Cetainly seem to be on track.
Just each time I have looked at them I am left wondering!??
Looking a little deeper,I am still left wondering. I do a lot of wondering!!! lol.
Percy,
Great to see you joining the conversation.
You will see that intangible assets increased significantly on the purchase of EC credit. In fact the net tangible assets of EC credit is around $1mill. Yet in the last six months they managed to make NPBT $2.358mill. So this type of business does not require an assets base to make a decent profit. EC Credit currently make up over half the NPBT for DPC.
In addition, you will need to add 2 years of profits($25mil+) to the NTA position (assuming no divi) for the FY16 return on assets.
So I don't think 37% return on assets will be accurate. It will be much lower. Also, I think you should only use this metric for the finance portion of the business. DPC are so much more than finance:)
cheers,
noodles
I am further in the dark.
We are talking about a finance company who borrows money from depositors and lends it out to borrowers,and the difference between the borrowing and lending is their margin?
Love to know how DPC can earn a margin on intangibles?
If they are a finance company then the return on assets and quality of assets is most important.Therefore the NTA and the incredible 37% return on them [$39.5mil ] giving projected profit of $14.8mil stills leaves me wondering.
Noodles.Earning $2.358mil NPBT in six months on $1mil of net tangible assets,leaves me at a total lost???
Percy,
EC Credit is a debt collector. They do not buy debt from the banks (unlike Collection house). Instead they receive a fee from the bank for successful collection.
Thus, their main asset to earn that profit is the relationship with banks, systems and processes, and people. A lot of this is intangible.
Hope that clears it up.
noodles
What really bothers me about DPC is the FY16 profit forecast.
Lets sumarise the forecasts
FY14 $6mill - They seem to be on target if you exclude one-off interest payment
FY15 $10-11mill - This seems reasonable with the Oxford acquisition and organic growth
FY16 $14-15mill. A 40% increase in profit. Wow. i just don't understand where this is coming from. They have flagged new business streams. Perhaps it is from them? Some organic growth. Previously they said insurance and finance can grow at 30% pa. Another acquisition? Perhaps? But they have previously excluded acquisitions from forecasts (apart from the $20mil forecast from AGM). Maybe(like me), they think TUA can double their NPAT by FY16:)
I just wish they could be more specific on the breakdown.
They have been very aggressive with their forecasts. So far they have not disappointed.
Any thoughts?
FORECAST: DPC: Dorchester Expects Higher Year End Profit of $8 Million
DPC
30/04/2014 09:47
FORECAST
REL: 0947 HRS Dorchester Pacific Limited
FORECAST: DPC: Dorchester Expects Higher Year End Profit of $8 Million
Dorchester Pacific Limited (NZX: DPC) today advised that its net profit after
tax for the financial year to 31 March 2014 is now expected to be
approximately $8 million. Its earlier profit guidance was an after tax
trading profit of $6 million.
The revised profit guidance is subject to audit review.
Dorchester CEO, Paul Byrnes, said the profit from the three trading
operations is expected to come in at around $6.5 million.
"Additionally, there will be two extraordinary items that will have the net
effect of increasing the net profit after tax to around $8 million.
"The first item is the pre-payment of $1.6 million interest on convertible
notes for the term to 31 March 2015, prior to their conversion to ordinary
shares on 30 August 2013. This was noted in the interim results to 30
September 2013.
"The second item results from bringing approximately $11 million of tax
losses on to the balance sheet, resulting in a positive impact on profit of
around $3.1 million.
"There is no contribution in the expected $8 million profit from the recently
announced acquisition of Oxford Finance Limited, with that settlement
completed on 1 April 2014.
"The guidance for group net profit before tax of $10 million - $11 million
for the financial year to 31 March 2015 and $14 million - $15 million for the
year to 31 March 2016, provided at the time of the Oxford Finance
acquisition, remains unchanged.
