Hanover assets drag Allied Farmers to $77.6m loss

Rob Alloway. Photo / Dean Purcell

Allied Farmers yesterday revealed a grim unaudited result for the year to June 30 - posting a loss of $77.6 million.

In December last year, Allied bought the loans of Mark Hotchin and Eric Watson's Hanover and United Finance in a deal which put the value of the loan book at $396.2 million.

More than half of Allied's loss is linked to the collapse of its finance company Allied Nationwide and impairments made on the assets it bought from Hanover and United Finance.

The result should have been released to the market on August 30 but the company was given a 10-day extension by the stock exchange after its subsidiary Allied Nationwide Finance was placed into receivership on August 20.

Allied said the result had been prepared on a "going concern" basis on the assumption that funding initiatives being arranged by the company were completed in the near term. It did not say what the "funding initiatives" were and managing director Rob Alloway did not return calls yesterday evening.

The audit was incomplete because the accountants were still assessing the impact of the collapse of Allied Nationwide and the adoption of the "going concern" principle, Allied Farmers said.

In a statement the company said the result included a $21.395 million goodwill impairment in its investment in Allied Nationwide which was now valued at nothing as a result of the receivership. A further $20.203 million in impairment losses stemmed from the former Hanover and United assets and $5.984 million had been spent on the Hanover acquisition during the year. Alloway, who last week announced he would resign from his executive role in December, said the receivership of Allied Nationwide was disappointing but the reasons were known.

The subsidiary which holds the former Hanover assets made a loss of $21.69 million after impairments on property and loan assets of $20.2 million. Since acquiring the assets Allied said it had dropped the provisional fair value assessment of the assets from $175.52 million to $109.975 million.

Alloway said that assessment of Hanover assets was "very disappointing" given the level of independent expert oversight while the company was in moratorium and prior to the acquisition. "In a number of cases, the combined effect of reduced liquidity in the financial sector and reduced demand for property has severely diminished the security value which backs these assets. Many had been valued based on assumptions that were subsequently found to be unrealistic," he said.

However, Alloway said the recovery process on loans and property had been encouraging with $9.447 million recovered in the six months to June 30.

Earlier Allied revealed more positive news with the early settlement of its Queenstown Five Mile property. The sale of the 23.4ha piece of land next to Queenstown airport had been due to settle in mid-November after going unconditional in July.

The company has refused to name the buyer and the sale price, citing confidentiality.

Alloway said the proceeds from settlement would be used to reduce its debt to Westpac from $14.2 million to $5.4 million. The debt would be further reduced early next week after it received the proceeds of a court hearing in the United States.

Last week Allied said it would receive about $3.5 million from the case which relates to a luxury development in Beverley Hills, California.

Alloway said the two payments would bring its senior term debt down to less than $2 million. "[It] gives significant impetus to our debt reduction programme," he said.

The company has been under pressure to pay back Westpac since it began negotiations with the bank back in June. Allied's share price spiked up 1.2c to 3.9c on the news of Five Mile settlement but fell back down to 3.4c by the end of trading.