FKP takes $166m hit ahead of sales
The newly appointed chief executive, Geoff Grady, has put the company on the path of becoming a pure play retirement home owner and operator.
Before the impairments, underlying profit of $39.2 million was in line with the group's guidance and slightly below the 2012 result. No dividend was declared.
Earlier this month, Mr Grady flagged impairments, including a $107.4 million write-down on the residential land division and $48.7 million from the commercial business, including the Gasworks development at Newstead in Brisbane, undeveloped land at Mackay and office suites at Brookvale in Sydney.
Mr Grady said on Wednesday that all non-retirement assets were on the market and about $200 million worth of properties already had interest, with due diligence under way. He did not make a formal earnings growth forecast while FKP goes through its restructure.
Richard Jones, from JP Morgan, said FKP appeared to be heading in the right direction with the focus on cash flow, asset realisation and simplification. But analysts said the group risked becoming a takeover target, particularly with Stockland keen to sell its 14.9 per cent stake.
Mr Grady said FKP had 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," he said.
Mr Grady said the past year has been transformational. "In the year ahead we will continue to divest non-retirement assets as we transition FKP Property Group to Aveo Group. Investors will consider the name change at the upcoming annual meeting.
"While market and property conditions continue to be challenging, we achieved 622 retirement unit sales in 2013, up 23 per cent on 2012, representing one of the best sales rates since pre the financial crisis."
"FKP's level of deposits on hand at June 30, 2013, was the highest in the last five years and provides a solid foundation for 2014."
Frequently Asked Questions about this Article…
FKP reported a $166.5 million full year loss primarily because it booked large impairments on non-retirement properties it plans to sell. The company flagged a $107.4 million write-down in its residential land division and about $48.7 million from its commercial business (including the Gasworks development at Newstead, undeveloped land at Mackay and office suites at Brookvale). Before those impairments, underlying profit was $39.2 million.
Under Geoff Grady, FKP is shifting to become a pure-play retirement home owner and operator. The company is divesting non-retirement assets, aiming for an 80% asset weighting to retirement by 2016, and planning to use sale proceeds to reduce gearing and speed up its retirement development pipeline.
All non-retirement assets are on the market. The company says about $200 million worth of properties already had buyer interest and due diligence was under way. Examples of assets affected by impairments or sales plans include the Gasworks development at Newstead, undeveloped land at Mackay and office suites at Brookvale.
FKP achieved 622 retirement unit sales in 2013, up 23% on 2012, which the company described as one of its best sales rates since before the financial crisis. Deposits on hand at 30 June 2013 were the highest in the last five years, which FKP says provides a solid foundation for 2014.
No. The company did not declare a dividend following the reported losses and impairments.
Analysts warned that FKP could be at risk of becoming a takeover target, particularly because Stockland holds a 14.9% stake and has been keen to sell. JP Morgan's Richard Jones said the strategy to focus on cash flow, asset realisation and simplification was the right direction, but the takeover risk was noted by market commentators.
FKP's impairments created a large one-off loss and management did not make a formal earnings growth forecast while the company undergoes its restructure. The underlying profit of $39.2 million (before impairments) was in line with guidance but the impairments mean future earnings visibility is reduced until asset sales and the restructuring progress.
Management said it is transitioning FKP Property Group to the Aveo Group and investors will consider a name change at the upcoming annual meeting. Proceeds from non-retirement asset sales are planned to be used to reduce gearing and accelerate the retirement development pipeline.
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