Stockland · ASX:SGP
Stockland — FY2008 Earnings Presentation
38 slides from Stockland's earnings presentation, Aug 14, 2008
Slide 1: FY08 Results Presentation
For personal use only FY08 Results Presentation 14 August 2008 www.stockland.com.au Agenda • Overview • FY08 Results • Finance & Capital Management • Business Unit Commentary • Strategy Stockland Merrylands proposed development • Summary & Outlook Artist’s impression -2- 1
Slide 2: Overview and Group Results in Summary
Overview For personal use only The Events of FY08 Our Response • Maintain low gearing (28.9%) through active capital and cash flow management Credit crunch – less liquidity, higher cost of debt • Recycle capital - $787m of asset sales • Review feasibility of development pipeline (higher hurdles) • C
Slide 3: Business Unit Financial Results: Retail, Office & Industrial
Business Unit Financial Results For personal use only RETAIL Retail Operating Profit $260m UK Comparable rental income growth 6.7% Net revaluations^ + $102m Retirement Industrial FY08 Asset sales $561m Living Portfolio Summary Apartments Office Total Portfolio (39 centres) $4.0bn Total MAT* $4.7bn R
Slide 4: Business Unit Financial Results: Residential Communities, Apartments
Business Unit Financial Results For personal use only RESIDENTIAL COMMUNITIES Lots Settled 3% 4,188 UK Revenue 13% $1,101m Retail Operating Profit 10% $274m Net Margin % 24.9% Retirement Industrial Living Portfolio Summary Apartments Gross Assets $2,232m Office No of Projects 65 Lots Controlled 66,2
Slide 5: Business Unit Financial Results: Retirement Living, Stockland UK
Business Unit Financial Results For personal use only RETIREMENT LIVING Operating Profit $41.5m UK Retail New units sold* 239 Existing units turned over 257 (8%) Average price growth 13% Retirement Living Industrial Occupancy 99% Apartments Portfolio Summary Office Residential Communities Existing u
Slide 6: Capital Management
Capital Management For personal use only Hugh Thorburn – Finance Director • Update on credit markets • Balance sheet position • Accounting matters • Distributions Tooronga, Glen Iris, VIC Artist’s impression - 11 - Capital Management FY08 FY07 S&P Rating A-/stable A-/stable Gearing (debt/total tangi
Slide 7: Accounting Matters & Distributions
Accounting Matters For personal use only Capitalised interest • On active projects in accordance with accounting standards • Fully taken account of in feasibilities and carrying value assessments Inventory valuation • Full review • Focus on realisable values and capitalised costs • Minor provision f
Slide 8: Commercial Property – Market Conditions
Commercial Property For personal use only John Schroder - CEO • Integration of Commercial Property • Market Conditions • Retail Portfolio • Office & Industrial Portfolio 9 Castlereagh Street, Sydney - 15 - Commercial Property – Market Conditions Demand Confidence 140 25 130 20 • The March interest r
Slide 9: Commercial Property – Market Conditions: Supply
Commercial Property – Market Conditions For personal use only Supply - Office Construction Price Index • Vacancy is currently at or near historic lows 175 in most markets • Elevated levels of supply risk over the next 150 three years as developments complete Index (10% increase in stock nationally)
Slide 10: Retail – Operational Update and Development Pipeline
Retail – Operational Update For personal use only • Strong rental growth in FY08, likely to moderate in FY09 Retail - Operational Update • Low occupancy costs (12.1%) provide protection against lower sales growth • Non-discretionary spending less volatile to consumer slowdown – most of our centres a
Slide 11: Outlook – Retail; Office Operational Update
Outlook - Retail For personal use only • Retailers are increasingly cautious as consumer confidence declines • But demand for our shops is holding up • Comparable rental growth from the portfolio is likely to ease in FY09 • Recent non-core disposals have Stockland Balgowlah, NSW strengthened the qua
Slide 12: Office & Industrial – Development Pipeline and Outlook
Office & Industrial – Development Pipeline For personal use only • Completed 2 projects in FY08: Total cost $24m , Average IRR 10.5%, Average project yield 7.9% No of Estimated Forecast Current 10 Year % Leased Project Status* Projects Total Cost Yield on Average Forecast (By GLA) (A$bn) Cost Cap Ra
Slide 13: Residential: Managing Through Cycles
Residential For personal use only Denis Hickey - CEO • Managing through cycles • Market health indicators • Market outlook by state • Outlook by business North Lakes, QLD - 25 - Managing Through Cycles SGP Profit vs Dwelling Approvals • FY08 result was strong considering Australia market conditions
Slide 14: Market Health Indicators and Outlook By State
Market Health Indicators For personal use only Short Medium Indicator Status Term Term Population Growth • Strong growth – fuelled by immigration Interest Rates • Risen from historic lows – easing expected Credit Availability • Tightened – but still available up to 90% LVR Unemployment • Historicall
