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'Mistakes made' Allied Farmers tells shareholders

Tuesday 30th November 2010

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Allied Farmers managing director Rob Alloway admitted to shareholders today that "mistakes have been made which the board and management acknowledge."

Alloway had earlier in the day in a radio interview resisted such an admission with respect to the acquisition of assets belonging to failed finance company Hanover, which turned out to be worth only a quarter of their purchase value.

In the year to June 30, Allied would be concentrating on its core rural services industry business, which continues to trade profitably, despite the collapse of Allied Nationwide Finance under the weight of Hanover's dud loans, Alloway told Allied's annual meeting, held in Hawera.

The Serious Fraud Office announced yesterday it was conducting an extensive fraud probe into Hanover's dealings, which Allied will assist with. Alloway has previously accused Hanover principals of forgiving substantial loans in the weeks before Allied bought the Hanover portfolio for $396.2 million.

The assets have since been written down to $94.3 million. The most dramatic writedowns relate to the Peninsula Road development in Queenstown, where the total original exposure of $96 million has been written off against both stages of the project. Another project, called Melview (Kawarau Falls) has been written down by $20 million to a value of $1 million, according to tables presented at the meeting.

Alloway laid out plans for the year ahead to reduce debt below $30 million by June 30 next year, having peaked at $79.7 million in December last year, and was down to $45.8 million by October 31, including repayment of $16.5 million in Westpac senior debt.

The company plans to restructure property debt further to reduce or eliminate ongoing servicing costs, while continuing with loan recoveries and asset sales with a viewing to "maximising value by recognising 'cost to hold'," said Alloway.

On the rural services business, Allied would "participate in and perhaps lead further industry consolidation", while focusing on margins and on fast-moving product lines. It would also seek to build up its central North Island and South Island livestock businesses.

NZX-listed Allied shares were untraded this morning, having closed yesterday at 0.2 cents.

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