Stockland back in black with $1.1b profit

Booming demand for warehouses and logistic hubs together with a spike in housing settlements has propelled property giant Stockland back into the black with a $1.1 billion statutory profit for the pandemic-hit 2021 financial year.

That profit compared to a $21 million loss in the prior year and was bumped up by solid valuation gains across the industrial sector and stabilisation in market conditions for the office and retail assets.

New Stockland CEO Tarun Gupta says the company is well positioned for future growth.Credit:Dominic Lorrimer

The funds from operation (FFO), being the metric used to measure revenue that excludes lumpy property valuation movements, fell 4 per cent to $788 million. It was in line with market expectations, but brokers warned of a mixed year ahead.

A distribution of 24.6¢ per security was declared, 2.1 per cent above 2020, representing a payout ratio of 75 per cent of FFO. It will be paid on August 31.

The $10.8 billion ASX-listed Stockland is a diversified company that develops, owns, manages and invests in residential and is the country’s biggest home and land package developer, retirement living, office and commercial sites and malls and large town centres.

Newly appointed chief executive Tarun Gupta, who was the former chief finance director at Lendlease and replaced the retiring Mark Steinert in June, said he will also focus on the land lease sector, known more commonly as manufactured homes and the burgeoning life sciences sector, which encompasses the growing demand for medical research.

Overall residential net sales volumes were up 54.2 per cent versus the 2020 year, to 7,700 lots and settlement volumes up 19.8 per cent to 6,374 lots.

He said FFO guidance for 2022, is between 34.6-35.6¢, implying a wide range of between 4.5 per cent to 7.6 per cent growth.

“While varying levels of uncertainty with COVID-19 remain, Stockland is in a strong position to respond and adapt. Continuing residential sales momentum, a significant development pipeline and a strong balance sheet, position us well for future growth,” Mr Gupta said.

“Current market conditions remain challenging with ongoing lockdowns and community transmission of COVID-19. All forward-looking statements including 2022 financial year earnings guidance are provided on the basis that the vaccination roll out continues and COVID-19 restrictions ease towards the end of calendar 2021.”

Mr Gupta said he will undertake a strategic review of the business.

Morgan Stanley’s property analyst Lauren Berry said the flagged strategic review, due to be completed by end of 2021, show early intentions are to sell down some of the retail/retirement assets in order to fund the development pipeline.

“Overall a solid result setting Stockland up for the 2023 financial year,” Ms Berry said.

In early trade, Stockland shares are 0.3 per cent higher at $4.57.

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