Company Profit

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GUEST OBSERVER
Each ‘earnings season’ or ‘profit-reporting season’ CommSec tracks all the earnings results of ASX 200 companies to obtain a comprehensive picture of the aggregate health of Corporate Australia.  
Despite some high profile exceptions, companies have generally reported solid results. All but 16 of the 139 companies produced a profit for the year to June. That is, almost 90 per cent of companies made money. Excluding BHP Billiton, aggregate profits lifted by almost 7 per cent.  
Gold, Real Estate Investment Trusts (REITs) and Health Care were some of the strongest sectors in 2015/16 together with companies linked to, or dependent on, home building.  
A record 92 per cent of full-year reporting companies elected to pay a dividend.
The Profit Reporting Season 
There is no doubt that the past year has been challenging for many companies. But that isn’t anything new. Australian companies have been living with the new realities of ‘disruption’, increased competition and low inflation for a few years now. The important point is that Australian companies continue to respond positively to the challenges. Almost 140 of Australia’s biggest companies reported full year results, and all but 16 have recorded a profit. Strip out BHP Billiton and aggregate profits are up by around 7 per cent compared with a year earlier. 
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In typical sporting parlance, it was a year of two halves. In the second half of 2015, unemployment fell, retail spending rose and the Aussie dollar eased  all serving to boost bottom-line profits. But over 2016, the dollar drifted up, the job market stalled and retail spending flattened. You can blame “Brexit” or the long election campaign, but operating conditions for companies became tougher.  
Assessing all the profit results of the major listed companies provides great insights into the health of Corporate Australia and thus the health of the economy. We are less interested in whether companies met or exceeded analyst forecasts. That says more about company guidance, the forecasting abilities of analysts and the number  of analysts providing forecasts for company earnings (in many cases just one broker ‘covers’ a stock).
The good news is that companies are making money; cash levels remain high; and companies remain super-keen to pay dividends to shareholders.  
Overall, though it is clear that Aussie companies have had to work hard in lifting revenues, they continue to achieve success in restraining costs. Low wage growth and weaker input costs such as energy assisted companies in boosting bottom-line profits. Aggregate cash levels haven’t budged much from the last reporting period in December. But as noted, companies are enthusiastic as they have ever been in paying out dividends.  
And while it has been hard work to lift revenues, Treasury Wine Estates (TWE) has shown what can be done with a re-assessment of strategy. TWE now employs a high margin strategy and it was successful in lifting revenues 19 per cent in the last financial year.  
And on the costs side, Fortescue Metals (FMG) has shown the benefits of its focus on cutting iron ore cash costs, slashing expenses by 31 per cent over 2015/16. Fortescue noted that C1 costs had been cut by 43 per cent over the financial year. And Qantas also trimmed costs by 1.4 per cent while lifting revenues by 2.4 per cent, boosting bottom-line profits. Underlying fuel costs fell by 17 per cent in 2015/16 with underlying non-fuel expenses down by 5 per cent.  
BlueScope Steel was another stand-out, continuing its amazing recovery, with profits more than doubling on the back of strategic decisions and improving industry fundamentals.  
It is wrong to say that resources companies had a poor 2015/16. Gold producers as a group actually reported a 4.4 per cent lift in profits. Demand for gold has remained firm while the gold price in Australian dollar terms flirted with record highs on a number of occasions in 2015/16. Earnings weakness was concentrated in the Diversified Metals &amp; Mining sector.  
Arguably the best performing sector in 2015/16 was Real Estate Investment Trusts – REITs or property trusts. The fundamental assets such as shops, industrial premises and offices have remained in firm demand with investors increasingly on the look-out for higher yields.  
Other solid-performing industry sectors include Health Care, Packaged Food, Broadcasting, Asset Management and Casinos &amp; Gaming. Companies linked to, or dependent on, home building and purchase also did well.  
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The Details: Full-year earnings
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CommSec has analysed all results from ASX 200 companies. Traditionally brokers or analysts focus on smaller subsets of results. And some merely focus on just whether companies have met or fallen short of “market expectations”.
