Finance firm’s profits tumble
MTF Finance has seen its annual profit after tax more than halve from $11 million to $5m because of the impact of the Covid-19 pandemic.
The company’s annual report reveals a 55 per cent drop in profit after tax for the year ended September 30, 2020, compared to the same time a year earlier.
It says underlying profit after tax, which removes the volatility of unrealised fair value movements and provides a more consistent measure of company performance, only fell 5.6 per cent to $7.5m. The drop from $8m in 2019 was mostly attributed to a reduction in sales in the second half of the year.
MTF reports sales fell by $26.8m, or 5.2 per cent, as a direct result of the level four lockdown when the company suffered a 90 per cent drop in business during April alone.
Glen Todd, chief executive officer, says a strong recovery has occurred following the nationwide lockdown with sales activity bouncing back to pre-Covid levels.
“Covid-19 was not how we imagined we would celebrate 50 years of successful business,” explains Todd.
“This year has been challenging to a degree never envisaged in our most challenging planning scenarios. What it has done, is provide us the opportunity to rethink what we need to prioritise to emerge from this crisis in better shape.
“The new financial year has started better than expected, but it feels like only now, post the general election exhilaration, that we are starting to face economic reality as a country.
“We are in a better position than most other countries, however, there remains considerable economic uncertainty. Consumer spending and the availability of credit will play critical roles in that recovery and MTF Finance is well placed to play our part.
“We are looking at ways to grow MTF Finance by teaming up with our originators to deliver leading customer experiences that combine digital and humanised lending.
“This customer-first approach means MTF Finance will be well positioned to thrive for the next 50 years.”
The annual report notes that more than 1,000 customers have signed up for products remotely since it introduced contactless means of doing business in response to Covid-19.
Operational expenses during the year to September fell 0.1 per cent on the previous year as well as being under budget with a ratio against average total assets under management of 2.6 per cent.
“To achieve this, we undertook an extensive review of our operating budget immediately following the nationwide lockdown announcement, in anticipation of declining sales,” notes Todd.
Total assets for the year fell $30.2m, or 3.9 per cent, to $753.8m, of which $22.9m relates to finance receivables and $11.4m to cash in restricted bank accounts.
The coronavirus crisis has MTF further reassess credit risk in 2020, resulting in an increased allowance of $4.5 million for forecast deterioration in credit risk as the global economic uncertainty continues into 2021. This resulted in a large loss on fair value of financial instruments for the business this year.
Commission paid to shareholder originators held steady with a minor increase of 0.5 per cent to $42.7m.
The MTF board approved a final dividend of 5.11 cents per ordinary share for payment on November 30, 2020. Total distribution relevant to the period will be 7.11 cents per share – compared to 14.51 cents in 2019 – or $1.6m.
