Brisbane residential developer Devine has announced a long-awaited but marginal $477,000 half-year profit just as the entire business is shopped around by Goldman Sachs.
Devine, which has a national portfolio of land, high-density apartments and cottages, announced a pre-tax profit of $5.6 million for the six months to June 30, well up on the $6.9 million pre-tax loss for the previous corresponding period.
Managing director David Keir said the company expected to deliver a full-year result of $10 million to $11 million profit before tax, which is lower than the $12 million to $14 million profit before tax guidance given in June. However Mr Keir said the company was seeing rewards from its long-term strategy.
“With residential property markets continuing to improve in our key operational regions in south-east Queensland and Victoria, 2014 will be a year of recovery for the company as we implement our strategy to return to sustained profitability,” Mr Keir said.
“Nationally, the fundamentals to support a strong residential market remain, with interest rates at 50-year lows and strong population growth.”
He said that in Brisbane volumes were improving as the region entered an upswing, while in Melbourne most markets had stabilised and expected to show steady growth.
The company has achieved strong results in land settlements with 85 per cent of the full-year settlement forecast either settled or subject to contract.
Devine sold assets at or above book value as part of its capital recycling program through the half year delivering more than $70 million. Although it should be noted that one asset in Brisbane city sold for almost half of what the new owner has now contracted to sell that site for to a Singapore-based investor.
The company has further reduced debt by $60 million resulting in a gearing level at June 30 of 16 per cent.
Devine Constructions work-in-hand grew to $179 million with the award of the Westmark Milton contract for Walker Corporation
However the turnaround has come too late.
Majority shareholder Leighton Holdings, which is now firmly in the control of Spanish Hochtief, has announced that it is seeking to sell its 50.6 per cent shareholding in the company.
As a result the Devine board have started a process to sell the entire business advised by Goldman Sachs.
An expression of interest program has commenced and is expected to conclude with submissions received before August 25. Short-listed proponents will be granted due diligence in September.
Despite plenty of offshore interest, it is local group Stockland that is said to be the front runner to absorb the Devine business.
Stockland is also said to be the frontrunner for Leighton Properties $7 billion property portfolio. Leighton is being advised by Bank of America Merrill Lynch.