By Gareth Vaughan
Fresh from its highest annual profit in eight years last year, UDC Finance's performance has continued to track strongly through the first-half of its current financial year, CEO Tessa Price says, and is ahead of last year on several key measures.
"We've already done the first six months and revenue, net profit after tax, return on equity are all stronger than last year. Our cost to income ratio has also come down as well. And we've had a massive 29% drop in our loan impairment so that's a really good sign," Price told interest.co.nz in a Double Shot interview.
"New lending is up 5.4%... not only in our car book but in our commercial (book) as well."
Price said sentiment and confidence among borrowers had improved with customers less nervous and prepared to buy assets earlier in their plans than they had been last year across a range of industries.
"There's contracts in the pipeline so they're buying assets earlier. We're hearing that across the board and across industries. There's growth out there," said Price. "Six months ago we certainly were seeing people wait for the actual contract before they purchased."
Key current lending competitors to the ANZ owned UDC were banks, notably BNZ, and GE Capital, she said.
As of December 31 UDC had NZ$1.45 billion worth of secured debentures on issue, slightly down from NZ$1.47 billion at September 30. A total of NZ$2.13 billion worth of UDC tangible assets were pledged as collateral for the debentures as of December 31. The finance company also has an NZ$800 million credit facility with its parent ANZ. As of September 30, NZ$290 million was drawn down. UDC says its ANZ loan and its secured debentures would rank equally in any wind-up scenario.
For the year to September 30, 2012, UDC reported a 31% rise in profit after tax to NZ$37.95 million.That was its highest annual profit since NZ$43.9 million in 2004. It paid ANZ a NZ$20 million dividend last year, equivalent to 96 cents per share, compared with no dividend in 2011.
UDC is celebrating its 75th birthday this month. Price said at a party celebrating this in Auckland were investors who have been with UDC for 55 years, and borrowers who have been with the firm for 40 years.
Price succeeded Chris Cowell as UDC's CEO in June last year. She joined from ASB's parent Commonwealth Bank of Australia, but began her career at UDC in 1997 as a graduate and was mentored by David Hisco, now CEO of ANZ New Zealand, and who was UDC CEO from 1998 to 2000. See more in last year's Double Shot interview with Price here.
Here's a look at UDC's history, as provided by ANZ/UDC
1937 – UDC begins life as Financial Services Ltd, formed to rescue an ailing business called the New Zealand Investment Trust. The idea behind the business is to provide industrial finance for NZ businesses.
1951 – Financial Services Ltd is bought out by London-based United Dominions Trust, and renamed United Dominions Corporation.
1947 - 1957 – UDC provides finance for Masport to develop the first petrol lawn mower in New Zealand and finances the first Hamilton jet boat for commercial use.
1960s – UDC finances the equipment for the development of the Benmore Dam, Haast Highway, Wellington Airport, Hunua Dam and Ngauranga Gorge Motorway. It sells 20% of its shares to ANZ Banking Group (NZ) Ltd after a change in legislation permits trading banks to take direct interest in finance houses.
1970 – UDC goes public, with 28% of its shares bought by the public and 72% by ANZ.
1970s – UDC funds much of the heavy plant and equipment to build the Twizel Hydro Electric programme and other major civil works of the period. Annual profits exceeded $1 million for the first time.
1980 – Becomes a wholly owned subsidiary of ANZ.
1980s – While other finance companies opened offices in Auckland and Wellington CBDs, UDC opens offices in places like Penrose, Manukau and the Waikato. There were 22 branches in all – each close to its customers.
1987 – As finance companies that invested in financial markets crumble, UDC stays strong due to its policy of investing in NZ businesses.
2002 – First franchisees appointed to sell UDC products. UDC becomes the first NZ finance company to reach $2 billion in lending.
2007 – UDC acquires the Ford Dealer network business.
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