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Australia's GPT Cuts Earnings on Market Turmoil

Reuters
Sunday, 6 Jul 2008 | 10:12 PM ET

Australian property investor GPT Group slashed its forecast for 2008 earnings by more than a quarter, hit by global market turbulence, sending its shares down as much as 21 percent.

The continuing deterioration of conditions in global financial, credit and property markets was having a marked impact on all real estate companies, GPT said. Difficult operating conditions would continue for the rest of 2008, it said.

While the trust's Australian retail, office and industrial portfolios continued to perform strongly, GPT cut its earnings guidance for hotel and tourism, European funds management and U.S. seniors' housing.

"It's incredibly disappointing that an industry icon is in as much trouble as it's in," said Andrew Parsons, managing director of property funds manager Resolution Capital.

"There's been a lack of capital management by a lot of different groups. We're finding a lot of issues across the industry but to blame global markets for the mess the industry is in is wrong. The management is responsible and there's got to be a restructure of the board and management," he said.

Shares in GPT fell as much as 17 percent to hit a low of A$1.95. Other property firms also fell, with Lend Lease Corp down 6 percent at A$9.44 and Mirvac Group down 5.3 percent at A$2.70.

GPT said on Monday its operating income would drop to A$464 million ($446 million) in 2008, down 27 percent from a previously forecast A$633 million and compared with A$605.1 million in 2007.

Earnings per share would be 21.2 cents this year, compared with an average analyst EPS forecast of 28.1 cents, according to Reuters Estimates.

GPT said its full-year distribution was now expected to be 20 cents per share, down from a forecast for 28.9 cents the company made in February.

GPT has deferred or revised assumptions related to several initiatives, including asset sales and the proposed launch of various funds by its European funds management platform.

GPT said its debt remained within all covenants and it had no provisions related to market capitalisation. It has about A$100 million to refinance in 2008, and has sufficient credit lines to meet its refinancing requirements.