Overall, 139 companies from the S&amp;P/ASX 200 reported profits for the year to June. Including all companies, profits fell 16.8 per cent over the year to $30.4 billion. But a significant distortion is imparted into the results from BHP Billiton. The mining heavyweight swung from a profit of US$1,910 million to a loss of US$6,385 million. To include BHP Billiton in the aggregate results would present an incorrect picture of the earnings season.  
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Some of the key results:
Excluding BHP Billiton, aggregate profits rose by 6.8 per cent to $36.8 billion.  
Average earnings per share rose by 1.4 per cent (ex BHP Billion, up 3.9 per cent).  
Aggregate sales were up by 3.2 per cent over the year; aggregate costs/expenses were also up 3.2 per cent.  
All but 16 companies recorded a profit for the year to June: that is, 88.5 per cent of companies recorded a profit.  
63.3 per cent of companies increased profit over the year; above the long-term average near 60 per cent.  
Aggregate cash holdings rose by 0.7 per cent to $74.2 billion.  
Adding in the 28 companies reporting half-year earnings, cash levels were up by 2.5 per cent on end  December levels.  
Aggregate dividends rose by 6.0 per cent over the year.  
 92.1 per cent of companies (128 of 139 companies) paid a dividend.  
Of companies paying a dividend, 65.6 per cent lifted dividends; 16.4 per cent maintained dividends; and 18.0 per cent of companies cut dividends.  
The Details: Half-year earnings results  
CommSec has tracked 28 companies from the ASX200 that reported earnings for the half-year to June. All but three reported a profit. That is, 89.3 per cent of companies reported a profit.  
The gap between profit and loss was closer: 57.1 per cent reported a profit.  
Cash levels fell 24.3 per cent from June 2015 to June 2016 to $24.8 billion.  
92.9 per cent of companies (26 of 28 companies) paid a dividend.  
Of companies paying a dividend, 53.8 per cent lifted dividends; 19.2 per cent maintained dividends; and 27 per cent cut dividends.  What are the implications for interest rates and investors?  
The Aussie sharemarket is slightly overvalued at present with a price-earnings ratio sitting closer to 17, above the longer-term average of 15.7. But the latest earnings results represent a tick for the sharemarket. And with the economy in decent shape, share prices have scope to track profits higher – particularly in light of the super-low interest rate environment.  
We see no need to change our long-held forecasts. We currently expect the All Ordinaries to be between 5,500- 5,700 points by end-2016 (ASX 200 probably 100 points lower) with the index lifting to 5,700-5,900 by mid-2017.  
As always, the focus of investors should be on total returns from shares, not just share prices. Global factors (that is, the US election and US interest rate hikes) may act to constrain domestic share prices in the short-term, but fundamentally Aussie companies are in good shape, making money and choosing to pay dividends. Indeed most  of the major listed companies have decided to lift or maintain dividends. The current dividend yield is around 4.2 per cent.
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<div class="column">Total returns on the Australian sharemarket – as measured by the All Ordinaries Accumulation index (XAOAI, dividends plus share price changes) – hit record highs on August 24 at 51,934 points. Currently total returns on Australian shares are up 7.4 per cent on a year ago. We expect total returns over the next 12 months to record annual growth of between 7-12 per cent. Companies have been cagey about providing guidance for the next six months. And that is understandable. Most are being challenged by the low inflation/low interest rate environment and looking at options for growth. And these options differ. Gold companies are looking to invest and expand. Industrial companies such as SEEK are looking at “aggressive” reinvestment in the business and potential acquisitions. Domino’s Pizza is looking to push the envelope further by focusing on completing deliveries in 10 minutes.
In other words, many see the best form of defence being attack. And that makes sense. Fewer companies can exercise price leadership, and competition is now very much global for many industries. The key for companies is to find a point of difference from competitors and one that customers truly value. The low inflation/low interest rate environment looks to be around for some time to come. 
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>. Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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jchancellor-FAypfDUnLy

