Stockland takes $306m asset hit

STOCKLAND's new chief executive, Mark Steinert, will conduct a wide-ranging review across the business, which could result in the ditching of the group's long-running three-Rs strategy of focusing on retail, residential and retirement properties.

The admission that conditions are not expected to improve until the second half of next year comes as the group reported a statutory loss of $147 million for the six months to December 31.

The result included $306 million of impairments to asset values, mainly in non-core residential projects that have been identified for sale, and unrealised fair value changes to other assets.

There was also a change in approach to the capitalised interest charge which had a $150 million negative impact on earnings.

Before one-off items, which followed the same route that Mirvac took last week in writing down $373 million in its residential business, Stockland's underlying profit was down 26 per cent to $255 million and earnings per security fell 20 per cent to 11.6¢, in line with market expectations.

Stockland's first half distribution is 12¢ per security, payable on February 28, and Mr Steinert confirmed the full year distribution will be 24¢.

The retail, office and industrial assets all performed well with the shopping centres generating a return of about 4.4 per cent, thanks to new developments at Merrylands and Shellharbour.

Mr Steinert, who joined as CEO in January, described the result as "pretty disappointing". He said nothing was off limits under his review, which could herald a renewed focus on high-density apartments, less reliance on retirement and mixed-use residential developments, and a revision of the policy to sell commercial and industrial properties.

In the impairments, there were 13 projects identified as more suited to disposal, mainly in Queensland, but also five in NSW including at Warriewood and one at Point Lonsdale, Victoria.

"[These are] obviously results we're not proud of. But we've taken these decisions, I would like to think with the right level of gravity and we thought very carefully about them," Mr Steinert said.

Stockland's head of residential, Mark Hunter, said the residential communities reported operating profit of $28 million, down about 64 per cent on the previous corresponding period.

Lot sales of 2085 were down 6 per cent on the previous year, while operating profit margins took a dive to 7 per cent albeit impacted by the change in capitalised interest policy.

"There has been little or no price gains for us. In fact prices have decreased across most corridors. That decline is in the order of anywhere between $2000 per lot to about $10,000 per lot. On average across the portfolio it's between $4000 to $5000 per lot," Mr Hunter said.