Like Boral, (See below) the housing finance news for December would have gone down a treat at Stockland, which continues to battle slumping market values here and in the UK, falling demand and sceptical investors.
The promise shown in the strong rise in not only overall approvals, but in first home owner interest, will be a rare offset to the unremitting sour news from the sector.
Stockland yesterday reported an expected fall in first half operating profit after booking inventory write-downs related to property, its UK business and several stockmarket plays, including GPT.
The property company also warned it was unlikely to meet its guidance for annual earning per share (EPS) although its distribution guidance remained intact.
Another loss this half is possible.
Stockland’s shares fell to a 52 week low of $2.57 before recovering slightly to end at $2.70, off 12 cents for the day.
The company said operating net profit available for distribution fell 60.6% to $127.9 million in the six months to December 31.
Stockland’s statutory result was a net loss of $726.9 million, reflecting downward revaluations of investment properties and movements in non-cash items. That compares with a profit of more than $660 million in the previous corresponding period.
Stockland said its EPS guidance of 35 cents for 2008-09 was unlikely to be met, because of the downside risk to residential super lot sales.
It said the potential impact would be up to 3.2 cents.
"Nevertheless, distribution/dividend guidance of 34 cents is unchanged as this is approximately the minimum amount that Stockland Trust can pay out under Trust taxation legislation," it said.
The company said that operating profit before inventory write-downs $286.9 million; operating profit after inventory write-downs $127.9 million; earnings per security before inventory write-downs 19.0 cents; earnings per security after inventory write-downs 8.5 cents and the distribution per security was 17.0 cents
Stockland’s CEO, Matthew Quinn said in a statement that the first half operating profit was "a good result, given the market conditions we face. We are actively managing the impact of current market dynamics with a strong focus on risk management, capital management and cost efficiencies.
"While we will continue to prudently manage the business, we are also focused on capitalising on opportunities to strengthen our business and ensure we maintain our position as Australia’s leading diversified property group."
"Stockland’s first half statutory accounting result is a loss of $726.0 million. This includes a range of non-cash items, which move from year to year and are not directly related to how Stockland’s operating businesses are performing.
"The non-cash items include: $388.9 million – Fair value adjustments of investment properties; $192.5 million – Impairment and net loss on sale of non-current assets; $165.3 million – Fair value adjustments of financial instruments and foreign exchange movements."
Stockland said a range of additional capital management initiatives is in place to ensure the Group has significant liquidity including asset sales and the deferral of capital expenditure.
"Given the higher cost and scarcity of capital, Stockland has reviewed its development pipeline.
“All uncommitted development expenditure in Commercial Property, Apartments and the UK has been deferred until markets improve, although work will continue to secure development approvals. Such deferrals result in minimal additional holding costs, as many projects are existing income producing properties.
"Stockland continues to actively manage its portfolio, with a total of $220.7 million in non-core asset sales achieved in 1H09. Since balance date, a further $85.5 million of non-core asset sales have been settled.
"Stockland has good coverage of Residential Communities profits in the next three years from existing projects. Restocking of Residential Communities inventory has therefore been significantly scaled back, further boosting the Group’s capital position."
That means the company won’t be actively buying new property to develop into home lots for the next three years.
Stockland said its current residential single lot sales rate was healthy, due to the strength of the first home buyer segment.
"At current sales rates full year single lot earnings targets will be achieved," it added.
In its commercial property business, Stockland said there were no major lease expiries.
"High quality covenants are in place and downside risks to earnings targets are minimal," it said.
The UK business remains on track for a break-even result before the latest write-downs.
But its market raids last year look foolish, especially as it used up some of the $300 million it raised from the market.
Stockland took hits on its investments in retirement home and aged-care companies FKP and Aevum, which were down $46.9 million, and on its 12% stake in GPT, where the loss was $86.7 million.
Aevum posted a half-year net loss of $115 million on the back of lower asset valuations, saying it was not immune from the market conditions.
