Image: Canva, Stockland.
  • Tightened FFO guidance of 31.6 to 35.6 cps
  • $850M profit includes $543M in property revaluation gains
  • NTA up 6.3% to $4.23 per security

Stockland (ASX: SGP) posted a statutory profit of $850 million in its 1H22 report, up from $339 million in the previous corresponding period. The company is executing on its strategy with some major announcements made alongside the half year report.

SGP announced that it entered into a binding agreement to divest its retirement living business and established two new capital partnerships, one with Ivanhoé Cambridge, and one with Mitsubishi Estate.

Revenue from continuing operations Up 0.5% to 1,188
Revenue from discontinued operations n/a 64
Net profit after tax from continuing operations attributable to securityholders Up 149.1% to 837
Net profit after tax from discontinued operations attributable to securityholders n/a 13
Funds from operations attributable to securityholders Down 9.3% to 350

Company net tangible assets rose 6.3% to $4.23 per security, however, funds from operations (FFO) fell 9.3% to $350 million. FFO per security was 14.7 cents, and FFO guidance for FY22 was tightened to 35.1 to 35.6 cps, previously guidance was 34.6 to 35.6 cps.

The rise in statutory profit was partly due to $543 million in net commercial property revaluation gains, equating to a 5.5% uplift to Jun 2021 book values.

“We delivered a solid operational and financial result in 1H22, and have tightened our full year FFO per security guidance range,” said MD and CEO Tarun Gupta.

“While maintaining our focus on operational excellence across our core business, we have also made significant progress toward implementing the strategy that we outlined in November of last year.

“We welcome two of the world’s leading institutional investors, Ivanhoé Cambridge and Mitsubishi Estate, to our third party capital platform.

Tarun Gupta
Tarun Gupta of Stockland. Image – LinkedIn.

“The formation of two new capital partnerships, divestment of the Retirement Living business and further sale of non-core assets in our town centres portfolio over the half concentrates our focus on the core of our business.

“It enables us to redeploy capital toward opportunities in the residential, logistics and workplace sectors that we believe will generate superior returns on a sustainable basis.”

Commercial property down

Stockland’s commercial property saw a 2.8% decline in FFO, despite the positive comparable growth of +2.3% across the portfolio. SGP said the increased trading profits were offset by the impact of non-core Town Centre disposals, Covid-related rental abatements, and higher Commercial Property net overheads.

Town Centres saw a growth of 2.0%, generating an FFO $153 million. Rental abatements due to Covid reduced Town Centre FFO by $27 million, as compared to the previous corresponding period where only $8 million in reductions was recorded.

Logistics was much stronger, FFO rose 58.2% to $87 million. On a comparable basis, FFO growth was +3.7% excluding the impact of COVID-related abatements in the previous period. Growth was underpinned by 99.9% portfolio occupancy, fixed rental escalations and 5.1% average rental growth on new leases.

Workplace FFO was flat compared with the previous corresponding period at $56 million. Post-balance date, Stockland entered into a capital partnership with Ivanhoé Cambridge for the staged development of up to $2 billion at the M_Park Precinct in Macquarie Park, Sydney.

Masterplanned communities FFO was down 10.3% to $122 million. Stockland said: “This reflects a more material skew in settlement volumes and FFO contribution to the second half of the financial year than in recent periods, consistent with previous guidance.”

“Enquiries remain well above long run averages, with market supply unable to keep pace with strong demand. This is reflected in 1H22 net sales of 3,815 lots, in line with sales volumes in 1H21 that were elevated by State and Federal Government stimulus measures, such as HomeBuilder, that have subsequently been withdrawn,” said CEO, Communities, Andrew Whitson.

Stockland said land lease communities business is performing ahead of the assumptions that underpinned the company’s Halcyon acquisition in August 2021. The combined business generated 212 net sales with price growth of approximately 12% over 1H22.

“The solid operational performance delivered in 1H22 provides us with good earnings visibility for the remainder of the financial year, notwithstanding the broader market uncertainty brought about by the ongoing COVID19 pandemic, elevated input cost inflation, and interest rate volatility. Accordingly, we are tightening our FFO per security guidance range,” said Mr Gupta.

“The strategic transactions that we have announced post-balance date provide us with an extremely strong balance sheet position and are also expected to be accretive to earnings in FY23.”

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