Babcock & Brown confident on earnings outlook-Article from: AAP

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Babcock & Brown confident on earnings outlook-June 30, 2008 02:42pm



Babcock & Brown  has reaffirmed its annual earnings guidance. Chief executive Phil Green said the group had high-quality assets and was continuing to do transactions.

"Clearly, there is potential impact of the events of the last two weeks at a small, almost immaterial level,'' Mr Green told journalists on a conference call.

"We have an increased cost of interest, and ultimately our full year outcome will depend on the success and prices at which we recycle assets.

"But the underlying assumptions, the quality of the assets etcetera, still remain.''

B&B on May 30 said it was on track to meet its annual guidance of achieving a net profit of at least $750 million.

When questioned about the forecast a second time today, Mr Green said its guidance was based on assumptions that the markets were changing all the time, "and that we're still doing the transactions and completing the transactions that would have probability weightings at the time we did that''.

"But the second half - it is a changing world - the Dow's dropped 10 per cent in the last four weeks,'' Mr Green said.

"While we certainly believe the long term impact of the events over the last couple of weeks is low ... there are factors that analysts are pointing to that we can't say don't exist.''

A number of analysts have recently downgraded their fiscal 2008 earnings forecasts for B&B.
Mr Green said B&B's bankers had not requested any changes to the group's executive team or board.

B&B announced today that its bankers had removed a market capitalisation review clause linked to its debt facilities.

Mr Green said their decision was important in terms of the stability of its debt facility.

"Does it change the global environment in which we're trading in? ... no,'' he said.

"But it certainly underscores and improves our risk profile relative to counterparts.''

Apart from raising the cost of its debt by 50 basis points, Mr Green said the banks had applied no other conditions or suggestions, other than responding positively to the public statements B&B had made about reducing its gearing levels and selling non-core assets.

B&B said the expense of the increase in funding costs on its $2.8 billion debt facility couldn't exceed $10 million.

Mr Green declined to comment specifically on why he thought investors had dumped B&B stock at such alarming rates.

"As a global view, there is no question that share prices of organisations in the financial services sector and in the peripheral parts of that, where we see ourselves as being, have been severely impacted by recent market events.

Mr Green said B&B had received "overwhelmingly supportive'' feed back from its wholesale investors.

"Clearly, we need to, as is always the case, continue to build on those relationships and develop them."

B&B has also agreed with its bankers to pay some of its $2.8 billion facilities by about $400 million from previously announced asset sales.

It declined today to say exactly which assets would be used to pay the $400 million. But the group also reiterated it was pursuing the sale of wind assets, power assets and European real estate.


Mr Green said the previously announced sale of wind assets was progressing to schedule, with "strong interest'' showed by investors.

Mr Green said he was committed to leading B&B for the long term.

By 1pm AEST, B&B shares were up 82 cents, or 12.89 per cent, to $7.18.