WESTERN Australia-based developer and land syndicator Peet Limited (ASX: PPC) has made a statutory net profit of $1.2 million for the half-year to 31 December 2012, down 86% from the previous corresponding period.
CEO Brendan Gore said as previously foreshadowed, the group’s full year performance would be heavily weighted to the second half of the year.
“The half-year result was disappointing, but also expected in some of the most challenging conditions the residential property market has seen, and reflects the ongoing capital management initiatives being implemented in response to those conditions. This includes implementing targeted pricing strategies to meet market demand.
“While this has had an impact on margins, we believe FY13 is the cyclical low point in terms of earnings and there are positive indications for improved earnings in FY14 and beyond,” he predicted.
As a result of the market conditions, the EBITDA margin was lower at 18%, compared with 32% reported for FY12. This has been impacted by the downward pressure on prices, particularly in Victoria, and the impact of low margins on the sales of some non-core assets as part of our capital management program.
During the half-year ended 31 December 2012, the Group also successfully renegotiated its bank covenants to better align with its strategy. continues to target gearing of 35% by 30 June 2013 and less than 30% by 30 June 2014.
Gore said there are some early positive signs in WA where the rental market is particularly tight with the vacancy rate remaining near historic lows.
He added that there are also indications that the Victorian market is stabilising, with sales in Peet’s Victorian projects generally in line with current expectations.
“However, this market remains price sensitive which has resulted in lower operating margins across the Victorian portfolio,” he noted.
In Queensland, Gore said the land market is still suffering from consumer uncertainty, which has been further impacted by recent weather events.
“Tropical Cyclone Oswald, which struck QLD in late January 2013, has delayed works and therefore the anticipated completion of lots, titles and settlements at the company’s Gladstone project. The impacts of these weather events may result in settlement proceeds being delayed into FY14,” he continued.
Gore said FY13 is likely to be the low-point of the cycle in terms of earnings and expects improvements in FY14 and beyond, underpinned by an upward trend in the WA market.
He said a series of 15 new projects scheduled to be launched through the second half of FY13 through to FY15, including seven company-owned projects, are also expected to contribute to an uplift in earnings through those periods.
“Taking into account the inclement weather impacting the Gladstone project’s development program, the company now expects FY13 operating earnings to be in the range of $11 million to $15 million,” Gore concluded.
Property Review
