Allied sinks deep in red after deals

Allied Farmers has incurred an interim trading loss of $15.68 million, up 302 per cent on the December 2008 half-year.

Allied bought Hanover Finance last year, and that deal added more than $5m in corporate expenses, but Allied Farmers also recorded massive writedowns on the value of Hanover and United Finance.

As part of the half-year process, the assets of Hanover Finance and United Finance, acquired by Allied Farmers in December through a share-for- debenture swap, were consolidated into the balance sheet at an NZ international financial reporting standards (IFRS) accounting fair value of $175.5m, down from an "attributed value" of $396m.

The balance sheet shows shareholders' equity of $171m, with total liabilities of $407m.

In the period leading up to settlement of the Hanover deal, the value of assets transferred fell by a net $20.7m. That fall related to asset realisations, loan advances, asset restructures, provisioning and bad debt write- offs approved by the board and management of Hanover Finance and United Finance, Allied said yesterday.

The initial transaction value was calculated on a gross realisation basis; however, the IFRS require acquired assets and liabilities to be recorded at acquisition date fair values. The IFRS interest rate adjustment to recognise the period of expected realisation of the loans transferred, causes a $55.95m net decrease in the value of the acquired assets.

Subsequent to these decreases, further fair value adjustments of $27.86m have been attributed to property assets (held for resale), $16.83m to investments, and $99.30m to finance loans, the latter heavily affected by uncertainties associated with stage one of the Kawerau Falls Station project in Queenstown.

Allied said key rural and financial services sectors had not yet returned to normal after the global financial crisis, although there were positive signs in sectors such as dairy and asset finance.

Chairman John Loughlin said Allied had been through "a challenging time".

The financial result for the half year was in line with expectations, and the purchase of Hanover and United assets had "clearly strengthened our position", he said. "This will allow us to take advantage of any opportunities which might arise short to medium term."

After accounting for non- trading and non-cash items, including the $3.84m impairment of goodwill in its investment in Allied Nationwide Finance, the group result was a loss of $11.84m, up 148.7 per cent.Fairfax

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