Ferrets Stock to Watch: ARIADNE AUSTRALIA LIMITED 09:08, Monday, December 11, 2006
A COMPANY THAT HAS FOUGHT ITS WAY BACK AGAINST THE ODDS
Sydney - Monday - December 11: (RWE Aust Business News) *******************************************************
OVERVIEW ********
Ariadne Australia Ltd (ASX:ARA) shareholders should have Dr Garry Weiss to thank for the company's survival and recovery from the multi-million-dollar losses incurred after its collapse in the 1980s.
Dr Weiss was the prime mover in convincing a number of investors that the company was worth saving and should eventually make profits for its long-suffering shareholders.
John Seymour has been another believer and if it hadn't been for him the company would not have recovered so quickly.
Mr Seymour gave his support and guidance and played a very proactive role in the reconstruction and continued development of Ariadne over the past 15 years.
He is reducing his shareholding, but will remain an active director.
Last week Richard Pratt, the packaging mogul and another believer in the Queensland-based property development, car parking and investment company, decided to almost double his stake to 10.6 per cent.
This should have given shareholders a confidence boost although the shares hardly moved.
It may have been John Seymour selling down his shareholding while the company's profit for the year to June, on a like-for-like basis saw earnings retreat 15 per cent to $7.21 million.
The comparative profit was before the impact of compliance with Australian Equivalents to International Financial Reporting Standards.
The major adverse impact on the result related to the reporting of a significant first-year loss for the Brisbane CBD car park, Queens Plaza.
This 595-bay car park was opened in June 2005 in relatively soft market conditions.
During the first year of operations the Queens Plaza retail centre operated on a lower than full capacity basis, with the Coles Supermarket store and a further 17,000 square metres of the David Jones Store yet to be opened.
But chief executive Murray Boyte told shareholders at the annual meeting that through a combination of improved trading conditions and aggressive marketing programs the car park in the first five months of 2007 had significantly improved its performance.
"We remain confident of the long-term value of this car park to Ariadne and the S&K Car Park Group," he said.
The lower level contribution from property was offset by an increase in investment contributions, as a consequence of the sale of a 10 per cent shareholding in International Parking Group and the restructuring of investment activities undertaken with Babc ock & Brown Ltd.
"While a relatively small investment, the joint venture with Babc ock & Brown, International Infrastructure Pty Ltd has positioned Ariadne to potentially participate with Babc ock & Brown in certain marine infrastructure asset and investment opportunities on a co-investment basis.
"Ariadne's primary objective moving forward is to build on the quality asset base, with a good balance between property and investment supported by recurring income activities," Mr Boyte declared.
SHARE PRICE MOVEMENTS *********************
Shares of Ariadne slipped 1.5c to 56c on Friday. Rolling high for the year is 59c and low 41c. Dividend is 1c to yield 1.79 per cent. Earnings per share is 3.2c and p/e ratio 17.5. The company has 222.4 million shares on issue with a market cap of $124.5 million.
The board and management of Ariadne maintain an ongoing review of its property portfolio.
Ariadne has demonstrated historically it has the ability to identify strategic property sites, which have upside potential with options to exit at various stages in the value-add delivery process.
The most recent review, undertaken with Jones Lang LaSalle, resulted in the decision to review its holdings by way of an expressions of interest campaign.
There was strong interest nationally from medium and large size property industry players and private equity groups in this portfolio.
Ariadne said the rationalisation of its property holdings will enable it to freshen up its portfolio and for new property development transactions to be shaped around marina development activities.
The only major project completed during the reporting period was Element on Coolum Stage 2.
This mixed residential and retail development was completed in April and comprises 48 residential units and six retail shops.
Forty two units and five retail shops have been sold, and Ariadne expects to complete the sale program for the remaining units over the next few months.
Ariadne has been reviewing a number of build/own/operate/ transfer (BOOT) car park construction opportunities.
These projects which are typically undertaken for hospitals and tertiary education institutions have very long lead times.
The company is at an advanced stage of finalising its first transaction.
In the event of the successful sale of the three properties taken to market, Element on Coolum Stage 3, Portal Stage III and Morris Marina & Caravan Park, Ariadne will still hold quality sites in various stages of the development cycle.
These include Viridian Noosa (50pc shareholding), Mariner's Cove (50pc shareholding), and the CBD Skyline Residential development, a joint venture with Watpac and Seymour Group.
The Botanic land development joint venture with Watpac is 90 per cent complete, only ten residential lots remain to be sold.
In July Ariadne acquired the Port Macquarie Marina which will be redeveloped over the next three years.
The redevelopment will include land based retail and leisure developments alongside the marina. Ariadne is reviewing three marina and property related sites, both for ownership and management and has entered into an exclusive due diligence period on one of these sites.
Meanwhile the company has established with Watpac a joint venture management rights and facilities management company, AS Strata Services Pty Ltd.
AS Strata Services has been operating for four months and in this time has established an operational structure and acquired, or has contracted to acquire the management rights for approximately 400 units.
The management rights industry is fragmented despite the presence of a number of corporate players.
Watpac and Ariadne perceive a niche opportunity to establish an operation of critical mass generating very acceptable cash & equity returns.
The opportunity in this industry is not unlike that of the car park industry - a fragmented industry which in some areas are under-managed and in need of a more professional interface with owners.
As Strata is finalising the development of a brand which will be launched early 2007.
The S&K Car Parking Group, in which Ariadne is a 50 per cent shareholder, completed its second year as a merged operation.
As CEO Boyte said in last year's review, the integration of the Kings and Secure businesses in Queensland and New South Wales has been very successful.
Trading conditions in those two markets remain relatively strong, particularly in Queensland.
Retention of market share, the successful acquisition of new management contracts, Sydney Airport and post balance date, Parramatta City Council, along with strong management supported by a stable operational environment have underpinned a strong performance.
However, overall performance in 2006 was adversely affected by continuing problems in the Melbourne market.
The introduction of a congestion levy in January and the continuation of management issues and weak market conditions affected performance.
Management changes have been made and the results are improving, although market conditions remain tough.
The congestion levy continues to have an impact and the use of public transport in Victoria increases.
On a national basis S&K continues to enhance its position as a market leader and a re-branding exercise is successfully underway in Victoria and New South Wales.
BACKGROUND **********
Ariadne Australia was listed on October 12, 1982.
It is a Queensland-based property development, car parking and investment company with a high-quality asset base.
With the development and growth of its recurring income activities, car parking, marina management and management rights business, Ariadne's strategic framework is developing around property and property related activities from which a combination of development profits and ongoing management income can be generated.
Ariadne believes this will, over time, lift the overall financial strength of the company and the potential profit profile of the group.
As part of a proposed restructure of substantial ownership interests in Ariadne, funds managed by Investec Wentworth Private Equity Ltd has conditionally agreed to acquire 20 million shares in the company (approximately 9 per cent of issued capital).
On completion of the transaction, John Murphy, managing director of Investec Wentworth Private Equity, will be appointed a director of Ariadne.
Investec is an international, specialist banking group that provides a diverse range of financial products and services to a select client base.
It will acquire its interest in Ariadne as part of a sell-down of shares held by Mr Seymour.
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