This article is from the Australian Property Journal archive
STOCKLAND has enjoyed the strongest specialty sales growth in four years of 7%, which is good news as the retail business accounts for approximately 60% of the group’s earnings.
Stockland’s residential business also performed strongly, with operating profit up 73.5%, ending the year with a record 3,742 contracts on hand.
The group posted a full year underlying profit of $608 million, up 9.4% on FY14 and a statutory profit of $903 million, up 71.4% over the previous year, which included $297 million in revaluation uplift and $80 million gross profit from the sale of its interest in Australand. Underlying earnings per security was 25.9 cents, up 7.8% and funds from operations per security was up 13.0% to 28.0 cents. Distribution was 24.0 cps, representing a payout ratio of 93%.
CEO Mark Steinert said all core business areas contributed with residential, retirement living and logistics and business parks each up more than 15%.
“Retail, which reliably provides around 60% of the group’s earnings, was up 4.2% on a comparable basis,” Steinert said.
The retail portfolio performed strongly in FY15 with high occupancy, positive leasing spreads on new leases and renewals and lower incentives. The portfolio also recorded the strongest specialty sales growth in four years of 7%, with total moving annual turnover up 4.5%. The best performing categories were food catering and fast casual dining, communication technology, services, homewares and apparel.
CEO commercial property John Schroder said Stockland achieved comparable specialty sales per sqm 12.6% above the Urbis average.
“This reflects the success of our active management approach which has seen us undertake small projects and remixing in a number of centres to meet the specific needs of their customer base.
“We are also starting to see the benefit of the major redevelopments we have undertaken over recent years as these assets progressively stabilise. In FY15 we opened major redevelopments at Hervey Bay in Queensland, Baldivis in Perth and the first stage of Wetherill Park in Sydney. The final stages at Wetherill Park, Point Cook in Melbourne, Glasshouse in the Sydney CBD and Harrisdale stage one in Perth are all underway and will complete in FY16. These developments represent a combined investment of $550 million with an expected stabilised average yield of 7 – 8%,” he added.
Another strong performer was the residential business, which reported an operating profit of $166 million, up 73.5%. During the year, Stockland settled 5,876 lots and lifted return on assets to 17% on the core portfolio.
“Over the last two years we have launched six new projects and these have contributed strongly to our result. We are on track to launch a further five new projects in FY16,” CEO residential Andrew Whitson said.
“We’ve also broadened our market reach with the introduction of medium density homes and completed homes at a number of our projects.
“During FY15 we continued to replenish our pipeline with the acquisition of 4,000 lots. We have also been quick to activate many of these with the majority of new projects on track to deliver profit within two years of acquisition,” Whitson said.
The logistics and business parks reported FFO of $131 million up 5.1% and office FFO improved by 4.2% to $78 million.
Schoder said Stockland’s exposure to the office sector remains tactical, reflecting its view on the state of the market.
“The majority of our portfolio is located in the improving Sydney market. Brisbane, Perth and ACT markets remain challenging and in late FY15 we entered into a conditional put and call option to sell our half share of Waterfront Place and Eagle Street Pier in Brisbane,” Schroder said.
Finally retirement living operating profit jumped 19.9% to $48 million. Stockland maintained gearing at 23.4%.
Steinert said Stockland was well placed to continue to deliver profitable growth.
“While the outlook for specific markets remains uneven, with some caution among businesses and consumers, we expect conditions to remain reasonably supportive.
“We have commenced the new year with a high level 6 of residential contracts in hand and retirement living net reservations, and with good momentum in retail sales. Interest rates are anticipated to be stable and we expect the economy to continue to grow, albeit at below trend levels,” Steinert said.
“We are targeting growth in underlying earnings per security in FY16 of 6 – 7.5% and FFO per security of 8.5 – 10%, assuming there is no material change in market conditions. Commercial property should maintain moderate growth in returns with comparable NOI growth expected to be 2 – 3% and comparable FFO growth 3 – 4%. We expect to achieve around 6,000 residential lot settlements, allowing for some production constraints in Victoria and NSW and continued slowing in the WA market.
“We have updated our distribution policy to pay the higher of 100% of trust taxable income or 80 – 90% of underlying profit. In line with this, FY16 distribution is targeted at 24.5 cents per security, assuming no material change in market conditions,” Steinert concluded.
Australian Property Journal
