Dorchester announces NET PROFIT after tax $3.06mil

Media Announcement
30 May 2007

Dorchester announces NET PROFIT after tax of $3.06 million
Dorchester Pacific Limited end of year results to 31 March 2007

Dorchester Pacific Limited (“Dorchester”) today announced a net profit after tax of $3.06 million for the financial year ended 31 March 2007, down from $8.15 million in 2006.

The result falls within the profit guidance range offered in mid-February, when the company announced two specific provisions (as detailed in the notes below).

Total shareholders equity increased as a result of the exercise of 3,192,900 warrants in August 2006 and the issue of 4,767,891 shares to Auguste Finance Limited (previously St Laurence Mortgage Holdings Limited), the holding company of St Laurence Limited, in March 2007.

The directors have declared a final dividend for the 2007 financial year of 4.25 cents per share, making a total dividend for the year of 9.00 cents, fully imputed (last year 11.00 cents fully imputed).

Chairman of Dorchester, Mr Barry Graham, commented: “Over the 2007 financial year, new management undertook a series of reviews, initiated change and set a platform in place to enable the development of the company.

“Although it was disappointing to announce a reduced net profit result, the directors have approved the dividend at 100 percent of FY07 profit, which is an expression of their confidence in the future of the company.

“There have been a number of positive changes and achievements during the financial year which will provide future benefit for the company, including our strategic partnership with St Laurence, the appointment of a committed management team and positive movements in the shareholder base.

“The exercise of warrants and the issue of shares to Auguste Finance have strengthened Dorchester’s capital base and balance sheet, ensuring the company is positioned to take advantage of future opportunities arising from industry consolidation.

“Support from our investor base remains strong and the company continues to maintain high levels of liquidity and cash reserves.

“The Dorchester board is committed to improving earnings, through the continued strengthening of our existing businesses and the identification of growth and market opportunities.”

CEO of Dorchester, Mr Andrew Walker, said: “Since my arrival in June 2006, we have taken steps to reposition Dorchester and to rectify some outstanding issues.

“_Following a review of operations, changes have been made to ensure a sound platform for the future development of the company, including much needed investment in systems, some restructuring and several write-downs and one-off provisions.

“We also identified key areas for expansion that fit with our strategic plans and have invested for growth, both organically and through acquisition.

“The investment in St Laurence is an indication of our strategic direction, shifting Dorchester’s historical consumer finance focus and rebalancing its lending and services around a more risk balanced strategy.

“The relationship between Dorchester and St Laurence has been strengthened, with Kevin Podmore appointed to the Dorchester board and Auguste Finance increasing its stake in Dorchester to 19.88 percent. This reflects a commitment from both companies to work together on a number of future opportunities, including a potential merger.”

He continued: “Since year end, we have launched a number of initiatives and programs including the development of several new home equity release and savings products and have an agreement from Kiwibank on funding for particular reverse annuity mortgage and home equity release products.

“We are continuing to look at alternative funding sources and reviewing the overall business structure and strategy to ensure capital is allocated appropriately to create long term shareholder value.”

Finance

One-off write-downs and provisions in relation to Senate Finance and the financing of an electricity metering business, impacted on the Finance division’s overall result. Senate’s performance was also impacted by a decline in the used vehicle market with a number of dealerships closing and a reduction in the volume of new business.

_Property lending has been strong across the group and the branch network has turned in a good performance.

Mr Walker commented: “Overall, the lending team had a solid year in a changing market. It was disappointing that isolated instances of poor lending decisions from prior periods had such a large impact in this financial year.

“The asset mix across our lending book has further diversified as we move away from Dorchester’s historical focus on consumer and motor vehicle lending. We will continue to rebalance our lending and investments into asset classes and markets that show good forward looking prospects.”

Insurance and Savings

The outlook for this division is strong, with a number of opportunities evident for DorchesterLife as management develop and implement customer focused strategies that differentiate the brand in the market and improve sales effectiveness.

Products continue to be introduced in response to customer needs and market demand, with a positive uptake of the reverse annuity mortgage, RAM Ultimate. In addition, a new DorchesterLife Home Equity Release loan has been launched since year end.

Mr Walker said: “In recent weeks, an agreement has been reached with Kiwibank to provide funding for DorchesterLife's reverse annuity mortgage and home equity release products. This funding relationship will assist in our continued expansion in the marketplace and we welcome Kiwibank as a valued financier to the company."

SuperLife continues to provide returns above comparable market rates, and other new savings and insurance products are due to be launched in coming months.

Investment Services

The outlook for the retail savings and investment sector is positive. Contributing to this are buoyant investment markets, improved tax treatment for managed funds (PIEs) and the introduction of KiwiSaver.

“Dorchester’s investment services businesses, including Equity, Money Online and NZ Investor, are well positioned to take advantage of the growth in this market sector. The result for the year was impacted by last year’s sale of Direct Broking and a downturn in brokerage from finance company debentures. We are expanding the services offered to remove the business’ reliance on brokerage revenue to create more sustainable income based on value added services and advisory fees”, said Mr Walker.

St Laurence investment (25 percent)

Dorchester acquired a 25 percent shareholding in St Laurence Limited on 28 March 2007.

_Mr Walker commented: “Dorchester was pleased to receive a fully imputed dividend from St Laurence Limited of $735,250 declared on 18 May 2007 which will be credited against the costs of the investment in accordance with the appropriate accounting standards.

“We are very pleased with this investment in St Laurence, an organisation of some considerable depth and credibility, which recently declared a FY07 NPAT of $15.2 million. The benefits of this investment for Dorchester and its shareholders will be realised in the 2008 financial year and beyond.”

ENDS

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