This article is from the Australian Property Journal archive
PROPERTY syndicator and developer Peet has reported a higher interim profit of $23.1 million – up 5.6% due to higher settlements, however it has avoided replenishing its land bank in Victoria and New South Wales because it expects residential market conditions will continue to moderate as the current cycle changes.
Earnings per share increased 6% to 4.7 cents. Peet announced a fully franked interim dividend of 2.0 cents per share. The first half EBITDA declined to $36.3 million from $41.7 million in the previous corresponding period.
CEO Brendan Gore said the solid result was underpinned by an increase in settlements. During the period, the company settled 1,417 lots, up 32%.
“There was, however, a decrease in the number of sales achieved across the Group’s projects in the first half of the year,” Gore said. “This was due to changing lending conditions for purchasers, the completion of several Syndicates in Victoria and more moderate market conditions, particularly in that state.
“The change in lending conditions has seen delays in buyers being able to secure finance approvals and more stringent assessment criteria impacting the availability of finance, particularly for first home-buyers,”
Peet reported a 28% decline in sales to 964. As at 31 December 2018 there were 1,804 contracts on hand with a gross value of $456 million, compared with 2,257 contracts on hand with a gross value of $616 million at 30 June in 2018.
Revenue for the period was impacted by lower project management fees as a result of lower sales activity and a strategic englobo land sale in Victoria in 1H18.
Gore said Peet’s funds management business continues to perform well, achieving a strong margin of 69% in 1H19, which is in line with the 70% achieved in 1H18. It contributed to the overall EBITDA margin for 1H19 of 31% and this compares to an EBITDA margin of 33% for the pcp.
Gore said the group has pro-actively managed the recent strong property cycle in Melbourne and, by FY20, excluding any new acquisitions, will have only three active projects in Melbourne.
“Peet has avoided replenishing its land bank in Victoria and New South Wales and divested a number of assets in Melbourne over the last several years to capitalise on that strong cycle.
“The capital raised from these sales has been redeployed across strategically targeted opportunities in Queensland, Western Australia and South Australia over the past three years, ensuring a strong market position in improving markets with a low cost base, enabling the group to deliver an affordable price point,” he continued.
Gore said market conditions and the availability of credit are expected to remain difficult for the next 12 months.
“Peet expects that Victorian residential property market conditions will continue to moderate as the current cycle changes.
“Peet has avoided acquiring land holdings across Victoria and New South Wales during the past three years and has divested a number of non-core assets in Victoria and redeployed capital into improving and affordable markets.” Gore concluded.
Australian Property Journal
