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Published February 15, 2007

CapitaLand joins billion-dollar profit club

CEO says drivers for sustainable growth are in place


(SINGAPORE) CapitaLand has joined the ranks of the billion-dollar profit club - which currently includes the likes of Singapore Telecommunications, Singapore Airlines, DBS, UOB and OCBC.

Home ground sparkles: S'pore accounted for the lion's share of 51% of full-year earnings before interest and tax from continuing operations, up from just 21% in 2005

Helped by a more than quadrupling in earnings for its fourth quarter, the group yesterday reported a 35.6 per cent surge in full-year net profit to $1.018 billion, the first time a Singapore property company listed here has crossed the $1 billion mark in earnings. Earnings per share for the full year ended Dec 31, 2006, came to 36.8 cents, up from 28.3.

The full-year net profit attributable to shareholders - a record for the third year in a row - compare with $750.5 million in the previous year. For the fourth quarter, CapitaLand posted net earnings of $455.8 million, up from $93.2 million in the previous corresponding period.

And in a major shift in the composition of the group's profits, Singapore accounted for the lion's share of 51 per cent of full-year group earnings before interest and tax (Ebit) from continuing operations, up significantly from just 21 per cent in 2005. Singapore Ebit from continuing operations hit $932 million last year - slightly over five times the $179 million figure in 2005.

The sparkling showing on home ground was underpinned by higher margins in the Singapore residential business, revaluation surplus on the group's office buildings and malls on the island, and higher divestment gains from continuing operations, such as the sale of Raffles City, several floors at Springleaf Tower and the group's stake in Hotel Intercontinental at Bugis Junction.

Although key overseas markets like China, Australia/New Zealand and Europe all registered higher Ebit last year, their share of group Ebit declined.

The 35.6 per cent increase in full-year net profit was due partly to a $277 million revaluation surplus in the form of a writeback of revaluation deficits (compared with an $80 million revaluation deficit in 2005), recognition of $77 million negative goodwill on the acquisition of a 20 per cent stake in Lai Fung Holdings, higher fee-based and interest income, as well as higher margins on the group's Singapore residential business.

CapitaLand's 2006 bottomline also included the group's share of gains after tax and minority interest from sale of investments amounting to $362 million (besides the Singapore divestments mentioned above, other disposals include the sale of Shanghai Xin Mao Property Development Co Ltd, units in CapitaRetail China Trust and private funds, and the disposal of The Ascott Mayfair in London).

However, this figure was much lower than the $533.9 million booked in 2005, when the group sold its entire hotel business (through Raffles Holdings) and its property services arm Premas International.

The group also highlighted that it created total shareholder returns (comprising dividends and share price growth) of $8.9 billion in 2006, 87 per cent higher than in 2005.

The group delivered a return on equity of 14.5 per cent last year, up from 12.5 per cent in 2005.

CapitaLand's net debt rose from $4.55 billion as at end-2005 to $5.44 billion as at end-2006. Net debt-to-equity ratio increased from 0.50 to 0.57 this time.

Assets under management (AUM) rose 68 per cent last year to hit $14.3 billion as at end-2006, surpassing the group's earlier target of $13 billion for 2007. 'We have now set ourselves an AUM target of $18 billion by end-2007,' CapitaLand group president and CEO Liew Mun Leong said.

Shareholders will receive a 5-cent (tax exempt, one-tier) special dividend in addition to a 7 cent first-and-final dividend. The latter comprises a 3.5 cent franked payout - exhausting CapitaLand's unutilised Section 44 tax credits - and a 3.5 cent tax-exempt (one-tier) payout.

Mr Liew declined to say if the group could achieve record profits again in 2007. However, he highlighted that the 'drivers for sustainable growth' are in place. These include a boom in the Singapore property market, diversified growth from China, the group's position as a leading mall owner and manager (with presence in Singapore, China, Japan and India) and CapitaLand's growing real estate investment trusts and fund management business. In addition, the group has a model for rapid expansion in the serviced residences business (through the combination of The Ascott Group and Ascott Residence Trust), and will leverage on oil-rich resource countries in the Gulf Cooperation Council, as well as the affluent Russian cities of Moscow and St Petersburg.

The group's new Integrated Leisure, Entertainment & Conventions business provides a further platform for growth.