Stockland’s Shares Plunged On ASX After Reporting 6.7% Decline In Its FFO For H1 FY19

Australia’s leading diversified property group, Stockland (ASX: SGP) has released its half-year results for FY 2019. For the half-year period, the company has reported Funds from Operations (FFO) of $407 million which is 6.7% less than the previous corresponding period (pcp) reflecting residential profit skew to 2H19. The company’s FFO per security also decreased by 6.7% to 16.8 cent. Following the release of half-year results, the share price of the company decreased by 3.05% as on 20 February 2019 (AEST 1:44 PM).

The company’s Statutory profit for the half-year period decreased substantially by 56.2% to $300 million as compared to pcp. The decrease in the Statutory profit is driven by the losses on financial instruments, reduced commercial property valuation increases and retirement living fair value changes. Further, the Statutory profit is also impacted by tax expense in 1H FY19, compared to the tax benefit in 1H FY18. The company has reported Return on equity (ROE) of 10.6% which is down by own 60 basis points on FY 2018.

While commenting on the half-year results, Stockland's Managing Director and CEO Mark Steinert told that the half-year results were generally in line with the company’s expectations. According to him, the company has reported lower first-half profit primarily due to a second-half residential profit skew in FY19 versus an atypical first half skew in FY18, and the impact of retail remixing.

He also informed that the Weak housing markets and ongoing headwinds in the retail sector will likely see the company’s full-year results at the lower end of its guidance range for FFO per security growth of 5-7 percent.

During the half year period, the company renewed its leadership team and undertook a detailed review of its assets and refined its strategy to position its business for sustainable growth. The new team has accelerated the execution of the company’s strategy and increased the scope of capital release from commercial property asset sales. The company is driving further improvement in the quality of its portfolio and it is also improving its income resilience.

While commenting on the outlook for Fy 2019, CEO Mr. Mark Steinert informed that the current market conditions are mixed, with sound economic fundamentals including continued employment growth, low interest rates and a bi-partisan commitment to infrastructure investment being offset by the deterioration in the housing market, reduced credit availability, investor tax policy uncertainty and weak consumer sentiment. The company is expecting further price declines in residential land of around 5% in CY 2019, concentrated in Sydney and Melbourne. According to him, the company is on track to achieve FFO per security growth of around 5 percent, at the lower end of its 5-7 percent guidance range, reflecting weaker market conditions, and a full year distribution of 27.6 cents per security, representing growth of 4%.

In the past six months, the share price of the company decreased by 12.73% as on 19 February 2019. SGP’s shares traded at $3.655 with a market capitalization of circa $9.07 billion as on 20 February 2019 (AEST 1:44 PM).


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