Published February 10, 2009

CapitaLand finds '07 tough act to follow

Full-year net profit halves to $1.26b after Q4 earnings plunge 88%

By KALPANA RASHIWALA

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PROPERTY giant CapitaLand yesterday posted a score-card that was in eclipse, as even the bluest of bluechip players are being hit by the ongoing financial maelstrom.

Mr Liew: 'During this recessionary period, it is satisfying to be able to achieve more than a billion dollar profit after tax.'

The group's fourth quarter net earnings fell 88.4 per cent to $77.96 million, while full-year net profit slipped 54.3 per cent to $1.26 billion. Return on equity fell from 31.9 per cent in 2007 to 12.2 per cent last year.

However, CapitaLand Group president and CEO Liew Mun Leong was far from downcast over the poorer bottom line at a results briefing yesterday afternoon. Instead, he said: 'During this recessionary period, it is satisfying to be able to achieve more than a billion dollar profit after tax.'

He also pointed out that the full-year 2008 showing was the third consecutive year that the group has achieved net profit of above $1 billion.

Shareholders will receive a 1.5 cent per share special dividend in addition to a 5.5 cent per share first-and-final dividend, resulting in a total payout of seven cents for the year ended Dec 31, 2008, down from the 15-cent payout in the preceding year.

For Q4 ended Dec 31, 2008, earnings before interest and tax (Ebit) fell 77 per cent to $235 million. Revenue for the quarter also shrank 46.9 per cent to $703.7 million. A large part of the Ebit contraction was due to revaluation losses for the group's investment properties portfolio, plus the absence of writeback of provisions. The group booked a $103.9 million net revaluation loss for Q4 2008, as against a net revaluation gain of $470.1 million for Q4 2007 'as real estate property values came under pressure amidst the weakened economic conditions and gloomy outlook', CapitaLand said.

Full-year revenue declined 27.4 per cent to $2.8 billion. Total revenue under management (this covers revenue for all properties managed by the group, including revenue from associates, joint ventures and properties managed but not owned by CapitaLand) slipped about 16 per cent to $5.9 billion from 2007's $7 billion. For the full year, Ebit shrank 42.1 per cent to $2.2 billion, on the back of lower fair value gains from investment properties, lower development profits and the absence of writebacks of previous provisions.

Overseas Ebit contribution last year eased to $1.3 billion from nearly $1.5 billion for 2007. The drop was due mainly to lower contribution from Australia due to the provision for foreseeable losses on development projects and fair value losses on investment properties (against fair value gains in 2007), but this was partly mitigated by the recognition of negative goodwill.

While most of CapitaLand's strategic business units posted lower Ebit last year, two shining stars emerged. CapitaLand China Holdings achieved record earnings of $883.4 million, more than double the $403.4 million Ebit for 2007, thanks to divestment gains from the sale of Capital Tower Beijing and the Raffles City portfolio in China.

The group's funds management business was the other star performer. Total assets under management grew by $8.2 billion last year to $25.9 billion. CapitaLand Financial's full-year Ebit rose 29.6 per cent to $90.4 million. CapitaLand Group's fund management fees rose 53 per cent to $182 million. Property management fees increased 16 per cent to $231 million. As well, CapitaLand enjoyed a stable distribution of $131 million from its real estate investment trusts (Reits) last year, resulting in total income of over $500 million last year from its Reits and funds.

The group's finance costs rose 27.9 per cent last year to $516.3 million. It trimmed gross debt from $10.4 billion as at Sept 30, 2008, to $9.8 billion as at Dec 31, 2008. Net debt-to-equity ratio stood at 0.47 times as at end-2008, unchanged from the end-2007 figure. Interest cover ratio fell from 9.4 in 2007 to 5.0 in 2008, and interest service ratio declined from 6.2 to 3.9 over the same period.

The group's attributable share of debt for its 17 private equity funds was $580 million as at Dec 31, 2008.

CapitaLand Retail plans to open ION Orchard mall in mid-2009. In China, it has decided not to proceed with developing 12 malls signed under respective MOUs. It has also deferred the launch of its proposed Malaysia retail Reit.