City Pacific’s 290 per cent loss
Shareholders in embattled financial services group City Pacific have been hit with a net loss of 290 per cent for the year ended June 30, 2008.
City Pacific has released its preliminary financial report for the year ended June 30, 2008, and despite sound operating profit of $55.5 million and revenue of $154.7 million, impairments and write-downs have resulted in a significant net loss of $139.5 million. This compares to last year’s profit of $73.2 million.
The group said the credit crisis and rises in official interest rates had had an impact on the “normally resilient” property markets that City Pacific operates in.
“The market adversity over the last 12 months has clearly had an impact on our business and necessitated one-off write downs of some assets and investments to bring them in line with current market values, resulting in a net loss after tax of $139.5 million,” said City Pacific managing director and chief executive Phil Sullivan.
The group pointed to the credit and liquidity crisis in relation to a reduction in overall funds under management, but also pointed to “adverse press speculation and its impact on investor sentiment”.
The group’s financial services segment was supported in the first half by the July 2007 acquisition of Australian Beneficial Finance, a residential and commercial mortgage originator, however a slowdown did occur in the second half. Australian Beneficial Finance brought to City Pacific a residential loan book of $115 million and added 89 brokers to the group’s network. The group reported operating profits of $840,992 in its financial services business.
City Pacific paid 3 cents of its 15-cent dividend on May 30, 2008, with the balance being payable on November 28, 2008. But due to the company’s troubles, the group will not pay a final dividend for the 2008 financial year.
The group is currently selling property and investment assets to reduce both project-specific and corporate debt, and has offered convertible preference shares in City Pacific to unit holders of City Pacific First Mortgage Fund in order to create liquidity for those wishing to redeem their investments.
“The prevailing market conditions have played havoc on a range of asset values across the markets in which we operate and similar to other organisations, we hade made the decision to mark these assets to market. While our expectation is that once the market stabilises these asset values should improve, it is prudent to adopt a conservative approach in valuing these assets in today’s environment,” Sullivan said.
“The operating conditions over the last year have been the most challenging the group has faced in its 10 year history.”
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