Results: Centro, AAC

By Glenn Dyer | More Articles by Glenn Dyer

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Holders of Centro Properties can expect analysts to boost their forecasts for the year after the property investor and funds manager revealed a 15.2 per cent rise to in distributable earnings for the December 31 half.

Centro said the net result of $162.8 million will mean investors will get an 8.4 per cent increase in the distribution per security to 19.3c for the half year.

Centro said a very strong, 35.7 per cent jump in funds under management to $15.6 billion and last year’s purchase of the listed US Heritage retail group lifted Centro’s coffers through lucrative management fees.

This has led CEO, Andrew Scott, to forecast a 7 per cent-plus a year growth in distribution per security.

Mr Scott said the group’s stronger performance was underpinned by the $US3.2 billion Heritage acquisition in October.

Meanwhile the associated Centro Retail Trust says its operating profit rose 45 per cent in the first half, after growing its property portfolio.

But the real driver seems to have been the improvement in retail sales towards the end of 2006, although yesterday’s retail sales figures from the Australian Bureau of Statistics didn’t directly suggest that.

CEO Scott said “underpinning the group’s strong result was an improvement in its Australian retail sales results, particularly over the last quarter of 2006”

The ABS said sales rose 0.3 per cent by price in December but by volume were up 5.8 per cent from December 2005, a truer indicator for the performance of groups like Centro.

Centro said its operating distributable profit was $33.5 million in the period, giving investors a 44.1 per cent total annual return. The result helped the Centro Retail Group, which includes Centro Retail Ltd and the trust, to generate a net profit of $41.90 million.

Mr Scott said: “The strong quarterly sales growth of 10.2 per cent across the group’s Australian property portfolio reinforces the success of recent development projects in capturing additional market share from their surrounding trade catchments,” he said.

“Specialty retailers which contribute 36 per cent of the group’s total Australian sales continued to perform well, up 5.7 per cent for the quarter and 4.8 per cent for the year.

“The strongest category was fresh food, further supporting the resilience of the non discretionary sales sector.”

The group declared an interim distribution of 6.3 cents, up from six cents on the prior corresponding period.

Centro said its Australian property portfolio performed “exceptionally well” in the half, with total net property income growth of 13 per cent.

“Steady income results were also achieved for the US properties with the east and west Coast portfolios reporting 3.9 per cent underlying property growth,” it added.

Chairman Brian Healey said in a statement: “This diversified portfolio of quality retail shopping centres has performed extremely well over the period and is benefiting from the completion of 10 of the developments identified at (group’s) listing in August 2005.”

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Meanwhile drought and a write-down in the value of its cattle has hurt the full year earnings of the Australian Agricultural Co Ltd (AAC) which yesterday revealed a 40 per cent fall in full year profit.

The news won’t help its major shareholder, Futuris, which owns 43 per cent and which is due to report earnings this Thursday.

Net earnings for the year came to $10.1 million, down from $16.78 million earned in 2005.

The result included that $17.3 million write down of its trading cattle inventory which is required under new accounting standards because of a fall in the cattle market especially towards the end of the second half as the impact of the drought took hold.

The market however, took this all in its stride. AAC shares have been strong in the past 10 days or so as the heavy wet has hit northern Australia which is where much of its stations and herds are located.

The shares jumped 15c to a new high of $2.25 yesterday, topping the previous all time high of $2.19, which should please Futuris management.

“In the 12 months to 31 December 2006, and particularly in the second half of the year, serious drought in the southern areas of Australia impacted on markets,” AAC said.

However, AAC reported that it “significantly” outperformed the previous year on revenue and earnings before interest and tax (EBIT)”.

“Seasonally, the company had a generally good year with excellent rain on the large northern properties with below average rainfall only affecting the southern properties, underscoring the value of a diverse northern focused operation,” it said.

In its outlook for the coming year, AAC pointed to continuing restrictions on the world supply of clean, quality beef cattle, with cattle numbers in key producing countries such as Australian and the USA, at historically low levels.

“Demand for beef however has been growing strongly with improving economic conditions in Asia as well as a strong demand in the US,” according to AAC CEO, Don McKay.

“These factors will underpin long term demand for Australian beef.”

AAC said net assets rose from $559 million to $582 million, beef production increased 9 per cent, and its total herd grew 11 per cent.

AAC boosted its wholesale meat sales by 95 per cent, to $78 million.

The company paid a 7c a share dividend in October, which it said was consistent with the previous year.

Mr McKay said 2007 had seen a good start for most of the company’s stations, although more rain was required across southern growing stations.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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