Stockland Sees Funds from Operations Growth Slowing in FY18

Australian property company Stockland (SGP.AU) said its annual net profit rose by 34%, although its growth in funds from operations would likely ease this year partly due to higher energy costs.

Stockland reported a net profit of 1.2 billion Australian dollars (US$939 million) for the 12 months through June, up from A$889 million a year earlier.

Annual funds from operations, the company's preferred measure of ongoing operating profits, increased by 8.5% to A$802 million. Funds from operations per security rose by 7.4% to 33.4 cents, above tightened guidance for growth of 6-7% provided in February.

"Our Residential and Retirement Living businesses achieved record results, and Commercial Property delivered a good performance across the different asset classes, despite challenging conditions in the retail market," said Chief Executive Mark Steinert.

Some analysts are worried that Stockland is vulnerable to a softening in Australia's housing market as regulators act more aggressively to curb risky lending. Further clouds hang over the Sydney-based company's shopping mall portfolio as debt-laden consumers grow leery of spending in stores and Amazon.com Inc. (AMZN) readies a retail offering that could stoke online sales.

Stockland said it expects funds from operations per security to grow at a more-muted 5.0%-6.5% in the current fiscal year, with growth skewed to the first half due to the timing of residential settlements.

"We expect FY18 funds from operations growth to be slightly lower than FY17, primarily due to non-Sydney office let-up assumptions, higher commercial property outgoings, particularly electricity prices, and lower retirement living development profit reflecting project timing," Stockland said.

It forecast a 4% increase in distributions in the 2018 fiscal year to 26.5 Australian cents per security.

-Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

August 15, 2017 19:30 ET (23:30 GMT)