v2 Report - Additional Information Supplement
DPC Dorchester Pacific Limited
Press releases
| Dorchester Pacific Limited
DPC 23 Aug, 2007, 16:24MEETING Dorchester Annual Meeting Summary Announcement |
| Media release 23 August 2007 DORCHESTER STRENGTHENS POSITION TO TAKE ADVANTAGE OF INDUSTRY CONSOLIDATION Refocusing, simplifying and strengthening the company were the key messages announced to shareholders at Dorchester's annual meeting today. At the meeting, chairman of Dorchester, Mr Barry Graham, commented on the company's performance and the finance sector generally: "The company is performing well and is on track to deliver a Net Profit after Tax in excess of $6 million for the 2008 financial year. "Fallout from the collapse of a few less robust finance firms, including Bridgecorp and more recently Nathans Finance, continues to impact the sector. In these times it is important to differentiate and to understand where your money is going and who is managing it. "Dorchester is a sound financial solutions company, with strong cashflow and liquidity. We are well positioned to take advantage of opportunities that may arise through industry consolidation." Chief executive officer, Mr Andrew Walker, detailed a streamlined future direction for the company that was the result of a 12 month strategic review. "A key part of the review was to identify the most appropriate strategy for the company. We concluded that in order to move forward, we needed to simplify and focus the company on those businesses with the greatest potential. "Our future focus is on non-consumer related finance activities, the home equity release market and savings products. We are exiting the Auckland used car market, shutting down sub-scale operations, and selling the investment advisory business and non core property assets. "The funds released will be used to strengthen the company's position to take advantage of opportunities arising from industry consolidation." Mr Walker also commented on Dorchester's acquisition of a 25% shareholding in St Laurence Limited. "We are very pleased with the investment and are starting to leverage each other's expertise and explore joint opportunities. Kevin Podmore is a welcome addition to the board as is his industry experience. It is too early to outline the definitive next steps for the companies except to say that currently the St Laurence investment is very positive for Dorchester shareholders and the closer the working relationship becomes, the more value will be realised. 'We have strong and supportive stakeholders, are well funded and have good liquidity - all of which are important factors in this environment." Voting on resolutions at the meeting was determined by polls. Results from the polls are to be released to the market by 9am on Friday 24 August 2007. ENDS For more information, please contact: Andrew Walker CEO, Dorchester Pacific Limited Tel: 09 308 4950 NOTES: Summary of key announcements at Dorchester annual meeting, held 23 August 2007: - Refocusing, simplifying and strengthening the company were the key messages announced to shareholders at Dorchester's annual meeting. - The company is on track to deliver a Net Profit after Tax in excess of $6 million for the 2008 financial year. - Following a twelve month strategic review, it was decided to simplify and focus the company on those businesses with the greatest potential. - Dorchester's future focus is on non-consumer related finance activities, the home equity release market and savings products. The company is exiting the Auckland used car market, shutting down sub-scale operations, and selling the investment advisory business and non core property assets. - The funds released will be used to strengthen the company's position and will allow us to take advantage of opportunities arising from industry consolidation. - The St Laurence investment is very positive for Dorchester shareholders and the closer the working relationship becomes, the more value will be realised. - Dorchester is a sound financial solutions company, with strong cashflow and liquidity. The company is well placed to take advantage of opportunities that may arise through industry consolidation. |
Chairman's report
CHAIRMAN’S REPORT
During the year, new management undertook a series of reviews, initiated change and set a platform in place to enable the development of the company. A number of areas were identified that required attention, resulting in several write-downs and one-off provisions.
These included an amount of $545,682 for mark-to-market write downs and realised losses on securities acquired as a result of underwriting activities in previous financial years, one-off costs of approximately $310,000 associated with corporate restructuring, a write-off of $2.7million in subsidiary Senate Finance, and a provision of $1.95 million relating to the purchase and financing of an electricity metering business in 2003.
These one-off costs, provisions and write-downs totalling $5.5 million, significantly impacted the company’s full year result. Dorchester posted a Net Profit After Tax (“NPAT”) in line with market guidance, of $3.06 million, down on the $8.1 million NPAT in 2006 (which included profit of $2.33 million from the sale of Direct Broking). Revenue of $100.00 million for the financial year was consistent with the previous year’s performance of $103.23 million.
Total shareholders’ equity increased as a result of the exercise of 3,192,900 warrants in September 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.
Dividend
The Directors declared a final dividend for the 2006/2007 financial year of 4.25 cents per share, making a total dividend for the year of 9.00 cents fully imputed.
Management
During the 2007 year, a new management team was appointed, including CEO Andrew Walker, CFO Tristram van der Meijden, and DorchesterLife Group General Manager, Henry Lynch. These executives have a wide range of experience and have bought significant value to the Dorchester Group. Since year end, a further executive appointment has been made with Cyrus Richardson joining as Group General Manager of Marketing and Investor Relations.
Directors
The Board currently consists of three independent directors and two non-executive directors, all having considerable experience in the sectors in which Dorchester operates.
