SCF says impairments lead to first-half loss

South Canterbury Finance said it will post a first-half loss on writedowns of impaired assets.

Wednesday, February 3rd 2010, 4:40PM

The company is due to post its results for the six months ended December 31 in the next few weeks. Further writedowns were intended not only to give a fair view of the current value of those assets, but would also "ensure as far as possible that the company's results for future periods are not distorted," chief executive Sandy Maier said in a statement.

"The results for the first six months of the year will not be representative of the historical achievements of the company's business nor the strength of its future performance," Maier said.  SCF made its first loss since the Great Depression of the 1930's, last year, and has gone through a difficult period of capital restructuring, asset writedowns and has changed senior managers and auditors. 

On the positive side, Maier said that investors pushed an average of $1.7 million a day into SCF products during January, a traditionally quiet period, and the company is retaining existing investors at rates that indicate "renewed confidence."

Also dragging down the first half result will be one-off costs from fees triggered by the early redemption penalties on SCF's US$100 million private placement credit facility, which was unwound after SCF breached banking covenants during last year's turmoil. 

A further negative impact will be the discovery during auditing that SCF's investment in South Island Farm Holdings preference shares should have been recorded at fair value rather than cost in the June 30 accounts.  However, this impact is not expected to be significant and should unwind as the shares were redeemed on July 1. 

The company also expects to make further announcements shortly on further fundraising to strengthen its balance sheet.  Investment bank Forsyth Barr has been mandated for this task.

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