Massive write-downs and difficult residential market conditions in Australia have caused profits at leading property development group Stockland to tumble by almost 80 per cent, the company says.
Announcing its full year earnings for 2012/13, Stockland says a previously announced write-down in the value of its residential portfolio has caused the group’s statutory profit to tumble from $487 million in 2011/12 to $104.6 million in 2012/13.
Even after the impact of the write-downs is excluded, the company’s underlying profits fell 27 per cent amid the impact of asset sales, soft conditions in new housing and a change in the way the company accounts for capitalised interest.
Stockland chief executive officer Mark Steinert says the company is focused upon restructuring the business to manage through difficult times.
“This has been a challenging year and we have responded with a number of important strategic decisions that position our business for stronger future returns,” Steinert says, adding that Stockland has a ‘refreshed’ senior management team and a clear strategy for optimising returns with acceptable levels of risk throughout the property cycle.
“We significantly restructured the business to reduce costs and improve core processes and skill sharing. We reviewed our residential landbank to create a clear classification of ‘core’ and ‘workout’ projects, and also maintained our strong balance sheet and A-/stable credit rating,” he adds.
Going forward, the company expects earnings per share growth of between four and six per cent in 2013/14 amid contributions from new retail, residential and retirement living projects, benefits from cost reduction and growth in industrial letting activity – albeit with subdued economic conditions set to continue amid household deleveraging and low levels of business confidence.
The group says it is shifting its focus to concentrate upon industrial developments and medium density housing, but says the benefits of such shifts.
Stockland’s report comes after fellow property group GPT posted a 6.7 per cent fall in interim net profit earlier this week, to $257 million.