Geneva reports ‘good lending growth’

Geneva Finance has reported a “disappointing” half-year result after the group’s pre-tax profit came in at $2.5 million, a drop of 23.8 per cent from the same period a year ago.

The company notes the fall, which was $800,000 in dollar terms, is bigger than the predicted range of 13-15.5 per cent advised in a market update on October 31.

Malcolm Johnston, managing director, says the higher shortfall is the result of additional insurance claims reserves processed following the completion of the actuarial review.

“The overall shortfall against the prior year was largely driven by the increase in cost of funds over the period,” he adds. 

“In addition, the company incurred additional costs in strengthening its regulatory compliance functions. One-off costs were also incurred in relocating to new premises in July this year.”

The group’s after-tax, unaudited financial result was a profit of $1.8m, down $800,000 or 30.8 per cent, from the six months to the end of September 2022. 

Total group assets rose by 14.6 per cent to $185m over the same timeframe and revenue hit $30.6m, an increase of $6.8m or 29 per cent.

Operating costs, including insurance direct costs, increased by $2m, or 19 per cent, to $12.7m.

Trading performance

A breakdown of the figures for each of the group’s subsidiaries reveals contrasting fortunes in the six months to the end of September this year.

Pre-tax profit at Geneva Financial Services, the company’s lending business, fell by $600,000, or 29 per cent, year-on-year to $1.4m. 

“Good lending growth” bumped up its revenue by $1.5m, or 22.6 per cent, but this was offset by the rising cost of funds, which were up $1.3m, or 77.2 per cent. 

“The increase in lending also resulted in additional provision for the period which was up $800,000 on the prior year,” explains Johnston, pictured.

“Total other overheads for Geneva Financial Services were $200,000 lower than the previous year. The current economic climate has not had an adverse impact on receivables but this is an area that will need to be monitored over the coming months.”

Quest Insurance reported a pre-tax profit of $3.2m, up 27.1 per cent as the previous year’s premium growth momentum continued. Premiums were up $3.5m, or 18.5 per cent, from a year ago and higher interest rates took investment income to $900,000, a climb of $700,000 over the same timeframe. 

Johnston notes Quest’s operating costs, including direct costs, were up $1.3m mainly due to investment in staff and IT.

Federal Pacific Tonga, which is 60 per cent owned by the group, continues to perform well and its half-year pre-tax profit was $900,000, a climb of 60.5 per cent. Geneva’s share of that sum was $500,000 before tax and $400,000 after tax.

Stellar Collections, including the debt litigation business, reported a $200,000 loss for the same period, down $100,000 from a year ago, and profit for Geneva Capital, invoice factoring, was up by $50,000 to $150,000.

The company notes that group costs not included in the trading operations results amounted to $2.9m, a jump of $1.2m.

Looking ahead

“The half-year result is disappointing and the rising interest costs were a large contributor to this,” says Johnston.

“The insurance business is performing well and this is expected to continue into the second half of the year. 

“At the AGM the board announced the start of a strategic review, which also includes reassessing each business unit’s contributions to the group and is looking at opportunities to streamline our operations. At this juncture no decisions have been made on this. 

“Lending demand remains high and with good asset quality the company is well positioned to take advantage of this in the coming months.”