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Transformed Dorchester Posts Record Year End Profit

22 May 2014

Company Announcement

Transformed Dorchester Posts Record Year End Profit

Dividend Declared
2 Year Profit Guidance Affirmed

Dorchester Pacific Limited (NZX:DPC) today posted its full year results for the financial year to 31 March 2014, reporting a net profit after tax of $8.21 million (2013, $1.72 million).

The result is ahead of the earlier forecast profit of $6.0 million and just ahead of the April revised guidance of $8.0 million. It includes the full year trading for Dorchester Finance, DPL Insurance and the EC Credit debt recovery business, but no contribution from Oxford Finance which was settled on 1 April 2014.

The $8.21 million profit includes two extraordinary items;

1. a one-off interest prepayment expense of $1.67 million relating to $11 million of convertible notes, converted to ordinary shares in August 2013; and

2. a gain of $3.23 million from bringing tax losses on to the balance sheet.

The balance sheet at 31 March 2014 shows shareholder funds of $74.1 million (2013, $33.2 million).

The results to 31 March 2014 have been audited by Staples Rodway. They expect to give an unmodified opinion on the financial statements.

Directors have declared a final dividend of a half cent per share for the year ended 31 March 2014. The total un-imputed dividend of $2.5 million equates to approximately 40% of the underlying trading profit of $6.7 million before extraordinary items, in line with the dividend policy guideline advised to the market last year.

The dividend will be paid on Wednesday 23 July 2014. For the purposes of determining shareholder entitlements, the record date will be 5.00 pm, Wednesday 16 July 2014.

Dorchester CEO and Executive Director, Paul Byrnes, said the results reflect a completely transformed business with a strong, conservatively geared balance sheet and sustainable and growing trading profits.

The funding model and financial structure of the new Dorchester business reflects lessons learned from the finance sector collapse in the global financial crisis.

“Equity is currently funding over 50% of total assets and there is no funding from the public. We have no exposure to property development lending. With the strong financial position and an increasing diversity of earnings, we enjoy very good support from our banking partner,” Mr Byrnes said.

“Trading profits are expected to increase to around $15 million before tax within two years, without any contribution from further M & A activity.

“What is particularly pleasing is the real potential we can see for organic growth in trading activity for each of the three existing businesses and for the just acquired Oxford Finance business.

Dorchester Finance is achieving or exceeding all performance metrics month on month. The receivables book is building well, although we are not specifically chasing market share. The focus remains on a quality build that we believe will result from a high and consistent level of servicing of our dealer and broker client network.

“For DPL Insurance, new policy sales of motor vehicle insurance, mechanical breakdown insurance and loan repayment insurance under the ‘Mainstream’ brand are consistently ahead of forecast and new distribution channels and cross selling opportunities are opening up. Loss ratios across the suite of Mainstream and Dorchester Life products are tracking at better than budgeted levels.

EC Credit’s New Zealand revenues, including contingency collection commission from bank and institutional clients, have remained buoyant and ahead of last year. Australian market revenues were slower in the months around the recent election. However, recent initiatives including an improved Australian sales territory structure to better target SME businesses, additional institutional debt recovery work and the launch of a new service offering around Personal Property Securities Registration (PPSR) will see an increasing Australian profit contribution over the next six months”.

Dorchester’s Chairman, Grant Baker, said: “This has been a milestone turnaround year for Dorchester. The result is a record profit for the company and the dividend is the first dividend return to shareholders for 7 years.

“We are very positive about the three acquisition investments - EC Credit, 20% of Turners Auctions and Oxford Finance - we have made over the last 18 months.

“While further merger and acquisition activity remains key to the growth strategy, we will continue to evaluate these opportunities very carefully to ensure we make the right acquisitions and investments”.


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