Corporate & Financial News
2005 Archive
15 November 2005
The following is a statement that will be made by the Chairman to Shareholders at the Annual General Meeting of Wide Bay Australia Ltd, to be held in Bundaberg, today at 11.00 a.m EST:-
The Chairman, Mr John Pressler has today confirmed that Wide Bay Australia Ltd has enjoyed a strong quarter to September, showing an overall estimated profit after tax in the range of $2.83 million. This figure compares to $2.35 million for the corresponding period last year and reflects an increase of 20.6% on that figure.
Mr Pressler has confirmed that this result is in keeping with the budget and that the Board expects to produce a further strong result this financial year.
He said that while the housing market had shown some slowing, that there has also been a general slowing in the loan payouts and churning and that the loan book is growing satisfactorily.
He said that in keeping with the statement made recently to the market in relation to the conversion of Resetting Convertible Preference Shares (RCP’s) and the policy in relation to capital, the society will be continuing their high payout ratio in respect of dividends. Expected total dividends for the 12 months would be in the range of 48 cents per share, fully franked (43 cents -2004/2005).
Mr Pressler said Wide Bay Australia’s recently opened branches at Camberwell in Melbourne and Upper Mt Gravatt in Brisbane, are showing steady growth and Parramatta in Sydney is contributing to overall lending operations.
The society is scheduled to complete a further off-balance sheet securitisation program at the end of November for approximately $325 million. He said the Board is delighted with the recent assignment of a “BBB-“investment grade credit rating from Standard and Poor’s and it is anticipated that this will have a significant impact on the overall cost of the securitisation program.
While the incidents of loan arrears has shown some increase, the society’s captive mortgage insurer, Mortgage Risk Management Pty Ltd (MRM) is also forecast to show a further increasing performance. Mr Pressler said the assigning of the “BBB-“ rating for both the society and MRM will provide opportunities for Wide Bay Australia to obtain funds when required from a more diversified source of investors and at a reduced cost, as well as creating other opportunities for both the society and MRM.
Wide Bay Australia Ltd is only the third Australian building society or credit union to achieve such an investment grade rating.
WIDE BAY AUSTRALIA LTD IS ASSIGNED A “BBB-“ RATING BY STANDARD AND POORS.
The Managing Director of Wide Bay Australia Ltd, Mr Ron Hancock has confirmed that the Board and Management were delighted with the announcement today from Standard and Poors that Wide Bay Australia had been assigned a “BBB-“ credit rating.
He said he believed this was the third such rating given to Australian building societies and credit unions and would have a significant impact on the cost of raising wholesale and institutional funds and cost of issue of future securitisation programs. He expected it would also generate new opportunities.
In addition to Wide Bay Australia being rated the Society’s wholly owned lenders mortgage insurer, Mortgage Risk Management Pty Ltd had been assigned the same rating of “BBB-“. Wide Bay Australia and Mortgage Risk Management had been assigned an outlook as stable.
He said, we are currently in the process of finalising another public securitisation issue for approximately $325 million, scheduled for the middle of this month and the benefits from such a rating will be no doubt reflected in the pricing of this issue.
He said the “BBB-“ category was accepted as an investment grade rating within the market and that many institutions and organisations under their charter, would now be able to invest and transact with Wide Bay Australia, where in the past they had been precluded through the lack of an investment grade credit rating.
He said the rationale and summary of S&P in assigning this rating, recognised the strong performance of the Society over previous years, the strength of the Society’s lending, asset quality, the Society’s funding and liquidity position and lack of losses over the past years.
He said the Society would continue to broaden its geographical spread throughout Sydney, Melbourne and Adelaide and this would assist in the ongoing rating evaluation which would be carried out on an annual basis.
Mr Hancock said that while lending had slowed over recent months, that the market was still quite strong. While lending has slowed, so has the amount of churning that had been obvious in the market over the past few years and the Society’s loan book continues to grow. He confirmed the Society continued to enjoy strong results as forecast.
CAPITAL STRUCTURE AND CONVERSION OF RESETTING CONVERTIBLE PREFERENCE SHARES
The Directors of Wide Bay Australia Ltd have reviewed their strategic planning of capital requirements for the next three years and in particular the action they propose to take on the dividend reset date of the Resetting Convertible Preference Shares (RCP’s) - due December 2006.