Slide 15: Outlook – Residential Communities and Apartments
Outlook – Residential Communities For personal use only • Continue to be the dominant profit Contacts on Hand - Year End July 2008 contributor in FY09 1,200 Sales 300 1,000 250 Revenue ($m) • Contracts on hand are lower, but still a 800 200 strong result Lots 600 150 400 100 • We expect lower demand
Slide 16: Outlook – Retirement Living; Summary
Outlook – Retirement Living For personal use only • Business continues to perform very well Retirement Living Development Pipeline (Generated from existing projects) 1000 • Embedded growth from existing villages 800 Number of ILU's (revenue and asset management) 600 400 • High levels of pre-sales an
Slide 17: Stockland UK
Stockland UK For personal use only • Property market conditions are very tough • UK economy heading for significant downturn Implications for Stockland − Buyers are scarce − Sales of several projects deferred − Projects will be carried on balance sheet until market improves Tudor Street, London − Ov
Slide 18: Stockland's strategy remains unchanged
Stockland’s strategy remains unchanged For personal use only Optimise performance from existing businesses UK Retirem ent Living Capital partners / JV’s to fund growth Retail Apartm ents Integrated mixed use Leverage synergies from capability diversification (mixed use) Residential Office Com m unit
Slide 19: Summary & Outlook
Summary & Outlook For personal use only • Stockland is in a good position − Sound balance sheet − Well proven strategy − Excellent property skills − Experienced team • Commercial Property business in very good shape • Short term weakness in Residential; to rebound strongly in medium term • Challengi
Slide 20: Consistent Delivery of Strategy; Summary of Results
Consistent Delivery of Strategy For personal use only EBIT FY08 Asset 30 June 2008 Actual Strategic Weighting Actual Strategic Weighting Recurring Income Commercial Property 67% 66% Residential 5% 8% Stockland UK 2% 0% Other -3% 0% Subtotal 71% 60-80% 74% 70-80% Trading Commercial Property 1% 0% Res
Slide 21: Segment Result
Segment Result For personal use only Residential Retail Office & Stockland Other Eliminations Consolidated Industrial UK $m $m $m $m $m $m $m External segment revenue 1,327 379 334 81 8 - 2,129 Inter-segment revenue 124 52 26 - 11 (213) - Unallocated revenue - - - - - - 5 Total Revenue 1,451 431 360
Slide 22: Total P&L Effect of Interest; Debt & Hedging Profile
Total P&L Effect of Interest – FY08 For personal use only Profit and Loss Effect FY08 $m Interest paid 299.7 Interest capitalised: Development assets (181.2) Investment assets (9.9) (191.1) Finance costs 108.6 Capitalised interest expensed via COS 52.8 Total P&L effect 161.4 - 43 - Capital Managemen
Slide 23: Financial Instruments: Mark-to-Market; Retail Sales & Occupancy Costs
Financial Instruments: Movement in Mark-to-Market For personal use only FY08 FY07 $m $m Ineffective Hedges* Profit & Loss - Unrealised (207) 21 Profit & Loss – Realised (NZ FECs) 21 - Effective Hedges* Balance Sheet (92) (194) Net impact of movement in Financial Instruments (278) (173) * As defined
Slide 24: Retail Portfolio Sales
Retail Portfolio Sales For personal use only Total MAT % MAT % Comparable ($m) Growth Growth Supermarkets 1,846.9 7.4 5.5 DDS 806.6 4.9 5.9 Specialties 1,400.6 8.2 5.4 Mini Majors/Cinemas/Other 618.8 14.2 14.6 TOTAL 4,672.9 8.0 6.7 - 47 - Retail Sales - Portfolio Summary % MAT Specialities % Occupan
Slide 25: Retail Sales - Portfolio Summary (continued)
Retail Sales - Portfolio Summary (continued) For personal use only % Property Total MAT % MAT Specialities Occupancy ($m) Growth MAT ($/m2) Cost Jimboomba 52.6 N/A N/A N/A Lilydale 60.6 19.0 5,206 N/A Merrylands* 153.3 (5.4) 9,909 11.2 Nowra 126.1 5.0 9,735 10.8 Piccadilly 18.6 1.8 7,197 19.3 Rivert
Slide 26: Retail - Development Pipeline
Retail - Development Pipeline For personal use only UNDER CONSTRUCTION Forecast Cost Forecast Yield FY09 FY10 FY11 FY12+ ($m) (%) Rockhampton 94 8.5 Merrylands (Stage 1 & 2) 169 7.5 Balgowlah * 130 6.3 Cammeray * 56 5.7 Tooronga * 42 6.8 Cairns – Coles remix 15 7.0 Total Under Construction 506 7.1 P
Slide 27: Retail - Revaluations
Retail - Revaluations For personal use only Previous BV Valuation (adjusted for Capex) Property ($m) ($m) % Increment Cap Rate % Stockland Bay Village 187.5 197.9 (5.3) 6.75 Stockland Baulkham Hills 137.0 128.1 6.9 6.50 Stockland Forster 126.5 111.1 13.9 6.25 Stockland Wendouree 115.0 92.2 24.7 6.50
Slide 28: Retail Revaluations; Office Market Commentary
Retail – Revaluations (Continued) For personal use only Office and Industrial – Revaluations Previous BV (continued) Valuation (Adjusted for Capex) Property ($m) ($m) % Increment Cap Rate % Botany Town Centre (50%), Auckland NZ 185.0 170.1 8.8 5.40 Lynmall Shopping Centre (50%), Auckland NZ 95.5 85.
