Mining downturn hits McMillan Shakespeare finance operations

Remuneration services and automotive finance specialist McMillan Shakespeare has suffered a heavy fall in earnings in its asset management (vehicle and equipment finance) division after it increased impairment provisions and credit loss charges during the year to June.

The asset management division's net profit fell 16.9 per cent from A$13.6 million in 2013/14 to $11.3 million in the year to June. Revenue was also down slightly.

The weaker result was due to a $2.3 million increase in the residual value provision on lease assets and a $300,000 increase in credit losses.

The company said its exposure to the mining industry caused the higher provision and the credit losses.

Assets under finance in Australia declined from $320 million in 2013/14 to $311 million in the year to June.

However, the company said it had a healthy pipeline of new business opportunities.

McMillan Shakespeare said the overall weak performance of the division was offset to some extent by new funding arrangements on improved terms and a maiden profit for the asset management division's United Kingdom operation.

The UK business turned around from a loss of $451,000 in 2013/14 to a profit of $526,000 in the year to June.

The company reported on the progress of its new retail financial services division, which was born out of the acquisitions of automotive industry finance companies Presidian in February, and United Financial Services in July.

Presidian provides finance, warranty and insurance products to the automotive industry, specialising in the used car segment. It has a distribution network of car dealers, finance brokers and 14 retail branches trading under the name Money Now.

UFS is an originator of consumer and commercial finance and insurance for vehicles and leisure goods, with 1900 dealers.

The new division made a net profit of $3 million in the period from February to June, which the company said was above expectations.