Stockland · ASX:SGP
Stockland — FY2010 Earnings Presentation
38 slides from Stockland's earnings presentation, Aug 11, 2010
Slide 1: FY10 Results Presentation - 11 August 2010
Settlers Hills, WA FY10 Results Presentation - 11 August 2010 Matthew Quinn, Managing Director Tim Foster, Chief Financial Officer www.stockland.com
Slide 2: Solid FY10 performance
Solid FY10 performance Earnings in line with guidance • Underlying Profit $692m, EPS 29.1 cents • Residential Communities - record FY10 settlements and record contracts on hand for FY11 • Solid Commercial Property result with marginal comparable NOI growth and stabilising asset values • Good Retirem
Slide 3: Underlying Profit up 10%, EPS down 20% due to FY09 equity raise dilution
Underlying Profit up 10%, EPS down 20% due to FY09 equity raise dilution Summary of key metrics FY10 FY09 Statutory Profit / (Loss) $478.4m ($1,801.9m) Underlying Profit1 $692.3m 9.6% $631.4m Underlying Earnings per Security2 29.1 cents 20.3% 36.5 cents Distribution per security 21.8 cents 35.
Slide 4: Residential
North Lakes, QLD Residential
Slide 5: Residential markets resilient with Victoria the standout performer
Residential markets resilient with Victoria the standout performer Private Detached House Approvals1 National • Recent interest rate rises have dampened the positive sentiment 4,000 generated by historically low interest rates and the First Home Owners Boost • Activity stabilising as affordability c
Slide 6: Record FY10 Residential Communities sales performance
Record FY10 Residential Communities sales performance Revenue Residential Communities FY10 FY09 • Record lot settlements: Lots settled1 5,236 4,303 22% Increased volumes in all states Revenue - Retail $917m $768m 19% Lower proportion of superlot settlements as - Superlots $91m $105m 13% builde
Slide 7: Big improvement in Upgrader activity, FHBs remain active
Big improvement in Upgrader activity, FHBs remain active First Home Buyers (FHBs) Buyer composition (no. of deposits) • Very high leads and deposits in 1H10 due to First 3,500 2,975 3,101 3,169 Home Owners Boost 3,000 328 568 738 137% in FY10 • Now back to target range of 20% - 30% of sales 2,500
Slide 8: Strong Residential Communities price growth and margins
Strong Residential Communities price growth and margins Prices Retail lot settlements - average price per sqm • Average price per sqm of lots settled up 12% due 450 $37 $12 Average sale price per sqm to price increases and product mix ($5) 300 • Average price per lot up 4% to $205k1 $403 $359 150 Ma
Slide 9: Focus on faster speed to market and improved return on NFE
Focus on faster speed to market and improved return on NFE Large and diverse land bank - 65,700 lots; $1.8b net Land bank comprises mostly active projects 1 funds employed (NFE)1 • Provides 90% coverage of revenue targets for next Active projects (live or commencing within 2 yrs) $1.4b - 33,300 lots
Slide 10: Residential Communities - Market leader with strong growth strategy
Residential Communities - Market leader with strong growth strategy Strategy to increase sales by lifting market share • Extend market-leading position into new growth Market share in active corridors1 corridors • Disciplined acquisition assessment filters: project Stockland 24% scale; population gr
Slide 11: Affordability is a challenge - Product innovation creates opportunities
Affordability is a challenge - Product innovation creates opportunities Affordability moving towards top end of benchmark Mortgage repayments as % of household income 1 • Will come under further pressure if variable 50% mortgage rate rises outpace income growth Masterplanned communities offer produc
Slide 12: Apartments - Pre-sales to deliver strong cash flow
Apartments - Pre-sales to deliver strong cash flow Apartments FY10 FY09 • Trade-out of existing projects and disposal of undeveloped sites going to plan - net cash flow to Apartments settled 315 175 be reinvested in Residential Communities Revenue $278m $227m EBIT (before interest in COGS) $40m $10m
Slide 13: Residential Communities is well placed for further growth in FY11
Residential Communities is well placed for further growth in FY11 Market leader • 24% market share in active corridors Enter FY11 with record contracts on hand • Good Upgrader and Investor demand • Strong momentum from first home buyers in Victoria, but likely to taper during FY11 • Sales rate remai
Slide 14: Retirement Living
Gowanbrae, VIC Retirement Living
Slide 15: Good result from Retirement Living and strong platform for growth
Good result from Retirement Living and strong platform for growth Good profit performance Retirement Living FY10 FY09 • Operating Profit up 13%, includes AASB 140 Operating Profit1 $36m $32m 13% accounting change1 Cash coverage ratio3 38% 34% 4% Established unit turnovers 253 217 17% • Operating
Slide 16: Retirement Living - Key growth business as the population ages
Retirement Living - Key growth business as the population ages Strategy to grow and diversify the village portfolio Growth of >65 year old demographic is an opportunity Population aged 65+ years • Develop new industry-leading villages (m) millions 8 25% • Drive operational efficiencies in establishe
Slide 17: Stockland's strategy is to create a national Retirement Living platform
Stockland’s strategy is to create a national Retirement Living platform Accelerating growth and diversification Summary of Aevum offer • Successful completion of Aevum transaction ► All-cash offer to acquire the outstanding share capital Compelling would create a genuine national platform: Offer of
Slide 18: New villages under development performing well
New villages under development performing well 6 projects under construction in 3 states Development pipeline (% of units) • Approx. 900 units to complete WA 21% • $230m cost to complete ($380m total cost) • Development margin range 15% - 20% QLD 39% (pre overhead, excludes DMF income) NSW 9% Total
