Peet Limited (ASX: PPC) announces FY23 results

• The company delivered $70.1M in profit.
• Part of the success was attributed to the changing product mix.
• Buyer confidence expected to return once interest rates stabilise.

Property developer, Peet Limited (ASX: PPC), has announced a record operating profit and statutory profit after tax of $70.1 million, representing a 34% increase on the previous financial year.

“The strong FY23 result is on the back of the Group’s continuing focus on monetising the high number of contracts on hand at the start of the financial year, many of which had high margins as a result of strong price growth,” said Peet managing director and CEO, Brendan Gore.

“Additionally, the changing product mix, including an improved performance from medium density townhouse product; continued focus on unlocking value by appropriately managing the Group’s significant landbank; and continued focus on cost management and operational efficiencies, contributed to the Group’s record performance,” said Gore.

Key results for Peet

Sales activity for FY23 included 1,399 lots, while FY22 included 3,163 lots. This was attributable to a combination of external factors and the Group’s measured response to those factors.

“Multiple interest rate rises and inflationary pressures contributed to more subdued market conditions during FY23, reducing the borrowing capacity of buyers, especially of first home buyers. This, together with continued supply chain constraints and labour shortages impacting builders, has negatively impacted consumer sentiment,” said Gore.

The company said it responded to the underlying market and broader economic conditions by reducing the number of new stage releases and allocating resources to the creation of lots pre-sold during the peak 2022 selling period.

“As previously communicated to the market, Peet pro-actively focussed on protecting its balance sheet and its high level of contracts on hand during FY23, resulting in strong settlements (FY23: 2,594 lots8, compared to FY22: 2,514 lots) during the year. This was achieved by the close management of construction programs and the low cancellation rate for unconditional contracts,” said Gore.

While markets are at or close to bottoming, and there is an improvement in enquiry levels, Gore said the company expected the market will require a stabilisation in interest rates before buyer confidence picks up and market conditions begin to normalise.

Markets remain undersupplied, with underlying fundamentals remaining positive including low unemployment, above-average wage growth, and increasing overseas migration.

“Peet will continue to focus on executing our strategic objectives and maintaining a disciplined approach to capital management. The Group remains well positioned to navigate the current environment, with a flexible delivery program in place to respond strongly to a recovery in activity and to take advantage of a shortage of market supply,” said Gore.