Australand Hit By Revaluation, Writedown

Source : The Business Times, July 29, 2008

CapitaLand's Aussie unit's half-year earnings slide 79% to A$25.6m

PROPERTY revaluation and project writedown have resulted in CapitaLand's Australian subsidiary, Australand, reporting a 79 per cent year-on-year fall in net profit to A$25.6 million (S$33.4 million) for the half-year ended June 30, 2008.

Earnings per stapled security for the period - based on profit attributable to the stapled security equity-holders - was 2.8 Australian cents, down from the year-ago period's 12.9 Australian cents.

Dividends/distribution per stapled security for the half year were maintained at 8 Australian cents.

Australand said that investment property assets had been revalued at June 30, resulting in a net reduction in asset value of A$7.3 million.

It also said that carrying values of residential assets had been reviewed in light of the current market conditions resulting in a writedown of A$34.7 million (net of tax).

The assets are located predominantly in Sydney which Australand says has continued to 'suffer more difficult market conditions with no improvement forecast in the short to medium term'.

Excluding the unrealised losses arising from property revaluations and the writedown to the carrying value of residential development projects, half- year operating profit rose 6 per cent on the prior year to A$67.5 million, said Australand. Earnings per stapled security, on an operating profit after tax basis, were 7.3 Australian cents, up from 6.9.

Australand, which has businesses in various property segments, reported that revenue from continuing operations rose 6 per cent to A$436 million for H1'08 from A$410.1 million for H1'07.

Commercial and industrial development profit before tax (PBT) was A$46.4 million for H1'08, up 93 per cent from A$24.1 million for the year-ago period.

Investment property PBT for H1'08 was A$64 million, up 20 per cent from A$53.5 million for H1'07, excluding asset sales and unrealised gains/ losses in property revaluations.

Residential development PBT for H1'08 of A$34.2 million was down marginally from A$34.3 million for H1'07.

As at June 30, the commercial and industrial business arm had a pre-committed forward workload of 374,000 sq m, down from 424,000 sq m at end-December 2007. Australand attributed the decline to the high level of construction delivered during H1'08.

Australand's investment property business comprises a portfolio valued at A$2.18 billion of 63 income-producing investment properties and a further 10 investment properties under development.

Australand said fixed rental increases within the portfolio average 3.3 per cent for the next 12 months and the portfolio has a weighted average lease expiry profile of 7 years.

For its residential business arm, Australand said that sales volumes were lower compared with the same period a year ago. However, operating margins remained consistent.

Australand had announced a non-underwritten one-for-one renounceable entitlement offer at 60 Australian cents per stapled security to eligible security-holders and CapitaLand has committed to taking up its full entitlement.

Depending on the remaining level of participation, Australand said the entitlement offer will provide between A$302 million and A$557 million of additional capital that will be used to reduce gearing and fund projects in its development pipeline.