Corporate Australia rewards shareholders: CommSec's Craig James and Savanth Sebastian

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GUEST OBSERVER
It’s reporting season, and over the past few weeks some of Australia’s biggest companies have been releasing information on how they’re travelling.
These reports reflect key themes of how things are going in key sectors of the economy. Over coming days we’re going to report on the results a handful of major companies in key sectors, transport, construction, retail, mining, insurance and banking. Today we look at the retail sector.
Dominant retail giants Wesfarmers - owner of Coles supermarkets - and Woolworths hold a 70 percent of market share of Australia’s fresh food grocery market, but have had contrasting fortunes over the past few years. Half-year results for Wesfarmers and Woolworths for 2016 show very different outlooks.
 
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Meanwhile, the major retail players are continuing to feel the disruptive impact of smaller players such as Aldi and highly competitive market conditions; both will have employ new strategies away from the tried and true defensiveness that has worked in the past.
Wesfarmers reported a net profit after tax of $1.4 billion, up 1.2% since the same time last year, while Woolworths reported a net loss of $973 million after a profit of $1.3 billion. Over the last few years Coles has seen stronger sales growth and comparatively better market share.
By contrast, Woolworth’s strategy problems with its home improvement business, Masters, has been widely ventilated. The company attributed $1.8 billion loss to the costs related to its exit from Masters.
Woolworths' underlying profit was $925 million, still down 33 percent on prior year. Woolworths would hope that its exit from the ultimately costly Masters endeavour will serve as a boost to investor confidence.
Woolworths has also struggled with branding and has seen advertising agency changes over the last few years the most recent being the dropping of Leo Burnett and a return to M&amp;C Saatachi.
Perhaps more revealing to the outlook of the industry are some of the underlying similarities in strategy. Both Woolworths and Wesfarmers emphasised price deflation, cost reduction and further price cutting, as key strategies.
The companies expect highly competitive market conditions and consumers to remain price sensitive, and will largely focus on improving supply chain productivity, through cost reduction. Woolworths is reducing its spending on activities such as marketing, property acquisition and rent as part of $500 million in cost savings during the 2016 financial year (July 2015 to July 2016).
Likewise, Wesfarmers has highlighted similar measures, with cost cutting objectives, the company hopes will allow them to lower their prices in the supermarket even further.
In an industry where profit margins are already low, such intense competition would carry significant risk. If sales don’t meet expectations, the retailers have little room to lower prices when margins are low. As a consequence, covering fixed costs like maintenance and rent of stores becomes increasingly difficult and the likelihood of making a loss is higher.
To some extent these price wars reflect the two retail giants directly competing against each other, but another factor is the disruption caused by new entrant Aldi. The supermarket chain has gained 11% of the market since it came onto the scene in 2002, using its streamlined, low cost supply chain to undercut Woolworths and Wesfarmers on price.
Aldi is a unique player in this space. In the past Coles and Woolworths could exercise their market share and size to squeeze out small producers; but Aldi is a different beast, a global company with a presence in both Europe and the USA.
Aldi may not even be the biggest problem facing the locals, if reports that European retailers such as German retailer LIDL are sizing up the Australian market prove true. LIDL is the fourth biggest retailer in the world, with $128 billion in annual sales. Whatever hold true for Aldi is doubly true for LIDL. Other hypotheticals floated around Danish discounter Netto and UK grovery giant, Tesco.
The traditional defensive strategy against competitors employed by the Aussie giants relies on economies of scale, being larger than your rival and being able leverage this efficiency to deliver a cheaper end product or more controversially to loss lead and force your opponent out of business maintain your market share and eventually maximise your profit.
Woolworths and Coles are falling back on their old ways to try and beat Aldi, the companies' corporate strategy for the most part is focused on a doubling down on the traditional squeeze out all newcomers approach. However Aldi brings global resources to the table that Woolworths and Coles don’t have access to.
In the retail sector Aldi will continue to steal market share from Wesfarmers and Woolworths more so if the companies continue with old strategies and don’t think of a way to innovate the retail space.
 
