TRAFALGAR Corporate Group has reported a 72% profit fall as a result of $22.3 million in writedowns.
For FY08, the company booked a profit after tax of $10.2 million compared to $36.4 million in the previous year. Revenue for period fell 9.5% from $71.4 million to $64.6 million.
The profit before tax of $17 million included revaluations of investment assets of $24.3 million, but was impacted by the writedown of the carrying value of development assets by $15.6 million (primarily Tallwoods). The company also took a $6.7 million write-off of deferred tax benefits. The FY2007 profit before tax included revaluations of $26.6 million and writedown of inventory by $4.3 million.
A final distribution of 5 cents per security will be paid on 12 September 2008 to security holders on the register at 30 June 2008. The directors have re-affirmed previous guidance that FY2009 distributions will be at least 10 cents per security.
Trafalgar’s chief executive Braith Williams said the company has made substantial progress in implementing its strategy to move away from direct development activities and reduce its exposure to the poor performing
“The company recognised that market conditions changed significantly during the course of FY2008 and has responded by undertaking updated valuations in June 2008 of its investment portfolio, disposing of development assets as well as reviewing the carrying value of its remaining development assets.
“The move away from direct development activities, combined with a 40% reduction in personnel and savings in corporate overheads, will ensure the group is well placed to achieve its target of a 30% reduction in operating costs (including development operating costs) in FY2009 compared to FY2007,” he added.
Williams said the decline in the NTA from $2.89 to $2.26 per security was largely attributable to the dilutive impact of the issue of 15.7 million securities in October 2007. On a fully diluted comparative basis, the NTA declined marginally from $2.30 to $2.26 per security.
During FY2008, the group sold the development rights for its Southbank project for $15.5 million, whilst retaining a profit sharing position in the development. Post balance date the Rhodes Shoreline Lot 204 residential development site (in which TGP has a 50% interest) was sold for $17.6 million, conditional on obtaining development approval.
The company’s debt profile remains well structured with 95% of debt facilities committed until 2011 and 77.7% hedged. The group continues to fully comply with its borrowing covenants. At balance date the company had undrawn loan facilities amounting to $25.5 million.
Williams insists the strength of the group remains the quality of its cash flow from the investment portfolio, which has a weighted average valuation yield of 7.3% and weighted lease duration of 5.5 years.
Chairman Richard Grellman said that the group has adapted to the current market conditions by implementing an aggressive cost reduction program for FY2009, which has seen a 40% reduction in staff numbers, cuts in development operating costs and further reductions in corporate overheads.
“The group is on track to deliver on its target of a 30% reduction in operating costs (including development operating costs) for FY2009, compared to FY2007.
“The strength of earnings from the investment portfolio will improve in FY2009, as a result of a significant increase in rent from the
Australian Property Journal
