Stockland cuts FY13 earnings guidance
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Nicholas Grove is a Morningstar journalist.
Stockland (SGP) on Tuesday said it expected underlying earnings per share (EPS) for fiscal 2013 to be at the lower end of a previous guidance range for a fall of between 10 to 15 per cent on the previous year.
At a first-quarter investor briefing, the property investor and developer attributed the downgrade to ongoing challenges in the Victorian residential market. It also said an improvement in this market was unlikely any time soon.
Stockland said the fall in EPS will be even greater in the first half, primarily due to a large skew to the second half in the company's Residential business.
Group executive and CEO of the Residential business, Mark Hunter, said market uncertainty and a lack of consumer confidence were continuing to present challenging market conditions, which were particularly apparent in the Victorian residential market.
"Although the challenging market is impacting our performance in fiscal 2013, we have made good progress in diversifying our Residential portfolio and we are meeting the market with more affordable products," he said.
"We have demonstrated our continued focus on larger, master-planned communities, which present better economies of scale and greater potential to deliver stronger returns over time.
"In the second half of fiscal 2014 and fiscal 2015 we will bring more projects to market that meet these core criteria and this will drive stronger returns."
Chief financial officer Tim Foster reiterated that Stockland is confident earnings will improve from fiscal 2014, buoyed by the contribution of new retail developments and a strong residential pipeline.
Also, Foster said the company's confidence that fiscal 2013 will be the low point in its earnings, with improvement from fiscal 2014, was demonstrated by its decision to hold its fiscal 2013 distribution at 24 cents a share, even though this will be above its target payout ratio.
"We remain very focused on actively managing our capital to improve returns," he said in a statement.
Stockland group executive and CEO of Commercial Property, John Schroder, said the company has taken decisive steps to reweight its commercial property portfolio to high-quality retail assets to provide stronger, less volatile returns over time.
"Fiscal 2013 is a key year in the delivery of the first stage our substantial redevelopment pipeline," he said.
"We're taking an innovative, robust approach to defining our trade areas and retail mix so that we have real points of difference that will continue to deliver resilience and growth."
Stockland said it will provide its next update to investors at its half-year results in February 2013.