Allied Farmers loss doubles amid finance unit’s failure

Allied Farmers more than doubled its loss this year after taking a $40.1 million hit on its failed finance unit and writing off another $20.2 million on the distressed Hanover and United loan books.

The company made a net loss $77.6 million, or 7.3 cents a share, in the 12 months ended June 30, compared to the loss of $34.2 million, or $1.50, a year earlier. Allied included pro-forma numbers that excluded the failed Allied Nationwide Finance unit, under which it made a loss of $79.1 million.

Taking out the finance unit, Allied's asset ledger lost some $245 million, the bulk of which was its loan book.

Outgoing managing director Rob Alloway said the receivership of the finance unit was disappointing, as was the fair value assessment of the Hanover assets, especially given the level of independent expert overview of the valuations before Allied took on the debtors of Mark Hotchin and Eric Watson's failed firm.

Separately today, the company announced the early settlement of its Five Mile property near Queenstown Airport, which will cut its term debt facility with Westpac Banking Corp. to $5.4 million from $14.2 million. Debt will drop below $2 million as a result of its successful outcome of the MAC Reeves court hearing in California.

The rural firm's shares climbed 0.7 cents to 3.4 cents in trading today, and have plunged 72% this year as it wrote down the value of the Hanover assets to a quarter of the $400 million bandied about during the ambitious debt-for-equity swap.

Even Allied's rural services unit suffered in the past year, posting a $757,000 loss compared to a $2 million profit a year earlier.

Alloway said margins were put under pressure as competition increased, and drought in some regions had caused a reduction in stock numbers.

"Allied Farmers does however see some strong signals for recovery coming out of the dairy sector, with forward sales figures into 2011 for dairy herds well up on the previous season," he said.

- BusinessDesk