Stockland Full Year Result: SGP profits lift on strong Australian property market

CommSec

One of the country’s biggest developers, Stockland (SGP) posted a larger than expected lift in net profit for the year to June 2017, to $1,195 million. This result benefitted from Australia’s solid property market. Funds from Operations (FFO) – its preferred measure of performance as it adjusts for depreciation and other costs that can skew a property group’s results – rose by a more modest 7.4 per cent, which was slightly ahead of consensus and above the company’s guidance range. FFO was boosted most by its Residential business, followed by its Commercial Property business. SGP shares are losing ground today and are underperforming Australian equities Year-to-Date.

SGP will pay eligible investors a 12.9c/unit distribution on 31 August 2017. This payment was already flagged in June and went ex-dividend 29 June 2017. This means investors buying SGP today are no longer eligible for the final distribution. SGP has a ~5.9% yield.

SGP’s Residential property business achieved record results as the division benefited from supportive market conditions and has record contracts on hand. It settled on 6,604 total lots over the year; a 7.6% lift on 2016. Revenue and earnings also lifted in this division.

Retirement Living recorded its fourth straight year of double-digit growth, with strong sales and improved margins over the year. SGP currently has over 2,900 units in the development pipeline and 9,600 established units in 65 established villages in Australia.

FFO in its largest business unit, Commercial property rose by 3.5% over the year. Within this division, its 41 retail centres are the main drivers of growth. SGP said it has made good progress on its shopping centre development pipeline, opening the first stage of its Stockland Green Hills centre redevelopment in Maitland, NSW. It is also in the process of carrying out a $37 million redevelopment of Stockland Wendouree in Ballarat. Its Logistics and Business Parks portfolio achieved solid growth.

Looking ahead, SGP warned rising electricity prices would hold back profit growth in FY18 as it is affecting the cost of occupancy for retailers and the group’s income growth. It expects slower income growth in Commercial over the year.

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