This article is from the Australian Property Journal archive
STOCKLAND has delivered a solid 8.7% increase in underlying profit for the full year of $752.4 million, but managing director Matthew Quinn has forecast flat growth for the year ahead due weaker consumer confidence and slower residential market.
Stockland’s statutory profit jumped 57.7% on FY10 to $754.6 million and underlying earnings per security was up 8.6% from 29.1 cents to 31.6 cents.
Gearing rose from 18% to 22% and Stockland has only $32 million debt maturing in FY12.
Quinn said all core areas of the business recorded profit growth.
The residential communities business posted an operating profit growth of 9% to $233 million. The division’s operating profit margin was 22% and the average price per sqm was up 11% to $447. As at June 30 Stockland had 2,288 contracts on hand valued at $485 million. In FY11, the group secured 27,000 lots with an end value of $4.8 billion.
Quinn said residential communities achieved an excellent result with lower than expected settlement volumes offset by strong price and margin growth.
“First Home Buyer leads are strengthening as a result of our affordable offering, while upgraders remain a key source of leads despite being hampered by a soft established market,” he added.
However Quinn said whilst employment is strong and household incomes are growing, buyers remain cautious and weak consumer sentiment is delaying purchasing commitments.
“Market conditions remain variable across the country but are paradoxically weak in Queensland and Western Australia, the two states with the greatest exposure to the resource sector,” he continued.
Despite this, Quinn said to underpin sales growth in FY12, Stockland will rollout nine new projects in FY12.
Meanwhile the discontinued apartments business posted an operating profit of $29 million. Existing projects and the disposal of undeveloped sites are expected to release an extra $180 million net cash by FY15.
The retirement living business saw strong operating profit growth 47% to $53 million, following the successful acquisition of Aevum, which delivered EPS accretion of 1% in FY11, ahead of the 0.6% target.
In the commercial property division, operating profit rose by a modest 2.9% to $524 million with comparable net operating income up 4.4% due mainly to a solid contribution from retail.
Office NOI was down 5% to $183 million, but industrial increased by 3% to $77 million. The decrease in office NOI reflects the impact of asset disposals.
Retail contributed NOI of $286 million, up 7.5%. However Quinn expects a slightly lower comparable retail NOI growth in FY12.
“Stockland is undertaking significant research to understand the impact of online shopping on consumer behaviour. We see online retailing as both a threat and an opportunity, and we are differentiating our retail centres by creating spaces that act as social and community hubs, and building in flexibility to our development plans and retail mix,” he added.
Stockland had 68% of its investment property assets independently valued in FY11 with a net valuation increment of $74 million due to rising income and slightly firmer cap rates.
Finally the United Kingdom business continues to break-even and Stockland expects a profit contribution of around $10 million in FY12 from the sale of London projects.
Quinn expects the carbon tax to have minimal impact on the group.
“We are not a big emitter of carbon so there is no direct cost through the requirement to purchase carbon credits. Our emissions are mostly indirect and are associated with energy consumption in our office buildings and shopping centres. We have reduced our carbon emissions intensity (CO2/m2) by 34% for office and 16% for retail from FY06 to FY11. We are targeting a further reduction of 7% for office and 20% for retail by FY14,” he added.
Meanwhile Quinn said there are short-term challenges in the year ahead, due to weak consumer sentiment and a slow residential market.
He has forecast FY12 EPS to be same as FY11 as long as interest rates do not rise further and there is no material flow-on impact to the underlying Australian economy from recent global market volatility.
“It is also clear that the weakness in household spending is not homogeneous across various consumer categories and our long-term strategy to focus on affordable products and services, offering value for money and meeting day-to-day household needs, is paying dividends,” he concluded.
Australian Property Journal
