Agricultural and forestry fund manager, Great Southern Limited, has recorded lower than expected project sales revenue on the back of legislative uncertainty surrounding non-forestry managed investment schemes, driving its 2007 net profit down 29 per cent
Agricultural and forestry fund manager, Great Southern Limited, has recorded lower than expected project sales revenue on the back of legislative uncertainty surrounding non-forestry managed investment schemes, driving its 2007 net profit down 29 per cent to $71.5 million.
In what was a challenging year for the country's largest MIS manager, 2007 project sales were down 10 per cent on the previous year to $412 million, affected by proposed changes to the tax treatment of non-forestry MIS.
The group's earnings before interest, tax, depreciation and amortization was down 29 per cent on 2006 to $150.7 million.
The legislative uncertainty also drove the group to include a $25 million after tax impairment loss relating to its horticulture assets, in the event that its horticultural MIS projects will not be available in its current form after June 2008.
The company declared a fully franked dividend of 8 cents per share.
Underpinning its outlook and five year strategic plan is a core focus on forestry MIS, including a restructured plantation forestry project, as well as growth and opportunities in agricultural funds management through new and existing projects, including its Rural Opportunities Fund.
The group currently manages over $2 billion of funds, with plans to grow to $3 billion over the next 12-18 months.
It has more than 2 million hectares of freehold and leasehold cattle land, as well as 240,000 hecatres of plantation forestry land.
Earlier this month, the group acquired 50 per cent of Bunbury woodchip mill, Hansol, and the assets of WA olive oil producer, Olea Australis Ltd.
The full company announcement is pasted below:
Australia's leading forestry and agricultural fund manager, Great Southern Limited (ASX code:GTP) is pleased to release its financial results for the full year ended 30 September 2007.
The group has achieved an underlying net profit after tax of $99.6 million, which after a specific provision for impairment of horticultural assets, translates into a reported net profit after tax of $71.5 million.
This is the company's first full financial result with its revised year end of 30 September, meaning comparison to previous reported results is not applicable and may be misleading.
The result for the year was impacted by lower than expected total sales of the company's MIS products ($412 million), which were affected by several factors including legislative uncertainty and the one off opportunity to contribute up to $1million into superannuation.
Whilst total forestry MIS sales were reduced from the previous year, sales for 2008 and beyond will be underpinned by the new tax legislation passed in June 2007, the very successful new high value timber project launched during 2007 and a restructured plantation woodchip project which is expected to provide increased forestry MIS sales in 2008.
Horticulture and cattle MIS sales increased substantially in 2007, with total sales to 30 September 2007 of approximately $190 million. Horticulture MIS sales are expected to continue to provide steady sales for 2008 however with an increased emphasis on minimising capital expenditure, the company does not expect to market a cattle MIS project in 2008.
Notwithstanding lower sales for the year, total revenues recognised from MIS sales have remained relatively consistent reflecting the change in sales mix. The company has deferred revenues at 30 September 2007 of $154.5million.
Cash at 30 September 2007 was $207.6 million which will be used to meet capital and operational requirements in 2008. More than $200 million net cash inflow from operating activities was generated for the year.
Gearing levels remained within the company's targeted range at 59.3% (net debt/equity). If the convertible reset preference shares are treated as equity (given GSL's ability to trigger conversion) then gearing drops to approximately 38%.
The company's balance sheet remains very strong, with net tangible assets per share of $2.16, underpinned by more than 2 million hectares of freehold and leasehold cattle land (recorded at cost) and some 240,000 hectares of plantation forestry land (recorded at fair value).
The company remains optimistic for the future of its non forestry MIS projects, which has been strengthened by the fact that the Rudd Labor government has committed to a comprehensive review of non forestry MIS.
However, the company recognises that there may be some continuing uncertainty regarding this part of its business, pending the specific outcomes of a test case with the Australian Taxation Office and the finalisation of any non forestry MIS review. Accordingly, the company has made a special adjustment of $28 million after tax for impairment of its horticultural assets in the event that its horticultural MIS projects will not be available in their current structures after June 2008.
This provision, together with the company's strategic plans and revised products (refer further below) means the company has a very clear and immediate direction and strategy and that any continuation with non forestry MIS products after June 2008 provides only upside for the company.
The company has declared a final fully franked dividend of 8 cents per share, payable on 17 December 2007, with a record date of 10 December 2007.
2. UPDATE ON CORPORATE TRANSACTION
The Company has previously announced that it had been approached by parties interested in exploring a possible transaction involving the future ownership of the Company and that it would inform the market if it received any offer capable of being recommended by the Board or putting to shareholders for their consideration.
The Board has not received any such proposals to date and formal discussions with all parties in this regard have now ceased. If the board does receive any subsequent definitive proposal that the board believes it could recommend to shareholders, an announcement would be made at that time.
3 2008 OUTLOOK AND 5 YEAR STRATEGIC PLAN
The company has developed a 5 year strategic plan that seeks to leverage off the company's existing capabilities, assets and resources to consolidate Great Southern as Australia's leading forestry and agricultural fund manager. The plan, which has a focus of increased cashflow and enhanced shareholder value, will be underpinned by:
(i) A core focus on forestry MIS, including a restructured plantation forestry MIS
project, with significantly reduced capital expenditure and other forestry MIS
projects including its successful high value timber project;
(ii) Increased growth and opportunities in agricultural funds management through
both existing and new projects, including the recently launched "Rural
Opportunities Fund"; and
(iii) Pursuing other growth opportunities and synergies within its existing forestry,
agriculture, funds management and distribution operations.
Great Southern is already one of the largest forestry and agricultural investment managers in Australia, currently managing over $2 billion of funds with plans to grow this to nearly $3 billion over the course of the next 12 to 18 months.
The company believes it can put a challenging 12 months behind it, and continue to grow shareholder value in 2008 through increased sales of forestry MIS products and continuing sales of non forestry MIS products, both with increased cash generation through reduced capital expenditures.
