Geneva Finance Half year pretax results up 44%

Geneva Finance Limited Half Year pretax result up 44% COMMENTARY Trading Performance The group reported a pre-tax profit of $3.3m, 44% up on last year. Profit after tax, attributable to the Geneva Group shareholders, totaled $3.0m up 108% on last year. The pre-tax profit improvement was led by Quest insurance (Up $0.9m, 126%) and the invoice finance operation (GCL up $0.3m, 96%). In addition, each of the trading operations continued to build on the business improvements initiated last year, with all positioned to deliver profit improvements in the second half of this financial year. The "Covid shut down(s)" in April and then August impacted our Lending and Insurance sales, but post shut down, in each instance, these operations bounced back with double digit sales increases. The impact on the debt litigation (as clients elected to manage debt collection inhouse to save cost) and invoice financing (as clients used the wage subsidy to fund their receivables) has similarly shown to be a timing difference. Our expectation is that both these operations will benefit from the recessionary impacts the economy will experience once we are through the Christmas break. COVID-19 had a lesser impact on our receivables arrears than expected and no additional provision was required. No tax expense was recorded for the period as the group utilized un-recognized tax losses. The group reported a pre-tax profit of $3.3m, 44% up on last year. Profit after tax, attributable to the Geneva Group shareholders, totaled $3.0m up 108% on last year. The pre-tax profit improvement was led by Quest insurance (Up $0.9m, 126%) and the invoice finance operation (GCL up $0.3m, 96%). In addition, each of the trading operations continued to build on the business improvements initiated last year, with all positioned to deliver profit improvements in the second half of this financial year. The "Covid shut down(s)" in April and then August impacted our Lending and Insurance sales, but post shut down, in each instance, these operations bounced back with double digit sales increases. The impact on the debt litigation (as clients elected to manage debt collection inhouse to save cost) and invoice financing (as clients used the wage subsidy to fund their receivables) has similarly shown to be a timing difference. Our expectation is that both these operations will benefit from the recessionary impacts the economy will experience once we are through the Christmas break. COVID-19 had a lesser impact on our receivables arrears than expected and no additional provision was required. No tax expense was recorded for the period as the group utilized un-recognized tax losses. Geneva Financial Services pre-tax profit result of $2.1m was 10% down on last year. The April lockdown severely impacted sales with new loan originations down 90% compared to April 2019. The demand for lending coming out of lockdown was better than expected and this, in conjunction with the operational changes made, delivered double digit increases in lending volumes. The performance of the ledger has improved as a consequence of both improved collection activity and better quality of lend. As such the current provisioning is considered adequate and no additional provisioning, as a result of COVID-19, was required. Quest Insurance Group Limited reported pre-tax profit of $1.6m up $0.9m (126%) as a result of both improved underwriting performance (up $0.6m) and increased investment income (up $0.6m). The April lockdown resulted in almost no new business written during April 2020. Post lockdown saw a recovery in sales, and premiums have continued to grow on prior year numbers. The broker and direct channels in particular have maintained premium growth, with the signing of key new introducers underwriting further growth of the direct channel for the remainder of the financial year. Total premium written amounted to $8.7m up $2.1m (31%) on prior period. This segment is also starting to benefit from a maturing insurance book with more insurance premium being released. Quest also maintained adequate solvency surpluses during the period. Federal Pacific Tonga (60% owned by the group) reported a pre-tax profit of NZD $0.7m, up 9%. The Group's share amounting to $0.4m pre-tax profit ($0.3m after tax). This operation also experienced lockdowns and was able to manage through this period without any major implications. The ledger continues to perform and no additional provision as result of COVID-19 was needed. Stellar Collections (Stellar) consolidated profit of $0.2m, down $0.02m on previous year. This operation was impacted by COVID-19 as new debt referrals slowed and Government assistance was offered to businesses. It is however expected that future economic conditions will be favorable for debt collection operations and both Stellar (Consumer Debt) and MFL (Debt Litigation) is well poised to improve on the first half's results. Geneva Capital (Invoice Factoring), reported a loss of $0.01m for the period, a 96% improvement on the prior period. The operation was also impacted with lower debt appetite during the Lockdown periods as businesses received Government assistance. However, cost saving changes initiated in the latter part of the previous year resulted this segment moving into reporting profitable results and is forecasted to continue to build on this for the remainder of the financial year. The after tax unaudited financial result for the period was a profit of $3.3m up $1.6m (97%). The after-tax profit attributable to Group was $3.0m an increase of $1.6m (108%). COVID-19 update The full impact of COVID-19 is not yet known and as such it is the board's view to maintain conservatism in releasing the overlay provision that was put in place in March 2020. Balance Sheet Total group assets increased to $132m (7% increase). The company's equity to total assets ratio is 24.4% vs 23.9% prior year. Revenues Revenue of $16m increased by 8%, $1.3m increase. Operating Costs Operating costs increased by 2% to $7.9m. The low increase was mainly as a result of the April lockdown. Funding Group funding: a. The lending and invoice financing businesses are funded via a Securitisation Facility of $70m, currently drawn to $60m. b. Stellar's banking facility remained unchanged at $3.4m, the facility's term is set to mature in June 2022. c. Professional investor debt funding of $14.3m. This debt funding includes loans from directors. Credit Rating The group's insurance company, Quest Insurance Group Limited's credit rating, issued by AM Best is, a Financial Strength Rating of B outlook stable and an issuer credit rating of bb+ outlook stable. Highlights/ Key Events oLending volumes from May20 - Sept 20 (excluding Apr lockdown) were 21% up on last year. oQuest premium Sales continue to grow and increased by 31% to $8.7m oThe operational changes made in the second half of Mar 20 year and since, have resulted in each of the loss-making operations turning around to near breakeven and now moving into profit. oGroup Revenue grew by 8% to $16m. oTotal group assets increased by 7% to $132m. Events Subsequent to Balance Date There were no material subsequent events to report on. Dividend The board have resolved to declare an interim dividend of 1.25 cents per share. The ex dividend date is 10 December 20, and the dividend will be paid to shareholders on 15 December 20. Strategic Direction Continue to focus and implement operational improvements to our core lending; Insurance and debt collection business operations. Summary and Outlook The Group delivered a 44% increase on the prior year's pretax profit despite the interruptions of COVID-19. Operationally, this was primarily attributable to ongoing improvements following the personnel and business changes put in place in the latter part of last year and the beginning of the current year. This positive outcome is a steppingstone in the right direction. The board remain committed to building on this result to further increase shareholder value. END For further information, please contact: David O'Connell, Managing Director 0800 800 132 End CA:00364209 For:GFL Type:HALFYR Time:2020-11-30 16:56:52