DORCHESTER PACIFIC TAKES IMPAIRMENT AND INCREASES PROVISIONS IN FY08 RESULTS

30 May 2008

Dorchester Pacific Limited today announced its full year results for the financial year to 31 March 2008.

An $11.4 million write down of the value of its 25% investment in St Laurence Limited, additional provisioning of $6.8 million after tax and goodwill write off in the finance group of $0.7 million resulted in a net loss after tax of $18.1 million (2007: $3.8 million profit).

Net revenue of $64.4 million (2007: $71.0 million), was down 9% on the previous year primarily due to the discontinuation of lending by Senate Finance from September 2007, a consequent reduction in insurance income and reduced lending volumes by Dorchester Finance.

The 25% investment in St Laurence Limited provided a return of $3.0 million for the year. This was a satisfactory result given market conditions but was less than anticipated. As required under IFRS, Dorchester has adjusted the carrying value of its investment in St Laurence to reflect current market conditions, resulting in a write down of $11.4 million.

The slightly higher than previously indicated post-tax provisions for the year of $6.8 million across both property and motor vehicle lending books reflect a deteriorating economic climate and property market. The provisions take into account a drop in some property asset values and the length of time likely to be required to realise property positions in the softening market.

As a result of rationalising the branch network all remaining goodwill within the finance group of $0.7 million has been written off.

Shareholders Equity of $41.7 million (2007: $63.5 million) equates to Net Tangible Assets per share of $1.12. A total of 456,000 shares were purchased under the share buyback scheme between July and September 2007 and are held as treasury stock.

The Directors confirmed there would be no additional dividend to the interim dividend paid in December 2007 of 4.25 cents per share.

Chairman of Dorchester, Mr Barry Graham, said: “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.

“These factors, combined with changes in investor behaviour and the consequent reduction in the availability of funding have resulted in a significant impact on the performance of Dorchester and its full year result.”

Mr Graham continued: “Clearly we are going through a period of market adjustment so we are focused on maintaining good liquidity and cash flow. Cash holdings in the Dorchester Pacific group remain strong at $28.2 million as at 30 May 2008.”

Finance Group

The finance group produced an operating loss before tax of $9.2 million (2007: $2.4 million profit) after increased provisioning of $9.7 million before tax.

As at 31 March 2008, cash plus equivalents increased to 13% of Total Assets (2007: 9%).

Mr Graham commented: “Lending decreased due to our focus on liquidity and more selective lending criteria. We have matching between our funding obligations and anticipated cash from receivables. The aggregate of current cash and receivables expected to be collected in the 12 months to 31 March 2009 total $183 million, with debenture maturities for the same period totalling $156 million.

“Reinvestment rates currently remain at around 20%. We are looking at a number of initiatives to improve reinvestment by rewarding loyal investors and are continuing to explore alternative funding sources, recognising we can not rely on debenture funding alone.

“Our diversified loan portfolio provides regular monthly cash flows. The top five loans in our trading book at year end accounted for around 24% of our total receivables with none of these being inter-related.”

Dorchester Life

Dorchester Life, the insurance, savings and reverse mortgage business achieved an operating profit before tax of $1.7 million (2007: $2.2 million profit).

Consumer insurance revenue was down as a direct result of the discontinued lending by Senate Finance.

Mr Graham said: “Our funding partnership with Kiwibank is working well and we remain focused on the Reverse Mortgage market which continues to have significant long term potential.”

Investment Advisory Businesses

The Investment Advisory Businesses – Equity Investment Advisers, MoneyOnline and NZ Investor Magazine – provided an operating loss for the year of $0.3 million (2007: $0.4 million profit).

The downturn in the finance market directly impacted revenue as debenture sales and corresponding commissions declined.

Following year end the businesses were sold at just under book value.

St Laurence

St Laurence has reported a net profit after tax of $12.0 million for the year ended March 31 2008.

Dorchester Pacific holds a 25% stake in St Laurence Limited, which contributed $3.0 million to Dorchester’s result.

Mr Graham said: “The recent deterioration in the property and finance market has resulted in a reduction in the valuations of companies in the finance sector, including our investment in St Laurence Limited.

“We still see this as a strategic, long term investment for Dorchester. St Laurence has a proven track record in property finance and property asset management providing asset and income diversification for the Dorchester Pacific Group.”

Outlook

“We are continuing to simplify the business, reduce costs and realise under-performing assets enabling us to redeploy capital into opportunities which leverage the company’s existing expertise and infrastructure.

“By way of example, since year end we have launched Senate Collections, a commercial debt recovery business focused on providing debt recovery services across a wide range of debt classes and values. Senate Collections is built upon the expertise and experience within the Dorchester group and is well positioned to take advantage of growing market demand.”

Mr Graham concluded: “The recent assignment of director Paul Byrnes to an executive role will provide additional leadership to our experienced management team. We are currently implementing a number of strategic initiatives to position the company for the ongoing market and to return the business to sustainable profitability.”

DORCHESTER PACIFIC LIMITED - Results for announcement to the market

Reporting Period: 12 months to 31 March 2008

Previous Reporting Period: 12 months to 31 March 2007

Ends

Barry Graham, Chairman, Dorchester Pacific, Tel: 0274 723810

Released on behalf of Dorchester Pacific Limited by Jackie Fairbairn, spice communications group, tel: 09 3666100.