Shumi Akhtar is senior lecturer, University of Sydney, and can be contacted <a href="https://theconversation.com/profiles/shumi-akhtar-228494" target="_blank">here</a>.
Farida Akhtar is lecturer, Curtin Business School, Curtin University, and can be contacted <a href="https://theconversation.com/profiles/farida-akhtar-228499" target="_blank">here</a>.
Both are authors for The Conversation.
 
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Big retailers feel the pressure of the new challengers

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<img src="https://counter.theconversation.edu.au/content/63192/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Retail sales data showed growth in the sector falling flat last week, and it remains a tough time to be a retailer in Australia.
Overall, shoppers are expecting more for less, abandoning any sense of loyalty. However, there are bright sparks of success in the moribund sector that point towards what works and what doesn’t in making profits in retail.
Australia’s overall inflation, currently at historical lows, is only kept above zero by the increasing prices of services like health and education, not by retail goods. Retail staples like food, clothing and footwear are all cheaperthan this time last year. Price competition, and pressure on margins in the grocery and clothing markets is intense.
The deflation in “food and non-alcoholic beverages” prices recently reported by the ABS can be most readily explained by the Aldi effect. Aldi’s continued expansion throughout regional Australia and continued push westward to South Australia and Western Australia is playing havoc with the retail margins of both Coles and Woolworths. Both have fallen to around 4.7 percent of sales as price declines have been outstripped by operational cost efficiencies. The major challenge for both Coles and Woolworths, however, is to address the fundamental difference in their cost of doing business versus the lean operations of Aldi.
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Away from groceries, as the seasons turn, Australia’s bulging wardrobes continue to make room for yet more clothes and shoes. Despite this, prices are falling. In clothing and footwear, deflation is better explained by the ascendant online marketplace and consumer preferences, shopping traits and experiences.
Overall online clothing retail sales growth continues to far outstrip bricks and mortar retail, with small online retailers (sales less than A$2.5 million) seeing strong growth of more than 20 percent per annum on the back of more agile systems and shopper convenience.
<h2>Green shoots</h2>
Looking below the “sectoral” numbers to some examples of individual businesses provides some interesting evidence of these trends - both supportive and contradictory.
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Online surfwear and sportswear retailer Surfstich, for example, saw its share price savaged after it posted a massive loss on the back of a flagging acquisition strategy and management upheavals. In a closely related market, however, Kathmandu is performing relatively well, flagging higher margins and earnings to come. CEO Xavier Simonet attributes these outcomes to “product newness and careful management of promotional activity” – basically selling a more narrow range of more appreciated goods with less discounting.
Premier Investments continues to outperform. Controlled by Solomon Lew and led by the colourful former CEO of David Jones, Mark McInnes, Premier seems to have the right portfolio of products and store-based and online business strategies to maintain growth and margins. Its Smiggle business is a case in point. It sells cheap things at high prices to a demographic of adoring tweens, while the quality Peter Alexander brand works as a sales generating all-rounder in the family clothing sector.
Another somewhat bright spot seems to be Kogan – the online electronics retailer that recently listed on the ASX. It is a business that is hard to categorise. It has a portfolio of own-branded electronics, operates a channel of grey imported products from its offshore subsidiary, and is branching into services including travel. Trading at a discount to its IPO, it is fair to say the market is watching with interest rather than enthusiasm before it decides on the longevity of this idiosyncratic retailer.
One of the most resilient of retailers, Harvey Norman, also reported last week. Its result was stellar and its share price soared. Sceptics wonder, though, how much of this can be attributed the the exit of Dick Smith and the rather topsy housing market which all but the most optimistic spruiker sees at or near its zenith.
Both Premier and Kogan point to an emerging trend – innovation matters in retail more than ever. Strong growth among small online retailers is showing consumers want variety and novelty in their baskets and wardrobes rather than generic and cheap (or worse, generic and expensive). Globally, firms like Threadless (a T-shirt company whose customers design its logos) are trying new things and creating products that appeal to narrow yet loyal customer groups. In Australia, niche online retailers like Babes in the Shade are showing they have a business model that can work over time.
But innovation is both risky and expensive. More often than not supermarket trialled novelties do not last, with the same true in clothing and elsewhere. This can explain the emergence of firms like Premier Investments that combine retail smarts, relatively deep pockets and novel ideas. Premier can afford the odd disaster when balanced with successes like Smiggle.
In the future, we expect more innovation and variety and thus more turblulence in the sector. Occasional narrow-brand innovators like Noni B will succeed, but a more likely model for success will be the porfolio players. They can ride out the ups and downs of retail’s various sub-markets and sustain profitability and growth.
John Rice is professor of management, University of New England and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/john-rice-93120" target="_blank">here</a>.
Nigel Martin is lecturer, College of Business and Economics, Australian National University and author for The Conversation. he can be contacted <a href="https://theconversation.com/profiles/nigel-martin-117971" target="_blank">here</a>.
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Company results wrap: retail sales flat, but some retailers buck the trend

