Stockland says housing market recovery will be modest and uneven STOCKLAND'S earnings expectations for the months ahead have disappointed the market after weak residential development conditions and project writedowns drove the companys net profit 79 per cent lower to $105 million for the 2013 financial year. A modest and uneven housing market recovery would deliver earnings growth of between 4 and 6 per cent for fiscal 2014, according to Stockland, which said fiscal 2013 was "a tough year." Shares in the nation's largest residential developer fell after analysts said the earnings guidance for the current financial year was lower than expected, with Stockland warning that impaired and low margin projects would continue to weigh on its bottom line. At just after noon, SGP stock was down 2.1 per cent at $3.73. "Although global economic conditions have improved over the last six months, there is still considerable uncertainty and volatility," chief executive Mark Steinert said. In Australia, business confidence remained low and consumer spending was relatively subdued, he said. The group's annual underlying profit fell 27 per cent to $499m and its earnings per security fell 24 per cent. Revenue fell 13.2 per cent to $1.9bn. The largely expected result came in a year the housing market remained weak and Mr Steinert wrote $355m off the value of its residential projects not long after he was appointed chief executive in May. He has also made job cuts, sweeping changes to the management team and introduced a new company strategy to focus on the industrial property market and embark on more medium density housing projects, given more people were choosing to live in townhouses and apartments. Today Mr Steinert announced that the group would exit its 14 per cent stake in FKP Property Group, currently worth about $66m, over time, and that the group had abandoned potential plans to partner with another retirement village operator. Stockland held its dividend steady at 24c per security, despite being above its payout ratio, on the expectation of an earnings lift in the next 12 months. "This has been a challenging year and we have responded with a number of important strategic decisions that position our business for stronger future returns," he said. Mr Steinert did not announce any further impairments to its residential portfolio. "We are confident we have made the appropriate adjustments," he said. Within Stockland's divisions, the residential business contributed operating profit of $60m, down 64 per cent on the last year, with a lower proportion of sales coming from the higher margin projects in Victoria and the previously reported change to its approach in capitalisation. The retirement division contributed operating profit of $38m, which was up 6 per cent. Net operating income from Stockland's shopping centres gained 5 per cent on the prior year to $324m, and 2.6 per cent on a comparable basis, the office properties contributed $119m, which was up 1.8 per cent on a comparable basis, but down 16 per cent overall after properties were sold. From its industrial arm, net operating income fell 18 per cent from the previous corresponding year and was down 19.9 per cent on a comparable basis, as tenants vacated buildings.