Ticker:         PFG
Website:       www.avoninvestments.co.nz
CEO:            Mr Darryl Queen
Chairman:    Mr Barney Sundstrum
AGM held:  

Shares.net.nz - Comment

  Property Finance Group Limited ( PFG ) or Avon Investments has undergone a 12 month

Restructuring program at a cost of $1.6 million to emerge as a company that lends money on first mortgage loans through marketing a range of branded loan products through a mortgage broker network. The broker network is incentivised through trail commissions to assist in building a long term relationship with brokers. PFG has a similar feel to Mike Pero Mortgages without having a franchise structure.

Management has focused on increasing the quality of the loan portfolio to the extent that bad debts for the last reporting period were only $57000. 93% of all loans are currently secured by first mortgages.

The appointment of Mr Mark Bellas with 15 years experience in the finance sector and Mr Leigh Davis formally with Fay Richwhite Ltd, will add some expertise to the company.

PFG has seen growth in assets employed from $36.7 March 2004 - $76.7 March 2005 – to $280 million March 2006.

PFG announced a loss of $345,000 after taking into account significant investment costs of approx $1.6 million. For the year ended PFG announced a net profit of  $740,000.

The company has restructured and seems to be moving forward to quote the Chairman Mr Sundstrum “the outlook was for a continued strong increase in growth and profitability.”

Profit comment:

 PFG has 13,658,833 shares on issue giving the company a market cap of  $15.8m . listed companies in this sector trade on an average 10 – 12 pe .

On this basis PFG would need to report a profit of circa $1.3 to $1.5m.

Share price comment:

PFG has shown a healthy upward trend from .92 August 2005 to $1.16 July 2006

COMPANY COMMENTS ON LATEST RESULT

The Avon group invested more than $1.6 million over the last 12 months relating to the up front costs of growing the first mortgage loan book and included costs of raising new capital, increased staff levels, building infrastructure and significantly higher levels of advertising. The benefits of this investment will flow for many years. A good example of this is the group's "Lifestyle Security" home equity release product which incurs high upfront costs but has a long average loan life and very low on going servicing costs. Avon recently announced the completion of a securitisation programme for this product which will provide competitive long term funding.

  Whilst the first mortgage strategy is very important, it is equally important to note that the type of borrowers the group lends to are "prime" or unimpaired credit borrowers. Avon lends to these borrowers on a long-term basis (often 30 years) to acquire residential property ("Headstart" and "No Nonsense" brands), commercial property ("Prime First" brand) and to release equity from residential homes for senior New Zealanders ("Lifestyle Security" brand). Lending rates for these branded loans are similar to bank rates and are funded through the securitisation trusts on a long-term basis.

LATEST FINANCIAL RESULT

CONSOLIDATED OPERATING STATEMENT FOR THE FULL YEAR ENDED 31/03/2006
Unaudited NZ$'000
Current Period; Previous Corresponding Period
OPERATING REVENUE
Trading revenue 14,615; 9,220
Other revenue -; -
Total Operating Revenue 14,615; 9,220

OPERATING SURPLUS (DEFICIT) BEFORE TAXATION (550); 1,176
Less taxation on operating profit (30); 433

OPERATING SURPLUS (DEFICIT) AFTER TAX (520); 743
Extraordinary items after tax 175; -
Unrealised net change in value of investment properties -; -

NET SURPLUS (DEFICIT) FOR THE PERIOD (345); 743
Net Surplus (Deficit) attributable to minority interests -; -

NET SURPLUS (DEFICIT) ATTRIBUTABLE TO MEMBERS OF THE LISTED ISSUER (345); 743

Basic EPS -2.53% 6.79%

  RECENT MILESTONES

  April 2005       Avon Investments lists on the NZAX market, “we believe listing will allow us to continue our positive growth momentum, as well as giving us a cost-effective mechanism for accessing capital when we need it” Mr Sundstrum said.

Sept 2005        Placement of 2,222,222 Ordinary shares to Oceania and Eastern Limited is completed.

  June 2006       Name change to Pacific Finance Group limited, and restructuring largely completed. The company moves focus to quality earnings with aim to have all loans secured by way of first mortgage.

  COMPANY ACTIVITIES

propertyfinance was established in May 2001. propertyfinance was initially positioned as a property oriented 2nd mortgage lender predominantly providing short term facilities, commonly referred to as “bridging” loans. At 31 March 2003 only 12% of propertyfinance’s loans were secured by registered first mortgages.
A change in strategic direction was implemented from the first of November 2004. From this date propertyfinance will only fund loans that are backed by a registered first mortgage. The aim, as soon as possible, is to be:
“Exclusively First Mortgage backed”
In addition to the branded products listed below, propertyfinance provides short term bridging and development funding for commercial and residential property secured by first registered mortgage           
 
The registered Trademarks developed and owned by the group are:

Headstart Home Loans provide owner occupied residential property finance. No Nonsense home loans provide owner occupied residential property finance up to 95% of the registered valuation.

No Nonsense home loans provide owner occupied residential property finance up to 95% of the registered valuation.

Prime First Commercial Property Finance provides flexible long term first mortgage funding for commercial property

Lifestyle Security is an innovative home loan product enabling senior New Zealanders to release some of the equity in their homes, either as a lump sum loan or line of credit.