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Industry super fund-owned bank ME reported a rise of 8 percent in underlying net profit for the six months ended December 31, 2015 at $30.2 million on the previous corresponding period and forecast further profit growth in the second half. 
“Net interest margin in the next six months will benefit from recent rate increases following regulatory capital changes imposed on the banking sector, although this will be partially offset by the increased cost of funding that is putting current margins under pressure,” ME CEO Jamie McPhee said in a media release. 
ME’s statutory profit after tax, which includes gains on hedging instruments, was $34.5 million (HY15:$39.1 million). Net interest income rose 9 percent to $149.3 million.
But the bank's total operating expenses were up 7 percent to $133.2 million due to its investments in technology and the brand.
It said brand awareness rose 11 points to 51 percent since the bank rebranded in July 2015, resulting in customer numbers growing to 347,000.
ME’s new mobile app, launched in July 2015, has increased mobile-based transactions threefold.
The bank is close to finalising the technical infrastructure to display industry super member balances on its online and mobile banking platforms through a joint partnership with Link Group, it said.
The bank launched co-branded low-rate credit cards with AustralianSuper, Hostplus, and Cbus in late 2015, which are being marketed directly through the funds. 
McPhee said more regulatory changes were required in 2016 to further level the playing field between the regional and major banks, including the amount of capital held by the advanced model banks.
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jonathanchancellor-7SQnKwU6yx

ME Bank says mid-year profit up 8 percent, forecasts further growth

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Listed property developer Cedar Woods Properties has doubled its profit for the half year to December 31, after securing better project margins. 
Net profit after tax was $18.1 million, up 100 per cent from the previous $9 million. 
Revenue remained steady at $77 million.
It found cost savings in lower development expenses, through cheaper contractors.
It is developing in four states, including the recently acquired a 3.81-hectare infill site approved for 279 dwellings in Wooloowin, Brisbane.
It has announced the expansion of the Williams Landing Shopping Centre, in western Melbourne which opened in December 2014, comprising a Woolworths supermarket, 21 specialty stores and 1,800 m2 of office space.
Cedar Woods is constructing a $6.5 million expansion of the centre. It noted strong price growth on residential lots was being achieved resulting in the higher margins.
The expansion will include a 106-place childcare facility managed by Future Kids and around 1200 square metres of ground floor retail space.
The expansion will be financed by a $30 million facility provided by Bankwest, to fund the expansion and also refinance the existing $23 million development facility that was arranged to build the Williams Landing Shopping Centre in 2014.
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Cedar Woods Properties doubles profit for half year to December 2015

