Stockland Group, Australia’s second-largest listed property group or Real Estate Investment Trust, says it expects earnings per share to fall 7% in fiscal 2009, after factoring in its forecast for nominal earnings growth, previously announced write-downs on its UK assets and a share sale last week.
CEO, Matthew Quinn told yesterday’s annual meeting that:
"As we have previously disclosed, we remain on track to achieve our guidance of nominal EPS growth in FY09, before allowing for the write-down in UK asset values that was announced on 3 October, and the dilutive impact of the share placement that was announced on 8 October.
"After taking these two things into account, EPS in FY09 will be around 7% per cent lower than the previous financial year. In providing this guidance we are also assuming there is no further material deterioration in economic conditions during the rest of the year."
Up to a couple weeks ago of Previously Stockland said it couldn’t give guidance for 2009 because of a ‘lack of visibility, but talked about a 1% rise in 2010.
But when disclosing the write-downs in the UK, Stockland indicated that returns would be lower after these were taken into account.
Stockland shares surged 8.3%, or 39c, to $5.09 at the close.
The company said the 2008 result was a record and "the 26th consecutive year of increasing net profit".
"Our operating profit of $674 million was an increase of 10.3 per cent over the previous year," chairman Graham Bradley told the annual general meeting yesterday in Sydney.
"We report operating profit rather than accounting profit because we believe it provides the most meaningful indication of the profit we have derived from running our business. Our profit attributable to security holders in 2008 was $705.2 million, but this includes a number of items, such as investment property revaluations, that move from year to year – up and down – not directly related to how our operating businesses are performing.
"We seek to provide investors with a clear understanding of the true performance of our business."
The lower profit expectations however put Stockland close to the top of the pecking order among the beleaguered property groups. Others, such are Raptis, are in near terminal decline.
Mirvac, a major competitor, has funding and financial pressures after two capital injections this year from Middle East and Singaporean investors, while Lend Lease has downgraded its outlook because of a slump in the UK.
Valad, another big property player, more on the funds management side with a late involvement in Britain, has withdrawn its 2009 distribution forecast because of the turmoil in financial markets. It also cancelled its February 2009 distribution.
Mr Quinn reaffirmed earnings would be skewed to the second half of the financial year, aided by stronger residential markets following interest rate cuts and the increases in the first home buyers allowances.
Stockland warned this month it would take $110 million in charges on its struggling UK residential development business. It joined Lend lease and Valad Property Group in revealing write-downs in the stricken UK property sector.
It also raised $300 million last week through a share sale and set itself up to expand in retirement villages with stakes in FKP Properties and smaller Aevum.
"While we’re realistic about the possibility that the property market may take some time to bounce back, we believe that we are well positioned for the recovery, and that we may, in fact, be able to take advantage of opportunities to acquire some high quality long-term assets at good prices in the months ahead,” Chairman Graham Bradley told shareholders.
"As you would expect, the Board and management have reviewed our operations and strategies very carefully in light of the challenging market conditions we face.
"We believe that our business direction remains fundamentally sound. We are confident that our focus on property fundamentals, quality assets and our conservative capital management policies remain the right approach.
"Our decision to freeze our Directors’ fees and the base pay of senior executives for the 2009 financial year further demonstrates our commitment to always manage our business prudently and appropriately," he said.
