DEVINE EKES OUT MODEST PROFIT AT LAST
Written on the 19 February 2015 by Nick Nichols
AFTER two years of losses, residential developer Devine (ASX: DVN) has finally scratched out a modest $3.59 million net profit in calendar 2014 and assured investors it is back on track.
While comparisons with a year earlier have been muddied due to Devine aligning its financial year with the calendar year for the first time, the company has made good on its December earning upgrade by delivering a pre-tax profit of $10 million.
The latest result is a far cry from a year earlier when Devine posted a $72.9 million interim loss, which was heavily affected by the write-down of assets. The latest net profit was achieved through the write-back of inventory totalling $3.94 million during the year, which prompted the December upgrade.
Devine's profit was built on annual revenue of $333.49 million in revenue, boosted by the settlement of 857 residential lots. Devine says it made 609 starts during the year and already has secured 40 per cent of targeted land settlements and 31 per cent of housing starts for 2015.
CEO David Keir (pictured) says an $80 million reduction in debt and the sale of "marginal projects" had combined with structural and operational changes to reduce overheads and boost the bottom line.
Keir says the company's performance has been aided up by Devine Construction's $183 million workbook and ongoing market diversification. Work in hand includes the 277-apartment Westmark Milton and the 136-apartment 38 High Street in Brisbane.
"As a result, we have delivered a positive operating cash flow surplus of $46.7 million, compared to the outflow of $3.6 million for the prior comparative period.
"The past 12 months has seen the company successfully regroup and refine its strategy to deliver sustainable profitability."
The reduction in gearing from 31 per cent to 15.4 per cent has opened the way for Devine to pursue higher margin projects that Keir hopes to finalise "in the short to medium term".
"We have experienced a steady improvement in property market sentiment throughout 2014 and into the new year with a strong level of interest from property investment purchasers carrying into the current year," he says.
Settlements at DoubleOne 3 at Teneriffe totalled 102 last year as Devine prepares to kick off construction on a new apartment project, Mode, at Newstead in March.
"Devine has undergone a fundamental transformation in recent years, having built a stronger, more sustainable business that has the capacity to grow well into the future," Keir says.
"We will continue to seek opportunities to expand the company's apartment development business, replenish the community development portfolio and secure more work for Devine Constructions."
In the notes accompanying the latest profit, Devine says it has repositioned itself over the past year for further growth, but it also concedes the proposed sale of the company has been a distraction for the board and shareholders.
"The conclusion of this (sale) process, whether leading to a sale outcome or not, remains a priority for the directors,'" it says.
Costs associated with the sale - initiated after major shareholder Leighton Holdings (ASX: LEI) announced last year an intention to sell its 50.6 per cent stake in the Brisbane property developer - currently stand at $1.6 million.
Devine is not paying a final dividend.
Author: Nick Nichols