- Net profit after tax increased by 5.3% to $47.9 million.
- Earnings per share increased to 21.6 cents.
- Record final dividend of 10.75 cps fully franked (full year: 19.75 cps fully franked).
- Gearing ratio at year end of 37%.
- 69% of EBIT from Vic and Qld and 31% EBIT from WA.
- Strengthened management team.
- $300 million wholesale land syndicate established.
- Acquisition of 5,600 lots across Australia.
- Land bank of approximately 37,000 lots, with an estimated on-completion value of $7.4 billion, if sold at today’s prices.
Group Operating Highlights
Peet Limited Managing Director and Chief Executive Officer, Brendan Gore, said the record result was achieved in very mixed market conditions, driven particularly by solid earnings from the Company’s east coast operations.
“Despite difficult trading conditions, Peet’s underlying business has performed well during FY08,” said Mr Gore.
“This performance demonstrates the fundamental strength and quality of our business model – and the experience and skill of our entire team.
“Specifically, the earnings growth is due to the continuing strength of the Company’s land syndication business, strong residential land sales in Victoria and Queensland and a satisfactory performance in a challenging Western Australian market.”
Some 69% of EBIT came from Peet’s Victorian and Queensland operations, while 31% of EBIT came from Western Australian operations, building on recent trends.
“This is the fourth consecutive year in which more than half the Company’s EBIT has come from east coast business activities and we are continuing to grow the business right across the country with strategic acquisitions and a well-mapped production pipeline,” said Mr Gore.
Peet Limited Chairman, Tony Lennon said the Company had achieved an increase in earnings per share to 21.6 cents per share for the year, and the Directors had declared a final dividend for the year of 10.75 cents per share, fully franked.
“That brings the total dividend per share for the year to 19.75 cents – or 28.2 cents per share before tax allowing for 100% franking,” he said.
Peet’s land bank continues to be an underlying strength with a total of some 5,600 lots acquired during the year. At year end, the Peet land bank stood at approximately 37,000 lots with an estimated oncompletion value of $7.4 billion, if sold at today’s prices.
Included in the year’s acquisitions was a rare 243 hectares of ocean front land at Alkimos on Perth’s northern beaches, which was purchased by Peet Limited’s first wholesale syndicate established late in 2007. It is anticipated the Alkimos project will yield in excess of 2,800 dwellings.
An Alkimos retail syndicate opportunity will be released in the first half of FY09. Land sales and settlements The Group sold a total of 2,274 lots from its managed and owned projects during the year grossing in excess of $370 million in sales.
Meanwhile, settlements were achieved on more than 2,400 lots grossing more than $426 million in sales revenue. At the end of the year the Group had in excess of 940 lots across its managed and owned projects that had sold but were yet to settle for a value of almost $183 million.
During the year Peet sold 814 Company-owned residential lots. The pre-tax earnings increased 7.8% to $34.8 million on revenue of $111.6 million from 806 lots settled.
Peet has also progressed development of its first over-55s venture with the first display home at Peet Senior Living’s Lattitude Lakelands site in Western Australia opened, and construction commencing on the first 31 homes in Stage 1. A total of 21 pre-sales has been achieved and are scheduled to commence settling in FY09.
Peet Limited’s strength in land syndication was again evidenced with revenue from land syndication increasing by 7.1% during the year to $45.6 million, contributing to a 10.8% increase in pre-tax earnings to $34.9 million. This result was achieved on the back of more than 1,400 lots sold and 1,484 lots settled across the syndicated portfolio.
“Once again, the improved result was attributable to sound demand for residential land across Victoria and Queensland,” said Mr Gore.
At year end, Peet was managing 28 syndicated land holdings nationally, half of which were located on the east coast of Australia.
During the year Peet also completed its first retail syndicate with land in three states and, in line with its national investor relations strategy, grew its investor base by attracting new investors from across Australia. Peet Tri State Syndicate Limited holds land in Western Australia, Queensland and New South Wales and the first lots are due to be released in the year ahead.
Changes to Management Structure
During the year, the Company appointed several experienced senior executives to the management team allowing the Managing Director and CEO to implement a new robust and efficient organisational structure.
“Peet has continued to invest for the future by adding highly skilled and experienced members to its executive and management team during the financial year,” said Mr Gore.
Capital Management
Peet had net bank debt at 30 June 2008 of $224 million while gearing (net bank debt/total assets – adjusted for market value) stood at 37%, which is within the Company’s target range of 30%-40%.
The Group maintained its three-year evergreen corporate facility with a maturity profile of 2.2 years and was 36.5% protected by fixed interest rate hedges. The average cost of debt for the year was approximately 7.8% and the interest cover was 4.21 times.
The Company is fully compliant with all its banking covenants.
“Peet remains well positioned with its banking facilities secured by its portfolio of high-quality property assets, solid operating cash flows and strong banking relationships,” said Mr Gore.
“Operating cash flows supported by additional borrowings were predominantly used to acquire and develop land during the year,” he said.
Strategy
Peet Limited’s focus, in what will be a challenging residential property market in the year ahead,
remains on delivering sustainable and steady growth in earnings for shareholders over the medium to long term.
Peet will continue to:
- focus on its core business of asset management, land syndication and funds management;
- seek opportunities to grow its existing funds management platform and capital partnering
- relationships;
- remain prudent with its capital management by recycling capital and managing gearing levels.
- address the affordability issue, ensuring a full range of product offering;
- leverage its land bank - generating further development opportunities; and
- ensure its operations are environmentally responsible.
“The Company is currently marketing and managing some 80 developments across Australia, well over half of which are on the east coast,” he said. “In the year ahead, sales at a further eight developments including seven on the east coast are scheduled to commence.
“Our production pipeline and marketing schedule underlines the strategic manner in which the
Company has built a strong and geographically diverse land bank with the objective of optimising
returns in varying market conditions and managing its business through property cycles,” said Mr Gore.
“We will continue to make prudent and strategic decisions about the allocation of capital, acquisitions and partnership opportunities.
“Peet Limited continues to operate under the same quality business model that has delivered
consistent growth over many years with a high level of transparency and responsible gearing.”
Outlook
“Peet Limited expects to be operating within a challenging Australian residential market in the year ahead, with clear signs that the difficult macroeconomic environment will persist in FY09,” said Mr Gore.
“Nonetheless, the fundamentals of the residential property market remain sound.
“While short-term issues such as affordability, purchaser confidence and investor activity can cause more volatile short-term cycles, long-term prospects for residential property development are strongly linked to underlying supply and demand.
“The current cycle has resulted in a major shortfall in housing supply relative to underlying demand, which is determined by factors such as population growth (driven by international migration) and employment rates – and those factors remain positive.
“Interest rates are also a key catalyst for consumer sentiment and, while anticipated lower interest rates are unlikely to spark an immediate response, it should have a positive impact on the residential property market,” said Mr Gore.
“Peet, with the strengths of its business platform, management experience and the geographic diversity of the business, is well placed to target ongoing earnings growth over the medium to long-term.”
