Stockland reflects strong operational performance

25 August 2023

Stockland (ASX:SGP) released statutory profit of $440 million compared with $1,381 million during the previous period, also hit by revaluations of the property portfolio.

Stockland delivered pre-tax Funds From Operations (FFO) of $883m, up 3.8% compared with FY22, primarily due to lower tenant incentives and leasing costs in FY23 compared with FY22.

Managing Director and Chief Executive Office, Tarun Gupta said “Our FY23 result reflects a strong operational performance and the continued implementation of our strategy in an uncertain macroeconomic environment. “We delivered pre-tax FFO growth of 3.8%, while reducing our gearing by 150 basis points to 21.9%.

“Comparable FFO growth from our Commercial Property portfolio accelerated to 3.5%11 , leasing spreads remained strong for both our Town Centres and Logistics portfolios, and the disciplined delivery of our $12.9bn Commercial Property development pipeline is flowing through to higher FFO.

“Our MPC business delivered a resilient performance over FY23 in a rising interest rate environment and is positioned well to capitalise on the strong residential market fundamentals as the interest rate environment stabilises.

“Demand for our Land Lease product remained solid and settlement volumes exceeded expectations. The business is positioned to deliver significantly higher settlement volumes over the medium-term. The acquisition of five additional LLC projects subsequent to balance date will accelerate the scale-up of our LLC platform and help drive material growth in the earnings contribution from this business in future periods.

“The strategic initiatives that we implemented over FY22 are now driving meaningful earnings contributions, with the FY23 result including Management Income and Development Income from both the Stockland Residential Rental Partnership (SRRP) and the M Park Capital Partnership.”

The previously announced masterplanned communities capital partnership with Mitsubishi Estate Asia became effective in July 2023. Stockland continues to explore opportunities for additional partnerships across its Communities and Commercial Property platforms.

“We are reshaping our portfolio by delivering new, high quality Logistics assets and scaling up our Land Lease platform, and we continue to engage with a range of capital partners for opportunities across our platform,” continued Tarun Gupta.

“Importantly, we enter FY24 in a very strong balance sheet position, with gearing toward the lower end of our target range.”

FY24 FFO per security is expected to be in the range of 34.5 to 35.5 cents on a pre-tax basis, with tax expense expected to be a high single-digit percentage of pre-tax FFO.