Stockland · ASX:SGP
Stockland — H1 2019 Earnings Presentation
34 slides from Stockland's earnings presentation, Feb 20, 2019
Slide 1: 1H19 Results
For personal use only 1H19 Results Creating Sustainable Communities 31 December 2018 1 FROG PARK, AURA, QLD
Slide 2: Agenda
Agenda For personal use only 01 & 05 02 03 04 Group Update & Group Commercial Communities Summary and Finance Property Outlook Mark Tiernan Louise Andrew Steinert O’Rourke Mason Whitson Managing Director CFO Group Executive & CEO Group Executive & & CEO Commercial Property CEO Communities 2 1H19 Res
Slide 3: Results in line with our expectations
Results in line with our expectations Skew to 2H as per guidance, contributing to lower profit this half For personal use only 1H19 Results FY19 Outlook Net tangible assets 6.7% 6.4% 14.2% $4.19 per security Lower end of range ~5% 0.2% FFO per security1 AFFO per security1 Statutory Profit FFO $1,025
Slide 4: Group Strategy
Group Strategy For personal use only Our strategy is to deliver sustainable and growing returns by: • Owning and managing leading retail town centres • Growing our workplace and logistics asset base in Sydney, Melbourne and Brisbane • Developing sustainable communities Strategic priorities Accelerat
Slide 5: Strategic Priorities
Strategic Priorities New team, refined strategy & accelerating execution For personal use only Progress to date Divested $113m non-core retail centres in Strong residential operating performance, 1H19, on track to achieve $400m retail growing market share, +150bp to 15.6% divestment target Proactive
Slide 6: Future proofing our business
Future proofing our business Lifting our capabilities to enhance customer experience and profit growth For personal use only Innovation and Our People Leading In Sustainability Technology Engagement score, 7% Launched to trial and test internal innovation 83% higher than the Australian GRESB sector
Slide 7: Finance
For personal use only Finance Tiernan O’Rourke STOCKLAND BARINGA SCHOOL, QLD
Slide 8: Focus on balance sheet strength
Focus on balance sheet strength Gearing up due to settlement skew to second half For personal use only Key metrics 4.4% 26.4% 5.3 years 4.6:1 Weighted average Gearing2 Weighted average Interest cover Up 420bp principally due to settlement skew to cost of debt 1H19 second half debt maturity Stable 6.
Slide 9: 1H19 FFO lower on residential 2H skew
1H19 FFO lower on residential 2H skew Funds from operations For personal use only 1H19 $M 1H18 $M CHANGE COMP GROWTH Remixing related rent adjustments and higher statutory Retail Town Centres 218 209 4.3% (1.1%) operating outgoings Total FFO reflects sale of Canberra asset, strong demand Workplace
Slide 10: Statutory Profit to FFO and AFFO reconciliation
Statutory Profit to FFO and AFFO reconciliation 1H19 $M 1H18 $M CHANGE For personal use only STATUTORY PROFIT 300 684 (56.2%) Adjust for: Amortisation of lease incentives and lease fees 39 36 Straight-line rent (2) (2) Net change in fair value of Commercial Investment Property1, 2 (22) (124) Net u
Slide 11: Valuation results mixed
Valuation results mixed Commercial Property valuations For personal use only Results Valuation movements in 1H19 • Net valuation uplift of $27m1 in 1H19 with 86%2 of assets independently revalued over past nine months • Retail Town Centre valuation reductions reflect lower forecast Retail Workplace
Slide 12: Operating cash flows reflect 2H skew
Operating cash flows reflect 2H skew Cash Flow Summary ($m) For personal use only 1,400 Key areas of capital employed 1,200 • $115m of $350m security buy-back to take advantage of security price below NTA. Average purchase prices at 6% discount to NTA 1,000 • Operating cashflows lower due to 2H sett
Slide 13: Commercial Property
For personal use only Commercial Property Louise Mason STOCKLAND BIRTINYA, QLD
Slide 14: Solid performance
Solid performance Commercial Property For personal use only Commercial Property key metrics ASSET FFO COMP WALE VALUES ($M) CHANGE OCCUPANCY (YEARS) WACR Logistics 18% Retail portfolio on 1H18 to $2.5b Town 7,228 (1.1%) 99.4% 6.1 5.9% Now 16% group assets Centres Workplace 786 10.5% 95.5% 3.8 5.
Slide 15: Ongoing improvement in specialty sales productivity
Ongoing improvement in specialty sales productivity Retail Town Centres For personal use only TOTAL COMPARABLE CENTRES3 growth in comparable specialty sales to 4.8% $9,295 per square metre1 SALES BY CATEGORY MAT ($M)2 MAT GROWTH MAT GROWTH 1H19 GROWTH Total Turnover 6,731 4.3% 1.4% 1.0% • Steady imp
Slide 16: Curating for sustainable income growth
Curating for sustainable income growth Retail Town Centres For personal use only Retail leasing activity2 1H19 1H18 Actively managing our assets Occupancy3 99.4% 99.5% Specialty retail leasing activity Tenant retention 63% 65% • Reversion on new leases Average rental growth on lease deals4 (1.0%) 1.
