F&P Finance posts 37% operating profit rise, warns interest rate hikes will pressure 2011 earnings

F&P Finance posts 37% operating profit rise, but cautions interest rate rises will pressure 2011 earnings.

Consumer finance lender Fisher & Paykel Finance has posted a 37% annual rise in operating profit before interest and tax, helped by a NZ$2.1 million rebate of fees paid to participate in the Crown's retail deposit guarantee scheme. The repayment came after F&P secured a BB credit rating from Standard & Poor's in February.

F&P Finance, a subsidiary of whiteware group Fisher & Paykel Appliances, said operating profit before interest and tax, including operating interest, rose to NZ$28.9 million in the year to March from NZ$21 million the previous year. For the half-year to March, it rose to NZ$16.5 million from NZ$12.4 million.

F&P Appliances managing director Stuart Broadhurst said the finance business was expected to remain resilient despite soft retail conditions. However, any increase in interest rates by the Reserve Bank would put pressure on March 2011 year earnings. See F&P Appliances' results here.

Debenture reinvestment rates averaged 63% over the past six months and hit 80% in April. The firm had total external debt funding of NZ$549 million at March 31 with retail debentures comprising 29% of this, commercial paper 39% and bank debt 32%. Since balance date the bank standby facility to support the commercial paper programme has been increased to NZ$285 million from NZ$214.1 million meaning the group has surplus liquidity of almost NZ$70 million.

Annual operating revenue fell to NZ$136 million from NZ$136.9 million which the company attributed to lower volumes of new lending and lower interest rates. However, second-half operating revenue was up NZ$3.35 million to NZ$69.7 million.

F&P Finance, which was recently approved by Treasury to participate in the extended government retail deposit guarantee scheme, received a BB, speculative or junk grade,  long-term issuer credit rating with a stable outlook from S&P in February. The firm said it had since received a NZ$2.1 million rebate of fees it had paid towards participation in the Crown's existing retail deposit guarantee scheme. Of this money, NZ$600,000 related to the 2009 financial year.

Meanwhile, the company said it had acquired a NZ$22 million receivables book in February, comprising fixed instalment contracts for household equipment. Arrangements had been struck to provide future financing.

Net finance receivable stood at NZ$615.7 million at March 31, up from NZ$587.3 million a year earlier. F&P Appliances' investment in F&P Finance rose by NZ$19.9 million to NZ$199.4 million over the year.