F&N profit falters 12% to $1b

Biggest earnings drag came from Properties segment.

In a release, Fraser and Neave, Limited (“F&N” or “the Group”) announced that revenue and PBIT for the full-year ended 30 September 2012 (“FY2012”) declined 12 per cent and 19 per cent to $5,570 million and $952 million, respectively.

"Lower profit was mainly due to lower recognition of Development Property earnings as a result of a change in accounting standards and one-off gains in FY2011 not repeated this year. Boosted by higher fair value gains from year-end revaluation of investment properties, profit after tax for the full year stood at $1,010 million, surpassing $1 billion for the second consecutive year," F&N said.

Full year earnings from Properties dropped 39 per cent to $364 million on a 39-per cent decline in revenue.

"Earnings were dampened upon the Group’s adoption of INT FRS 115 accounting standard, which created volatility in Development Property’s profit. Under this new rule, earnings of overseas and certain Singapore residential developments are recognised only upon completion, and not according to construction progress," F&N said.

"Consequently, despite achieving strong pre-sales of private residential units in Australia and China as well as executive condominium units in Singapore, such revenue and profit were not recognised in FY2012. Specifically, earnings of the 573-unit Esparina Residences (99 per cent sold), an executive condominium in Singapore, and phases 1 and 2 of the mixed-use Central Park project in Australia (64 per cent sold) will only be recognised upon construction completion in the coming financial year. At the end of FY2012, the Group had unrecognised contracted sales of $3.1 billion from Singapore and overseas pre-sold residential projects," it added.

"Last year, Development Property earnings were also lifted by a $68 million gain from the Group’s sale of its 50-per cent stake in the mixed-use Central Park project in Australia to Sekisui House Ltd. Both the absence of this gain and the accounting change mentioned above have resulted in a 55-per cent drop in Development Property earnings," it said further.

F&N said the changes in accounting standards will create volatility and lumpiness in F&N’s earnings. To minimise earnings volatility, the Group will focus on achieving its sales target of over 1,000 units in its key overseas markets of Australia and China, as well as ensuring completion of overseas development projects every year. To further minimise earnings volatility, F&N said it will continue to grow and strengthen its Commercial Property segment so as to ensure a stronger flow of recurring income. This year, the Group successfully added Fraser Place Queens Gate and Fraser Suites Kensington in London, Fraser Suites Perth in Australia and Capri by Fraser in Singapore to its Hospitality portfolio.

“FY2012 was a year dominated by events and developments that are transformational for F&N, and present great opportunity in the coming years," said Mr Lee Hsien Yang, Chairman of F&N.

"While we realised substantial value through divesting the APB/APIPL interests, we will continue to take actions to ensure we remain competitive and drive the growth of the remaining businesses. Our well established leading positions in regional markets, our in-depth understanding of Asian markets and the alliances with our partners, both present and future, will ensure a more balanced portfolio of businesses and provide a platform for sustained growth,” added Mr Lee. 

F&N said its directors have recommended a final dividend of 12.0 cents per share, which together with the interim dividend of 6.0 cents, brings the total dividend for the year to 18.0 cents, same as last year. Following the divestment of APB/APIPL interests, the Board is exploring all options available to it to distribute a portion of the sale proceeds to Shareholders, after F&N is no longer the subject of a takeover offer.

This final dividend, if approved by shareholders, will be paid on 21 February 2013.