In December 2006, Mr Michael Fisher was appointed to the board following the resignation of long standing director Mr Robert Carter. Michael is an Auckland-based barrister who specialises in banking, finance, property, company and securities law, and has over 19 years experience in providing legal and strategic advice in these fields.
We thank Mr Robert Carter for his significant contribution to the Board. Managing Director of St Laurence Limited, Mr Kevin Podmore, also joined the Board as a director in March 2007, following Dorchester’s acquisition of a 25% shareholding in St Laurence. In addition to driving the establishment and growth of St Laurence, Kevin has experience as a lending analyst and has consulted on financial and economic issues for leading New Zealand companies.
Looking Forward
During the 2007 financial year, Dorchester showed good progress in its strategy to move away from a consumer finance focus to position itself as a multi-faceted financial solutions provider. Although it was disappointing to announce a reduced profit result, there have been a number of positive changes and achievements during the financial year which will provide future benefit for the company.
These include our strategic partnership with St Laurence, the appointment of a committed management team and positive movements in the shareholder base. The Dorchester Board is committed to improving earnings, through the continued strengthening of our existing businesses and the identification of growth and market opportunities. The exercise of warrants and the issue of shares to Auguste Finance Limited 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. I would like to thank our board for a year of continued contribution, our management team for their commitment and focus and all our employees whose passion and enthusiasm will help us regain our place as a top performing company.
Barry W. J. Graham
Chairman
Director's Report
CHIEF EXECUTIVE OFFICER’S REPORT
The 2007 financial year was a challenging one for Dorchester Pacific in which a number of issues came to light that needed rectification, resulting in a disappointing profit result.
Restructuring and Rebuilding
Following a review of assets, lending policies and operations undertaken shortly after my arrival, it became apparent that there were a number of outstanding issues that needed to be addressed. Broadly these fell into four main areas: The first area was operations and systems within the company which required remedial attention.
IT and communication systems were updated to ensure compliance and alleviate overcapacity issues. The second area was in addressing a number of non-core assets sitting on the books that resulted from underwriting positions or investments made in previous years. The impact of dealing with these assets (none of which were considered worth holding) was felt in the FY07 year. The third area was in addressing some issues in the lending book that resulted in the two adjustments announced in February 2007.
The first adjustment related to a specific ledger of loans within Senate Finance, whilst the second related to the purchase and financing of an electricity metering business in 2003. The fourth area was the review and subsequent overhaul of lending commissions and tightening of credit policies, which has resulted in lower loan volumes, but higher quality business. We have taken the remedial steps required to clean up these outstanding issues.
Finance Division
The specific provision mentioned above combined with a poor operating result in motor vehicle lending through Senate Finance were the main contributing factors to a disappointing result for the Finance Division. Senate’s result was impacted by a confluence of write-offs and lower levels of business being written through the second half of FY07, due to a deliberate tightening of our credit criteria combined with an industry slow-down. Write-offs in this business predominantly relate to a period of high volume lending through calendar year 2005.
Lending across the rest of the Finance Division was solid for the year. We had a particularly good year in property lending across the group with the book increasing by $35 million through FY07, a pleasing result. In line with our strategy to shift Dorchester’s historical consumer finance focus and taking account of an overweighting in motor vehicle lending apparent over the last few years, we have made good progress in risk balancing our lending profile with both motor vehicle and consumer lending dropping as a percentage of finance receivables. We will continue driving this strategy and lowering our group exposure to this type of lending.
Insurance and Savings
The outlook for this division is positive, 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 pleasing uptake of our reverse annuity mortgage, RAM Ultimate. In addition, a new Home Equity Release loan has been launched since year end.
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. The key focus for this division will be on growing the Equity Release portfolio and developing innovative customer focused savings and insurance products to take advantage of the rapidly changing savings and investing market.
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, MoneyOnline and NZ Investor Magazine, are well positioned to take advantage of the growth in this market sector.
This division’s 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 currently expanding the services offered so as to remove reliance on brokerage revenue, creating more sustainable income based on value added services and advisory fees.
St Laurence Investment
Dorchester acquired a 25% shareholding in St Laurence Limited on 28 March 2007. Dorchester has received a fully imputed dividend from St Laurence Limited of $735,250 declared on 18 May 2007 which has been 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. We expect the benefits of this investment for Dorchester and its shareholders will be realised in the 2008 financial year and beyond.
Outlook
We have a moderate outlook for FY08 as we centre our attention on refocusing and rebuilding the business. The consumer lending environment looks challenging as mainstream banks and international competitors aggressively increase their exposure to this market. Our move away from this market space is driven by a combination of increased competition, record levels of household debt, a predicted move from structural full employment and continued tightening in the economy.
Summary
In summary, FY07 was a mixed year of overdue repair and maintenance for the company, combined with a positive change in lending focus and business direction, as evidenced by the change in our lending mix (see page 34, note 16) and the transaction with St Laurence Limited. The reallocation of capital into more stable areas that show good prospects for mid-term growth has begun, both organically and through acquisition. This will continue as Dorchester moves through the next chapter in its development.
Andrew Walker
Chief Executive Officer