Slide 29: Industrial Market Commentary; Office and Industrial Revaluations
Industrial – Market Commentary For personal use only SGP Under Construction Pre-Commitment Land Values Rental Portfolio m² * Growth * Sydney 56% 569,248 54% Ù Ù/Ø Melbourne 21% 360,418 32% × × Brisbane 17% 337,062 61% × × Adelaide 6% 62,987 85% × × Perth 0% 232,092 77% × × * Arrows represent change
Slide 30: Office and Industrial – Revaluations (continued)
Office and Industrial – Revaluations (continued) For personal use only Office and Industrial - Revaluations Previous BV Valuation (adjusted for Capex) Property ($m) ($m) % Increment Cap Rate % Office Trace and Todd Building, ACT 18.6 21.5 (13.5) 8.75 Cox & Drakeford Building, ACT 20.0 21.1 (5.2) 8.7
Slide 31: Office and Industrial – Revaluations (continued)
Office and Industrial – Revaluations (continued) For personal use only Office and Industrial – Revaluations Previous BV (continued) Valuation (Adjusted for Capex) Property ($m) ($m) % Increment Cap Rate % Industrial 72 Formation Street, Wacol, Qld 12.4 12.9 (3.9) 7.50 42 Birnie Avenue, Lidcombe, NSW
Slide 32: Lease Expiry Profile – Industrial; FY08 Acquisitions
Lease Expiry Profile – Industrial For personal use only June 2007 June 2008 Vacant Vacant 5% FY08 5% 10% FY09 13% FY12+ FY09 FY13+ 43% 15% 39% FY10 14% FY10 14% FY11 FY11 13% 13% FY12 16% WALT: 4.0 Years WALT: 4.0 Years Expiry by GLA - 63 - Office & Industrial – FY08 Acquisitions Acquisition Cost In
Slide 33: Office & Industrial – FY08 Disposals and Development Pipeline
Office & Industrial – FY08 Disposals For personal use only Office Property & Industrial – FY08 Disposals Disposal Date Disposal Value Passing Yield ($m) Office Northpoint, NSW Mar 08 225.6 5.5% Total – Office 225.6 - 65 - Office & Industrial - Development Pipeline Forecast Forecast Building/ UNDER C
Slide 34: Office & Industrial Pipeline; Residential Geographic Diversity
Office & Industrial - Development Pipeline (continued) For personal use only Forecast Forecast Building/ MASTER PLANNING FY09 FY10 FY11 FY12+ Cost ($m) Yield (%) Land Area (m2) Port Adelaide, SA 5 8.2 6,810 Waterfront Place Restaurants, QLD 16 6.4 2,103 Toowong - Town Centre, QLD 156 6.9 24,507 150
Slide 35: Residential – Financial Result
Residential – Financial Result For personal use only FY08 Residential Retirement Total Total Apartments Communities Living FY08 FY07 Performance Units / Lots Sold No. 4,188 225 239 4,652 4,349 Revenue $m $1,101m $212m N/A $1,313m $1,157m Operating Profit $m $274m $11m $42m $327m $273m Net Margin % 2
Slide 36: Communities – Projects Launched and Restocking
Communities – Projects Launched For personal use only Projects Launched FY08 Darcy's Peak Bayswood Northshore Riverstone Woodgrove Eve - Formely Ravenhurst Sierra Projects Completed in FY08 Highcroft Hidden Grove Monterey Central The Parks of Bellevue Hills Sanctuary The Boardwalk - 71 - Communities
Slide 37: Communities – Lots Sold; Contracts on Hand
Communities – Lots Sold For personal use only FY08 FY07 No. Lots Avg Price* No. Lots Avg Price* Sold $(000) Sold $(000) New South Wales 266 390 248 381 Victoria 1,029 235 906 182 Queensland 2,348 284 2,202 263 Western Australia 545 329 714 263 TOTAL 4,188 284 4,070 252 * Inc GST - 73 - Residential -
Slide 38: Stockland contact details and disclaimer of liability
For personal use only Stockland Corporation Limited ACN 000 181 733 Stockland Trust Management Limited ACN 001 900 741 25th Floor 133 Castlereagh Street SYDNEY NSW 2000 DISCLAIMER OF LIABILITY While every effort is made to provide accurate and complete information, Stockland does not warrant or repr