The Society’s current structure with respect to the public issue of the securitisation programs and for the 2004 program, is for the issue to be almost totally off-balance sheet as opposed to previously where the Society held the first loss unrated tranche. This structure has freed up capital and the Board are confident that they will not require any additional capital for the next three years and in fact will repay subordinated debt when it matures in December 2008. The strategic plan continues to adopt the higher dividend payout ratio of previous years.
With respect to the RCP’s the three options considered by the Directors were:-
Roll over for a further five years
Payout
Conversion to ordinary shares.
With a conversion to ordinary shares, one of the terms of the issue was a minimum of 13 shares would be issued on conversion irrespective of the share price at the time. The board also considered the cost of the RCP’s at 240 points over 90 days BBSW. At the time of issue this spread was the current market rate, however with margin spreads reducing substantially over the past two years, consider a spread of 240 points expensive.
The Board are also conscious of APRA’s intention to require tier 1 capital to constitute 75% of total capital. Currently the RCP’s are limited to their classification as tier 1 to the extent of 25% of total tier 1 capital, with the remainder classified as upper tier 2.
The Board is also aware of the concern being expressed by regulators at the quality of hybrid instruments and what would appear to be an ongoing move to require more genuine fixed equity.
Recently Directors have received queries from investors as to possible action in respect of the RCP’s on dividend reset date.
As part of their strategic capital planning the Board have resolved that they will convert the RCP’s at dividend reset date to ordinary shares. This will result in the number of shares being calculated having regard to the share price at the time, however under the terms and conditions of the RCP’s issue if the share price is in excess of $7.70 at the time, there will be a minimum of 13 shares issued per $100 of RCP’s. Assuming the share price will be in excess of $7.70, this will result in 4,366,843 additional ordinary shares being allocated bringing the total shares on issue to 24,801,632 dependent on what shares are issued over the next 12 months under the staff share plan.
It is considered that this conversion will bring the following benefits to the shareholders of Wide Bay Australia:-
The current payment of BBSW plus 240 points is fully franked and is a payment from profits. The availability of the RCP dividends for fixed shares will increase the dividend to existing shareholders.
There has always been a lack of liquidity in the Society’s shares with many investors expressing their disappointment at not being able to acquire a holding. The issue of 4,366,843 shares in respect of RCP’s, which are currently primarily held by institutions and professional investors, is expected to create some liquidity in the market.
The full amount of capital under RCP’s will be treated as tier 1 capital.
Whilst informing the market of this strategy to be adopted in respect of RCP’s and capital, the Board confirms that Wide Bay Australia continues to enjoy strong results, with their new branches at Upper Mt Gravatt, Brisbane and Toorak Road, Camberwell, Melbourne, which provide full retail and loan facilities now fully operational.
JOHN PRESSLER RON HANCOCK
Chairman Managing Director
29 July 2005 Equity Stake in Financial Technology Securities Pty Ltd
Wide Bay Australia Ltd (WBB) and Aviva Australia (a wholly owned subsidiary of UK listed Aviva Plc) are pleased to announce that following extensive due diligence, they have agreed to each acquire a 25% interest, giving a collective interest of 50.01% interest in Financial Technology Securities Pty Ltd (Financial Technology).
Financial Technology has operated since 1993 as financial planners using a plan that utilises investor equity for wealth creation, with Wide Bay Australia being one of their preferred lenders and Navigator their investment platform, during that period. The company is a very successful operation primarily based in South East Queensland and New South Wales, with a large clientele developed over the years.
The acquisition will strengthen Wide Bay’s presence in the financial planning industry, extending our range of services that will be available to our customers and shareholders.
The founder and Managing Director of the company Mr Geoff Putland, will continue in the role of Chief Executive Officer, until a successor is appointed and will remain on the Board as Chairman for at least five years, ensuring the company retains the extensive expertise and skills he has developed over the years.
Commenting on the acquisition, Ron Hancock Managing Director of Wide Bay Australia, said Financial Technology provided an exciting opportunity for the Group as it had a wide reach in its selected market and an excellent demographic amongst its client base.
“Both Aviva and Wide Bay Australia recognise the growth opportunities Financial Technology brings. It is a business that will grow with the additional support provided by its new equity investors.
