Stockland deliver $903 million statutory profit for FY2015

Australia’s biggest residential developer, Stockland Property Group, expects the property cycle to continue for several years as it believes all of Australia’s metropolitan markets are suffering from an undersupply of homes.

Stockland chief executive Mark Steinert made the prediction in announcing the group’s $903 million statutory profit for the 2015 financial year. The result was up 71.4% on the previous year, due to revaluations of its commercial property assets and an $80 million gross profit from the sale of its stake in Australand.

“The typical cycle, without a severe economic disruption, normally lasts seven to eight years. This one started in January 2013 so I think it’s very premature to be calling the top,” Steinert said. 

He moderated his forecast by adding strong growth in inner Sydney and Melbourne was likely to slow given affordability challenges and recently introduced constraints to investor lending.

Sales activity was lower in Western Australia, and moderate price falls were possible during the 2016 financial year.

Queensland’s market was improving driven by a strengthening labour market and affordability relative to Sydney and Melbourne, which was expected to boost interstate migration. 

Stockland focuses on the affordable end of the residential market. It sells 75% its homes to owner occupiers, with 42% of total sales to first home buyers.

The group reported a 73.5% increase in profit in its residential business to $166 million and said it had a record 3742 contracts for home sales on hand.

Operating profits in each of its commercial divisions were also up: by 6.4% in its office business; 4.2% in its retail division; and 3.1% in logistics and business parks. The retirement living business lifted its operating profit by 19.9%.

The group’s underlying profit increased 9.4% to $608 million. 

Underlying earnings per security was 25.9 cents, up 7.8%. Funds from operations was $657 million, up 14.7%.

The group paid a 24 cent distribution. 

For the 2016 financial year, it forecast earnings per share of 6-7.5% and funds from operations per security of 8.5-10%.

It lifted its target payout range for distributions for the 2016 financial year to 80-90% of underlying profit, up from 75-85%, and forecast distributions of 24.5 cents per security. 

The writer is a shareholder in Stockland Property Group