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Finance company Dorchester Pacific yesterday said it would leave the "risky" Auckland used car market, claiming a series of bad loans to its motor vehicle business were partly to blame for the company's disappointing result this year.
Dorchester also hastened to assure shareholders their money was safe, but conceded the recent collapses of Bridgecorp, a former big shareholder, and more recently Nathans Finance, had "created distraction".
Chief executive Andrew Walker told shareholders at the company's annual meeting in Auckland that "Dorchester is not going under. Dorchester is stable, strong, well-funded, well-supported and we believe we're going to have a very positive year."
Walker said "outstanding and unresolved issues" had had significant impact on the company's bottom line, leading to a "disappointing" net profit after-tax result of $3 million for the 2007 financial year.
One of those issues was a large writedown within the company's motor vehicle lending business, Senate Finance, on loans that Walker said "should never have been written" and which dated back to 2005.
Dorchester had taken over the ledger in 2005 when it realised the external parties it was funding to write and manage the loans were not administering them appropriately. Walker said Senate's business "went backward" last year due to a combination of a slowing used car market and its own tightening of Senate's lending criteria, which also contributed to Dorchester's disappointing result.
As well as leaving the Auckland used car market, Walker said Dorchester would now focus on non-consumer- related finance activities such as the home equity release market and savings products. It would also shut down sub-scale operations, sell its investment advisory business and non-core assets such as its property trust.
Shares in Dorchester Pacific closed up 11c at $1.12.
