MFS announces another record full year profit

MFS Limited this morning announced a second successive record full-year net profit after tax of $185 million in the 12 months ended June 30, 2007, compared to $97.4 million in the previous corresponding period.

MFS says that the substantial increase in full-year profit, represents an increase of almost 90% from the same period a year ago, equating to weighted earnings per share of 53 cents compared to 43 cents in the previous corresponding period, an increase of more than 23%.

It also incorporates less than a full year’s contribution from a host of major acquisitions such as S8 Limited, Protea Hotels of Africa, Tourism, Hotels & Leisure Limited, Outrigger, Sunleisure, SunKids, Northplan Group, MFS New Zealand or Saville Hotels Group.

MFS says that it has helped build its net assets to more than $1.53 billion from less than $350 million one year ago, with MFS Chief Executive Officer Michael King attributing the record result to the growth in the company’s Funds Under Management and its success in building its tourism business, which now accounts for more than 55 per cent of ongoing recurrent earnings.

He said the growth was also substantially due to the company’s ability to identify and execute opportunities, thanks to a strong staff and management group, boosted in the past 12 months from the appointment of a significant number of senior, experienced and highly-skilled executives.

Reflecting the record profit, MFS today declared a final dividend of 20.5 cents per share on all issued shares, this payment takes the total dividend for the 2007 financial year to 28 cents per share, up from 26 cents per share in the previous corresponding period despite an approximate doubling of the number of shares on issue.

There were approximately 471 million MFS shares on issue as at June 30, 2007, up from approximately 230 million at the same time a year ago. MFS’ dividend policy targets a payout ratio of 60% of total reported earnings.

As at June 30, 2007 MFS had fee paying Assets Under Funds Management of approximately $5.26 billion, compared to approximately $4.25 billion as at December 31, 2006 and approximately $2.9 billion as at June 30, 2006.

MFS Australian Funds Management CEO Craig White confirmed that MFS was targeting at least $10 billion of fee paying AUM by June 30, 2008.

Mr White said such projection was confirmed despite current equity and debt market volatility and bearing in mind MFS management’s ever present intention to seek to exceed its market guidance, adding,  The Australian funds management business continues to perform strongly and we expect earnings and growth to significantly better the market’s present expectations,” he said.

Mr White said MFS and its funds were not exposed to the recent contraction in global liquidity due to uncertainty in the US Sub-Prime lending market, adding, “MFS has a robust and diverse pool of externally-managed funds generating management fees, performance fees and transactional revenue”.  “This provides us with a very secure recurrent income stream that is both scaleable and has high growth prospects.”  “This pool of assets is primarily linked to the Australian real estate market and is not correlated to the current volatility in world equity and debt markets.”

“We view the recent tightening in lending criteria and borrowing cost increases as an opportunity, not a threat,” he said. “The fact that none of our managed funds are leveraged beyond normal traditional prudent real estate lending ratios will prove a substantial risk mitigant in the next 12 months.”

MFS’ tourism business Stella Travel and Accommodation Group was a substantial contributor to the group’s 2007 earnings despite less than a full year’s contribution from several major acquisitions, including S8 Limited, Protea Hotels of Africa, Tourism, Hotels & Leisure Limited and Outrigger.

The Stella Group presently contributes more than 55% of the company’s recurring earnings and continues to perform strongly and in excess of budget expectations.

Stella Group Managing Director Rolf Krecklenberg said July’s earnings from the Stella Group were exceptional and above budget for July 2007, adding, “This fantastic start to the new financial year points to a great outcome for shareholders from their ownership of the Stella assets”.

Mr Krecklenberg said, “MFS is on track with its plans to seek a partner to support the growth of Stella Group. The company’s plan remains to complete a transaction in the second quarter of 2008. Current debt market volatility is not expected to have any effect on the execution of the plan.”

In the 2008 financial year MFS will seek Earnings Per Share growth of at least 30% and Mr King said MFS was not exposed to sub-prime lending in the US and the outlook for the company’s tourism and funds management businesses remained excellent. Credit remained for good quality acquisitions, with the tightening in lending expected to increase opportunities available to the company.

“We are excited about our prospects for the 2008 financial year,” Mr King said. “As a net buyer of assets we are happy for prices to come back while at the same time the underlying markets in which our core businesses operate remain strong.”

“MFS looks forward to another year of substantial growth across its business,” he said.

Report by The Mole