“Together we will offer a wealth of financial skills to Financial Technology which we are widely recognised for. We think their customers will be even better served as a result of this restructure,” said Mr Hancock.
Aviva Australia Chief Executive Officer Allan Griffiths added he was very conscious of maintaining the unique character of Financial Technology that had helped it to become so successful.
“Aviva’s model is to support the growth and development of successful financial planning groups. We expect both Wide Bay and ourselves will be able to lend our proven skills to the Financial Technology team.
“I’m very excited by the opportunity this investment provides. Our Navigator platform has been an integral part of Financial Technology’s business since it began, so the whole team knows each other well.
“Aviva has also admired the growth of Wide Bay, and its exciting business model. Together with the staff who continue to hold equity in Financial Technology, we expect this will be a very exciting partnership based around taking the business to the next level,” said Mr Griffiths.
The 50.01% investment in Financial Technology is expected to be completed on Wednesday 3 August 2005.
29 July 2005 Wide Bay Australia Australia Ltd 2004/2005 Results
Wide Bay Australia Ltd has experienced strong performances for the year ended 30 June 2005 showing steady improvements over and above that of 2004.
Managing Director, Mr Ron Hancock said the Board and Management are delighted with the achievements, where the building society had increased profit by 25.5% to an after-tax profit of $12.413 million.
Mr Hancock said that while loan approvals for the year fell from $485.3 million to $448.5 million, the actual outstanding loan book had increased by 12% to $1.311 billion. This could be attributed to a direct result of the slowing in the housing market and the resulting slowing in payouts and churning that had been experienced over the past few years.
Other significant results were:-
· Cost to Income
Cost to income has reduced from 62.7% in 2003/2004 to 57.8% in 2004/2005. He said, this result is the best performance to date and is an outstanding result compared within the building society industry and compares favourably with that of the regional banks.
· Return on Equity
Return on equity increased from 12.3% in 2003/2004 to 15% in 2004/2005.
· Assets and Funds Under Management
Assets and funds under management had increased from $1.369 billion to $1.523 billion – an overall increase of 11.2%.
· Dividends
A final fully-franked dividend of 23 cents per share, will be paid on 23 September 2005, bringing the total dividend for the year to 42 cents per share, representing an 87% payout of the total earnings per share for the year of 48 cents.
· Capital Adequacy
Capital adequacy as at 30 June 2005 stood at 14.05%, compared with 13.72% as at 30 June 2004.
· Revenue from ordinary activities
Revenue from ordinary activities increased from $92.2 million to $108.7 million – an increase of 17.91%.
Mr Hancock stated these results had been achieved with the society maintaining its policy of writing off loan origination costs in total during the year they are incurred. He said it is the Board’s intention to maintain this policy.
The coming financial year will be assisted by the opening of a branch in Parramatta, Sydney late in 2004; the recent opening of a branch at Allenstown in Rockhampton; a branch at Upper Mt Gravatt, Brisbane being opened early in August 2005; and the scheduled opening of a branch in Camberwell, Melbourne in October/November 2005..
He said the results were assisted by the contribution from Wide Bay Australia’s captive lenders mortgage insurance company, Mortgage Risk Management Pty Ltd, which had shown a surplus of $2.609 million after tax.
Loans originated from brokers for the year represented 16.5% of loan approvals, however with the further expansion into Sydney, Brisbane and Melbourne, the society will increase its use of brokers, which could see this account for up to 25% of approvals for the coming year.
Mr Hancock said that while margins continue to remain tight and the cost of regulatory compliance is substantial, particularly with the Financial Services Reform Act, the Board and Management are confident of a continuing strong performance for 2005/2006.
17 May 2005 Wide Bay Australia Anticipates Strong Profit Growth
Managing Director of Wide Bay Australia Ltd, Ron Hancock today announced that the building society is anticipating an increase in trading results for the year in the range of 22%.
He advised that the profit after tax is anticipated at approximately $12.1 million, compared to $9.9 million for 2003/2004.
Based on the Board’s earlier advice of an increased dividend payout ratio in relation to the amount of capital held, it is anticipated that the final dividend will be in the range of 22 cents per ordinary share - bringing total dividends for the year to 41 cents.
Mr Hancock said the results reflected strong growth in the society’s operations.
“The opening of a new branch in Parramatta in 2004 has seen a significant contribution from New South Wales and the extension of our lending operations in Melbourne is also contributing.”
