Stockland (ASX:SGP) share price rises on strong sales growth in FY21 earnings

Shares in the Australian property giant are on the move this morning…

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The Stockland Corporation Ltd (ASX: SGP) share price has edged into the green this morning. This comes after the Australian real estate investment trust (REIT) reported its FY21 earnings.

At the time of writing, shares were changing hands for $4.56 apiece, up 0.33%.

Stockland share price up on 54% growth in residential sales volumes

The company reported several investment highlights in its report, including:

  • Funds from operations (FFO) at top end of guidance range
  • Residential sales volumes (7,700 lots) – up 54.2% vs FY20
  • Comparable moving annual turnover growth up 2.3% vs pre COVID-19 levels
  • Retirement living settlements up 22.3% on a like-for-like basis
  • Executed on its $5.5 billion logistics, life sciences and technology development pipeline, with several key leasing, planning and construction milestones reached over FY21
  • Strong capital position, with gearing of 21.4% and $2.2 billion of available liquidity

What happened in FY21 for Stockland?

Stockland recognised a strong year of growth from FY20. For instance, its residential sales volumes grew 54% year-on-year to 7,700 lots.

Moreover, the company's moving annual turnover (MAT) also grew 2.3% compared to "pre COVID-19 levels". The company also saw its retirement living settlements increase by 22.3% from FY20.

In addition, the company's gearing came in at 21.4%, "at the low end" of the guidance range of 20–30%, as per the release.

As such, Stockland retained its A-/A3 credit rating from Standard & Poors (S&P) and Moody's ratings agencies, which is considered investment grade.

In terms of distributions, Stockland's dividend remains "covered by strong operating cashflows". The FY21 distribution of 24.6 cents per share reflects "a payout ratio of 75% and (the) continued focus on retaining capital for growth".

Furthermore, the company completed $584 million of "non-core divestments". It also advised that "80% of land capital (was) acquired on capital efficient terms".

Bringing it all together, Stockland recorded a statutory profit of $1.105 billion, compared to a loss of $21 million the year prior.

However, the company's FFO came in at an approximate 5% decrease from FY20 to $788 million, despite being at the "top end of guidance range".

What did management say?

Stockland managing director and CEO Tarun Gupta said:

Our performance in FY21 reflects strong sales growth across our communities business, the resilience and quality of our retail town centres and the successful ongoing execution of our logistics, life sciences and technology development pipeline. In July 2021, we announced the acquisition of the Halcyon Group's land lease communities business, which accelerates our land lease strategy and is immediately accretive to FFO per security.

Regarding FY22, Gupta added:

While varying levels of uncertainty with COVID-19 remain, Stockland is in a strong position to respond and adapt.
Continuing residential sales momentum, a significant development pipeline and a strong balance sheet, position us well for future growth.

What's next for the Stockland share price?

It will be interesting to see how the company's FY22 plans affect the Stockland share price.

Stockland estimates that in FY22 it will retain its distribution ratio of 75–80% of FFO. It is targeting a "FFO per security in the range of 34.6 to 35.6 cents".

Moreover, the company forecasts residential settlements of 6,600 lots, on a residential operating margin of 18%.

Furthermore, management expects land lease communities to deliver 300 settlements in FY22. These factors combined "will continue to optimise the allocation of capital" across the portfolio and "accelerate conversion of the $33 billion pipeline".

The Stockland share price has climbed around 9% into the green from January 1. This has lagged the S&P/ASX 200 Index (ASX: XJO)'s return of about 14% this year to date.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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