AAP
Property group Stockland's first-half net profit has fallen by 28 per cent due to tough economic conditions, but the company expects a better performance in the remainder of the financial year.
Stockland reported a net profit of $307.6 million in the six months to December 31, 2011, down from $425.1 million in the previous corresponding period.
"Economic conditions were very tough at the start of FY12 resulting in poor consumer sentiment, reduced discretionary spending and weaker demand for Sydney CBD office space which affected our result," managing director Matthew Quinn said in a statement on Thursday.
Residential property sales had picked up in the last four months, particularly from first-home buyers, he said.
Stockland says it still expects its earnings per share (EPS) for the financial year to be the same as in the previous year, assuming current residential conditions continue.
EPS in 2010/11 were 31.6 cents.
EPS in the first half of 2011/12 were 14.9 cents.
"Conditions will remain challenging with credit markets tightening, the Australian economy under pressure and tough property markets," Mr Quinn said.
"Stockland is well-capitalised with a strong balance sheet and there are good opportunities for revenue growth in the second half and beyond, particularly in our retail and residential businesses."
Mr Quinn said economic conditions were very tough at the start of fiscal 2012 resulting in poor consumer sentiment, reduced discretionary spending and weaker demand for Sydney CBD office space.
"Despite these challenging conditions, our retail business proved resilient with earnings growth of six per cent on the previous corresponding period," Mr Quinn said.
The group also recorded a reduction in overheads across the business.
Stockland's strategy of reducing lot sizes to improve affordability led to a four per cent increase in revenue from single lot sales, the company said.
But, Stockland recorded a fall in larger lot sales due to contract settlements being skewed to the second half, it said.
"We have seen residential sales pick up in the last four months, particularly from first-home buyers who are very attracted to our affordable product," Mr Quinn said.
But, he added, the residential market was very segmented and challenging in some areas.
"For the mid-affordable segment where we participate, the market is picking up and we are seeing a bit of confidence," he said.
It appeared the low point of the cycle for land sales in the affordable segment was around the middle of 2011.
"We've seen a steady pickup in there, not shooting the lights out."
Office earnings were lower than last year, primarily due to asset sales and weak demand in the Sydney CBD.
