29 May 2009                                                                                    

Dorchester Confirms Full Year Results

Dorchester Pacific today posted its full year results for the financial year to 31 March 2009 reporting a Net Loss after Tax of $25.4m (2008 $18.1 million loss).

The result is in line with the Company’s announcement of 12 May 2009 which detailed additional provisions and write-down adjustments required in the year end accounts.

Chairman Barry Graham noted:  “Additional property loan provisions, consumer loan provisions and the write-down of Energy Direct Metering assets in the audited accounts are all as earlier advised.   The provisional and deferred tax write off at $12.7 million was marginally lower and the fair value adjustment at $30.7 million was marginally higher than indicated in the 12 May 2009 announcement”.

Shareholders Funds of $16.2 million as at 31 March 2009 (2008 $41.7 million) were  higher than the earlier $15 million guidance.

Mr Graham commented:   “Obviously comparisons with last year reflect the wind-down of the finance receivable book and no new lending for most of the financial year following the decision in June 2008 to freeze repayments to investors pending approval of the Deferred Repayment Plan.

“As a result net revenue of $24.6 million was significantly down on 2008 net revenue of $64.4 million.

“The finance group produced an operating loss of $28.7 million before tax and before the fair value adjustment  (2008  $9.2 million loss) as a result of the increased provisioning and bad debts written off.

“Dorchester Life achieved an operating profit before tax of $1.2 million (2008  $1.7 million profit)  which was a creditable result in deteriorating economic conditions and with limited funding for new business as a result of the group’s position.

“As advised in the half year result, the investment in St Laurence Limited has been written down to a nil carrying value”.

Directors confirm that no dividend would be payable.

The accounts have been prepared on a going concern basis.   Although an unqualified opinion is expressed, auditors Staples Rodway note fundamental uncertainties with respect to the realisation of property book loans should the property market continue to decline.

Executive Director, Paul Byrnes commented:  “While the additional property loan provisions we are now taking were not anticipated at the time of the approval of the Deferred Repayment Plan last year they reflect a more negative view taken by independent valuers in the current market.

“However, one of the primary objectives of the Deferred Repayment Plan is not to conduct fire sales, but rather to carry out an orderly realisation during the term of the Plan.   This approach is likely to produce a significantly better result”.

On the fair value adjustment of $30.7 million Mr Byrnes commented:   “The  adjustment is the difference between the original liabilities in respect of debenture stock and unsecured notes and those liabilities as modified by the Deferred Repayment Plan terms, including interest forgiven.   This fair value adjustment to the profit and loss is mandatory under current accounting standards and while it supports positive shareholder funds in the meantime it does not create sustainable value for shareholders in the long term because of its reversal over the term of the Deferred Repayment Plan”.

Commenting on the current trading position and outlook Mr Byrnes said;  “Collections from our motor vehicle and consumer loan books are tracking as forecast.   While not under-estimating the property market uncertainty and challenges in realising property backed loans, there have been some signs of increasing interest in property positions in the last month or so.   Our cash position  as at 29 May 2009 is approximately $21 million and we are writing to our investors to advise them that we will be making our next 5% principal payment under the Deferred Repayment Plan a week early on 23^rd June which will bring total repayments to date to 30%.

“Over the last 9 months we have significantly reduced staff numbers, overheads and operating costs to the level appropriate for current business activity.  We are targeting around a break-even operating result before fair value adjustment for the current financial year on the basis of no additional provisioning nor provision write-backs”.

DORCHESTER PACIFIC LIMITED - Results for announcement to the market

Reporting Period: 12 months to 31 March 2009

Previous Reporting Period: 12 months to 31 March 2008

ENDS