“We are focussing on a steadily controlled expansion of its own branch network”.
“In addition to Parramatta, we have just opened a new branch at the Allenstown Shopping Centre in south Rockhampton. We have also completed negotiations for premises at Mt Gravatt in Brisbane, where it is anticipated that a new branch will be open in July 2005, and a further branch will be opened in Camberwell in Melbourne in approximately October 2005.”
“These branches will have full retail banking facilities as well as full time loans consultants.”
Mr Hancock said Wide Bay’s branch expansion has also assisted in offsetting some slowing of lending in the society’s traditional areas of operation.
He stated that Wide Bay Australia continues to maintain an excellent cost to income ratio, in the low 60% range, and this is a major contributing factor to on-going development of profits.
17 February 2005 DIRECTORS’ REPORT for the Half Year ended 31 December 2004
- The Board of Directors are pleased to report another period of strong growth for the six months to 31 December 2004.
- The principal highlights for this period were:-
- After tax profit for the group increased to $5.669 million – an increase of 19.25% over the corresponding period of last year.
- Outstanding loans and loans under management as at 31 December 2004, totalled $1.239 billion which reflects a growth for the six months of 6.3%. It is also anticipated that this level of growth of the loans book will be able to be maintained for the remainder of the year, which should result in an overall growth of 12% to 14%. The Society’s move into New South Wales and expansion into Victoria of our lending operations is now showing an improving level of loan approvals for those areas.
- Loan approvals for the period were $222 million, which is consistent with the 1st six months of 2004 and despite the decline in housing, by holding these figures reflects the impact of the Society’s expansions of its lending activities particularly in New South Wales and Victoria.
- Consistent with the advices in our report for the year ended 30 June 2004, the Society’s Captive Mortgage Insurer, Mortgage Risk Management Pty Ltd has shown an after tax surplus of $1.228 million, a substantial contribution to the overall operations.
During the past period we have had several discussions with various options for reinsurers and have now completed for business written from 1 January 2005 a new Reinsurance Agreement for 4½ years, with Radian Insurance Inc. an S&P “AA” rated reinsurance company based in the United States.
This reinsurance will provide additional strength to the Captive and ensure its exposure is restricted for future year activities. It is expected that the Captive will continue a similar level of profitability for the remainder of 2004/2005, having experienced very little demands in respect of claims.
The Reinsurance Agreement will now have an impact on the capital requirements from the parent company in future years, with our projections, that no immediate further capital contributions will be required by the Captive.
- At 31 December 2004, the Society’s capital adequacy was 16.12% and this increase was a result of the Society completing an off-balance sheet securitisation program in Oct 2004 for $300 million bringing the total public issues completed by the Society since 1997 to $1.287 billion. This securitisation program being off-balance sheet released a significant amount of capital, with the current capital available surplus to the Society’s needs.
- The Board has maintained a high level of dividend payout ratio and given the current capital surplus, intends to distribute approximately 90% of profits for the current year. A fully franked dividend of 19 cents (16.5 cents – 2003) will be paid in respect of the six months on 18 March 2005.
After tax profit has improved in spite of tightening margins as a result of the large amount of wholesale funding used, the cost of which fluctuates with market expectations. It does not include any Cashcard sale surplus as this was bought to account in total in the second half of 2003/2004 as per our report and in accordance with our Auditor’s advices.
Our cost to income ratio for the period was 61.22% compared with 61.5% for 2003/2004.
We are continuing with the installation of our electronic loans processing system and have completed the in-house mortgage documentation process. The bulk of our mortgages are now being completed in-house and has provided substantial cost savings.
We have maintained our policy of expensing our loan origination cost at the time of processing rather than amortising these costs over an extended period.
We are currently reviewing our south-east Queensland, Gold Coast and Melbourne operations with a view to expanding our representation in those areas, which are predicted to provide strong future growth.
Our Management Team continue to monitor the market to ensure the products and facilities that we offer remain competitive and are meeting the needs of our borrowers and investors. We are continually looking at opportunities to develop further products and provide enhancement to our existing range.
Our Internet Banking facilities are showing strong growth, as are Telephone Banking and electronic payments such as BPay.
Your Board and Management are forecasting similar trends for the remainder of this financial year.
