Dorchester Pacific hammered after another profit downgrade

By NZPA

Thursday 1st May 2008

Dorchester Pacific shares fell to a 17-year low today after the finance company issued its second profit warning in three months, and said its chief executive was moving on.

The company also said it expected a $5 million after tax increase in provisioning on its property loans, as a softening market had pushed down property asset values, against which it secured lending.

The provisioning took into account the longer time it was expected to take to realise some property positions.

Dorchester no longer expected to achieve net profit of between $3m and $4m for the year ended March 31, which was in turn a downgrade from the $6m annual net profit previously forecast.

The company was also reviewing the carrying value of investments, including a 25% stake in St Laurence which could cut profit further.

The board said it would miss earlier guidance as a result of trading conditions in a difficult finance market, and a lower than anticipated contribution from St Laurence Ltd.

Cash holdings remained above $30m, and the company was receiving enough from loan repayments to meet its debenture obligations.

"We have maintained a diversified loan book, with our top five loans accounting for only around 25 percent of our total receivables with none of these being inter-related parties," said chairman Barry Graham.

The company would no longer focus on capital intensive activities, and would look to other new business.

Chief executive Andrew Walker had resigned to take up a role at Auguste Holdings Ltd, whose majority owned August Finance Ltd is in turn a majority shareholder in St Laurence and a substantial shareholder in Dorchester.

Shares in Dorchester slid 18%, or 9c, to 40c after an earlier low of 33c, having fallen from $2.18 a year ago.

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