Stockland earnings hit but shares climb
Diversified real estate heavyweight Stockland has warned of a further downgrade to its earnings outlook after an additional $49 million hit on several underperforming projects.
Stockland has kept investors onside by sticking to its promise of paying a 24.4¢ dividend per stapled security for this financial year.
In February, when the company released its interim result, Stockland wrote off $306 million across its residential business.
But outlining a long-awaited strategic review for the nation's second-largest listed property group, new chief executive Mark Steinert said Stockland would boost its focus on the retail and industrial businesses, although it would continue to maintain exposure to the retirement living sector.
Mr Steinert plans to also focus more heavily on reducing costs.
This includes centralising Stockland's human resources, finance and marketing operations, as well as improving efficiency in all operations.
He said the initial costs of the changes would cause the company's earnings per stapled security to drop by 25 per cent this financial year. Even so, Stockland units ended up 1.8 per cent to $3.89, as investors welcomed the commitment to the dividend.
As with Mirvac, Stockland will look at more large mixed-use housing developments such as projects in Sydney's west. Despite the write-downs in its residential business this year, Mr Steinert said the housing market was showing some signs of recovery.
"The residential platform will improve in coming years with the launch of new projects," he told an analyst briefing.
The retail sector was also seen as a growth area, evidenced by the strong performance of several Stockland centres, which had a high weighting to food and supermarkets. Meanwhile, a rise in online retailing had boosted demand for warehouses to provide storage. This would remain a focus for the group's development sector, he added.
A flat outlook for the nation's office market means the group will reduce its exposure so it holds only premium office towers in central business districts.
The group has forecast a return on assets for the sector of about 6.5 per cent this financial year.
Some analysts had been speculating the flat housing market could lead to an eventual exit from the retirement sector but Mr Steinert said joint venture options were being looked at. Stockland holds the first right of refusal over retirement assets with FKP Property and there has been talk of discussions being held about possible joint ventures.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free