Watpac wins over $628M of projects in last quarter

Watpac Limited (“Watpac”) (ASX: WTP), a diversified construction, civil and mining, and property group today announced an after-tax profit for the half year to 31 December 2010 of $4.3 million.

This result is within the profit guidance range released to the market on 18 January 2011. As indicated in that announcement, the Group’s result is lower than the previous corresponding period primarily as a consequence of the sustained unseasonal wet weather in Queensland and Victoria during the quarter up to 31 December 2010. The Directors expect an improved second half for FY11 and believe the Group is well positioned for FY12 with record contracting work in hand.

The full results can be viewed at http://www.watpac.com.au.

The Board has declared a fully franked dividend of 1.5 cents per share for the six-month period. Whilst lower in dollar terms than the previous corresponding period, the dividend reflects continuation of the Company’s historical payout ratio and reinforces the Directors’ confidence in the strong long term earnings expectations for the Company. The dividend reinvestment plan remains in place.

Greg Kempton, Watpac Managing Director said, “The business remains in sound financial condition and the Company expects to report a stronger second half. In saying that however, I expect the abnormal wet weather conditions experienced on the east coast of Australia to result in a weaker financial performance in the contracting sector in FY11 when compared to FY10. Watpac’s diversified operations and strong forward order book finds us particularly well positioned though for FY12 and beyond.”

Contracting

The Group was awarded $628 million of contracting work in the quarter to 31 December 2010. The Company’s quarterly work in hand media release is attached to this announcement. The Group’s work in hand position is currently a record $1.8 billion.

“We have continued to secure high quality building, civil and contract mining projects during the period.”

“Our brand reputation continues to grow interstate having secured the $353 million One Central Park residential project for Frasers Property in Sydney and the $102 million Eastern Plaza Development at the Melbourne Tennis Centre.”

“Our entry into the South Australian construction market has also been successful securing the $75 million Adelaide Airport Landside project.”

The Company’s Civil & Mining business on the East Coast was impacted by bad weather in the first half, but mining work in Western Australia is being delivered in accordance with Watpac’s contractual obligations, on time and on budget.

“The mining services sector represents a huge growth upside for the Group, but we must ensure that growth is delivered in a measured way.” Mr Kempton said.

Property

Mr Kempton reiterated that the Company’s property book was comprised of quality assets that were strategically well located in South East Queensland.

“There is significant value to be realised from the strategic disposal or development of the Group’s property portfolio, but for the moment, supply and demand side forces are not operating to allow those assets to be realised”. Mr Kempton said.

“Whilst investor yield expectations on commercial and industrial property are not helpful for developers, it is encouraging to see financiers are more positive about the sector”.

The Directors continue to apply a conservative accounting treatment in respect of property and have directly expensed property holding costs and interest of $6.3 million during the six month period.

Notwithstanding these challenges, the company has delivered on its strategy to reduce its exposure to property by completing the sale of the Waterloo Stage 1 Commercial Office tower and the Coolum Lot 146 Industrial assets in Queensland at book value. It is expected that the 8 Australia Avenue Commercial Office tower in New South Wales will be disposed prior to 30 June 2011.