Stockland has reported a first-half loss after writing down the value of residential developments and said full-year earnings per share will decline more than previously forecast.
The reported net loss was $147.1 million in the six months ended December 31, compared with a profit of $307.6 million a year ago, the Sydney-based company said in a statement to the ASX. Revenue fell to $791.9 million from $936 million.
Earnings per share will be 20 per cent to 25 per cent lower in the year ending June 30, compared with an earlier forecast for a drop of as much as 15 per cent, Australia's biggest housing developer said.
"Stockland's disappointing first-half result reflected the difficult operating conditions we faced," said Mark Steinert, who took over as managing director last month. "The new housing market remains very soft and this has significantly impacted our residential business result."
Stockland shares were up 4 cents, or 1.15 per cent, $3.52.
Macquarie Equties said operationally the result appeared broadly in line with expectation, however substantial writedowns have adversely impacted net tangible assets with the near term outlook remaining challenging for Stockland.
UBS’s analysts said they expect the 2013 full year earnings per security to 20-25 per cent below the 2012 financial year after the impact of the capitalised interest application change.
‘‘Outside of changed capitalised interest policy we anticipate EPS downgrades of 5 per cent over the medium term reflecting impaired projects (a combination of no earnings and no longer able to capitalise interest). Cash flow from operations weak at $189 million.
Mr Steinert told investors at a briefing today that the move to make the asset impairments was ‘‘disappointing’’ and ‘‘not taken lightly.
At Moelis & Co, the analysts said the maintenance of the dividend was positive and the residential impairments were in line with their expectation when adjusting for the number of projects having been written down to a wholesale value.
‘‘We maintain the view that the 2013 financial year is the low point and 2014 should show some improvement, before a strong increase in 2015. We reiterated our buy recommendation,’’ Moelis analysts added
Stockland's earnings have been hit by two consecutive years of home price declines across Australia, particularly in Victoria. Home prices fell 0.4 per cent in 2012 in Australia's eight major cities, with prices in Melbourne sliding 2.9 per cent, according to the RP Data-Rismark home value index.
‘‘Market conditions," Mr Steinert said, "Are expected to remain challenging with ongoing weakness in Victoria and uncertainty in Queensland where we will watch closely to monitor any impact on already weak consumer sentiment following the recent floods.’’
Stockland has taken impairments on 13 residential projects that it plans to sell instead of develop, the company said. It has also written down seven other residential communities after making more "conservative" assumptions about the housing market, it said.
While Stockland’s retail and retirement living businesses were expected to lift earnings this year, returns from its office and industrial portfolios were expected to drop.
‘‘We remain confident earnings will begin to improve from FY14 as we see the benefit of major new retail and residential projects coming on line,’’ Mr Steinert said.
‘‘For this reason, the board has re-affirmed the FY13 distribution of 24 cents per security, notwithstanding the impact of the changes we have announced today.’’
The impairments have reduced net tangible assets by 14 cents a security to $3.49 per share, it said.
Underlying profit fell 26 per cent to $255 million, it said. Stockland will pay a distribution of 12 Australian cents a share for the half, unchanged from a year earlier, it said.
Bloomberg, with AAP and Carolyn Cummins