FIIG - The Fixed Income Experts

News and Education

Stockland 1H14 - strong results with a positive outlook

by Ekaterina Skulskaya | Feb 18, 2014

Key points:

  1. Statutory profit was $298m for 1H14, compared with a $147m loss in 1H13. Net operating cashflow was solid at $303m, a significant 51.5% increase from $156m in 1H13.
  2. Unadjusted gearing was down to 24% compared to 27.6% in 1H13 and within Stockland’s target range of 20-30%.
  3. Improvements in the residential market support a positive outlook.

Last week Stockland reported their 1H14 results, headlined by an increase in semi-annual net profit of $298m versus a $147m loss in the 1H13 (see Table 1). On a half year basis, net operating cashflow was a solid $303m, a significant 51.5% increase from $156m in 1H13. Underlying (operating) NPAT was up 4.8% on 1H13 to $267.2m.

Unadjusted gearing was down to 24% compared to 27.6% in 1H13 and within Stockland’s target range of 20-30%. Weighted average debt maturity was extended from 5.2 years to 5.7 years. Chief Financial Officer Tiernan O’Rourke commented, “The group had maintained its strong balance sheet with a continued focus on active capital management. At 24%, gearing remains comfortably within our 20-30% target range”.

Table 1
Residential operating profit rose 39% to $39m on 1H13 reflecting an 8% increase in settlements and operating efficiencies. The solid results reflected the company’s efficiency improvements, the reshaping of the residential portfolio and improvement in the residential market with EBIT of $120m in 1H14 compared to $76m in 1H13 and operating profit $39m in 1H14, up 39.3% from 1H13 (see Table 2).

Table 2

Commercial property business was up 3.8% to $249m with a strong performance from the retail business where net operating income was $174m, up 9% on 1H13. Although the retail environment remained soft, Stockland continued to achieve rental growth on both lease renewals and new leases. The company’s managing director and CEO Mark Steinert commented: “The operating environment during the half was mixed, with challenges in retail and office markets balanced by a significant improvement in residential. Pleasingly Retail, our largest business, continued to prove resilient with our shopping centres achieving a solid result for the period despite soft conditions. Our Residential business capitalised on the improved housing market with a substantial uplift in sales”. 

Office underlying profit dropped 11.7% to $53m in 1H14, while the Retirement business performed well, up 42% to $17m compared with $12m in 1H13. The business remained focused on “organic growth” with a strong development pipeline.

Improving results, an improving residential market and an extension to the debt maturity profile support the Stockland fixed rate bonds.

From a relative value perspective, the 2020 bonds generate a high income of 7.00% and have a yield to maturity of 5.10%. They are available to retail and wholesale clients from $10,000 and remain one of our favourites. 

Please speak to your FIIG representative if you are interested in Stockland bonds.

All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities. Stockland bonds are available to wholesale and retail investors.