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STOCKLAND

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Stockland : CEO discusses FY15 results and strategy

12/22/2015 | 05:22pm EST

Stockland Group Limited (ASX:SGP) MD and CEO, Mark Steinert discusses the company's FY2015 results, its property portfolio, development pipeline and focus for the company.


Transcription of Finance News Network Interview with Stockland Group (ASX:SGP) CEO and Managing Director Mark Steinert. 
 
Carolyn Herbert: Mark, could you start by giving us an introduction to Stockland?
 
Mark Steinert: Stockland’s Australia’s largest diversified real estate trust, we have around $12 billion in assets; half of our assets are shopping centers, 20 per cent are in residential communities, around 10 per cent is in retirement living and logistics and business parks, and the balance in office. We’ve been doing those areas of business for 63 years and our unique customer proposition is to create happy communities where people thrive.

Carolyn Herbert: Turning to financials, can you tell us about the key aspects of the company’s full year FY2015 results?

Mark Steinert: FY2015 was a strong year for Stockland with a combination of implementing our strategy and also having favourable market conditions. So our statutory profit was up 71.4 per cent to $903 million. Underlying profit was up 9.4 per cent to $608 million and Funds from Operation which is a key metric for the  REITs was up 13 per cent and our underlying earnings per security was up just under 8 per cent. We also maintained a strong balance sheet, with our leverage sitting around 23.4 per cent, maintaining our S&P A minus credit rating and our return on equity was 9.9 per cent.

Carolyn Herbert: And Mark what was the FY distribution?
 
Mark Steinert: Distribution for FY2015 was 24 cents and for FY 2016 assuming we don’t see deterioration in market conditions we’ve indicated 24.5 cents will be the distribution.

Carolyn Herbert: Mark, taking a look at operations now, what is the split between commercial, residential and retirement living and how have they performed?

Mark Steinert: So half our assets being in shopping centres is a key driver for us, and that area has been performing strongly, so our retail sales were up 4.5 per cent, the best numbers in four years, and that’s underpinned rental growth that sat around 4.5 per cent. We saw similar increases in our logistics and business park office assets through letting up. On the residential side very strong growth there up around 71 per cent and that was a combination of new projects with higher profit margins as well as bring operational efficiency into the business and our retirement living area grew by 20 per cent. Once again improved operational efficiency, increased levels of development, particularly with bring Cardinal Freeman in the inner west of Sydney into production and making sure our customer proposition was strong.

Carolyn Herbert: Can you tell us about some of your major projects and what’s in the pipeline?
 
Mark Steinert: So major projects in our shopping centre portfolio include Wetherill Park in Sydney, a $228 million project we have just opened 3 or 4 months ahead of schedule pre-Christmas, also other key projects in retail include H and M and Zara Home in Pitt Street Mall, Point Cook in Melbourne, Baldivis in Perth and Hervey Bay in Queensland. They’re all  7 to 8 per cent yields and accretive, we’ve got a whole range of new projects in residential where we’ve launched over 20,000 lots and we’ve just brought to market our largest project ever on the Sunshine Coast being Aura which will ultimately house 50,000 people. There’s $350 million of development across logistics and business parks and in retirement living there are historically high levels of construction with the core project being Cardinal Freeman in Sydney’s inner west which is a high quality, top end apartment project which is a unique proposition for customers.
 
Carolyn Herbert: Thanks Mark. And can you give an update on guidance for FY2016?
 
Mark Steinert: We’ve really guided around earnings growth to sit between 6 and 7.5 per cent and for distributions to be 24.5 cents.

Carolyn Herbert: Finally Mark, what is the focus for the next 12 months?

Mark Steinert: So our focus for the next 12 months is continuing to implement our strategy in a disciplined way. We’ve got a three pillared strategy, it’s to grow our customer base in a reliable way and to build on the 80 per cent plus customer satisfaction that we have in all our business areas. It’s also to grow our asset base through both development and selective acquisitions. It’s to improve our operational efficiency through both system enhancement and making sure we have high staff engagement which is currently over 85 per cent and as part of that to also build on our community contribution through the Stockland Care Foundation and it’s to maintain a strong balance sheet, so that we can fund the organic growth I’ve talked about.

ENDS
 

ę Financenewsnetwork 2015
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Financials
Sales 2022 3 015 M 2 165 M 2 165 M
Net income 2022 818 M 588 M 588 M
Net Debt 2022 3 728 M 2 678 M 2 678 M
P/E ratio 2022 12,7x
Yield 2022 6,67%
Capitalization 9 606 M 6 921 M 6 899 M
EV / Sales 2022 4,42x
EV / Sales 2023 4,27x
Nbr of Employees 1 600
Free-Float -
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Income Statement Evolution
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Mean consensus HOLD
Number of Analysts 11
Last Close Price 4,03 AUD
Average target price 4,70 AUD
Spread / Average Target 16,5%
EPS Revisions
Managers and Directors
Tarun Gupta Chief Executive Officer, MD & Director
Tiernan Patrick O'Rourke Chief Financial Officer
Thomas William Pockett Non-Executive Chairman
Sharmila Tsourdalakis Chief Innovation, Marketing & Technology Officer
Justin Louis Chief Investment Officer