DKN Financial Group has set aside $1 million to fight any claims resulting from Westpoint made against its now-defunct dealer group in a move it said would limit “potential loss” to the listed entity.

Last week in an announcement to the ASX, DKN confirmed the closure of its Dealership Division – consisting of 40 financial planners and operated by wholly-owned subsidiary Deakin Financial Services – and said the shut-down would wipe $2.2 million of the group’s bottom line. The loss included a $1.2 million write-down of Deakin’s value in the DKN accounts and the $1 million provision for other closure costs – most of which are understood to relate to Westpoint claims. “This [the $1 million provision] will include any claims arising from advice given by former authorised representatives of Deakin in relation to products issued by the Westpoint Group of companies, together with the potential cost of litigation that has been commenced in the Supreme Court of Queensland against both Deakin and a former authorised representative in relation to that matter,” DKN said in its release the stock exchange. “This provision should limit the potential loss to the DKN Group.” A former Deakin’s planning business, Brannelly Financial, and its managing director, Matthew Brannelly, are facing legal action the Brisbane Supreme Court from five Queensland clients who collectively lost $1.6 million. Deakin was also named in the lawsuits. DKN said the Deakin subsidiary would defend the legal challenges “in its own right” and would also exercise its professional indemnity insurance policy as well as “its rights under contractual indemnities granted to it by various third parties”. The $2.2 million write-off, however, has left a sizeable hole in DKN’s profit, which was projected to be at least $3.2 million for the 2005/06 financial year. But the underlying performance of DKN remained strong and the outlook for the 2007 tax year was positive, the group said in its ASX statement, with a 3 cent dividend still on schedule before September this year. The firm also told the ASX that 820,000 unlisted options over its ordinary shares lapsed on June 30. Phil Butterworth, DKN chief, was not available for comment. The DKN share price was up 4.5 cents to $1.95 at the close of trade yesterday, almost double its price of six months ago.

Leave a comment