SUNLAND Group Limited (ASX:SDG) has been bogged down by a sluggish property sector with half year net profit dropping 97.6 per cent to $185,000.

It compares to  $7.8 million on the corresponding period, while revenue from settlements over the six months to December 2011 was just $59.4 million, after 263 settlements. The result follows slow sales in 2010 and new developer stock yet to come on line.

The Gold Coast developer is slightly buoyed by settlements to be finalised in the second half of the 2011-12 financial year, where net annual profit of between $14 and $15 million is forecast.

Sales activity slowed over the period, with the group completing 219 sales totalling $102 million. The company has 470 unconditional presales across its land and housing portfolio, worth $200 million, including joint venture projects.

Sunland managing director Sahba Abedian (pictured) says the announcement reflects uncertainty relating to the timing of settlements and the continued lack of confidence by the market.

“The group has remained focussed on its core business of house and land coupled with stringent capital management initiatives,” says Abedian in a statement to the ASX.

“This will remain the directive of the group for the future, until market conditions and investor sentiment improves.”

Revenue from ordinary activities is down 25.3 per cent to $78 million, but the company still has $19.2 million in the bank and $65.9 million in undrawn credit lines.

New acquisitions totalled $39.6 million, with purchases at University Hill and Springvale in Melbourne and Mariners Cove at Gold Coast.

Company secretary Grant Harrison says a number of factors have influenced the company’s poor start to the year.

“The relatively low value of settlements, revised programming surrounding the projects, together with the timing of expensing the marketing costs (ahead of recognising revenue from settlements of various projects) have all contributed to lower margins in the first half,” says Harrison.

Sunland retains what Harrison says is a robust Australian housing and land pipeline with an inventory of 3,635 allotments with a combined end value of $1.6 billion, but the tough times will continue.

“The international financial markets continue to experience ongoing volatility with restricted liquidity in the banking sector and continued price moderation,” says Harrison.

“Accordingly, the group envisages the sentiment of the Australian economy to continue to reflect a lack of confidence in the real estate sector, compounded by purchasers experiencing further difficulty in accessing bank funds.

“Towards the end of the year, we noted a significant reduction in enquiries, sales activity and subsequent delay in settlements, in particular in SE Queensland and Victoria, reflected in the half yearly results.”

Sunland’s board has approval to buy back 48 million shares, but has not yet started the buy back.

“Sunland is yet to enter the market to acquire any shares under the programme, however its directors remain committed to completing the buy back and balancing the company’s borrowings, cash resources and replenishing the group’s development portfolio,” says Harrison.

Sunland shares dropped 4 per cent to around 0.70c.

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