"Conservative management" could be Sunland's best bet through market downturn
Written on the 22 August 2018 by Paris Faint
Despite exceeding its guidance, Sunland Group's (ASX: SDG) profit margin has dipped 11 per cent as market headwinds begin to emerge.
The Gold Coast-based property developer posted a $298.7 million revenue, down 26 per cent on FY17, as well as a 19 per cent reduced earnings before interest and tax result of $51.9 million.
While Sunland's FY18 financial performance may have left shareholders wanting, the group's operational progress was lifted by $32 million worth of new site acquisitions across Brisbane and Victoria.
Sunland also launched four new residential projects including Magnoli Apartments, 272 Hedges Avenue and Arbour Residences on the Gold Coast and The Hills Residences in Brisbane.
Managing director Sahba Abedian says that although property sales were diminished at $290.4 million, down 26 per cent, the "cyclical nature" of the industry is expected to revive performance beyond 2019.
"Following a nine-year period of expansion, the Australian property market has entered an inevitable phase of consolidation and adjustment," says Abedian.
"This is the natural consequence of the cyclical nature of our industry and evidenced by a reduction in the volume of property sales, a reduction in foreign investment, a tightening of the lending environment and softening economic conditions.
"Accordingly, Sunland Group's strategy is focused on establishing the company for the next phase of the cycle through strategic, counter-cyclical portfolio replenishment and the conservative management of our balance sheet."
Sunland continued its series of share buyback programs over the past year which has consolidated SDG shares on issue by 54 per cent.
This capital management strategy has paid off for the company in terms of financing new developments and supporting growth in earnings per share.
In the year ahead, Sunland will continue to focus on growing its portfolio which is weighted to the more reliable owner-occupier market, with a special focus on downsizers and first home-buyers.
"In the 2019 financial year Sunland Group will continue to actively monitor the market for new opportunities to increase our development pipeline in strong performing markets that continue to offer value for off-market, infill acquisitions," says Abedian.
"The Group's mid-rise portfolio will also continue to expand as part of an integrated housing strategy that enables us to mitigate risk through staged delivery."\Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Author: Paris Faint