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Allied Farmers' equity $6.4m in the red after $43m annual loss

Allied Farmers's equity was $6.4 million in the red at June 30 and it made a $43 million annual loss.

Tuesday, August 30th 2011, 10:29AM

by Jenny Ruth

The result bodes ill for former Hanover debenture holders who currently own 1.91 billion of Allied Farmers' 2.04 billion shares on issue.

Although it is obviously questionable whether Allied Farmers is still a going concern - the accounts were unaudited - those Hanover investors are facing a massive dilution of their interest in the company, based on these results.

"The completion of the audit in the next few weeks will also confirm the position of the number of additional shares that need to be issued," Allied Farmers' report to NZX says.

"The cost of these additional shares had been fully provided in the accounts … and accordingly shareholders' funds have increased by the value of the shares to be issued," the company says.

Allied Farmers' latest loss compares with the $77.6 million net loss it reported last year.

The latest loss includes a further $29.7 million write-down of the Hanover assets acquired in late 2009 when they were valued at $396 million. They had been written down to just below $110 million at December 31 last year.

Allied Farmers' results show total assets fell to $52.1 million at June 30 this year from $378.4 million a year earlier. Equity, or shareholders' funds, fell to negative $6.4 million from $44.5 million a year earlier. It says the total value of Hanover and sister company United Finance assets realised since December 2009 is $93.6 million.

Allied Farmers also has $12.6 million of NZX-listed capital notes on issue which are due to mature on November 15 this year.

Asset valuations received in the last few days have "identified that a short-term breach of the capital note debt-to-equity ratio covenant occurred" from June 30. That breach was remedied by a reduction of debt on July 22, the company says.

"The only consequence is an additional 2% interest rate payable to the capital note holders for this 22 day period," it says.

The capital notes last traded at 57. 835 cents in the dollar on July 6. Allied Farmers' shares closed on Monday at 0.8 cents each.

Allied Farmers said although the result is "unsatisfactory," it included a fully provided $5 million disputed obligation to Hanover "despite the view of the board and its legal advice that a favourable outcome will be achieved" and the sale of its shops at higher than the book value recorded in the accounts.

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