09/07/2020 - 16:02

Peet defers new projects

09/07/2020 - 16:02

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Peet has announced a major restructure to cut costs, including the divestment of $75 million of non-core projects and annual savings of up to $7 million.

Peet defers new projects
Brendon Gore said the divestment of projects also involved reducing the number of people employed by the group. Photo: Gabriel Oliveira

Peet has announced a major restructure to cut costs, including the divestment of $75 million of non-core projects and annual savings of up to $7 million.

The ASX-listed company provided a trading update for FY20 to its shareholders today, outlining a series of measures it was planning to implement to simplify Peet’s “strategic focus” as well as reduce costs and help to strengthen the group’s capital position.

This included divesting its non-core assets, including for regional and sub-regional projects with the expectation that would result in the recycling of circa $75 million of capital over the next 18 to 24 months.

The group hopes that initiative will further strengthen the group’s balance sheet as well as assist in the streamlining of the business and simplifying its operating structure.

 “The efficiencies arising from the investment in internal system improvements and the divestment of a number of projects have meant making some difficult decisions, including reducing the number of people employed by the group,” Peet managing director Brendan Gore said.

“This is an unfortunate outcome and is in no way a reflection of their value or contribution to the Group.

“These decisions are difficult but necessary to ensure the Group is well positioned for the post-COVID-19 environment and to consider investment opportunities should they arise.”

Peet anticipates these measures will result in annualised overhead and fixed cost savings of $5-7 million once fully implemented in 2H21, and in a one-off provision of about $45 million after tax in FY20.

“There remain uncertainties around the impact of the roll-off of government stimulus, including on the rate of unemployment and the short to medium term impact of COVID-19 on the federal government’s immigration policy,” Mr Gore said.

“While Peet is well placed to respond and is responding to the increase in demand resulting from the Federal Government’s HomeBuilder and various other State Governments’ residential-focused initiatives, Peet will continue to defer commencements of new projects, subject to more clarity on the sustainability of a market recovery.”

As announced at the half-year, Peet’s FY20 earnings were lower than FY19 and subject to final audit, the FY20 operating profits after tax is expected to be $14-$16 million, in comparison to $47.5 million last year.

Shares in Peet closed down 3.8 per cent to trade at $0.90 per share.

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