Struggling Australand posts $269m loss
The Age
Tuesday July 28, 2009
AUSTRALAND yesterday started the reporting season for property trusts with a profit warning and a $475 million equity raising, one week after it slashed the value of its portfolio by 10 per cent.The property group, controlled by Singapore's Temasek Holdings, warned that a recovery in the residential market would be difficult in the near term €” even though interest rates were low €” because the fear of rising unemployment was hurting consumer sentiment.Australand reported a $269 million loss due to the impairments on its portfolio, compared with a $26 million profit in the first half last year. Excluding impairments, its operating profit fell to $60 million from $68 million last year."Our corporate earnings reflect a low point in the economic cycle, and we expect conditions to improve in 2010," said Australand's chief executive, Bob Johnston, after he revised the full-year operating earnings guidance to a 35 per cent fall from last year compared with the previous guidance of a 30 per cent fall.The operating profit in its residential division fell to $7 million, compared with $34 million in the first half last year."The middle to upper segments have remained subdued, with little or no sales volumes in a number of projects in these segments," Mr Johnston said. "Further pressure has been placed on project margins through increased sales incentives on slow-moving projects, as well as increased holding costs resulting from the deferral of selected development activity."He said that in the longer term, the outlook for the residential market was more encouraging in light of continuing population growth amid a growing undersupply of new housing."Office and industrial markets are not in oversupply," he said, adding Australand would look to take advantage of acquisition and joint-venture opportunities to expand its business.Before unveiling yesterday's underwritten 7-for-10 rights issue at 40 a security, Australand was near the upper limit of the allowed loan-to-valuation ratio under its debt covenants.The raising, conducted at a 20 per cent discount to its last trading price, is Australand's second in less than a year, following a $461 million rights issue at 60 a security in September.Winston Sammut, the investment director at Maxim Asset Management, said this was likely to be only the first of many capital raisings by property trusts during this reporting season."It's positive in terms of Australand being first cab off the rank," he said. "They get to come to market ahead of the train."Mr Sammut named Goodman Group, ING Industrial and various Macquarie Group property vehicles as among the more likely candidates for capital raisings in coming weeks.KEY POINTS- Unemployment fears are hurting sentiment, Australand says.- Chief executive says long-term signs are more encouraging due to rising population.- Australand's capital raising tipped to be first of many.
© 2009 The Age
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