FLLYR: ALF: Allied Farmers Announces Unaudited Annual Result 2010

10 Sep 2010 4:36 pm

ALF 10/09/2010 16:36 FLLYR

REL: 1636 HRS Allied Farmers Limited

FLLYR: ALF: Allied Farmers Announces Unaudited Annual Result 2010

Allied Farmers Announces Unaudited Annual Result 2010

Allied Famers Limited announced today an unaudited operating loss after tax of $77.587 million (2009: $34.198 million loss) for the 12 month period ended 30 June 2010. The result for the year includes a $21.395 million impairment of goodwill in its investment in subsidiary Allied Nationwide Finance which was placed in receivership on 20 August 2010. Consequent to receivership, all of the goodwill related to this investment has been written off. Corporate expenses for the year include one off acquisition costs of $5.984 million, directly related to the purchase of the Hanover Finance and United Finance assets. Impairment losses of $20.203 million on the ex Hanover Finance and United Finance assets relating to events after the 18 December 2009 acquisition date have been recognised in the result for the year.

As at 30 June 2010, Allied Nationwide Finance was under the control of Allied Farmers and therefore its result, an after tax loss for the year of $19.335 million, has been consolidated in the Group accounts. The appointment of a receiver to Allied Nationwide Finance after balance date has resulted in Allied Famers writing off $21.395 million of goodwill which was being carried in relation to this subsidiary. This write-off is included as part of the Corporate expenses outlined in the table above. Additional "Group Proforma" information has been included in the reported Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet and Statement of Cash Flows which represents the consolidated Group as it would stand excluding Allied Nationwide Finance. This provides a more relevant reflection of the Group going forward. The carrying value of Allied Nationwide Finance is reported in the Proforma accounts as nil. Managing Director, Rob Alloway said the receivership of Allied Nationwide Finance was disappointing, and noted that the reasons for receivership of Allied Nationwide Finance had been well documented.

Allied Farmers Investments, the asset management subsidiary which holds the assets acquired from Hanover Finance and United Finance incurred a loss of $21.694 million for the period to 30 June 2010. Included in the loss are $20.203 million of impairments on property and loan assets. Since the 31 December 2009 Interim Financial Statements there have been $85.748 million of additional impairments recorded, $65.545 million of which has been attributed against the fair value of the assets acquired as at acquisition date of 18 December 2009. This decreases the $175.520 million provisional fair value assessment as at acquisition date reported in the 31 December 2009 Interim Financial Statements to $109.975 million.

Alloway said the fair value assessment of the assets acquired from Hanover Finance and United Finance was very disappointing given the level of independent expert overview of these values while Hanover was in moratorium and prior to acquisition. In a number of cases, the combined effect of reduced liquidity in the financial sector and reduced demand for property has severely diminished the security value which backs these assets. Many had been valued based on assumptions that were subsequently found to be unrealistic. Our fair value assessment process was designed from the outset to be fair, taking into account parameters such as security value, prior charges, borrower risk, guarantor risk and country risk - and has delivered what we believe to be a realistic representation of the value, as it stands today. The recovery process on loans and properties has been encouraging with $9.447 million recovered in the six months to 30 June 2010. Highlights over the period have included the unconditional sale of Five Mile Stage Two which settled yesterday, and a partial, but substantial recovery on the MAC Reeves loan, of $6.2 million (together with an additional $3.5 million due early next week) which has involved obtaining interim distributions from a court appointed receiver.

The rural services subsidiary, Allied Farmers Rural, encountered tough trading conditions during the year and reported a loss of $0.757 million. Alloway said "Increased competition in the merchandising segment has again put pressure on margins and caused us to examine the way we do business in many areas. The Livestock division experienced a reduction in stock numbers. This was due to drought in some regions, and once again a tightening of on-farm cash flow led by the major banks, many of who are heavily exposed to the rural sector. Allied Farmers does however see some strong signals for recovery coming out of the dairy sector, with forward sales figures into 2011 for dairy herds well up on the previous season. This, together with signs of recovery across the rural sector generally, is likely to have a positive impact on performance in all the business sectors in which the rural business operates"

Senior term debt during the year has decreased to $16.5 million (2009: $21.0 million) as at 30 June 2010. The Board has acknowledged Allied Farmers was over geared for the current environment, and debt reduction has been the key objective during the year and will remain a key focus for the Group for some time to come. In this regard, with yesterday's early settlement of the Five Mile sale reducing term debt to Westpac to $5.4 million as at today, and a further significant reduction scheduled for early next week, we will be very near to achieving our objective of fully repaying Westpac in the near term. End CA:00199597 For:ALF Type:FLLYR Time:2010-09-10 16:36:26

More announcements for ALF