"The guidance does not include any contribution from further M & A activity
or the benefit of additional tax losses of approximately $5 million remaining
after the $11 million is recognised in the 31 March 2014 accounts," he said.
Chairman, Grant Baker, said: "This latest profit guidance would bring profit
to a level in line with the highest profit achieved in the history of
Dorchester, since it listed in 1985.
"These continued upgrades to profit guidance reflect both the outstanding
progress the company has made over the last 18 months and the significant
further growth opportunities for Dorchester in the broader financial services
sector."
ENDS
Great result, first dividend in 7 years and things looking good for the current year and the future. Nothing flashy, just good steady management and growth and the meeting or exceeding of forecasts and budgets.
And what a turnaround success story.
Disc: hold quite a few so I'm biased
Transformed Dorchester Posts Record Year End Profit
11:49am, 22 May 2014 | FLLYR
22 May 2014
Company Announcement
TRANSFORMED DORCHESTER POSTS RECORD YEAR END PROFIT
Dividend Declared
2 Year Profit Guidance Affirmed
Dorchester Pacific Limited (NZX:DPC) today posted its full year results for the financial year to 31 March 2014, reporting a net profit after tax of $8.21 million (2013, $1.72 million).
The result is ahead of the earlier forecast profit of $6.0 million and just ahead of the April revised guidance of $8.0 million. It includes the full year trading for Dorchester Finance, DPL Insurance and the EC Credit debt recovery business, but no contribution from Oxford Finance which was settled on 1 April 2014.
The $8.21 million profit includes two extraordinary items;
1. a one-off interest prepayment expense of $1.67 million relating to $11 million of convertible notes, converted to ordinary shares in August 2013; and
2. a gain of $3.23 million from bringing tax losses on to the balance sheet.
The balance sheet at 31 March 2014 shows shareholder funds of $74.1 million (2013, $33.2 million).
The results to 31 March 2014 have been audited by Staples Rodway. They expect to give an unmodified opinion on the financial statements.
Directors have declared a final dividend of a half cent per share for the year ended 31 March 2014. The total un-imputed dividend of $2.5 million equates to approximately 40% of the underlying trading profit of $6.7 million before extraordinary items, in line with the dividend policy guideline advised to the market last year.
The dividend will be paid on Wednesday 23 July 2014. For the purposes of determining shareholder entitlements, the record date will be 5.00 pm, Wednesday 16 July 2014.
Dorchester CEO and Executive Director, Paul Byrnes, said the results reflect a completely transformed business with a strong, conservatively geared balance sheet and sustainable and growing trading profits.
The funding model and financial structure of the new Dorchester business reflects lessons learned from the finance sector collapse in the global financial crisis.
“Equity is currently funding over 50% of total assets and there is no funding from the public. We have no exposure to property development lending. With the strong financial position and an increasing diversity of earnings, we enjoy very good support from our banking partner,” Mr Byrnes said.
“Trading profits are expected to increase to around $15 million before tax within two years, without any contribution from further M & A activity.
“What is particularly pleasing is the real potential we can see for organic growth in trading activity for each of the three existing businesses and for the just acquired Oxford Finance business.
“Dorchester Finance is achieving or exceeding all performance metrics month on month. The receivables book is building well, although we are not specifically chasing market share. The focus remains on a quality build that we believe will result from a high and consistent level of servicing of our dealer and broker client network.
“For DPL Insurance, new policy sales of motor vehicle insurance, mechanical breakdown insurance and loan repayment insurance under the ‘Mainstream’ brand are consistently ahead of forecast and new distribution channels and cross selling opportunities are opening up. Loss ratios across the suite of Mainstream and Dorchester Life products are tracking at better than budgeted levels.
“EC Credit’s New Zealand revenues, including contingency collection commission from bank and institutional clients, have remained buoyant and ahead of last year. Australian market revenues were slower in the months around the recent election. However, recent initiatives including an improved Australian sales territory structure to better target SME businesses, additional institutional debt recovery work and the launch of a new service offering around Personal Property Securities Registration (PPSR) will see an increasing Australian profit contribution over the next six months”.
