Revaluation losses, writedowns push company into red

CAPITALAND unit Australand yesterday reported a net loss of A$298.2 million (S$368.1 million) for 2009 as it was hit by revaluation losses on its investment properties as well as writedowns of development and joint venture assets.

In 2008, the Australian developer’s net profit – net earnings attributable to stapled-security holders – slid 85 per cent to A$40.2 million.

Australand achieved a net operating profit after tax of A$120.2 million in 2009, but sank into the red after revaluation losses of A$249.4 million and writedowns of A$148.4 million. The company also saw non-recurring finance costs of A$20.7 million.

Looking ahead, Australand said that operating profit in 2010 will be similar to that achieved in 2009. It added that investment property earnings are expected to grow steadily, mainly from embedded rental growth.

Australand also said that market evidence indicates that investment property valuations are either at or near trough levels in the cycle.

‘Property valuations now appear to be stabilising with revaluation losses of A$14 million in the second half across the A$2 billion portfolio,’ said Australand managing director Bob Johnston.

‘Despite the large statutory loss for the full year, the majority of which was recorded in the first half, the operating profit demonstrates the resilience of the group’s high quality investment portfolio.’

In 2009, Australand’s earnings before interest and taxes (Ebit) from its investment properties grew to A$154 million from A$136 million in 2008. However, Ebit from the residential segment fell sharply to A$68 million from A$117 million.

‘Margins for the residential division remained under pressure during the year as the division continued to trade through impaired and non-core inventory,’ Mr Johnston said.

Looking ahead, the company unveiled a host of new strategies for growth – including a fresh target to get 60-70 per cent of group Ebit from recurrent earnings. It also intends to improve the development divisions’ return on average capital employed to at least 12 per cent over the next three years and recycle underperforming capital in the development divisions to drive earnings growth.

Finally, the company’s gearing will be maintained within a target range of 25-35 per cent, Australand said. The company’s gearing fell to 25 per cent at end-2009, from 36 per cent at the end of 2008.

‘With a strengthened balance sheet, the group is well-positioned to take advantage of the improving economic conditions in the commercial, industrial and residential markets,’ Mr Johnston said.

The company is paying a full year distribution of 5 Australian cents per security. Australand will continue to distribute 80-90 per cent of realised operating trust income.

The company also announced that it intends to seek approval at the annual general meeting in April to undertake a five into one consolidation of the group’s stapled securities.

Source: Business Times, 10 Feb 2010