Ahead of today’s AGM, Bank of Queensland last night downgraded its full year cash profit guidance and substantially raised its projections for bad and doubtful debts for the first half.
The bank said it had issued the surprise trading update followed an extensive review of its commercial lending portfolio in response to weaker than expected trading conditions in the commercial property portfolio, especially in Queensland.
Shareholders will no doubt ask why the update was issued last night and why not to the meeting today.
But the bank has done the right thing by making an immediate disclosure.
CEO, David Liddy said the bank remained on target for an increase in cash profit for the 2010/11 financial year, but had changed the range to between $210 million and $230 million.
(An increase of 7% to 18% from the 2010 year)
The bank had previously forecast full year net profit of between $220 million and $250 million, so there’s now more uncertainty in the outlook with a $30 million earnings range against $20 million.
Mr Liddy said in the statement that the bank expected interim bad and doubtful debt expense of $85 million to $90 million, partly due to a rise in impaired commercial assets of $97 million.
"This is above the previous expectations of bad and doubtful debt expenses in the first half FY11 which was in line with second half FY10 results of $53 million," Mr Liddy said in the statement issued last night.
"We expect significant improvement in bad and doubtful debt expenses in the second half of FY11.
"Whilst we remain cautious about a recovery in commercial property valuations in the near term, the actions we have taken confirm that we have limited exposure to high rise residential property developments in Queensland, and none on the Gold Coast."
On the general market, Mr Liddy said the BOQ distribution network continued to perform strongly against competitors, growing above guidance.
"Our cost disciplines continue to gain traction and our margins have recovered to first half FY10 levels as forecast."
Train late, again, is an old story for Sydney commuters every day.
It’s also an old yarn for shareholders in Downer EDI as well as the struggling NSW government as the vaunted, but much-delayed new Waratah suburban train is once again late.
Downer blamed lack of track access for testing for the latest delay of about a month.
Downer told the ASX yesterday that the handover of the first train would now happen next month, not this month.
"Whilst discussions continue with RailCorp on track availability for December and the Christmas-New Year holiday period, it is now expected that a small number of tests will be completed in January and the first Waratah train will be presented to RailCorp for Practical Completion following the successful completion of those tests," Downer EDI said.
Downer EDI CEO Grant Fenn said the liquidated damages payable by Downer due to the late delivery of the first Waratah train were included in a $190 million provision announced by the company on June 1, 2010.
"The delay of the first train into revenue service is not expected to materially impact the schedule for the 77 remaining train sets," Mr Fenn said.
Early last month, Mr Fenn had said the December timetable had been achieveable provided testing continued to go well.
Downer shares rose to a high of $4.44 yesterday and ended down a cent at $4.30.
For a while there in early trading it looked as though investors had either missed the statement or were ignoring yet another bit of bad news about Downer, which has been a perennial underperformer in the past year to 18 months, especially on the Waratah train contract.
