar economy or see benefit from dairy prices when they were high. "They've had it tough since the GFC," he said. But in the past 18 months, there have been signs of a pick-up in jobs.

"Categorically I can say for the last 18 months, manual type workers in South Auckland have seen an upturn in hours available," he said. Instant Finance has about 26,000 active customers and 23 retail branches.

While Instant Finance has some capacity to expand it also launched MyFinance, aimed at "the next tier up" of borrowers and offering to lend for everything from cars to overseas travel - what de Lautour calls "more aspirational lending."

Notes to the company's annual accounts show its own funding costs average 6.93 percent, including a rate of 5.67 percent on its wholesale facility and 9 percent on its preference shares.

BusinessDesk.co.nz

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