Surging residential settlements push Stockland profit up 19pc
ASX-listed property company Stockland said a surge in settlement volumes at its master-planned communities more than doubled half-year development profit in its build-to-sell housing arm and powered a 19.3 per cent jump in statutory profit to $292 million.
The listed developer, builder and investor said funds from operations – an industry measure of profit – leaped to $106 million in the six months to December from $36 million a year earlier, as settlements in its for-sale housing estate communities jumped 60 per cent to 3168.
The company lifted its half-year dividend to 9¢ per security from 8¢ a year earlier and reaffirmed guidance it published in August for full-year funds from operations of between 36¢ and 37¢, with full-year distribution of 25.2¢, in line with last financial year.
After a year in which Stockland and other residential developers benefited from falling borrowing costs and rising housing prices – which stimulate demand for new housing – the company now faces the challenge of keeping sales momentum going as rates start rising again, and construction costs keep rising.
The company’s development net overheads rose 19 per cent in the period to $112 million, reflecting higher costs from the Lendlease portfolio of masterplanned communities it acquired last financial year, as well as costs associated with “significantly higher levels of activity”.
Even so, it was a more profitable year for development. The company’s development operating margin for the first half rose to 18.1 per cent from 14.2 per cent a year earlier, reflecting strong price growth in the Queensland and WA markets, even as this was partly offset by a shift to lower margin projects and volume weighting to the second half.
Stockland maintained its forecast for between 7500 and 8500 masterplanned community home lot settlements this year.
“We delivered a strong first half result, with earnings growth supported by higher development production and continued progress in executing our strategy,” chief executive Tarun Gupta said.
“Our investment management portfolios performed well, delivering positive comparable growth across all sectors, supported by strong leasing outcomes and contributions from recent project completions.”
It recorded 254 land lease settlements in the business that sells new homes to downsizing baby boomers, up marginally from the 248 settlements it made in the same period a year earlier.
Development operating profit margin in the land lease business fell to 16.9 per cent from 21.8 per cent. The company said it had 637 contracts on hand and kept its forecast for land lease community settlements this year constant at 700 lots to 800 lots.
Funds from operations in Stockland’s investment management business slipped to $296 million form $298 million, weighed down by a 5.1 per cent decline in FFO from its logistics business to $85 million from $89 million.
But the company did show signs of growth in its $3.5 billion-logistics portfolio, with releasing spreads jumping 32 per cent on new leases and renewals negotiated during the period.
It said gearing stood at 28.1 per cent at December 31, up from 25.2 per cent at the end of the last financial year, but would fall back closer to the midpoint of the company’s 20 per cent to 30 per cent target range by year-end.
