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Allied Farmers fails to convince auditor it is a going concern

Friday 1st October 2010

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Allied Farmers’ auditor gave only a qualified sign-off on the failed financier’s annual accounts, saying it doesn’t have enough evidence that the company can continue as a going concern.

“We have been unable to obtain sufficient audit evidence upon which to form an opinion whether application of the going concern assumption remains appropriate,” auditor PricewaterhouseCoopers said in the report.

The assumption relies on Allied generating “sufficient future cash flows” from the sale of assets in an uncertain market, and PwC said it was “unable to quantify” the impact of those uncertainties.  

Allied said in its annual report that it needs to raise new capital and find a new lender for its rural unit for a “reasonable expectation” to continue as a going concern. It also needs to collect $5 million from debtors which came due yesterday, sell the Hanover and United assets and await the receivership of its failed finance unit.

PwC said Allied’s pro-forma accounts weren’t prepared with generally accepted accounting practice and were subject to “assumptions adopted by the directors” and “should be read in that context”.

Allied hocked off a former Hanover loan to an undisclosed party earlier this week, using the proceeds to pay off its facility with Westpac. It expects to give an update on funding arrangements next week.

The firm, which failed to transform itself into a major lender when it took on the Hanover loan book, doubled its loss to $77.6 million in the 12 months ended June 30 after taking a $40.1 million hit on the collapse of its Allied Nationwide Finance unit.

Allied wrote down the value of the distressed Hanover loan book by more than three-quarters from the $396 million initially estimated in the ambitious debt-for-equity swap last year.

The shares, which have plunged 72% this year, rose 7.4% to 2.9 cents in trading today.

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