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120-year-old property group company, Peet Group (ASX:PPC) today announced its 1H2019 results. The operating profit after tax was up by 5.6%, as compared to the previous corresponding quarter; however, the company reported an 8% drop in revenue in 1H2019. The company declared a fully franked interim dividend of 2.0 cents per share.
Key Result Highlights:
- EBITDA Margin of 31%.
- Earnings per share of 4.7 cents, up 6% PCP.
- 1,417 lots settled, up 32%.
- Gearing of 22.2%, $190 net debt.
- Contracts on hand as at 31st December 2018 of 1,804, valued at $456 million.
Management Commentary:
Peet Managing Director and CEO, MR. Brendan Gore mentioned that the company witnessed an increase in settlements across the Groupâs national portfolio which aided the 1H2019 results. The group reported a decrease in number of sales in the first half of the year and the MD, MR. Gore attributed the drop in the sales to the changing lending conditions for purchasers, the completion of many syndicates in Victoria and a moderate market condition.
The MD noted that the changing lending conditions witnessed delay in buyers securing finance approvals and drop in availability of finance due to stringent assessment criteria in particular for the first time home-buyers.
Mr. Gore expects the normalisation of the finance approvals going forward.
Lower project management fees resulted in drop in the revenue by 8%. The Company witnessed lower sales activity and the strategic englobo land sale in Victoria in 1H2018.
Peetâs management acknowledged the continued performance of The Funds Management business, achieving a margin of 69% in 1H19 vs. 70% achieved in 1H18. The Funds Management business contributed 50% of the groupâs earnings.
The Management attributed its balance sheet strength to the active management of its land bank. The group had in the past several years prudently avoided investing in Victoria and New South Wales and divested a couple of assets in Melbourne. The fund raised was redeployed in Western Australia and South Australia over the past three years.
Speaking on the operational performance of the company, the management stated that the group achieved a sale of 964 which was down by 28% on the corresponding period. As at 31st December 2018, the company had 1,804 contracts with a gross value of $456 million compared with 2,257 contracts on hand with a gross value of $616 million at 30 June 2018.
Outlook:
The management believed that the market conditions and the availability of credit would remain difficult for the next 12 months. Mr. Gore stated that Peet expects Victorian residential property market conditions to moderate as the cycle changes. The management indicated that they have strategically avoided acquiring land holdings across Victoria and New South Wales during the past three years.
However, the MD had a positive medium to long term outlook, on the back of a strong balance sheet and diverse land bank with a low-cost base that has exposure to affordable markets.
Stock Information:
Peet Group (ASX:PPC) market capitalization stands at $478.71 million. The Stock price was noted as A$0.975 (Closing Price on Tue 26 February 2019) with the 52-week low price of A$ 0.950 and the 52-week high price of A$1.500. The company has a PE of 9.880x and EPS of 0.100 AUD. The dividend yield is noted as 5.05%.
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