Strategic warns of NZ$15.5 mln loss

Strategic Finance has warned in an announcement to the NZX that it now expects a loss of around NZ$15.5 million for the year to June 30 after reviews of its loan book by Korda Mentha and KPMG had revealed additional provisioning for loan defaults and bad debts because of the property market slowdown.Here is the full statement below.

Strategic Finance Limited (SFL) is in the course of completing its financial statements for the financial year ended 30 June 2008. To assist with that process and in view of the increasingly difficult market conditions in the property sector generally, KordaMentha has undertaken a review of the company's loan book as at 30 June 2008. KPMG, as the company's auditor, has also been reviewing the level of provisioning made by the company in respect of its loan portfolio. SFL, along with all participants in the property finance sector, has been affected by loan defaults and there are likely to be further loan defaults due to the continuing slowdown in the New Zealand economy and in particular the property development sector. As a result, the board of SFL expects to make significantly higher levels of impairment and provisioning in SFL's financial statements for the year ended 30 June 2008 in comparison to the previous financial year. These additional provisions, bad debt write offs and one off adjustments are expected to result in a net operating loss for the year ended 30 June 2008 in the vicinity of $15.5 million. The final amount will be known once KPMG has completed its audit work. This is a disappointing result but it is considered appropriate in the current economic environment to adopt a conservative view on the realisation and underlying security value of SFL's loan book and further increase the company's collective provision to reflect the inherent uncertainties that currently exist. This collective provision is not allocated to any specific loan exposure. After making allowance for these bad debts and provisions, Total Shareholders Funds as at 30 June 2008 are expected to be reported in the vicinity of $73 million. SFL expects to release full details of its audited results for the financial year ended 30 June 2008 on 29 August 2008