Peet says market is at the bottom

Land developer Peet has reported a net profit of $1.2 million for the half year to December 2012, and foreshadowed better results in the second half of the financial year and in future years.

The net profit compared with an $8.7 million result in the previous corresponding period.

Managing director Brendan Gore said the result was disappointing, and reflected very challenging conditions and capital management initiatives being implemented.

This includes “targeted pricing strategies to meet market demand,” he said.

“While this has had an impact on margins, we believe FY13 is the cyclical low point in terms of earnings and there are positive indications for improved earnings in FY14 and beyond.”

Reflecting ongoing challenging conditions in the development sector the company has continued with its strategy of debt reduction.

The sale of $42 million in non-core assets up to December 2012 led to a reduction of $26 million in core bank debt.  

Despite the disappointing results Peet stated its optimism regarding the future performance of its portfolio, stating that sales volume in Western Australia, where Peet has a substantial presence, has improved in January and February 2013.

Mr Gore said in light of improving market signs in Western Australia the group will focus additional capital on further land development in the state to match demand.

“During 1H13, the group has begun applying development capital to create additional lots in order to meet strengthening demand in Western Australia,” he said.    

 Mr Gore said the company expects FY13 operating earnings to be in the range of $11 million to $15 million.