Securities in Stockland added more than 3% yesterday, hitting their highest level since last October, after the property developer said it almost doubled first-half profit and upgraded its full-year earnings outlook to growth of 8.5% from 7% previously.
Stockland securities rose 14c to $3.85, up 3.7%.
The company’s profit statement to the ASX altered the negative sentiment hanging over the stock because of fears the wet weather in Victoria and Queensland in late 2010 would delay sales and lower earnings.
While the company had told the market that it was writing record levels of new business, it did warn late last year that quite a few sales would not be settled until the second half.
Now the company says it is looking for full-year underlying earnings per security to rise to about 31.6 cents, compared with 29.1 cents for the year to June 2010.
Net profit rose to $425.1 million for the six months to December 31 compared with $213.7 million in the prior corresponding period of 2009.
Underlying profit, which removes large fluctuations associated with property valuation, rose 14% to $380.3 million and underlying earnings per security also rose 14% to 16 cents.
From that Stockland declared a distribution per security of 11.8 cents, 9% higher than a year earlier.
"Our three operating businesses – residential, retirement living and commercial property – all made good progress in the first half," chief executive Matthew Quinn said in the statement.
"We’ve maintained our conservative and disciplined approach to capital management; we have a strong balance sheet, good cash flows and long-dated debt."
The company said the upgraded guidance reflected "stronger Commercial Property Net Operating Income (NOI) growth, a better-than expected contribution from Aevum and higher Retirement Living Deferred Management Fee (DMF) accrual.
"This upgrade to 31.6 cents per security takes into account the Queensland floods, including a potential short-term slowdown in residential activity and an estimated $3 million adverse EBIT impact to the Commercial Property business in the second half, due primarily to Waterfront Place."
Stockland said its gearing, the net debt over total tangible assets, was 20% and the weighted average debt maturity was 6.2 years.
It would increase gearing to fund growth, the company said but had $600 million of cash and $500 million of available debt facilities.
The residential business increased operating profit 20% to $101 million with higher margins and solid price growth.
It had 3,188 contracts on hand at December 31, up 70% on a year earlier.
The retirement division’s operating profit rose to $23 million, including a two month contribution from the recently acquired Aevum (of $4 million).
The combined businesses had a development pipeline of 3400 independent living units.
Stockland said the integration of Aevum was going well with the takeover expected to add about 0.6% to earnings per security for the full year.
It would add a further 2.5% to earnings in 2011-12.
The commercial division’s operating income gained 8.3% to $143 million as retail rents grew by 4.3%.
There was also contributions from newly completed developments.
Despite the buoyancy from the upgrade yesterday, Stockland did warn that the 2012 financial year wasn’t looking as solid as 2011.
"Continued profit growth is expected from Residential Communities, Commercial Property and Retirement Living in FY12.
"However, FY11 is the final year of meaningful contribution from Apartments and this will lead to more modest overall FY12 EPS growth."
That was as discrete a warning as any to investors not to go overboard.
