Diversified property group Devine has shaken off the shackles of the housing downturn from last year to report an impressive net profit after tax of $18.8 million stated under AIFRS for the year ended June 30, 2006.
Yesterday result was turnaround for Devine, which posted a net loss after tax of $2.7 million in 2005.
The company’s 2006 result was underpinned by strong earnings growth in the property development and construction division, which offset the slowing housing division.
Over the 12 months, Devine reported total revenue of $572 million, compared to $209.6 million in 2005. This has resulted in Basic EPS of 14.4 cents for the year compared a negative 2.3 cents per share in 2005.
The property development and construction division contributed $330 million up from $507,000 in 2005 and the housing division contributed $221.2 million up from $197 million in 2005.
Devine said it has been an active year for the property development division. During the year, the company completed and settled of the 214 unit “Casino Towers” project in the Brisbane CBD and completed the $338 million mixed-use development “Victoria Point Docklands” in the Melbourne CBD.
The company said there are a number of other opportunities that it is exploring and, if realised, these will underpin this division’s results over the next few years.
Devine said the housing market remains subdued, however signs have emerged that first homebuyers are re-entering the market.
“Early indications are that when the dwelling commencements for the 2005/06 year are confirmed, they will be down 7% nationally. This follows a fall of 9% in the preceding 2004/05 year.
“The rental market has become tighter in major population centres where growth in employment has been strong and this will provide opportunities for investors and is therefore expected to flow through to an increase in housing activity over the coming year. Lack of affordability however continues to be the major issue facing the Housing Industry and governments at both the State and Federal level are acutely aware that assistance is needed to allow First Homebuyers to purchase their first home,” the company said.
Devine said is has continued with its strategy of acquiring land in all of the major markets in which it operates however, given the lead times involved in land development, the benefits of this strategy will take some time to flow to the bottom line.
At June 30, 2006 developed lots and lots yet to be developed from broad acres that are either owned or under control, totaled 3,028 – an increase of 61% over the equivalent number as at June 2005.
Devine is looking to increase this number to around 5,000 lots owned or under control by June 2008.
Meanwhile, the finance division which is very much dependent on the number of loans and a result of the weaker housing market has contributed to a loss of $2.850 million before tax.
Devine said the company continues to closely monitor the performance of this division and investigate a number of alternative strategies.
Looking ahead, Devine has also laid foundations for further growth with the establishment of a funds management division. The company recently announced its intention to launch its first residential land syndication, which is expected to contribute external equity to assist with the acquisition and development of land projects.
Devine said in future, the company will look to retain an interest in the commercial and retail components of future projects through its property trust structure.
The company said the outlook for housing remains uncertain but the strategy adopted by the company to substantially increase its land development activities and to market developed land to other builders will, it is expected, result in earnings for the housing division at similar levels to the year just ended.
“Overall, profit for the 2006/07 year is expected to exceed that of the 2005/06 year,” the company concluded.
Devine has declared a full year dividend of 8.0 cents per share fullyfranked, unchanged from last year.
By Kathryn O’Meara