Slide 19: Commercial Property
Rockhampton, QLD Commercial Property
Slide 20: Commercial property markets are stabilising
Commercial property markets are stabilising Rents National retail demand outstrips supply1 • Retail: 24 700 23 Population growth drives retail sales, in turn 600 Supply „000 sqm Population (m) driving tenant demand for new space 500 22 400 21 Consumers spending less, but still expect 300 modest rent
Slide 21: Commercial Property delivered solid performance
Commercial Property delivered solid performance • FY10 NOI $534m: Commercial Property Commercial ($m) Operating Property FY10 FY092 Profit ($m) Net operating income: Headline NOI down 1.4% due to reduction in - Retail 266 255 income from non-core assets sales ($177m1 in FY10 and $406m in FY09) - Off
Slide 22: Strong Retail performance
Strong Retail performance Highlights Specialty shop lease expiry profile2 • NOI $266m: FY11 Headline and comparable income growth +4% 21% FY15+ 500 specialty shop lease transactions completed 33% with +5% average rental growth • Comparable MAT growth +1.5% FY12 18% • Comparable specialty MAT $8,976
Slide 23: Minimal lease expiry risk in Office and Industrial portfolio
Minimal lease expiry risk in Office and Industrial portfolio Low Office Office and and Industrial Industrial rent rent atat 1 1 risk risk Highlights Office Industrial Total • 260,000m² of office and industrial space leased: FY11 FY12 FY11 FY12 FY11 FY12 Ave. face rent: Office +12%, Industrial -4% $m
Slide 24: Commercial Property asset values are stabilising
Commercial Property asset values are stabilising • Average cap rates steady in 2H10: Commercial Property book values ($b)3 9 97% of investment property assets1 0.4 0.1 (0.3) (0.4) independently valued in FY10 8 • Net valuation decrement in 2H10 due to asset 7 specific issues: 7.9 7.7 6 $21m decremen
Slide 25: Commercial Property strategy to re-weight to Retail and enhance asset quality
Commercial Property strategy to re-weight to Retail and enhance asset quality • Retail development underpins growth strategy • Strategy to develop larger, higher quality retail assets • Drive returns through internal asset management, leasing and development capability • Recycle capital from sale of
Slide 26: Good progress with Retail development pipeline
Good progress with Retail development pipeline Projects completed in FY10 Estimated Estimated % Estimated cost to fully specialty • Balgowlah and Riverton completed total complete leased year one shops cost ($m) ($m) yield leased1 Projects underway Regional2 retail redevelopments under construction
Slide 27: One Tudor Street, London
One Tudor Street, London UK www.stockland.com
Slide 28: Continued orderly work out of UK operations
Continued orderly work out of UK operations Progress in FY10 Profit and assets FY10 FY09 • $40m of asset sales Operating Profit / (Loss) $1.2m ($0.7m) Assets: • $2m profit on sale of impaired projects excluded - 100% owned $237m $312m from Underlying Profit - Joint ventures, net of non- recourse off
Slide 29: Capital Management
Triniti Business Campus, NSW Capital Management www.stockland.com
Slide 30: Strong balance sheet
Strong balance sheet Target gearing range 25% - 35% of tangible assets Key FY10 metrics S&P rating A- / Stable • Currently at 18% but will progressively move Drawn debt1 $3.0b towards lower end of target range to fund 3-R Cash on deposit $0.9b growth opportunities Available undrawn committed debt fa
Slide 31: Cash flow, net interest and tax
Cash flow, net interest and tax Operating cash flow Operating cash flow $m • Operating cash flow up 31% - lower interest 900 229 152 expense (76) 600 (116) Gap between interest paid and interest expense has 791 300 602 narrowed 520 0 • Interest capitalised has decreased (lower interest FY09 Revenue
Slide 32: Significant cost reductions and efficiency gains
Significant cost reductions and efficiency gains Residential $m FY10 FY09 FY08 • Organisation structure now flatter and more Residential 140 163 177 efficient • Substantial savings in marketing and other key Retirement Living 28 28 23 variable costs Commercial Property1 36 30 45 Retirement Living UK
Slide 33: Distribution policy simplified
Distribution policy simplified Distribution policy • Board policy is to have a high payout ratio reflecting the predictability of earnings, while maintaining some retained earnings to fund growth • Payout ratio changed for FY09 to greater of 80% of AFFO or Trust Taxable Income Further review • Furth
Slide 34: Strategy and Outlook
Highlands, VIC Strategy and Outlook www.stockland.com
Slide 35: Focus on 3-R growth strategy
Focus on 3-R growth strategy Diversified model drives competitive advantage Retail Retirement Living Residential Communities Strategy Strategy Strategy Extensive $2.5b retail Increase market share and Grow market share through development pipeline, returns through development of geographic and produ
Slide 36: Importance of sustainability and people to success
Importance of sustainability and people to success Outstanding results in sustainability • Davos Global 100 Most Sustainable Organisations Overall ranking 24 Highest rated diversified property company globally • Australian Ethical Investor 2009 Sustainable Company of the Year • Reductions in Commerc
Slide 37: Strategic investments
Strategic investments Principles Strategic stakes as at 30 June 2010 • M&A activity will only be contemplated if it secures Cost Market value high quality assets that fit the 3-R strategy and Price Total Price Total enhances securityholder returns % ($) ($m) ($) ($m) • Strategic stakes provide optio
Slide 38: In summary, strong growth opportunities in FY11 and beyond
In summary, strong growth opportunities in FY11 and beyond All businesses enter FY11 in good shape • Residential Communities - record contracts on hand • Retail - low vacancy and good rental growth • Office and Industrial - lease expiries largely de-risked • Retirement Living - profits from developm