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Auditor gives Allied Farmers qualified opinion only

Fuseworks Media
Fuseworks Media

Wellington, Oct 1 NZPA - Auditors have given Allied Farmers' financial statements only a qualified opinion, and have raised concerns about the going concern basis of the company and the carrying value of assets.

Because of the potential effect of the limitation of the scope of evidence, auditors PricewaterhouseCoopers said they were unable to form an opinion on whether Allied Farmers' financial statements gave a true and fair view of the financial performance of the company for the year ended June.

During the year, Allied Farmers bought the assets of Hanover Finance and United Finance, which had an attributed acquisition value of $396.2 million.

In Allied Farmers' annual report, published today, managing director Rob Alloway said the fair value assessments of the assets acquired in the Hanover and United deal had been a "huge disappointment".

"In a number of cases, the combined effect of reduced liquidity in the financial sector and reduced demand for property has severely diminished the security value which backs these assets," Mr Alloway said.

"Many had been historically valued based on what I would describe as 'blue sky', which can only be described, in hindsight, as highly optimistic."

The financial statements were presented on a going concern basis, but noted several conditions that would have to be met for the group to have adequate resources to continue operations for the foreseeable future.

Among those were the completion of a capital raising, and the continued realisation of financial and property assets of Allied Farmers Investments, where the Hanover and United assets have been quarantined.

Auditors PwC said they had been unable to "obtain sufficient audit evidence upon which to form an opinion whether application of the going concern assumption remains appropriate".

They also said the carrying value of loans and advances, inventory property and investment property may be further negatively affected by the current credit environment, an increased level of uncertainty in respect of property values and difficulties in assessing borrowers' ability to meet future obligations.

"In addition, the recovery of these assets is, in many cases, dependent on the ability to sell the collateral assets in which the company and group have a security interest," the auditors said.

"In the current market conditions there is additional uncertainty over the value of some collateral assets and the timing of sale of those assets. We are unable to quantify the potential effect of these uncertainties."

Mr Alloway today said the audited result crystallised the financial position for the company, following the receivership of its finance subsidiary, and removed much of the uncertainty around the business.

The company expected to make announcements soon on the timing and structure of capital raising to support further balance sheet restructuring.

In early August the company postponed the second part of a capital raising, which involved a $19m renounceable rights issue, while talks were held with the trustee of Allied Nationwide Finance. Later in the month the finance unit went into receivership.

Allied Farmers reported a loss of $77.6m for the year to June 30.

Most of the audited loss was attributed to a $21.4m goodwill write-off against Allied Nationwide Finance, and further impairment of $20.2m against ex-Hanover and United assets acquired by Allied Farmers in December, Mr Alloway said.

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