The market gave property companies a hiding yesterday as Goodman Group’s securities plunged in the wake of a very nasty result.
The market sliced 28% from the company’s securities after it reported a net loss of more than $465 million, compared with a net profit of $285 million in the first half of the 2008 year.
This is the latest in a lengthening line of appalling results from the sector. Real Estate Investment trusts have shed more than 70% of their market value in the past year and some seemed bound for the knackers”s yard, as the likes of Allco Equity, MFS, City Pacific, ABC Learning and others have already have gone. The Centro Group is struggling on a lifeline from its banks that has all but wiped out all of its shareholders.
Goodman has cut back on development work, like its peers, such as Mirvac and Stockland which have chopped into their housing development plan for up to the next three years.
These moves will conserve cash and capital.
Mirvac saw its December half result move deeply into losses exceeding $645 million; Stockland had a statutory loss of $726 million.
Both companies took an axe to balance sheet values for property and listed assets here and offshore.
Goodman saw had a similar experience: "the key movements consist of a $487 million write-down in asset values, and a $171 million fall in the value of our listed investments," the company said. That’s over $650 million.
The $420 million non-cash mark to market valuation loss has been recorded against the Group’s derivative positions. The bulk of this was interest rate related. Importantly the mark to market deficit does not impact on gearing covenants.\
For Mirvac, Goodman and Stockland, the non cash write-downs and other losses (including Goodman’s $420 million derivatives write-down) the total losses were over $2.3 billion for the half year.
Goodman’s stapled securities fell to an all time low of 19 cents yesterday morning before recovering to 24.5 cents, down 5.5 cents, or 18.3%.
The net loss totaled $465.9 million included property and equity investment revaluations and some non-operating items.
Analysts said the results were in line with the company’s update last week, but it was still terrible.
There was also a number of write-downs, including a loss on derivative valuation movements of $419.6 primarily relating to interest rate swaps.
But the group maintained its distribution of 9.65 cents for the December half year. But the distribution was 17 cents a security a year ago.
The company said it will take a ”conservative approach” to development projects and has significantly cut new commitments to keep with its capital management strategy.
Goodman posted operating income after tax of $216.2 million, but tidying up the accounts and cutting overripe valuations plunged the bottom line deeply into the red.
It said it had "successfully raised new equity of $956 million and completed $378 million of asset sales – of which, $210 million settled in the first half and a further $168 million to be settled in the second half.
"Capital expenditure commitments significantly lower with development work in progress reduced to $1.5 billion down from $3.1 billion. Goodman Group is directly responsible for 11%, with the remainder for third parties and our funds."
Goodman said it had "executed cost rationalisation strategy and restructured our Asian operations and Sound financial position maintained with available liquidity of $842 million as at 31 December 2008, headline gearing at 41.2% and an interest cover ratio of 3.4 times – well within the Group’s debt covenant limits. Progressing positively on refinancing."
It said it had cut back on more than $1.5 billion in projects to improve margins.
“Whilst we are undertaking less activity in our development business, we are currently reviewing all projects to focus on doing only the best developments at the best margins. This means we have halved the size of our development work book,” the company said.
