VINEYARD property investor Challenger Wine Trust has lifted its profit by 5.6% in the first half, but the trust was unable to provide a guidance for FY09 because of deteriorating market conditions.
CWT has delivered a profit after tax of $8.4 million for the six months ended December 31 2008, up 5.6% on prior corresponding period.
Operating performance was underpinned by an increase in net property income of 5.3%. Net profit after tax was $2.9 million, after allowing for an unrealised decrement from property revaluations of $5.6 million. Distributions for HY09 totalled 4.7 cents per unit.
CWT’s fund manager Nick Gill said the trust’s core business held up well during the first half of FY09, however the recent steep fall in interest rates resulted in a mark-to-market net liability of $21.7 million on CWT’s financial derivatives (interest rate swaps) and a narrowing of headroom on bank covenants. In addition, bank lending margins have increased.
CWT’s portfolio comprises 25 vineyards, as at December 31 it was 98.4% occupied with a long weighted average lease term of 5.3 years. During the period, 24 properties were independently valued, nine of which were valued which resulted in a fall of $5.6 million.
CWT had total drawn borrowings of $159 million, up from $155 million at June 30 2008.
Gill said the Australian wine and vineyard sectors continue to operate in a challenging environment. Over committed grape contracts during the 2008 harvest resulted in an over-supply of primarily Chardonnay grapes.
“Economic, financial and trading conditions are extremely challenging globally and the wine industry is not immune. Most large wine companies have booked write downs in response to current and projected market conditions.
“In the short term CWT may not be immune from declining vineyard values in some regions, however capital management initiatives will be implemented to maintain and improve CWT’s LVR banking covenant headroom,” Gill continued.
“To maintain balance sheet strength and flexibility in these uncertain times, CWT is pursuing asset sales. Until we have a clearer understanding of the likely outcome of asset sales, and until we have fully assessed the implications of recent announcements and strategic reviews by several of our major tenants, we are placing FY09 distribution guidance on hold pending further review,” he concluded.
Australian Property Journal