Dorchester’s Chairman, Grant Baker, said: “This has been a milestone turnaround year for Dorchester. The result is a record profit for the company and the dividend is the first dividend return to shareholders for 7 years.
“We are very positive about the three acquisition investments - EC Credit, 20% of Turners Auctions and Oxford Finance - we have made over the last 18 months.
“While further merger and acquisition activity remains key to the growth strategy, we will continue to evaluate these opportunities very carefully to ensure we make the right acquisitions and investments”.
ENDS
An excellent result.
Well done holders.!
With current businesses doing well, organic growth, possible M&A and excellent management, I think DPC is looking increasingly good value at 24c but the market may take a while yet to recognise it.
Ditto, been acquiring for a while now (I was a seller a year plus ago above the 30 cent mark) and really think that management are doing the right thing. Forward looking PE is acceptable but I like the potential for more Merger and Acquisition activity as Byrnes et al have shown in the last 2-3 years that they are very selective at what they purchase and seem to buy low PE assets that exhibit organic growth or assets that supplement their own operations (eg, Turners). 24 cents could be looking cheap in a year or 2.
Updating the performance metrics for the financial year just gone. I am interested in the underlying performance of the finance business at DPC. So I am leaving out the equity accounted earnings of Turner's Auctions in which DPC has a significant stake.
In addition, I leave out the effect of the substantial tax losses brought back onto the books which benefitted DPC shareholders during the year. While the benefit of bringing these losses back onto the books is very real for DPC shareholders, they are not useful when assessing the performance of the underlying business going forwards.
DPC paid no income tax for FY2014. So EBIT can best be estimated by adding to operating profit (huh, I thought EBIT was operating profit - obviously not so in the case of DPC) the interest expense:
($4.171m + $2188m)/$2.188m = 2.91 > 1.2
=> a big improvement from last year. DPC now passes the EBIT to Interest Expense Ratio test.
SNOOPY
Updating the above FY2013 figures
The gearing ratio in based on the underlying debt of the company, calculated by stripping out the already contracted future liabilities eventually payable to insurance policy holders on the balance sheet.
$52.630m -( $6.733m + $15.293m + $6.420m ) = $24.184m
Likewise on the asset side of the balance sheet we have to strip the finance receivables, and this case the equity investment in TUA, from the total company assets. From the Balance Sheet.
$126.682m - $37.726m - $10.209m = $78.747m
Gearing Ratio = Underlying Liabilities/Underlying Assets = $24.184m/$78.747m = 30.7% < 90%
=> Pass Test, and a large improvement on the previous year
SNOOPY
I made a hash of this last year, but PT put me straight. So let's see if I can get it right this year.
I do realise that Tier 1 and Tier 2 capital are usually terms reserved for banks, and that DPC is not a bank. But to enable a comparison with other listed entities in the finance sector, please bear with me.
We are looking here for a certain equity holding to balance a possible temporary mismatch of cashflows. The company needs basic equity capital and disclosed reserves defined as:
Tier 1 capital > 20% of the loan book.
(Dorchester has only Tier 1 capital for these calculation purposes.)
Tier 1 Capital = (Shareholder Equity) - (Intangibles) - (Deferred tax)
= $74.052m - $25.912m - $6.761m
= $41.379m
Not sure if I should make another deduction for 'Investment in Associate' (the Turners shareholding) but my gut feeling is no, so I won't.
The money to be repaid to the company (assets of the company) can be found as assets on the balance sheet. This is the sum total of:
1/ 'Financial Assets at fair value through profit or loss'
2/ 'Finance Receivables'
3/ 'Receivables and deferred expenses'
4/ 'Reverse annuity mortgages'
For the FY14 year these come to $77.65m
$41.379m / $77.65m = 53.3% > 20%
This is a big improvement on the fail grade of last year, and shows the result of the recapitalisation of the company during the year.
SNOOPY