MTF Finance, which is largely owned by its dealer shareholders, has announced a stronger year on year profit off the back of growing lending.
The Dunedin-based company says growth in its assets – the loans it is charging interest for – is behind the growth.
Commissions paid to its shareholder originators – the dealers writing business for it – has increased 6% to $39.9m.
Total amounts paid to shareholder originators, including commission, fees and payment waiver, reduced slightly by 2.4% to $68.3m, as less upfront income has been paid due to significantly lower non-recourse sales.
Sales increased 5.5% in 2018 but was a tale of two halves. After a record breaking 2017, the first half of the year continued strongly. Demand for the non-recourse product, introduced in 2016 in conjunction with Oxford Finance, faltered in April after more onerous underwriting criteria was introduced in response to disappointing arrears performance.
Expenses rose 15% year-on-year, partially attributed to rolling out a new brand.
Total assets increased 11.6% to $748 m, on the back of good sales. Net interest income, as a percentage of average finance receivables, of 9.3% (2017: 9.3%) was consistent with expectations and reflects the competitive pressures of the current lending market.
The MTF Finance Board approved a final dividend of 9.32 cents per ordinary share for payment on 30 November 2018. Total distribution relevant to the period will be 15.32 cents per share – up 2 cents on last year.
For the future, the firm says the focus will turn to technology.
“MTF Finance is aware that consumer demand for continuous technological innovation is strong in the financial services sector,” the result announcement says. “A customer focused approach, coupled with a business model targeting new opportunities for growth will be employed to help service this demand in the next financial year.”
The MTF Finance franchise network remains the company’s strongest performer with sales up 10% during the year, as initiatives to widen the scope of the company’s traditional consumer market have started to produce positive results. Expectations for this channel remain high with a number of growth initiatives due to commence in early 2019.
An exclusive arrangement with Trade Me Motors promoting MTF Finance through private vehicle listings is currently being piloted in Canterbury and is expected to be rolled out nationwide early in the new year.
The company’s traditional dealer market has declined slightly.
“Market research carried out mid-year reaffirmed the high regard dealers have for the MTF Finance brand. This research provided valuable insights as to where efforts should be focused in order to regain lost market share.”
“Originators play a vital role in the building of MTF Finance as a progressive and agile company,” The result announcement says. “MTF Finance’s ongoing commitment to this partnership ensures seamless delivery of tools and products that enable them to meet and exceed customers’ expectations and further grow the company.
