stockland announcement, page-2

Stockland issues warning as profit plummets

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14th August 2008, 9:00 WST

Property developer Stockland Group has reported a fall in bottom line annual profit and says it faces tough market in the year ahead.

The company also said it was budgeting for just a nominal increase in earnings per security (EPS) in 2008/09.

Stockland's net profit for 2007/08 was $705.2 million, down 58.9 per cent on the previous year.

Its operating profit was $674 million, up 10.3 per cent.

During the year, EPS increased five per cent to 46.2 cents.

¡§We face a tough market in the year ahead, but we are well placed to withstand these conditions with a proven business model, clear strategy and sound property skills,¡¨ managing director Matthew Quinn said.

¡§We are budgeting for a nominal increase in earnings per security in financial year 2009, but it is going to be tough and we are assuming that market conditions do not deteriorate further.

¡§Looking through the current cycle we expect to achieve higher earnings per security growth from financial year 2010 onwards.¡¨

Mr Quinn said Stockland was pleased with its annual result given the volatility in capital and property markets over the past year.

¡§We have seen a steep decline in confidence in the Australian real estate investment trust sector in recent months and were disappointed to have been impacted,¡¨ he said.

¡§We are intent on restoring confidence through our focus on value creation for our security holders, and our sound balance sheet puts us in a good position to do so.¡¨

Stockland said its Australian operating businesses performed in the year.

The commercial property business, which includes office, industrial and retail operations, was supported by good rental growth and high occupancy levels.

During the year, Stockland sold $787 million of non-core assets in the commercial portfolio, and expects to settle a further $114 million worth in the current year.

The proceeds are being used to repay debt and fund the company¡¦s development pipeline.

¡§Our residential business also performed well despite deteriorating buyer sentiment and our ability to once again grow profits through a tough residential cycle demonstrates the quality and diversity of our business,¡¨ Mr Quinn said.

Stockland's retail property business lifted its operating profit to $260 million for the year.

¡§Active asset management and low occupancy costs should enable us to deliver further operational upside despite the recent slowdown in consumer spending,¡¨ Mr Quinn said.

The office and industrial property business also increase its operating profit, to $305.9 million.

Stockland said office markets are generally in good shape with low vacancies and rising rents.

But it expects demand to taper off in line with falls in business sentiment.

The residential communities business operating profit was $326.1 million.

¡§We remain of the view that the medium-term prospects for the Australian residential market are favourable due to high immigration and significant supply constraints,¡¨ Mr Quinn said.

Stockland also said its UK business had posted a lower than expected profit of $11.6 million due to poor market conditions.

Stockland declared a final distribution of 23.9 cents, up from 22.8 cents in the previous corresponding period.