cpk update, page-6

Looks like CIY won't be paying a final divi either. Better to keep the cash and finish the projects...

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From Egoli 27/6/8

City Pacific Limited (CIY) has cut it FY08 earnings guidance and cancelled its year-end dividend due to the ongoing credit crisis, which has seen its shares drop more than 90% since the start of the year. The company said it expected net profit after tax, before write downs, to fall 59% on last year to between $30 million and $35 million.

CEO Phil Sullivan said exceptional market conditions had presented a challenging year for City Pacific.

"The sustained deterioration of financial market conditions over the second half of fiscal 2008 has been reflected in the continued strain on financial stocks," the company said.

"City Pacific's core business operations focus on the financial services sector resulting in an exposure to the effects of the slowing global economy and credit tightening."

Mr Sullivan said the company recognised the importance and the need to reduce gearing levels and was undertaking a strategic review.

"We have implemented a program of debt reduction which we continue to pursue in co-operation with our financier," he said.

"In respect to City Pacific this program is being achieved through the divestment of certain property assets and in relation to the Fund through the repayment of loans by borrowers in the usual course of its business," Mr Sullivan said.

He said the management team and board remained focused on reducing debt, strengthening the company’s financial position and meeting the markets expectations in light of the global credit crisis. He said the company’s gearing levels was currently 32% of total assets.

"Whilst the company is focused on reducing its gearing level, we are mindful of the opportunities that exist as a result of the current market and we will continue to consider those opportunities as they present themselves," City Pacific said.

"A decrease in the company’s gearing will avail it to opportunities and shield it from the effects relating to the current market conditions associated with credit and capital."

City Pacific said the first stage of the asset realisation program had seen it enter into contracts to sell its Townsville assets, Breakwater Marina, and its rights to the Townsville Future Development Area.

"These transactions are expected to settle in July and will result in the retirement of approximately $30 million of debt," the company said.

City Pacific said it was also undertaking confidential and commercially sensitive negotiations with a range of parties who have expressed interest in several of the company’s other assets.

"Through the strategic review of its non property assets, City Pacific has determined that certain adjustments to carrying values of these assets may be necessary."

These potential write downs centre on intangible assets such as goodwill and property related investments such as City Pacific’s investments in CP1 Limited (CPK) and Indigo Pacific Capital Limited (IPA).

"City Pacific is currently working with its advisors and auditors to determine the expected financial impact of these adjustments and will be in a position to inform the market after the end of the financial year," the company said.

At 1407 AEST, City Pacific was trading down 5c or more 12% to 34c.