Irate shareholders are laying into Allied Farmers managing director Rob Alloway and the company's board at the annual meeting in Hawera.More than 100 angry investors have gathered to hear an update from the troubled company and to air their grievances.Inv
Irate shareholders are laying into Allied Farmers managing director Rob Alloway and the company's board at the annual meeting in Hawera.
More than 100 angry investors have gathered to hear an update from the troubled company and to air their grievances.
Investor David Bryant said the board is a "complete embarrassment" and that the situation for ex Hanover investors keeps getting worse and worse.
"I cannot believe how far in the past 12 months the company has deteriorated."
Mr Bryant was referring to Allied Farmers' revaluation of the assets the company took over from failed lenders Hanover Finance and United Finance in a debt for equity swap last December.
Those assets and loans were deemed to be worth $396 million at the time of the deal but have now been written down to $94 million.
In the meantime, Allied has reported a $77 million bottom line loss for the 2010 financial year, after taking a huge goodwill writedown on its finance company subsidiary Allied Nationwide Finance, which collaped into receivership in August.
"People are devastated," he said. "Their shares are worth 2c and you still get paid huge directorship fees."
Allied managing director Rob Alloway defended the board's handling of the business, saying the first priority was to pay down debt. The company had cleared its senior debt with Westpac and unwound debt factoring arrangements with its rural customers.
While the company still had $45 million of debt on property assets, total group borrowings were down from $79 million as at December 9.
The plan now was to continue to realise ex Hanover assets while refocusing on its "core" rural servicing business.
But shareholders remained sceptical.
Many questions focused on a controversial share reset mechanism that Allied set up at the time of the Hanover transaction.
If at July 30 next year the value ascribed to the former Hanover loans is less than the $396 million attributed last December then the original Allied Farmers shareholders will receive bonus shares to "compensate" for the risk inherited from the largely property loans taken on.
At the current $94 million value, those original shareholders will receive a significant number of new shares, which will effectively dilute the Hanover investors' shareholdings further.
Some of Allied's board members are large shareholders, including Mr Alloway, who was once Allied's largest shareholder.
Former Hanover investor Ted Franklin called on the director shareholders to distribute their bonus shares back to the Hanover investors should they be granted.
Allied's legal counsel, Gary Bluett, said Hanover investors would get a chance to top up their shareholdings via a planned capital raising, which he hoped would be announced in the new year.
"No, I dont want to buy more shares," said Mr Franklin, who invested close to $1 million in Hanover. "I want them as a gift."
Another shareholder interjected: " It sounds like Irish accounting to me."
Tim Rainey, a lawyer acting for about 3000 Hanover investors, questioned why Allied recorded goodwill of $20 million for Allied Nationwide as at June 30 2009.
"If it wern't for the Hanover assets, the subsequent receivership of Allied Nationwide would have seen Allied Farmers put into receivership as well."
"It is morally wrong for shareholders to accept a bonus issue of shares given that if it wasn't for the Hanover assets, their shareholdings would have been wiped out."
Mr Bluett said he didn't accept that Allied Farmers had no other options but to do a deal with Hanover. "I don't think you can say that one was dependent on the other. "The board would have had other nvestors lined up."
Due diligence
Allied's due diligence on the Hanover assets also came under fire.
One shareholder asked why Allied did not foresee the problems within the Hanover loans book, such as the ranking of mortgages which in most cases was second or third or worse.
Mr Alloway said the starting point for the valuation of the assets was Hanover's audited accounts fo rthe June 2009 year. Allied then conducted its own due diligence with third party valuers and legal experts.
"Were we told the truth on cost overuns on some of the developments? Clearly not."
Path ahead
Shareholder John Gibson asked how the company was going to restore its sagging share price.
"Please tell us you have a strategy."
Mr Alloway nodded his head.
"Don't nod your head at me Mr Alloway. My 10k is next to worthless but I'm not worried about that. I'm concerned about the future of this company," he said, picking up on an earlier question about Allied's sovency and status as a going concern.
Mr Alloway reiterated that he was a shareholder as well. "If we could get the share price back up, then we'd all be happier."
He said the future was going back to the company's roots as a rural service provider. The industry was ready for another round of consolidation and Allied wanted to play a big part in that.
"We could have as many experts helping us as we like but the fact is its going to take hard work. We have plans but we can't disclose them right now."
