The half year reports from Boral and Stockland gave us two sides of the housing boom yesterday – Boral from the supply of building materials such as bricks and concrete – Stockland from the building and marketing of homes to new and existing buyers (investors and private buyers and retirees).
Yesterday we saw both companies release their interim results and both companies are doing very nicely from the boom, thank you very much. Both have listed payments to shareholders as a result.
As a result of a solid rise in earnings for the half year, Boral yesterday boosted its interim dividend 29% after a 30.7% lift in earnings.
The shares jumped 3.5% to $5.32, which was a solid performance in yesterday’s big sell.
Boral declared an interim dividend of 11 cents a share, up 29% and a payout ratio of 60% of group earnings per share of 18.2 cents. Boral’s board also formalised its dividend policy and said it now expects to maintain a payout ratio of between 50% and 70% of earnings before significant items.
Boral said the East Coast housing boom drove earnings higher in the six months.
CEO Mike Kane said in a statement, ”The success of the first half is underpinned by a very strong residential construction market in NSW, solid performance in south-east Queensland, further recovery in the United States and a successful growth strategy in the gypsum business in Australia and Asia”.
He said that cutting costs and price increases helped improve margins in the six months ended December 31, with group earnings before interest and tax (EBIT) rising 19% to $200 million.3 The dramatic plunge in oil prices helped Boral by trimming its diesel fuel costs by $10 million in the half.
Group revenue fell 4% to $2.194 billion, reflecting lower sales from Boral’s brick business after forming an east coast brick joint venture with CSR.
Stockland experienced a boom in demand for its houses and lifted dividend and says it remains on track to achieve full year guidance.
The company is one of the country’s biggest home builders and says the boom in construction and demand (especially in NSW) helped push underlying profit up 8.1% to $313 million.
But unlike Boral, Stockland’s securities eased 2% to $3.956 in yesterday’s sell-off.
The interim dividend was 12.2 cents a security, up from 12 cents and the group said it is on track to achieve its guidance range, and have tightened this to 6.5% – 7.5% earnings per security growth in 2016, with funds from operations growth of 9% to 10%.
“We are targeting a full year distribution of 24.5 cents per security, assuming no material decline in market conditions,” CEO Mark Steinert said in yesterday’s statement.
Steinert said the residential business saw a 45% plus jump in earnings and capitalised on favourable market conditions in Sydney and Melbourne, ending the half with a record number of contracts on hand of 4,109, an increase of 377 over January 2015.
“Stockland’s residential business is tracking marginally above the top end of its target through the cycle settlements range of 5,000 – 6,000 lots, allowing for some production constraints on recently commenced projects," Mr Steinert said.
But he did note a softening trend appearing in the current half year in Sydney and Melbourne as demand slowed and house price growth dropped.
