Chairman's Review

GARTH MCILWAIN

A further year of pleasing growth in total Group assets - total Group assets now exceed one billion kina - and increased profitability is recorded for 2012:

  • Group core business cash operating profit for 2012 was K80.79 million, a steady increase from the 2011 result of K74.16 million;
  • Group total assets reached K1,008.94 million, a significant increase when compared to the 2011 figure of K890.56 million;
  • Shareholders’ equity reached K711.02 million up from K633.86 million; and
  • A dividend payment totalling K31.74 million was distributed to shareholders during August 2012, this representing an increase of 25% when compared to the sum of K25.31 million distributed during 2011.

Strong volumes of new finance contracts were settled in Papua New Guinea during 2012, a significant number being related to the construction of the PNGLNG project. As the LNG Project construction stage is trending towards completion, the volumes of new LNG related financing opportunity may well disappear as 2013 progresses. In Fiji new finance contract levels showed a slightly reduced volume when compared to recent years. This is not surprising as the Fiji economy remains subdued. Reduced volumes also featured in Vanuatu. This was expected as the growth achieved since establishment has matured to what seems to be a sustainable level. Solomon Islands continued its recent strong growth trend. The Solomon Islands subsidiary too has now reached a level of assets that seems appropriate for the Solomon Islands economy. In all, the overall indicators are that all finance company activities have reached a sustainable level with future growth opportunity that will be directly related to large projects that appear from time to time that stimulate demand for financing facilities.

The Port Moresby executive office and residential properties continue to perform well with no vacancies. This trend is expected to continue during 2013. The new 20 executive apartments at Era Dorina will be completed later this year and it is anticipated these will be occupied by year end.

A recovery in share trading price levels on the Port Moresby Stock Exchange has now arrested the negative adjustment to annual profitability for the past three years. At year end, Bank of South Pacific Limited (BSP) shares were trading at K8.06, up from K7.53 at end 2011. This is the major reason for the positive adjustment of K21.94 million in the investments revaluation figure.

The property portfolio was subject to formal valuation during the latter part of 2012 in accord with the three yearly revaluation requirement. This too resulted in a positive adjustment to the value of Credit House and the Era Dorina executive apartment development. The sum of K47.75 million has been booked in this regard.

The after tax profit outcome for 2012, following the revaluation adjustments is K106.93 million, a significant increase from the 2011 result of K42.10 million.

During November 2012 the On Market Share Buy Back Scheme that allowed shareholders to dispose of up to 5,000 shares via this scheme expired.

Your Board has now extended the On Market Share Buy Back Scheme under a reviewed level. Shareholders can now dispose of up to 20,000 shares under the revised 2012 scheme. The sum of K5.00 million has been reserved to facilitate the scheme.

During late December 2012 an unsolicited, non-binding offer was received from BSP for the purchase of the Group’s subsidiary finance companies in Papua New Guinea, Fiji, Vanuatu and the Solomon Islands. The prospective offer is subject to due diligence and various regulatory approvals in each of the four nations. Should a firm offer eventuate, Board consideration and shareholder consideration will proceed. Shareholders will be kept informed with market releases through the Port Moresby Stock Exchange.

The pleasing results during 2012 indicate the continued dedication and commitment by the Group’s executive and support staff. My fellow Board members also play a crucial role in formulating the future strategic directions of the Group. Continued shareholder support is also important for ongoing stability. To you all my sincere appreciation for facilitating yet another successful year.

CHAIRMAN'S SIGN

Garth McIlwain
Chairman