Thursday, July 29, 2010

Business Times: Australand posts A$72.2m H1 profit

July 28, 2010
Australand posts A$72.2m H1 profit
Turnaround from loss helped by A$11.8m of revaluation gains on investment property
By KALPANA RASHIWALA 

CAPITALAND subsidiary Australand has returned to the black at half time. It has posted A$72.2 million (S$88 million) net profit for the first half ended June 30, 2010, against a net loss of A$268.8 million in the same year-ago period. 

The turnaround was helped by A$11.8 million of revaluation gains on investment property, against a A$235.3 million revaluation loss previously.

There was also no half-time impairment of development assets this time round; last year, Australand booked impairment of about A$93 million.

Earnings before interest and tax (Ebit) from the investment property and residential divisions improved, although this was partly offset by lower profit from the commercial and industrial division.

Australand will make a half-year distribution of 10 Australian cents per stapled security, underpinned by recurrent income from the group's quality investment portfolio. The payout is more than treble last year's three Australian cents.

The group expects to pay 10.5 Australian cents for the second half, for a total of 20.5 Australian cents for the year, more than four times full-year 2009's five Australian cents. 

'The fundamentals for the commercial, industrial and residential sectors remain positive,' said Australand managing director Bob Johnston. 'With a strengthened management team, the group is well positioned to achieve its 2010 earnings guidance and deliver growth in 2011.'

The group also remains on track to deliver a full-year operating profit in line with the 2009 result, he added. Australand posted A$120.2 million net operating profit for FY2009.

Gearing came to 27.1 per cent as at end-June, up slightly from 25.4 per cent as at end-December but still within the group's target range of 25-35 per cent. Australand continued to comply with all debt covenants in the first half. The group had cash and cash equivalents of A$39.5 million as at June 30, down from A$123.6 million as at end-December.

Earnings per stapled security for the first-half came to 12.5 Australian cents, against a loss per stapled security of 72.7 cents for the same period last year.

Australand is a stapled group in which the security holders hold direct interests and an equal number of securities in each of the following: Australand Holdings, Australand Property Trust, Australand Property Trust No 4 and Australand Property Trust No 5.

Ebit from investment property (excluding revaluation gains/losses) rose to A$82.6 million, from A$77.9 million previously.

'The increase in recurrent income was driven by comparable rental growth of about 3.4 per cent and additional income associated with the Crest Hotel sales process,' Australand said.

Ebit from residential jumped to A$23.7 million from A$14.3 million previously, despite a 24.2 per cent fall in revenue to $183.9 million - as the impact of low margin and impaired inventory progressively falls.

However, Ebit from commercial and industrial halved, to A$10.95 million from A$22.98 million.

Australand said: 'With the improved level of enquiry, we remain optimistic that development activity in the commercial and industrial division will strengthen during the second half of 2010, leading to growth in 2011.'

It also noted that valuations for quality assets have stabilised. It expects investment property earnings to grow steadily - underpinned by embedded rental growth and the delivery of new assets from the group's internal development pipeline.

'The residential division's full-year Ebit contribution is expected to be in line with 2009. The progressive reduction in impaired and low margin inventory and the commencement of several large new projects will underpin earnings growth and momentum in 2011.'

Australand shares last traded at A$2.58. 


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