Desane : Preliminary Final Report

ASX release

23 August 2017

ABN 61 003 184 932

68-72 Lilyfield Road, Rozelle NSW 2039

PO Box 331, Leichhardt NSW 2040

T: [phone]

F: [phone]

www.desane.com.au ASX Code: DGH

DESANE ANNOUNCES SOLID EBIT OF $7.9M FOR 30 JUNE 2017

The Board of Desane Group Holdings Limited ("Desane" or "the Group") is pleased to announce $7.9m of earnings before interest and tax for the Group's full financial results for the year ended 30 June 2017.

In accordance with ASX Listing Rule 4.3A, the Appendix 4E - Preliminary Final Report for the Financial Year ended 30 June 2017 is released to the market.

FY17 financial highlights:

• Earnings before interest and tax ("EBIT") of $7.9m

• Net profit after tax ("NPAT") of $5.1m

• Earnings per share ("EPS") of 13.6 cents

• Final dividend of 2.25 cents per share, fully franked, to be paid on 6 October 2017

• Special dividend of 10 cents per share, fully franked, to be paid on 6 October 2017

• 2017 full year dividend total of 14.5 cents per share, fully franked

• Strong balance sheet position with cash of $9.4m

• Net tangible asset ("NTA") of $0.82 per share (FY16 $0.83)

Property Assets

Desane has achieved a 32% uplift in value of property assets during the financial year, from

$35.2m to $46.6m including the sale of the property 7‐9 Orion Road, Lane Cove and the acquisition of 91 Thornton Drive, Penrith.

The Group's loan to value ratio ("LVR") has dropped by 8%, from 47% to 39%.

The summary for each of the properties in the portfolio as at 30 June 2017 is summarised below:

Asset	Area & Type	Strategy
68‐72 Lilyfield Road ROZELLE	5,500m2 High tech multimedia centre	In June 2015, Desane lodged a planning proposal with the NSW Department of Planning to allow for a mixed use development. The planning proposal is still a live planning proposal. On 10 March 2017, the Roads and Maritime Services ("RMS") made an offer of $18.4m for the freehold of the property. On 26 May 2017, RMS issued a Proposed Acquisition Notice ("PAN") to commence a compulsory acquisition process. Desane, on 4 August 2017, lodged a section 39 claim under the Land Acquisition (Just Terms Compensation) Act 1991 with the RMS.
91 Thornton Drive PENRITH	1.2ha Development property	Desane has commenced a rezoning proposal for the development of the property with the view of achieving the highest and best outcome for the site.
7 Sirius Road LANE COVE	2,800m2 Commercial / industrial building	The property is 100% leased and generating annualised rental growth of approximately 3.5% ‐ 4.0% .
13 Sirius Road LANE COVE	2,200m2 Commercial / industrial building	The property is 100% leased and generating annualised rental growth of approximately 3.5% ‐ 4.0% .
7‐9 Orion Road LANE COVE	6,000m2 Office and warehouse	The property was sold for $18.2m, with settlement completed on 31 July 2017. The sale price reflects a 5.5% yield on a fully leased basis.

Capital Management

The Company's statement of financial position as at 30 June 2017 is strong, with cash of $9.4m and the Loan to Value Ratio ("LVR") remaining below 40%. The Group's cash position has been further boosted by $12.3m following the sale of 7‐9 Orion Road, Lane Cove on 31 July 2017.

Finance costs remain steady at $0.6m for 2017. In July 2017, following the sale of 7‐9 Orion Road, Lane Cove, the Company's total debt facility has been reduced by 32% to $11.1m.

Outlook

Desane expects the Australian property market to show significant returns over the short to medium term, particularly with the inflow of new offshore entrants into the market. It is anticipated that there will be a tightening in property yields across the sector as these groups look to inject capital into low risk assets such as well leased real estate assets.

Desane's existing property portfolio is under continual review, in order that the Group and its shareholders benefit from the strength in the Sydney metropolitan property market. Where appropriate, Desane will seek rezoning, strata subdivision and development approval for some of its strategically well placed properties, in order to take advantage of these market conditions. Desane will continue to closely monitor the Australian industrial, commercial and residential property markets, seeking opportunities through property fundamentals such as leasing risk and value add opportunities.

Desane has not engaged in any speculative investment or in any activities outside its expertise of property investment and property development. The Group continues to develop its skills and systems to meet its long‐term objectives.

The Board looks forward to rewarding shareholders with fully franked dividends in future years.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Phil Montrone Managing Director & CEO

Desane Group Holdings Limited [phone]

[e-mail]

Jack Sciara Company Secretary

Desane Group Holdings Limited [phone]

[e-mail]

Preliminary Final Report - Appendix 4E of

Desane Group Holdings Limited and Controlled Entities ABN 61 003 184 932 for the Financial Year Ended 30 June 2017

This full year final report is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.3A.

Current Reporting Period: Financial year ended 30 June 2017

Previous Corresponding Period: Financial year ended 30 June 2016

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