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Villa World, Queensland’s oldest ASX-listed housing developer, said its half-year net profit after tax rose 57%, helped by a strong performance in Queensland and growth in Victoria sales.
Villa World shares were trading up more than 3 percent on the ASX after the earnings announcement.
Chief executive Craig Treasure attributed the result to consistency and “getting our business fundamentals right”.
Villa World posted a half-year profit after tax of $20.4 million, or 18.5 cents per share (cps). Revenue grew 49% to $200.2 million.
It announced a half-year dividend of 8.0 cps fully franked. The company is targeting a total dividend of at least 18 cps in FY16, representing a 9% yield.
Treasure Villa World’s 14 Queensland projects contributed 80% of sales during the half-year and 86% of revenue. Growth in its Victorian operation has added geographic diversity to Villa World’s product offering, said Treasure.
He added that Villa World was set to return to the New South Wales market through partnering and joint ventures.
“A strong performance from our delivery team has meant that we have been converting sales to settlements, enabling us to deliver a very strong first half,” said chief financial officer Paulene Henderson.
The company settled 550 contracts in the half-year, up from 329 in the comparative half year (1H15).
With seven new residential projects contributing to sales in 2016, and pre-sales of $107.7 million, Villa World said it was on track to meet its target of between 1,000 and 1,200 sales in FY16 and deliver a full-year net profit before tax of $46.6 million (FY15: $29.4 million).
Villa World has made a series of acquisitions in the recent past to maintain its product pipeline.
In December it acquired a 254-hectare site in Strathpine, 19 km north of Brisbane CBD. The company also made strategic acquisitions in Logan and at Arundel, and entered into a joint venture with Ausin Group at Rochedale, on Brisbane’s south side.
Settlement of Eynesbury estate late in the half year contributed $3.6 million to the company’s half-year profit, it said.
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prateek24-ezbwHMbNAk

Developer Villa World posts 57% rise in profit and signals return to NSW

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Hassad Australia, the $469 million agricultural land company owned by Qatar's sovereign wealth fund, has delivered a $3.46 million loss.
The Australian Financial Review reported it was yet to make a profit since arriving in Australia in 2010 with a combined loss of $27 million.
Hassad owns 14 agricultural property aggregations in Queensland, NSW, Victoria, South Australia and Western Australia, totalling about 300,000 hectares of pastoral and cropping land. 
The Hassad board is chaired by Nasser Mohamed Al Hajri, who chaired the delegation of the state of Qatar at the World Bank and International Monetary Fund.
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Hassad Australia make another farming loss

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Residential developer Peet Group announced an operating profit after tax for the half-year ended 31 December 2015 of $18.5 million – an 8% increase over the the previous corresponding period.
The national group’s managing director and chief executive officer, Brendan Gore, said the Group had achieved a good half-year performance that reflected the supportive conditions across the group’s key east coast markets, in particular Victoria and ACT/ New South Wales.
“The strong result was driven by price growth across the Victorian land portfolio as well as the group’s continued focus on operational efficiencies.
“It confirms that the ongoing disciplined implementation of our strategy is delivering improved operating performance, and underlines the benefits of Peet’s diverse national portfolio.has a record number of contracts in hand as the buoyant east coast markets helped it to an 8 per cent lift in its 2016 interim profit."
Headquartered in Perth, the listed developer's strength is its national portfolio with weakness still in WA. 
By the end of December last year, the developer had 2,318 contracts on hand with a gross value of $523 million.
That stockpile compares with the 2,061 contracts Peet had accumulated by the end of June last year, with a gross value of $441 million.
Peet has progressed preparations for the launch of sales at Flagstone in South East Queensland, and is also currently preparing to launch its next retail syndicate opportunity in Victoria.
As at 31 December 2015, the group’s gearing was 30.6%, following the acquisition of a 123-hectare developing residential estate in Tarneit (Vic) in December 2015, with settlement to occur over three years.
This acquisition followed the Group’s sale of its Arena residential estate in Greenvale (Vic) for $93.1 million with the settlement of that property also to occur in instalments over three years.
Part of the proceeds from this sale have been redeployed to fund the acquisition of Tarneit at a substantially lower cost base than the Greenvale land.
"“Conditions across Victoria, New South Wales/ ACT and South Australia are expected to remain supportive, while Western Australia and Northern Territory are expected to remain subdued through the 2016 calendar year,” said Mr Gore.
“Activity in the Queensland residential market continues to improve due to its relative affordability, which has seen a recovery in interstate migration.
"This market recovery is expected to support the launch of the Group’s 12,000-lot Flagstone project in 2H16.
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Peet sees Queensland recovery as interstate migration pickup

