Wellington, Aug 17 NZPA - Fisher & Paykel Appliances Ltd said reinvestment rates in its finance business averaged in excess of 70 percent over the past four months.

The company, like other finance companies, is waiting to hear if the Government will extend the retail deposit insurance scheme.

The guarantee removed uncertainty and anxiety caused by the failure of many finance companies for investors.

"This Crown guarantee is due to expire in October 2010 and we expect the Government to make an announcement shortly on the future of this scheme," chairman Gary Paykel told shareholders at the annual meeting.

Over the course of 2008 reinvestment rates fell from historical levels between 65 percent to 80 percent to around 50 percent and they were around that level in March when the parent company was restructuring capital.

The company is approved under the Government's scheme.

Chief executive John Bongard said that in the period since balance date the finance business has achieved an above budget and improved financial performance over the corresponding period last year.

"This result is due to the efforts put in to contain bad debt expenses and reduce costs as retail spending levels and volumes of business written have reduced in line with the weakening economy."

An overall lower interest rate environment also contributed to the above budget earnings performance.

Further investment has been made in introducing new technology to manage credit.

New Zealand households remained under significant financial stress due to increasing levels of unemployment and the weaker domestic economy.

"Management therefore expect account delinquencies and resulting bad debts to continue for some time yet before a recovery in the economy will reverse this trend," Mr Bongard said.

The business was well prepared to meet new regulations for finance businesses, which include requirements to increase capital, gain a credit rating, and appoint independent directors.

Mr Paykel said the finance company concentrated almost exclusively on merchant originated point of sale consumer credit, which was a niche business.

It achieved normalised operating profit before interest and tax of $21.1 million for the year ended March 31, 2009, driven by growth in Q Card and Farmers Finance Card, improved yields, and fee income.

Funding costs increased during the year as the global credit crisis intensified.

Operating costs remained stable resulting in a cost-to-income ratio of 40 percent.

But a bad debt charge of $6.7m adversely impacted earnings.

The finance business continues to maintain its Standard & Poor's A1 plus short term credit rating for its commercial paper programme.