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Glenn Freeman

Multiplex Profits Climb 150pc

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Perth-based construction company Multiplex has reported net profits of $539.4 million for the year, up 149 percent on 2006 due to positive contributions across most divisions. In today’s statement to the market, Multiplex management indicated its outlook for 2008 and beyond was positive and anticipated underlying earnings to continue climbing.
“However, the completion profile remains biased towards 2009 and beyond. Development earnings for 2008 are heavily dependent on the successful completion and sale (to interests outside the Group) of Eden, High Wycombe (UK) and the ATO Building at Latitude East (NSW),” it said.

The group’s total revenue for the year was $3.5 billion, down 6 percent on last year. It experienced a $40.7 million outflow due to the Australian Security and Investment Commission’s enforceable undertaking related to the Wembley Stadium project in the UK, but added $441 million in net profit from investment properties.

Earnings before interest and tax (EBIT) were $684.1 million, up from $310 million last year, the Multiplex Property Trust contributed $641.3 million in EBIT.

Its construction division contributed EBIT to the Group of $72.3 million, bouncing back from its June 2006 loss of $319.8 million). Operating revenue was $2.3 billion, down from 2.46 billion last year.

Multiplex’s construction portfolio is growing in all regions, including 47 projects with a  total contract value estimated at $7.6 billion across Australia, New Zealand, the Middle East and the United Kingdom.

Locally it has continued to target large negotiated contracts in Australia and New Zealand and Public Private Partnerships, with its internal development projects for the region growing from $3.3 billion to $4.0 billion.

A sharp decline in development activity saw the earnings contributed by its property development division fall to $24.1 million, down from $100 million last year.

The contribution from facilities management improved to $8.5 million from $7.4 million, while funds management added $30.3 million, down from $53.8 million a year ago.

The Multiplex Property Trust’s EBIT contribution was $641.3 million, increasing from $442.8 million in 2006.

Growers And Traders Get Last Warning

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The ACCC has issued a third and final warning to horticultural growers and traders who are backdating contracts to circumvent the recently introduced Horticulture Code of Conduct

Some horticultural growers and traders have continued to ignore warnings about breaching conditions of the Horticulture Code of Conduct, despite repeated warnings from the Australian Competition and Consumer Commission (ACCC).

Introduced on 14 May 2007, the Code regulates trading of horticulture produce, with the aim of providing greater commercial
transparency in transactions between growers and wholesale traders.

While the ACCC said it has had positive responses from some traders and associations, there have been a number of instances where they have backdated contracts to avoid obligations under the Code, which became law on 14 May 2007.

 

It said traders engaging in such conduct risked contravening the Code and may be engaging in misleading or deceptive conduct by wrongly leading growers to believe they will not enjoy the benefits delivered the legislation.

The ACCC has issued two prior warnings on the matter, prompting ACCC Chairman, Graeme Samuel to threaten court proceedings against traders who don’t comply.

“Some still trade in horticulture produce without an appropriate agreement. There are still template agreements being used in the marketplace that include clauses that the ACCC considers may breach the code.

“The ACCC continues to investigate complaints about non-compliant agreements. It will not hesitate to take enforcement action against those who continue in a non-compliant manner,” Samuel said.

Foxtel Monopoly Now Paying Off

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Foxtel has announced record high growth for the year ended 30 June 2007, up 40 percent on last financial year largely due to subscriber growth and retention. It posted a record $76 million profit up from last year’s maiden $4 million gain.
The results announcement comes soon after the Federal Court dismissed Seven Network’s legal action against Foxtel, and just days after Seven became the only commercial network not signed with Foxtel after Ten agreed to retransmit the Ten network signal.

The pay tv provider now has 1,292,000 direct subscribers, up 13.1 percent since 30 June 2006. Its total subscriber base, including wholesale customers, grew to 1,443,000 an increase of 12.4% over the 12 month period.  Subscriber revenue grew 13 percent  to $1.23b, while total revenues reached $1.42b.

Foxtel’s average revenue per user continued to improve on the back of high consumptionof its iQ digital offering and further penetration of its premium Platinum package. Over 16 percent of subscribers have taken up the digital recording offering, and more than a third of all new subscribers are opting for this package.

Platinum subscribers account for around 40 percent of the total, with less than 5% of all subscribers electing to take the $36.95 entry price package.

For the year to 30 June 2007, subscription television achieved a 58.8 percent overall share of viewing in subscription TV homes, compared with a 56.1 percent share in the corresponding period last year. Strong ratings performance continues with a further lift in subscription viewing to a 60.2% share for the first 26 weeks to 30 June 2007.

Foxtel pointed out that in the nation’s largest region of Sydney, subscription TV continued to be the most watched service with a 24.8 percent viewing share, greater than any of the commercial or national broadcasters.

The strength of the content offering, combined with the consumer benefits of the iQ has resulted in continued low churn rates with total churn remaining below 12% for the financial year.

FOXTEL Chief Executive, Kim Williams said it will continue its investment in content, continuing the extension into new delivery mechanisms like broadband and mobile, “while retaining our strong focus on delivering improved business performance”.

Business Rent Rise Tipped

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The crash in commercial property vacancy rates has the potential to drive rents up, with tightening of capacity occurring to some degree across all Australian states and territories, according to the latest data from the Property Council of Australia.

In January 2007, PCA measured overall vacancy ratesfor commercial buildings in the Sydney CBD at around 8 per cent and onlyslightly higher in North Sydney.

Commercial rents will likely start to climb within thenext 12 to 18 months, with this market always “lagging the residentialincreases in rent”, according to David Bolt, a Director of North Sydneycommercial property real estate agents Hartigan Bolt.

In his analysis of the figures, Bolt said thetightening market means businesses in both Sydney and North Sydney CBDs areradiating out to St Leonards and Chatswood “because they can no longer findwhat they want closer in”.

“The market is tightening – the vacancies from thelast two or three years are now going away,” Bolt said.

North Rydeis also continuing to emerge as an alternative site for businesses unable tofind suitable premises in the traditional urban centres. Bolt expects this tocontinue as transport to the area improves on the back of the planned Epping toChatswood line which will have two or three North Rydestations including Delhi Roadand Macquarie Shopping Centre.

 

He points out the factors driving low commercialvacancy rates are a combination of low levels of new property constructionpaired with high levels of expansion within businesses, which are in the midstof an extremely positive economic cycle and now deciding to upsize theirbusinesses to take advantage of these conditions.

Bolt attributes much of the capacity constraint to ashortage of suitable sites and also to restrictive council planningrestrictions which severely limit the number of appropriate sites because ofbarriers to re-zoning for commercial use.

“Companies are finally taking more space and movingpremises,” he said, but many are now finding the options are not as broad as inthe past, particularly within the preferred centrally located areas.

In particular, businesses working in the construction,infrastructure and engineering sectors are adding staff and expanding rapidly,buoyed up by what he describes as a “huge non residential building boom goingon in Australia,such as roads and infrastructure”.