It was a great honour to be invited by my fellow board directors to become Chairman last October.
I am pleased to report that Stockland delivered a strong result across our diversified portfolio for the 2017 financial year. This outcome is a result of the disciplined and consistent implementation of our strategy.
Funds from operations (FFO) grew by 8.5% to $802 million and FFO per security grew 7.4% on the prior year. This was slightly above our previous guidance range for the year. Statutory profit was $1,195 million, up 34.4%.
In our Commercial Property business, our Retail Town Centres are the largest component of our portfolio. We delivered 3.5% comparable FFO growth, and continued to remix our assets to reflect changing customer trends.
Within the financial year we made good progress on our Commercial Property development pipeline. The first stage opening of our $412 million Stockland Green Hills shopping centre redevelopment in Maitland, NSW, was well received by locals, and our customers in Ballarat eagerly anticipate the opening of our $37 million redevelopment of Stockland Wendouree.
Our Logistics and Business Parks portfolio achieved strong comparable FFO growth with positive leasing results. Recent industrial redevelopments in Sydney and Melbourne were completed on budget and fully leased.
Our focus on delivering diverse and affordable housing options for all Australians, coupled with positive market conditions, resulted in record Residential and Retirement Living sales.
Profitability of our Residential business improved strongly, at 17.4% growth on the previous year. A record 6,604 lots were settled in the financial year, with 75% of sales to owner occupiers and more than 50% of net deposits coming from first home buyers.
We have made a number of strategic land acquisitions over the past 12 months to significantly restock our portfolio, acquiring 9,900 lots. The majority of these are in the high-performing Melbourne market. Our landbank now totals over 80,000 future housing lots nationally.
Our focus remains on owner occupiers and first home buyers, placing us in a preferred position for residential lending trends and government growth initiatives.
Our Retirement Living development pipeline is also proceeding well and we remain committed to providing high quality retirement living options for our residents. We delivered our Urban Development Institute of Australia (UDIA) award winning apartments at Cardinal Freeman The Residences in Sydney’s inner-west, our vertical village at Birtinya, Sunshine Coast is making good progress, and planning is underway at a number of brownfield projects.
As forecast, our full year distribution was 25.5 cents per security, representing a payout ratio of 77% of funds from operations.
We saw a good take-up of our distribution reinvestment plan with over 20% of securities participating, providing funds for our accretive development pipeline.
We are targeting to increase distributions by 4% to 26.5 cents per security in FY18, assuming there is no material change in market conditions.
The expectations being placed on companies continue to evolve and the Board closely monitors and engages with these changing expectations, which go to the heart of our ability to deliver long term value.
The Board is committed to an open and transparent relationship with stakeholders. We believe we have the right mix of skills and experience to oversee a high standard of governance, integrity and accountability.
In July we were delighted to welcome Andrew Stevens to the Board. Andrew is a highly regarded director with extensive expertise in the technology sector and significant commercial experience. He has strengthened the breadth and depth of knowledge and leadership capabilities on our Board and we look forward to his contribution.
As required by the Stockland Constitution, Andrew will offer himself for election by securityholders at the 2017 Annual General Meeting on 25 October 2017.
The Board recognises and promotes the importance of a strong culture and the shared benefits that this can bring to employees and securityholders.
Our employees have all contributed to the strong result for the year. It is also pleasing that we maintained a high employee engagement score of 82%, with 95% of respondents saying they are willing to work above and beyond what is required to help Stockland succeed. Our safety and employee turnover metrics improved and we were recognised by the Workplace Gender Equity Agency (WGEA) as an Employer of Choice for Gender Equality.
Our focus on sustainability remains, with many key achievements during the year including Aura, our largest masterplanned community, achieving the highest ever Green Star Communities Rating – World Leadership – of any greenfield community in Australia.
We have also retained our global sustainability leadership credentials.
We were named Global Real Estate Sector Leader by both the S&P Dow Jones Sustainability Indices and GRESB (the Global Real Estate Sustainability Benchmark) in the category Diversified – Retail/Office.
Thank you to my Board colleagues and our employees for their continued enthusiasm and dedication to delivering exceptional outcomes. The Board and I are confident we have the right management and strategy in place and look forward to discussing these results with you at our Annual General Meeting in October.