Stockland 1H23 result reflects softer conditions

Stockland has released its results today for the half year to 31 December 2022 delivering Funds From Operations (FFO) of $353m and FFO per security of 14.8 cents in 1H23, both up by 0.7% relative to 1H22. The results were impacted by softer conditions across the market, including the impacts on development projects from extended wet weather periods.

Stockland were trading today down -3.5% following the announcement to $3.76 per unit, a -36% discount to NTA, as investors see further pain ahead as interest rats continue to rise.

Managing Director and Chief Executive Officer, Tarun Gupta, said β€œWe have continued to progress the execution of our strategy while delivering solid operational and financial results in an uncertain macroeconomic environment.

The Groups’ Adjusted Funds From Operations (AFFO) was $310m and AFFO per security was 13.0 cents in 1H23, up by 5.7% compared with 1H22, primarily due to lower tenant incentives over the period.

Statutory profit for 1H23 was $301m, down from $850m in 1H22. The statutory result for this period includes $30m of net commercial property revaluation gains, compared with a net uplift of $543m in the previous corresponding period, reflecting the high quality of Stockland’s portfolio in an environment of softening capitalisation rates.

Tarun Gupta said, β€œOur 1H23 financial result reflects the strength of our diversified business model. 1H23 FFO was up slightly despite a significant expected earnings skew to 2H for our MPC business. The earnings impact of this skew was offset by a higher contribution from our Commercial Property investment portfolio. This reflects solid like-for-like net operating income growth and the contributions from Logistics developments completed over FY22 and 1H23.

β€œThe result also reflects the initial financial benefits of the strategic initiatives that we implemented over FY22. In February 2022, we announced the establishment of two significant capital partnerships – the Stockland Residential Rental Partnership (SRRP) and the M_Park Capital Partnership. The 1H23 result includes meaningful Management Income and Development Income contributions from both partnerships, along with our other joint ventures and management agreements across our portfolio.

”We have extended our existing relationship with Mitsubishi Estate Asia through an agreement to invest in masterplanned communities. The new capital partnership is expected to take effect in mid-2023 and will have a mandate to invest in Stockland owned and market originated masterplanned communities.”

β€œFollowing the divestment of our Retirement Living business in July 2022, we have continued to reshape our portfolio in line with our strategic priorities, executing on ~$266m of non-core asset sales at a ~4% aggregate premium to book values.”

Stockland expects FFO to be more heavily skewed to 2H in FY23 than in recent periods due to the timing of MPC settlements.

A distribution of 11.8 cents per security was declared, reflecting a payout ratio of 80% of FFO.

Stockland maintains its FY23 FFO per security guidance range of 36.4 to 37.4 cents on a pre-tax basis.

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