Dorchester Pacific posted a net loss of $18.1 million, undershooting its revised profit warning by a large margin, and said it would seek new sources of finance.
The deterioration of the previous year's $3.8 million net profit was due to an $11.4 million writedown of its 25 percent stake in St Laurence, an after-tax provision of $6.8 million, and a $700,000 goodwill writeoff in the finance group as a result of rationalising the branch network.
At the start of the month, Dorchester said it no longer forecast net profit of between $3 million and $4 million, and expected a $5 million after-tax increase in provisioning on its property loans.
"Obviously this is a disappointing result but revaluing our investment in St Laurence, taking additional provisions and writing off goodwill in the finance group is appropriate given the current market," said Dorchester chairman Barry Graham.
The company had joined others in the sector hit by a loss of investor confidence and funding drying up. Reinvestment rates were about 20 per cent.
Revenue fell 9 per cent to $64.4 million due to the discontinuation of lending by Senate Finance from September 2007, a consequent reduction in insurance income, and reduced lending by Dorchester Finance.
The St Laurence stake provided a $3 million return for the year, which Dorchester considered satisfactory given market conditions but was less than anticipated.
As required under IFRS accounting standards, Dorchester adjusted the carrying value of its investment in St Laurence to reflect market conditions.
The company has disappointed the market, which has slashed the shares from $2.03 a year ago to 40c. Net tangible assets per share were $1.12.
"Cash holdings in the Dorchester Pacific Group remain strong at $28.2 million as at 30 May 2008," Graham said. At the start of May, the company said its cash holdings were above $30 million.
