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Dorchester Pacific posts 1H profit on fair value adjustment

Wednesday 17th November 2010

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Dorchester Pacific, which kept receivers at bay by convincing investors to swap their debt securities for a grab-bag of new securities, posted a first-half profit after making fair-value adjustments.

Profit was $15.7 million in the six months ended September 30, from a loss of $8.5 million a year earlier, the company said in a statement. Operating revenue tripled to $33.8 million, with $29 million coming from an item described as "Fair value adjustment - capital raising & capital reconstruction."

Dorchester's debt and equity investors agreed to accept four new securities - property trust units, 2013 notes, shares and options - in what the company called "a complex set of transactions to effect forgiveness of debenture liabilities."

In August it raised $10.3 million through the offer via a capital raising that was underwritten by $7 million by major shareholders the Business Bakery and Hugh Green Investments.

As at September 30, Dorchester has had "a clean balance sheet with positive shareholder funds of more than $25 million, which is slightly ahead of forecast," said chief executive Paul Byrnes. The company anticipates "at least holding on to the first half gains" in the second half of the year, he said.

The shares last traded at 11 cents on November 12, valuing the company at $19.3 million.

Byrnes said in the past three months the focus has turned to improving the performance of its Dorchester Finance and Dorchester Life units.

Dorchester Finance's recovery of bad debts and cash collections from its legacy Senate motor vehicle book have been ahead of forecast and new lending demand has exceeded expectations, Byrnes said.

"We now expect close to 50% of the new lending receivables book to be commercial loans with the balance being our more traditional motor vehicle lending," he said.

The firm expects Dorchester Life's sales of existing products to pick up ahead of Christmas, he said.

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