Schaffer Corp profit up 11% to $5.8m

West Perth-based industrial company Schaffer Corporation Ltd has announced a net profit after tax of $5.8 million for the first half of the 2008 financial year, 11 per cent higher than the $5.2 million profit posted in the corresponding period last year.

Shares in the company ended the day even at $8.50 each.

Group revenue improved significantly to $91.1 million, up 23 per cent over the previous corresponding period, while operating profit (EBITDA) rose 12 per cent to 12.8 million during the period.

Accordingly, Schaffer has declared an interim ordinary dividend of 25 cents per share (fully franked), unchanged from 2006.

In announcing the interim result, SFC chairman John Schaffer said the group's performance was the result of relatively even contributions from the Building Materials ($33.0 million up from pcp $27 million) and Leather divisions ($54 million up from pcp $44 million).

The property division continues to contribute strongly to both earnings and cash generation, with unrealised gains on the group's property assets amounting to $71 million (pre-tax), at current evaluations.

"Building Materials' revenue increased on the back of increased activity at Delta, which is leveraged to Western Australia's strong economy, and the inclusion of the Archistone business," Mr Schaffer said.

"Over the last 18 months, SFC has invested $30 million in increasing the depth and breadth of Building Materials' business and increasing its leverage to the Western Australian economy.

"That investment will deliver further improvements in revenue and earnings in coming years but, in the short term, SFC anticipates that input cost increases, labour shortages and market fluctuations will exert downward pressure on earnings in the Building Materials division although supplemented by increased volume," Mr Schaffer added.

Mr Schaffer noted that SFC expects significant improvement in Automotive Leather revenue overall for the 2008 financial year as a result of a rebound in North American revenues and continued demand in the Asian market.

Following the recent completion of independent valuations of the group's property assets (including both its Joint Venture Investment Property portfolio and SFC-owned operating premises), SFC has approximately $71 million (pre-tax) in unrealised capital gains in respect of those property assets (book value of approximately $38 million).

Mr Schaffer noted that SFC would continue to carry those assets at book value but would keep shareholders abreast of the level of unrealised gains in the group's property portfolio.

The company has also announced the resignation of group CFO, Geoff Davieson, effective from the end of March.

David Richardson will take over as CFO and joins SFC after more than 18 years' senior finance experience at leading groups including Worley Parsons and Schlumberger.