• Funds From Operations (FFO): $251 million, down 5.6%.
• FFO per Security: $0.105, down 5.6%.
• Investment Management FFO: $298 million, down 7%.
• Development Segment FFO: $36 million.
• Gearing: Within 20% to 30% target range.
• Weighted Average Cost of Debt: 5.3% for the half, expected to average 5.4% for the full year.
• Operating Cash Flow: Negative $187 million for the first half.
• Logistics Portfolio FFO Growth: 8.7% with positive leasing spreads of 33.2%.
• Occupancy Rate: Logistics at 97.3%, Town Centres over 99%.
• Comparable FFO Growth: 3.5% for Investment Management.
• Masterplanned Communities Settlements: Just under 2,000 in the first half, targeting 6,200 to 6,700 for the full year.
• Land Lease Settlements: Expected around 600 for the full year.
• Distribution per Security Guidance: Around 75% of post-tax FFO.

• Warning! GuruFocus has detected 10 Warning Signs with STKAF.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Stockland Corp Ltd (STKAF) reported a solid financial result with pre- and post-tax funds from operations (FFO) of $251 million, reflecting strong operational performance.
• The company successfully completed the acquisition of 12 actively trading Masterplanned Communities, integrating them into their platform and launching two additional communities.
• Stockland Corp Ltd (STKAF) expanded its capital partnerships in the Logistics sector, forming new partnerships with M&G Real Estate and KKR, with a combined initial portfolio value of approximately $800 million.
• The Logistics portfolio delivered strong performance with comparable FFO growth of 8.7% and positive leasing spreads of 33.2%, benefiting from strong market rental growth.
• The company maintained a strong balance sheet with gearing within the 20% to 30% target range and a weighted average cost of debt of 5.3% for the half year.

Negative Points

• FFO per security was down 5.6% compared to the previous period, reflecting a material second half skew in residential development.
• The Investment Management portfolio's FFO decreased by 7% due to asset disposals in FY24, impacting overall earnings.
• Operating cash flow for the first half of FY25 was negative $187 million, primarily due to increased development spend and second half weighting of settlement cash inflows.
• The Development segment's FFO was impacted by a material second half skew in Masterplanned Communities settlement volumes and no contribution from third-party Commercial Development activities.
• The company faced high cancellation and default rates in the Victorian market, although there was some improvement in settlement performance in the second quarter.

Q & A Highlights

Q: Can you elaborate on your data center strategy and the timing of project commitments? A: Tarun Gupta, CEO: We've completed a 32-megawatt data center at MPark in partnership with Ivanhoe Cambridge. We're now expanding capacity at MPark Stage 2. Future projects may include turnkey developments in partnership with operators. We're currently working through these strategies and will share more details soon. The data center at MPark will take 12 to 24 months to get the DA in place, followed by user and capital partner discussions.

Q: How will profit recognition work for the new Logistics partnerships? A: Tarun Gupta, CEO: The investment assets sold do not contribute to FFO but are slightly above our book value, affecting NTA. The partnerships are about expanding our portfolio with globally recognized partners, contributing management fees over time.

Q: Can you explain the margin changes in the Masterplanned Communities (MPC) for the first half and expectations for the second half? A: Andrew Whitson, CEO of Development: The first-half margin was impacted by a mix of lower-margin settlements, particularly from WA, and fixed project costs over fewer lot settlements. We expect margins to normalize in the low-20s in the second half with increased volume.

Q: What are the expectations for cash flow in the second half and beyond FY25? A: Alison Harrop, CFO: We expect improved operating cash flow in the second half due to increased settlement receipts. Land payments will be higher, but cash flow will improve with contracted disposal proceeds. Future cash flow will depend on balancing development expenditure and settlement receipts.

Q: What are the future opportunities for capital partnerships, and which sectors are you focusing on? A: Kylie O'Connor, CEO of Investment Management: We see strong demand in Logistics and living sectors. We're exploring opportunities in retail and mixed-use sectors, including apartments. Our goal is to align capital partners across all operating sectors to fund growth and improve portfolio quality.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.