Sunland reveals $17.7m FY19 profit, half of FY18 and well below guidance but is boosted by Gold Coast sales

Listed developer Sunland has revealed the painful impact of a slowing property market its full-year results. However, there is a reason for investors to smile

Artist impressions of the Sky Villas in Sunland's 272 Hedges Ave tower. Picture: Sunland Group

DEVELOPMENT group Sunland has logged a profit more than $10 million below its expectations amid a sluggish and slowing property market.

The Brisbane-based group, which has much of its development stock on the Gold Coast, reported a net profit of $17.7 million, half its $31.3 million 2018 profit and well short of its $27-$30 million profit guidance.

Revenue was down on the previous financial year, with the group generating $277.6 million from property sales, down from $321.6 million the previous year and logging 382 settlements, down from 487.

Earnings per share were down from 23 cents in FY18 to 13c in FY19, however it wasn’t all bad news for investors, as the group announced a final franked dividend of 4c, bringing the full-year dividend to 8c — 2c higher than the previous financial year.

The construction site of Sunland Group's 272 Hedges Ave where a 45-storey tower will be built Picture: Sunland

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In February, Sunland warned it was unlikely to make its predicted profit, adding it would take a more conservative approach in the coming year after a softening property market and a drastic writedown on a major project.

Managing director Sahba Abedian said the company’s earnings were sound in a softening property market.

“The headwinds in Australia’s residential market have had a significant influence on the slowing rate and volume of sales across the property sector during the past financial year,” he said.

“While these are being offset by the introduction of structural reform in the finance sector and historic low rates, it is unlikely that market conditions will improve significantly in the short-term.

“Accordingly, Sunland Group is focused on strategically positioning the company for the next phase of the cycle through a conservative approach to project delivery and identifying opportunities for replenishment.”

Artist impression of The Lanes Residences proposed by Sunland for a site at Clear Island Waters. Picture: Sunland Group

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Mr Abedian said Sunland’s underlying operational performance was from settlements across Sunland’s residential developments in southeast Queensland and Sydney.

The Group’s multistorey segment also contributed to the result from settlements at Marina Concourse on the Gold Coast.

Sunland reported increased balance sheet capacity, with $19.8 million in cash and $185.4 million in undrawn working capital, and said it had reduced its overall gearing to 24 per cent on a debt-to-assets ratio.

The group said a share buyback had reduced the company’s shares on issue by 58 per cent in the past decade, with the ratio of net tangible assets per share increasing from $2.47 in FY18 to $2.56 in FY19.

Artist impression of The Lanes Shopping Centre proposed by Sunland for a site at Clear Island Waters. Picture: Sunland Group

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As at June 30, the group had 13 active projects along Australia’s east coast and a $3 billion portfolio comprising 4292 residential homes, urban land lots, multistorey apartments, and an emerging retail and commercial portfolio.

This includes the luxury 44-storey 272 Hedges Ave high-rise in Mermaid Beach and the boutique Magnoli Apartments mid-rise apartment development in Palm Beach on the Southern Gold Coast.

Sunland managing director Sahba Abedian. Photo by Richard Gosling

Mr Abedian said the 2020 financial year would present both challenges and opportunities, as evidenced by the softening conditions in the current phase of the property cycle.

“Sunland is focused on delivering a stable, consistent performance during a period of continued adjustment and consolidation in the market cycle,” he said.

“This includes a strategic approach to geographic and portfolio diversification and weighting our residential portfolio towards the owner-occupier segment in strong performing markets.

“The Group’s mid-rise apartment portfolio will also continue to expand as part of an integrated housing strategy that enables us to mitigate risk through staged delivery.”