PGC slumps to $54.4m loss as Marac, Wrightson woes bite

Pyne Gould Corporation slumped to a loss of $54.4 million in the June year as a result of the previously announced impairment charges on subsidiary Marac's property finance loans, and its share of PGG Wrightson's $66.4 million loss.

Write-downs on Marac's property loans totalled $59.5 million while PGC's share of 20.7 per cent-owned PGG Wrightson's loss was $13.8 million.

Coming not long after Marac's credit rating downgrade, the loss is a big setback for PGC which hopes to transform the finance company into a registered bank and which recently announced a diversification into funds management.

"The loss is disappointing, especially given the group's long and proud history," said chairman Sam Maling.

"We need to learn from mistakes made and ensure they don't happen again," he said referring to the fact that Marac had "got caught up in the demand for property development finance and the high returns that were offered".

Aside from its property book writedowns, Maling said Marac's core business - providing vehicle, plant and equipment and cash-flow finance - had performed well. It recorded a normalised net profit of $19.5 million against $27.9 million a year ago.

PGC's Perpetual Trust subsidiary posted a net profit of $3.3 million against $3.7 million a year earlier.

Two months ago PGC announced a "new strategic focus" which sketched out its banking and asset management aspirations.

The writedown of Marac's property assets was a "necessary and realistic" step to help "lay a platform for repositioning the group for future growth", Maling said yesterday.

Chief executive Jeff Greenslade said the successful execution of the company's previously announced capital raising would be a key factor in achieving its aims.

There has been considerable speculation as to how much PGC will need to raise and while Greenslade gave no new guidance yesterday, he said factors that would determine the eventual size included ensuring Marac had sufficient capital to comply with Reserve Bank requirements for banks and also non-bank deposit takers.

Cash also needs to be raised to pay for the purchase of Marac's property loans by the group's new funds management subsidiary Torchlight Credit Fund.

PGC also wants to repay its bank debt and "support growth initiatives with its other businesses and investments".

That could be read as a reference to the fact that PGG Wrightson badly needs a capital injection and will likely tap existing investors including PGC.

PGC shares rose 11c yesterday to close at $1.14.