KEY POINTS:
In anticipation of a grilling from shareholders at its annual meeting, Lombard Group today said the hard truth was that "New Zealanders have fallen out of love with property".
The group's subsidiary Lombard Finance was put into receivership on April 10 owing 4400 investors $127 million. Receivers this week lowered their estimated recovery level to 19c to 40c in the dollar.
Lombard Group, like Dominion Finance, did not support the receivership, preferring a moratorium proposal.
The parent is not saying exactly what its future is. The company continues to receive income from its mortgage facilitating business, and as at March 31 had total assets of just $2.6m and total equity of $1.87 million. Its auditor KPMG has resigned and it hasn't found a new one.
Shareholders will be able to quiz the board at the annual meeting at Museum Hotel in Wellington, at 2pm on Wednesday.
"In terms of the future strategy there are a number of opportunities that are being carefully considered and we trust that you will be supportive as we move through this rebuilding phase."
Lombard said today that sentiment had turned against property investment very quickly.
At the annual meeting last year the company reported net profit before tax of $7.7m in the year ended March 31.
Directors at that time were pleased with the progress and profit of the group, and expected continued performance from its subsidiary.
The financial storm that then occurred was more far reaching and of greater impact that many companies in the financial sector ever envisaged it would be, with the consequence that major institutions have suffered.
Lombard Finance was seriously affected when investors turned away from property.
"In late 2007, our former chairman, Sir Douglas Graham, and chief executive, Michael Reeves conducted a series of `road shows' around New Zealand with debenture-holders.
"At that time Lombard Finance's board and senior management fully expected that Lombard Finance was in the position where it would survive and continue to succeed, despite the changing market conditions."
In March 2008 it became clear there was a severe and rapid deterioration of the position of its borrowers.
In mid March 2008, Lombard Finance commissioned Korda Mentha to assess its overall position.
Lombard was disappointed that the trustee rejected the moratorium proposal and on April 10 placed Lombard Finance into receivership.
"We genuinely believed that a moratorium would be in the best interests of investors.
"Lombard Group itself is the holder of secured debenture stock of $2m invested in Lombard Finance."
Lombard Group was left assessing the "new territory" of the New Zealand financial sector.
"Despite the cyclic reduction in real estate values, the directors are confident that the New Zealand economy is sufficiently strong to weather this particular storm, albeit with some casualties."
Bill Jeffries will stand for re-election at the annual meeting as an independent director.
The group said it has entered into a funding agreement with its major shareholders to provide certain additional funding but the funding has not been required to date.
- NZPA
