2009 Annual General Meeting - Chairman's Speech

20 August 2009

Welcome to this Dorchester Pacific Limited annual meeting of shareholders.

My name is Barry Graham and I am the Chairman of the Company.

As a quorum is present, the meeting is duly constituted and I declare it open.

Thank you for your attendance at today’s meeting. 

Meeting Agenda
Executive Director Paul Byrnes and I will both be presenting to you today. We will review the events of the last financial year then discuss the actions we have taken to position the company for this very challenging business environment. Following our presentations, we will have time to answer any questions you may have on these presentations. I ask that you keep all questions until that time. We will then move to the resolutions set out in the Notice of Meeting.  You will have the opportunity to ask questions about the resolutions at the time they are proposed.

The Board has received proxies from 117 shareholders representing 56.8% of the shares in the Company. 

Having regard to the make-up of the register and the fact that many shareholders could not be here today and have sent proxy forms, a poll on all resolutions will be conducted at the end of the meeting.

The notice of meeting, 2009 annual report and audited financial statements have been circulated to all shareholders and I propose we take them as read.

We will be serving light refreshments at the conclusion of the meeting.

Directors
I would now like to introduce my fellow Directors.

Paul Byrnes was appointed to the Board in January 2004.  Paul accepted the role of Executive Director in May last year. He is an experienced CEO and director.

Michael Fisher was appointed in November 2006. He is an Auckland based barrister who specialises in banking, finance, property, company and securities law. Michael represents the interests of Hugh Green Investments Limited, one of Dorchester’s major shareholders.

John Gosney was appointed in May 2008. He holds a B.Com and M.B.A and is experienced in business planning, corporate restructuring and financial analysis. He is an independent director in terms of NZSX Listing Rules.

General Managers
I now introduce our General Manager Finance and Property Tristram van der Meijden and our General Manager Group Operations Henry Lynch.

We have a number of management and other members of staff here today.  To you all - welcome.

I would also like to welcome Staples Rodway, the Company’s auditors, our legal advisers Simpson Grierson and our trustees and Pricewaterhouse Coopers who are the monitoring managers for our Dorchester Finance investors.

Thank you to all these firms which provide their valuable services to Dorchester.

Chairman’s Address

Ladies and gentlemen I will now move to the Chairman’s address.

The 2008 Annual Meeting was deferred until February this year to allow us to gain acceptance from our finance company investors to a deferred repayment plan. At that meeting I was pleased to report that the deferred repayment plan was overwhelmingly approved by 98% of our investors.

In the relatively short time since we last met in February we have achieved quite a lot at Dorchester. The company has been stabilised, overheads have been reduced quite dramatically and we are trading at a modest profit.

I am not saying that the future is fully secure because we continue to face very challenging circumstances for the recovery of outstanding loans.

In some cases we have taken over the assets against which loans are secured. This has been done to avoid “fire sales.” We are managing these assets with the expectation that value can be added to ultimately achieve a more favourable realisation.

As required by International Accounting Standards we brought to account a fair value adjustment gain of $30.7million. This arose from the Deferred Repayment Plan which modified the terms of the finance company liabilities.

Unfortunately the Accounting Standards require this gain to be reversed progressively over the period of the deferred repayment plan.

So although we are making a modest operating profit, the results reported over the next 3 years will be impacted by this large reversal.

The finance group
At the last meeting I told you about the dilemma which faced our finance group last year:

• investors requiring repayment of their investments at a time when clients were unable to repay their loans on due date.
• the value of underlying securities falling by up to 50% and even at these lower values the ability to achieve timely exits was greatly diminished. 
    
  and
• despite maintaining reasonable levels of reserve liquidity and provisioning, it turned out that our balance sheet was unable to withstand these extraordinary events.
   

The Deferred Repayment Plan has given the finance group the opportunity to realise loan positions in an orderly manner and as previously mentioned we are managing some acquired assets.

We have maintained a reduced infrastructure for Senate, our motor vehicle finance business unit.

Collections of motor vehicle receivables at this stage are ahead of expectations. Within the limited funds available we are writing profitable motor vehicle finance business.

The finance group has met the obligations under the deferred repayment plan and by the end of this calendar year will have repaid secured note holders 42.5cents in the dollar and subordinated note holders 10 cents.

Dorchester Life
Our insurance, savings and reverse mortgage business unit achieved an operating profit of $1.2 million for the year ended 31 March 2009 and since balance date has continued to trade profitably in a difficult market and constrained by the Group’s funding position.

Dorchester Life holds the number 2 position in the reverse mortgage market.

St Laurence investment
As previously reported we have written down our investment to a nil carrying value. Dorchester holds a 3 year option to increase its shareholding in St Laurence back to 25% should this be considered appropriate

2009 Financial Performance
For the year to 31 March the company made a loss of $25.4 million.

This was the result of negligible new lending for most of the year, a $25.3 write down of the investment in St Laurence, deferred tax write off $12.7 million, additional loan provisioning of $8.2 million and the fair value adjustment gain of $30.7 million.

Revenue was down significantly due to the wind down of the finance receivables book.

Shareholder’s equity at 31 March was $16.2 million which equated to net Tangible Assets per share of 45 cents, but this includes the fair value adjustment of $30.7 million which will reverse over the term of the Deferred Repayment plan. 

Dividend
As previously announced the company did not pay a final dividend for year ended 2009 and, under the terms of the deferred repayment plan, it is unable to pay a dividend over the 3 year term of the plan.

Outlook and Board Focus
The Company is operating under the terms of the Deferred Repayment Plan which applies for the three year period through to December 2011. Our primary focus is to meet the obligations under the plan which means that the company needs to operate on a restricted and much reduced scale.

We are now nine months through the period of the plan and I am pleased to report that all requirements have been met and we are in line with the milestones under the plan.

The question which I am sure is in your mind and is certainly a major focus for the Board is “What is the future for Dorchester after the plan?”

The Board are examining the existing businesses of Dorchester to determine their future potential. We are also reviewing other market opportunities which may arise from industry consolidation.

We are well aware that the company will require additional capital and funding to re-emerge as a revitalised and viable business. In order to attract capital and funding we will need a well defined strategy and a convincing business case.

Your Directors are focussed on developing this strategy and business case and will keep shareholders informed of progress.

In conclusion I would like to thank the directors for their contribution and commitment to Dorchester and to Executive Director Paul Byrnes and his hardworking team for progress made.

I will now ask Paul Byrnes to address you.
 

Thank you.