Slide 17: Retail strategy refined
Retail strategy refined Broaden our capital base and accelerate improvement in the quality of our portfolio For personal use only Leadership Repositioning Invest Strengthen • Detailed and disciplined asset by • Core portfolio - leading centre in the • Broadening capital partnering • Placemaking for
Slide 18: Concentrating exposure across higher quality assets
Concentrating exposure across higher quality assets Retail Town Centres For personal use only Core portfolio differentiated performance Defining core Current Comparing the portfolios as at 1H19 Core portfolio Asset value $7.2b ~$6.0b • Leading town centre in trade area Comparable portfolio metrics S
Slide 19: Leading town centre: Stockland Green Hills
Leading town centre: Stockland Green Hills Upgrading well located assets and enhancing customer experience driving sales productivity For personal use only Strong trade area Enhance asset Sustainable growth • Reduced escape expenditure • Highly successful $421m development • Post development • Total
Slide 20: Enhancing returns, delivering quality
Enhancing returns, delivering quality Workplace For personal use only Workplace 1H19 1H18 Leases executed1 10,300 sqm 11,700 sqm Occupancy Leases under HOA1 22,700 sqm 2,400 sqm improved to Average rental growth on new leases and renewals 18.7% (6.2%) 95.5% Portfolio occupancy2 ,3 95.5% 91.1% Portfo
Slide 21: Significant development pipeline, improving quality and returns
Significant development pipeline, improving quality and returns Logistics For personal use only Logistics 1H19 1H18 Leases executed1 VIC Predominantly eastern 321,100sqm 214,700 sqm seaboard location Leases under HOA1 149,300 sqm 30,700 sqm QLD Average rental growth on new leases and renewals 1.1% 0
Slide 22: Accretive development pipeline, repositioning portfolio
Accretive development pipeline, repositioning portfolio Logistics For personal use only Completed in 1H19 Total Gross Stabilised IRR1 Completion spend ($m) lettable area Yield date (sqm) Yennora, Sydney ~26 22,600 7.8% ~13% - 14% 1Q19 Ingleburn Stage 2, ~50 36,850 7.7% ~10% - 11% 1Q19 Sydney Willawo
Slide 23: Integrated development model improving portfolio
Integrated development model improving portfolio Logistics For personal use only Ingleburn, Sydney Warwick Farm, Sydney Melbourne Business Park Workplace and Logistics growing to 2018 2018 2019 25-35% SGP portfolio Stage 1 • $77m greenfield development • Largest future logistics precinct in Melbourn
Slide 24: Communities
For personal use only Communities Andrew Whitson 24 SIENNA WOOD, PERTH
Slide 25: Settlements on track despite moderating demand
Settlements on track despite moderating demand Residential For personal use only Residential 1H19 1H18 Change 2,588 ~87% Net deposits in 1H19 Owner occupiers Total lots settled4 2,460 3,210 (23.4%) • In line with guidance, profit and settlements skewed to 2H19 Total revenue $658m $870m (24.4%) • O
Slide 26: Operating profit margin increase reflects Sydney and Melbourne settlements
Operating profit margin increase reflects higher number of Sydney and Melbourne settlements in 1H19 For personal use only Residential Growth in land prices over past five years has Operating Margin resulted in strong embedded margins 4.0% (0.3%) (1.8%) (1.2%) • High margin Sydney and Melbourne settl
Slide 27: Competitive advantage drives relative outperformance
Competitive advantage drives relative outperformance Brand, scale and location of landbank delivering high quality communities For personal use only Our scale Our brand Our landbank 10% 22% Aura 20% WA Well located landbank Qld 25% Vic 23% NSW Aura, Qld Minta Farm, Melbourne • Deep understanding of
Slide 28: Residential market outlook
Residential market outlook Challenging market conditions to continue in 2019 For personal use only Resilience of portfolio supported by: CALENDAR 2019 MARKET OUTLOOK • Ongoing demand for house and land packages in affordable, liveable VACANT LAND VACANT communities STATE SALES VOLUMES LAND PRICES CO
Slide 29: Repositioning the business to drive growth
Repositioning the business to drive growth Retirement Living For personal use only Retirement Living 1H19 1H18 Change • Enhanced product offer and relative pricing driving improved development reservations and settlements EBIT $22m $19m 14.1% Operating Profit $20m $18m 8.3% • Strong customer sat
Slide 30: Retirement Living: broaden capital base and improve portfolio
Retirement Living Broaden our capital base and accelerate improvement in performance of our portfolio For personal use only Improve quality of our portfolio Increase returns Enhance customer experience • Leveraging our landbank to drive • Lower capital expenditure and and satisfaction growth through
Slide 31: Outlook
For personal use only Outlook Mark Steinert TRINITI BUSINESS CAMPUS, Sydney
Slide 32: Group Strategy: What investors can expect
Group Strategy What investors can expect For personal use only Commercial Property Communities Group • Increased focus on improving • Continued focus on creating liveable, • Sustainable growth retail operational performance affordable and connected communities • Concentrated exposure • • Counter cyc
Slide 33: Group outlook
Group outlook Intense focus on execution of strategy For personal use only Targeting FFO per security growth of ~5%1 for FY19, at lower end of 5-7% range, reflecting weak market conditions Key assumptions for FY19: Residential Retirement Living Commercial Property FY19 distribution • Settlements abo
Slide 34: Important Notice
For personal use only Important Notice While every effort is made to provide accurate and complete information, Stockland does not warrant or represent that the information in this presentation is free from errors or omissions or is suitable for your intended use. This presentation contains forward-