Revenue climbs by 24%

Geneva Finance has reported a pre-tax profit of $4 million for the six months to September 30 – up by 22 per cent up on the previous year. 

Profit after tax of $3m level was level with 2020 as that year’s result didn’t incur a tax charge due to available tax losses.

New business originations in each of Geneva’s trading entities showed good growth in the first four months without lockdown restrictions. 

However, the shutdown from August onwards was a setback. Although trading could continue remotely, it was achieved at reduced levels.

Revenue of $20.5m increased by 24 per cent, up by $4m. Operating costs increased by 22 per cent to $9.4m, largely due to an increase in direct expenses associated with growth in the insurance business.

Total group assets increased to $153m – up by 16 per cent – and the equity to total assets ratio is 23.6 per cent compared to 24.4 per cent in the prior year.

Geneva Financial Services’ pre-tax profit result of $2.7m was 28.6 per cent up on last year. Lending grew strongly in the first four months – up 28 per cent up on the prior year. 

But by September 30 the lockdown impact on its Auckland motor-vehicle introducer network resulted in lending being reduced to five per cent above last year. 

“Despite difficult times, it’s pleasing that asset quality was maintained through this period and ledger performance continues to improve,” says David O’Connell, group managing director. “As a consequence, provisioning for the period has been lower than forecast.”

Quest Insurance Group reported pre-tax profit of $2.4m for an increase of 48.6 per cent on the previous corresponding period. 

Despite August and September’s lockdowns, premium sales of $14.6m climbed by 67.8 per cent and by $5.9m, with Quest’s direct channel having the largest increase – up by 124 per cent. 

The underwriting result of $3m was up by 102.7 per cent, partly assisted by lower claim volumes during lockdown with Quest maintaining its positive solvency surpluses during the period.

Federal Pacific Tonga, which is 60 per cent owned by the group, reported a pre-tax profit of $800,000, up 5.9 per cent. The group’s share amounted to $500,000 pre-tax profit and $300,000 after tax.

Stellar Collections consolidated profit of $151,000, down $24,000 on the previous year, which was a “good effort by the team in difficult circumstances”.

Services provided by Stellar on GFSL’s ledger made a significant contribution to the performance of that operation’s performance.

“Unfortunately, the debt-litigation operation felt the brunt of lockdowns with restrictions on document serving and court closures effectively cutting off revenue,” says O’Connell. “The group is confident once these restrictions ease, this business will normalise and contribute to profit growth.

Geneva Capital reported a loss of $300,000 compared to a $13,000 loss the prior period. 

This business recovered well in the first four months, but an impairment provision of $300,000 accrued for recovery of outstanding debt has been taken up.

“While the provision is considered to be adequate, the outcome of this recovery is uncertain at the date of this report.”

Covid-19 update

“During lockdowns, the Geneva team reacted well and diligently worked remotely, mostly in less-than-ideal circumstances,” says O’Connell.

“However, all operating business were adversely impacted. The financial impact is to a degree reflected in the half-year result, and to a certain extent reflected in lower future profit growth as the receivables ledger and insurance book are lower than they would be otherwise, therefore giving lower future profit over the life of loans and insurance policies.

“Despite this, provided the business can resume normal operations over coming months, the group is expected to get back on the profit growth path it has achieved over the past 18 months.”

The board resolved to declare an interim dividend of 1.25 cents per share on November 8 with the ex-dividend date being the 16th. The dividend will be paid to shareholders on November 30.

Looking ahead

“The group built on last year’s success and continued its growth path in the first four months of the period, without Covid restrictions,” says O’Connell.

“The lockdown starting in August stalled this momentum and limited core operations to reduced levels of trading. Lockdown is a reality of life and Geneva has had to manage its way through these challenges as most other businesses have.

“In terms of strategic direction, the key focus for the group remains on core lending, insurance and debt-collection functions. 

“The commitment to enhance the IT systems continues and recent changes to lending onboarding systems allowed the group to trade through lockdown as new originations were able to be completed electronically.

“Following the growth in the insurance business over the past few years, the board has decided to replace the existing insurance software with a purpose-built platform, and due diligence on a replacement system is under way.

“The board remains confident in the business strategy, and is fully committed to continue to deliver profit growth and increase shareholder value.”