FKP REPORTS MIXED 2013 FINANCIAL YEAR RESULTS

Written on the 22 August 2013

FKP REPORTS MIXED 2013 FINANCIAL YEAR RESULTS

FKP Property Group today announced an underlying profit of $39.2 million as part of its full 2012-13 financial year results.

The group’s (ASX: FKP) statutory result for the year was a $166.5 million loss attributable solely to a previously announced revaluation of non-retirement asset sales.

CEO Geoff Grady says the past year had been “transformational”.

“In the year ahead we will continue to divest non-retirement assets as we transition FKP Property Group to Aveo Group – Australia’s leading retirement group,” says Grady.

“While market and property conditions continue to be challenging, we achieved 622 retirement unit sales in the 2013 financial year, up 23 per cent on 2012, representing one of the best sales rates since pre the financial crisis.

“The level of deposits on hand at June 30 2013 was the highest in the last five years and provides a solid foundation for 2014.

“With more buoyant sales activity across our retirement portfolio and an accelerated retirement development pipeline, we remain confident about the outlook for our business.”

The group’s share price fell one per cent as the results were released. From an opening price of $1.395 its current price is now $1.385.

Retirement

FKP’s Retirement business contributed $24 million to underlying profit in the 2013 financial year, down from the $33.2 million recorded in 2012.

This reflects the strategic focus on reducing company owned stock held on the balance sheet.

A more normalised mix of sales is expected going forward.

The successful sell-down of company owned stock has resulted in an increase in occupancy across the portfolio of three per cent, from 93 per cent.

In the next financial year the Retirement division will accelerate its development pipeline, initially at Aveo Mingarra, Aveo Durack and Aveo Albany Creek, with a target rate of 200 units to be developed per annum by 2016.

About 82 per cent of the 12,000 residents living within Aveo villages are aged over 75 years old.

The group has set a target to provide care services to 75 per cent of the portfolio in 2014.

As previously announced, no change has been made to the December 31 2012 valuation of FKP’s retirement assets.

An independent valuation was completed by Deloitte Touche Tohmatsu at June 30 2013.

Non-Retirement

The Residential Communities and Apartments division contributed profit of $30.2 million in 2013, up 60 per cent on 2012 and driven by the settlement of 121 apartments at Melbourne’s Aerial development and the settlement of 242 lots across the land estates.

Interest levels remain high at The Rochedale Estates in Brisbane.
Saltwater Coast was impacted by continued subdued conditions in the Melbourne market.

Buyer sentiment is improving with a strong level of pre-sales across all the land estates which are due to settle in 2014.

Construction at the Luxe apartment development in Sydney is on track to be completed in mid-2014, where 10 units remain available for sale.

Construction is underway at The Milton in Brisbane with 206 of 303 apartments pre-sold to date.

Enquiries and sales rates into 2014 remain strong.

The Commercial and Industrial division contributed $14.3 million profit in 2013, up 54 per cent on 2012.

This was largely driven by the sale of Gasometer 2 and the sale of industrial lots at Industroplex in Mackay.

Gasometer 1 in Brisbane achieved practical completion in July 2013.
Almost all of the retail area has been leased, with tenants currently completing fitouts.

Capital Management

The group continued to deliver on reducing debt levels in 2013.
FKP has reduced debt by $287 million from $972 million to $685 million.

Group gearing has reduced from 39 per cent to 31.5 per cent.

This was a result of:
− Successful entitlement offer in September 2012;
− Settlement of units at Aerial;
− Divestment of $134 million of Property Trust assets; and
− Sale of Gasometer 2 in May 2013.

The group currently has assets with a value in excess of $200 million in exclusive due diligence.

Over the next two months FKP will announce the results of these dealings should they become unconditional.

Over the period to June 30 2014, FKP has the following major debt facilities expiring:
− $99.7 million of Convertible Notes currently outstanding expiring in January 2016, with a put option investors can exercise in January 2014; and
− $250 million Retirement Facility expiring on March 31 2014.

With the asset sales noted above plus the current available capacity, FKP believes that it will be able to meet its short-term debt liabilities.

The board deemed it appropriate to continue to preserve capital and, as announced at FKP’s AGM in November 2012, no dividend will be paid from the company in relation to 2013.

However, the Trust is required to pay a distribution, accordingly the board announced a 1.0cps distribution in June 2013.

Following the recently announced impairments, the reported NTA per stapled security decreased by $0.45 from $3.98 at December 31 2012 to $3.53 at June 30 2013.

No dividend from the company will be paid for 2014. Distributable income as determined by the directors will be paid from the Trust.

Outlook

The group will continue to execute its stated strategy and progress to become Australia’s leading pure retirement group through divesting non-retirement assets and further enhancing care services across the retirement portfolio.

The group has a target of an 80 per cent asset weighting to retirement by 2016.

Proceeds from non-retirement asset sales will be used to reduce gearing and accelerate the retirement development pipeline.

As previously announced, FKP will be rebranded to Aveo Group.

The proposed name change will be put to security holders at the 2013 AGM.

In line with the rationalisation of various fractional interests and holdings over the past 12 months, FKP is exploring further rationalisation to streamline its business.

FKP’s 2013 results presentation will be webcast live from www.fkp.com.au at 11am (AEST) today.

Group Financial Results

− Statutory profit/(loss) after tax: ($166.5m) (FY12: ($350.3m))
− Underlying profit after tax: $39.2m (FY12: $41.3m)
− Net tangible assets per stapled security: $3.53 (FY12: $6.33)
− Underlying earnings per stapled security: 13.6cps (FY12: 24.1cps)
− Gearing: 31.5% (FY12: 39.0%)
− Distribution: 1.0cps (FY12: 19.5cps)


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