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Credit union CUA announced a nine percent rise in its group net profit after tax (NPAT) in its first-half ended December 31, driven by strong loan growth and net interest income.
The CUA Group – which includes its banking operations (the ADI) and CUA subsidiaries and insurance businesses – also recorded asset growth of more than $500 million over the six months to 31 December 2015, taking consolidated assets to a record $12.5 billion, it said. 
Loans grew 4.2 percent to $10.83 billion, with $1.5 billion in new loans. 
NPAT was $28.05 million, while net interest income was up 5.7 percent or $6.17 million for the period to $113.75 million, boosted by strong lending in FY15, new products and interest rate changes, it said. CUA said it was on track to improve its net interest margin during the second half. 
CUA’s banking business (or ADI) posted a first-half NPAT of $30.85 million, up 12.5 percent on the previous first-half result of $27.43 million.
“This is another solid financial result for CUA which reflects our focus this year on sustainable growth, investing in our future capability and building capital to enable us to lend to more customers,” CUA chief executive officer Rob Goudswaard said. 
Since launching CUA’s updated mobile banking app in October, online banking has attracted 9,500 new mobile users and the number of new registrations each month is up by 46 percent. CUA recently launched a new website.
Goudswaard said he was pleased with the continued high quality and low risk of CUA’s lending growth. Home loans with a Loan to Valuation Ratio (LVR) above 90 per cent account for less than 8 percent of CUA’s total home loan portfolio. Impairment charges were down 9.6 percent on the same period last year and CUA’s loan arrears are around half the rate being reported at industry level. 
“We also launched two new home loan products in July 2015, giving borrowers a greater choice of rates and features, depending on the size of their deposit and whether the customer is buying the property to live in or as an investment. In addition, we implemented different rates for investors across variable and fixed home loans, in response to the regulators’ focus on managing growth in investor lending.
Last year, Goudswaard had said new <a href="/expert-insights/finance/45957-cua-to-peg-back-investor-loans-under-apra-crackdown" target="_blank">loan growth would not be as strong in 2016 </a>as it needed to peg back growth in its investor loans, which is at 16 percent, were above the banking regulator's 10 percent growth cap. 
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CUA first-half profit up nine percent on net interest margin, loan growth 

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East coast residential developer Sunland reported a dip in net profit to $3.2 million but has reconfirmed full-year earnings of up to $29 million, given anticipated second-half property settlements.
Sunland managing director Sahba Abedian said he had also noticed a cyclical pull-back in bank lending for new properties.
"I do feel there is some adjustment taking place where banks are becoming more stringent on their lending, and that is in respect to lending to developers as well," Mr Abedian said. 
"I think it is partly regulation, but I also feel they have a view to the cycle," the Australian Financial Review reported.
"Despite the prevailing headwinds, we continue to see opportunities in specific market segments in Brisbane, the Gold Coast and Sydney's northern beaches, and our recent acquisitions in these locations are expected to contribute to earnings growth in the short to medium term."
Sunland has a total of 855 contracts on hand with a combined value of $663 million, with an estimated 380 settlements during the second half of the year.
He said a sustained focus on operational efficiencies enabled the group to achieve an average return on development of 25 per cent, above a target of 20 per cent.
 
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