Peet profits fall 75% in 'challenging year' as residential lot sales decline

Property developer and fund manager Peet has reported a 76% fall in net profits for the 2012 financial year in what it described as challenging market conditions, with Victoria the toughest market where it has projects under development.

Net profits for the year to June were $20.3 million, just ahead of earlier market guidance of $15 million to $20.2 million.

Earnings in Peet’s residential development operations declined 50% compared with the 2011 financial year to $20.2 million as lot settlements for the year declined to 395 from 598.

A further $40 million worth of contract are due to settle by December 2012.

Contracts on hand fell from 1,125 in 2011 to 788 in 2012 – worth $788 million – with Peet attributing this to “market weakness, substantially reduced capital investment in certain Victorian projects and difficulty of buyers obtaining finance”.

In particular it reported a slow-down in sales at its $293 million Aston residential development in Craigieburn, where more than 1,500 lots ares still available on Melbourne’s fringe. Its $131 million Ardan development in Greenvale featuring 558 lots has been deferred.

The developer expects market conditions to remain challenging in the 2013 financial year.

However, it says positive signs are emerging in WA and Queensland is also poised for recovery, with housing finance growth and building approvals improving.

Peet’s biggest residential project is Flagstone City, 45 minutes south-west of Brisbane in Jimboomba, which has a gross development value of $1.87 billion and is due to begin in 2013. It features 1,500 lots and is proceeding as scheduled.

In total Peet has a lot pipeline of 34,600 worth $6.2 billion.