This article is from the Australian Property Journal archive
STOCKLAND has posted a 50.6% jump in statutory profit for the first half to $696 million, on the back of a roaring residential business.
Funds from operations (FFO) increased 11.3% to $342 million, FFO per security was up 9.9%, to 14.5 cents.
The underlying profit was $313 million, up 8.1% and underlying earnings per security (EPS) increased to 13.2 cents, up 6.7%.
CEO Mark Steinert said the result was underpinned by continued growth in all businesses, including a solid contribution from residential, which delivered operating profit growth of 45.5% on 1H15. Commercial property operating profit was up 3.8% and retirement living achieved operating profit growth of 9.2% on 1H15.
“In our residential business we capitalised on favourable market conditions in Sydney and Melbourne, ending the half with a record number of contracts on hand. We’ve activated a high proportion of our residential land bank and we have sufficient depth to our projects in high demand corridors to underpin future organic growth,” Steinert said.
Residential operating profit increased by 45.5% on 1H15. Volumes and operating profit margin were both stronger in the half, with 2,771 lots settled, marginally higher than 1H15. Contracts on hand at the start of January 2016 totalled 4,109, an increase of 377 over January 2015.
Steinert said the business is tracking marginally above the top end of its target through the cycle settlements range of 5,000 – 6,000 lots.
Within the commercial portfolio, retail comparable FFO was up 3.3% of $197 million and comparable underlying NOI increased by 3.5% to $183 million. This result was supported by high stable retail occupancy levels of 99.5% and blended average rental growth on lease renewals and new leases of 2.6% in the stable portfolio. Within the portfolio, 94% of specialty shop leases have fixed 4-5% annual rent increases. The sustainability of Stockland’s stable rental growth is underpinned by below average specialty occupancy costs of 14.6% and specialty sales of $9,042 per sqm, exceeding Urbis averages.
Logistics and nusiness parks recorded comparable FFO growth of 3.8% relative to 1H15. Comparable underlying NOI grew by 0.3% in 1H16, with the relatively low figure due to non-cash IFRS adjustments from prior leasing activity.
Office comparable FFO was up 11.1% and comparable underlying NOI was up 8.6% to $36 million and $29 million respectively.
“Our commercial Property business delivered solid growth in recurring income. We achieved comparable FFO growth of 4.5% and comparable underlying profit growth of 3.3% across the portfolio. Total retail sales exceeded $6.6 billion in 2015.
The retirement living business posted operating profit of $18 million, an increase of 9.2% over the period half year.
“In retirement Living, we continue to make good progress growing return on assets and we are on track at the half way mark of our five year plan. Operating profit was up 9.2% on the prior corresponding period and we ended the half with record reservations on hand. Development continues to underpin our growth with 470 homes now under construction or ready for sale,” Steinert said.
Meanwhile Stockland’s gearing remains conservative at 23.1%, on the lower end of its target range of 20 – 30%.
Steinert said while there is some uncertainty about the economic outlook, conditions should remain generally supportive with sustained low interest rates and modest economic growth.
“We are well placed to continue growing returns from our core asset base, further supported by a very active development pipeline across key asset classes.
“We are on track to achieve our guidance range, and have tightened this to 6.5 – 7.5% EPS growth in FY16, with FFO growth at 9 – 10%, and we are targeting a full year distribution of 24.5 cents per security, assuming no material decline in market conditions.” He concluded.
Australian Property Journal
