This article is from the Australian Property Journal archive
HOUSING affordability and weaker consumer sentiment have failed to stifle Babcock & Brown Residential Land Partners, but the highly geared company has senior debts maturing in October 2008.
BLP has notched a net profit after tax of $7.6 million for the year ended June 30 – an increase of 145% from $3.1 million in the prior corresponding period.
The residential developer’s underlying net profit after tax was $9.3 million, in line with guidance.
Reported net profit after tax includes two non-cash items $1.4 million in unrealised foreign exchange hedging losses related to BLP’s New Zealand investments and a $0.3 million provision against the carrying value of inventory.
BLP’s managing director Michael Balkin said notwithstanding the difficult market conditions in recent months, the company was pleased to deliver a solid result in line with previously stated guidance.
“In light of the challenging market conditions, BLP undertook a detailed review of its portfolio, which has resulted in a provision against the carrying value of inventory,” he added.
Revenue from the sale of land increased 48% during the period to $62.7 million, driven primarily by healthy sales at Seabreeze (Pottsville, Northern New South Wales), Haywards Bay (Wollongong, NSW) and Renaissance Rise (Mernda, Victoria).
The company’s equity investments delivered interest income of $12.6 million – 73% higher in the pcp, due to a full 12 months from the Links Living investment and the NZ investments which took place in December 2007.
BLP’s gearing as at June 30 was 62.6% which is at the high end of the company’s target gearing range of between 50%-65%. Balkin said the current interest cover ratio of 3.3 times comfortably supports gearing at these levels. In addition, $25.9 million of senior debt was repaid during the period.
BLP has $28.6 million in debt maturing in October 2008 related to the officer project in Victoria. A project financing facility is being negotiated to replace the existing land bank facility.
The net tangible asset backing was $0.81 per stapled security as at June 30 2008, a substantial premium to BLP’s current trading price.
BLP has also completed the sale of one third of its interest in Ascot Chase, its project at Ascot Vale near Melbourne at a premium to book value. The sale resulted in net proceeds of $8.2 million.
The counterparty on the sale is BLP’s existing joint venture partner BMD Urbex, who is also the development manager on the project. Additionally as part of the sale, BLP has granted an option to BMD Urbex to acquire BLP’s remaining stake (50%) in Ascot Chase.
“The partial sale of Ascot Chase was opportunistic and demonstrates the underlying value embedded in our land investments,”
Balkin said the company is now undertaking a strategic review to narrow the significant trading discount to the underlying portfolio value.
He forecast net profit for FY09 will exceed FY08.
“Going forward, any declared distributions will no longer be funded from capital.
“While we expect residential markets in Australia and NZ will continue to face some headwinds in FY09, we remain focused on delivering earnings growth.
“With the high level of settled and exchanged lots achieved in FY09 to date, we are confident that we will deliver on our guidance, despite market conditions,” he concluded.
Australian Property Journal
