Stockland · ASX:SGP
Stockland — H1 2012 Earnings Presentation
32 slides from Stockland's earnings presentation, Feb 9, 2012
Slide 1: 1H12 Results Presentation
For personal use only Stockland Merrylands, NSW 1H12 Results Presentation 9 February 2012 www.stockland.com
Slide 2: Overview of 1H12
Overview of 1H12 For personal use only 1H12 results impacted by difficult property market and economic conditions Good NOI growth from Retail – Commercial Property returns will improve further as we reweight from Office and Industrial to quality Retail Lower Residential 1H12 profit, but outperformin
Slide 3: Reasonable 1H12 result, improvement expected in 2H12
Reasonable 1H12 result, improvement expected in 2H12 For personal use only Businesses performed reasonably well in challenging market conditions • Our Retail portfolio performed strongly as new developments came online • Lower Office NOI due to asset sales and weak demand in Sydney CBD • Higher Resi
Slide 4: Summary 1H12 results
Summary 1H12 results For personal use only 1H12 1H11 Statutory Profit Statutory Profit impacted by $85m unrealised mark to market loss on $307.6m 28% $425.1m financial hedges Statutory Earnings per Security 13.1c 27% 17.9c Underlying Profit1 $350.8m 8% $380.3m Underlying Earnings per Security1
Slide 5: Profit summary
Profit summary 1H12 1H11 Change Commentary For personal use only Retail 152 143 6% New developments, 2% comparable NOI growth Office 80 94 15% Asset sales, (2%) comparable NOI growth Industrial 38 38 - 1% comparable NOI growth CP Overheads and Trading (12) (12) - Total Commercial Property 258 26
Slide 6: Capital management strategy balances growth with capital returns
Capital management strategy balances growth with capital returns For personal use only Conservative balance sheet Diverse debt sources • S&P A- / Stable credit rating Australian bank European / debt • Diverse funding sources – low bank debt Distributions Asian MTNs, $340m, 11% $300m, 10% • Weighted
Slide 7: Commercial Property: 67% of Total Assets
For personal use only 67% of Commercial Property Total Assets www.stockland.com
Slide 8: Retail returns demonstrate resilience of our portfolio
Retail returns demonstrate resilience of our portfolio For personal use only • Retail NOI growth 6%: Commercial 1H12 1H11 Change Comp Property growth - Comparable Retail NOI growth reasonable at Net operating income: 2.3% - Retail 152 143 6% 2.3% - Expect FY12 comparable growth of 3.5 - 4% - Off
Slide 9: Retail sales growth outperforming the broader market
Retail sales growth outperforming the broader market For personal use only • Total comparable MAT up 3.5%: Solid retail sales growth - Higher than ABS retail sales data SGP ABS Comparable Absolute • Two thirds of rent comes from specialty shops: MAT growth MAT growth1 - Specialty comparable MAT up 4
Slide 10: Strong tenant relationships the key to sustainable growth
Strong tenant relationships the key to sustainable growth For personal use only • Landlord and tenant relationship has never been Renewals are critical for income growth more important: Area Rental Transactions Incentive (sqm) growth - Retailer sales and margins under pressure Lease renewals 102 11,
Slide 11: Reweighting to Retail to capture stronger, less volatile returns
Reweighting to Retail to capture stronger, less volatile returns For personal use only Through the cycle, Retail assets perform better than 1H12 Return on Cost from stable assets1 Office 12% • Higher returns (Stockland 1H12 Retail Return on 10% 10.0% Cost 10%; Office 7%) 8.3% 8% 7.0% • Less non-reco
Slide 12: Creating leading Retail assets in their trade area
Creating leading Retail assets in their trade area For personal use only Good progress with orderly reweighting Commercial Property NOI weighting towards retail 2 • Retail will contribute ~65%2 of Commercial 100% Property NOI by FY14 as developments complete 80% 35% • Will be even higher with furthe
Slide 13: Major retail developments delivering strong returns
Major retail developments delivering strong returns For personal use only Completed project performing well Retail development pipeline • Rockhampton (completed mid 2010) expected Completion Est. fully Trade area to achieve 7% comparable FY12 NOI growth Est. Est leased year 1 Est. total SGP total co
Slide 14: Centres less exposed to discretionary spending and online shopping
Centres less exposed to discretionary spending and online shopping For personal use only Less exposed to discretionary spending Stockland centres are less exposed to discretionary sales • Our existing centres and future developments are Category rent contribution for Stockland vs super-regional cent
Slide 15: Continue to optimise performance of Office and Industrial
Continue to optimise performance of Office and Industrial Good portfolio occupancy and low rent at risk Low Office and Industrial rent at risk1 For personal use only • Office occupancy 94% (96% excluding space Office Industrial Total under refurbishment): 2H12 FY13 2H12 FY13 2H12 FY13 $m $m $m $m $m
Slide 16: Residential Communities: 23% of Total Assets
For personal use only 23% of Residential Communities Total Assets www.stockland.com
Slide 17: Higher Residential Communities profit expected in 2H12
Higher Residential Communities profit expected in 2H12 For personal use only 1H12 Performance and earnings visibility Residential Communities 1H12 1H11 • 1H12 profit lower, mainly due to timing of superlots Lots settled 2,209 2,195 1% 4% • Expect stronger second half: Revenue - Retail - Superlot
Slide 18: Residential land sales at ~two thirds underlying demand in 2011
Residential land sales at ~two thirds underlying demand in 2011 Underlying demand for vacant land sales and actual 2011 demand For personal use only ~85,000 ~8,000 Our 26 priority ~34,000 corridors ~43,000 ~43,000 Not yet entered 2/3 of underlying due ~4,000 to low point in the 3 corridors housing c
Slide 19: Market conditions improving for affordable product
Market conditions improving for affordable product For personal use only Polarisation in market segments Market conditions improving for SGP affordable product • Top end of market still under pressure State 1H12 market 2H12 Commentary • Stockland affordable product segment much conditions outlook fo
Slide 20: Customer leads provide strong indicator for future revenue
Customer leads provide strong indicator for future revenue For personal use only Customer leads support 2H12 outlook Customer lead volumes improving • Sustained improvement in leads since mid 2011: + 66% - Reflects growing appeal for affordable products 3,500 with strong sustainability credentials 3
Slide 21: Innovative affordable product underpins strong market share
Innovative affordable product underpins strong market share For personal use only Delivering affordable solutions Smaller lots enhance price per square metre • Buyers increasingly value conscious: sqm % change over 3 years 600 500 - Stockland house and land packages from under 447sqm 469sqm +30% 569
Slide 22: Average lot price and margins holding up, despite lower lot sizes
Average lot price and margins holding up, despite lower lot sizes For personal use only Steady margins Maintaining affordable lot prices • Average prices holding up despite decline in $ sqm + 3% established house prices 250,000 $206,000 $215,000 $212,000 $205,000 • Margins within target range: 200,0
Slide 23: Focus on capital efficient growth
Focus on capital efficient growth For personal use only Large and diverse land bank Funds mainly employed in live and impending projects • Large masterplanned communities commencing Number Net Funds within two years: of Lots Employed1 - East Leppington (NSW), Lockerbie (Vic), Live projects 25,700 1.
Slide 24: Retirement Living: 9% of Total Assets
For personal use only 9% of Retirement Living Total Assets www.stockland.com
Slide 25: Retirement Living Operating Profit flat but cash metrics growing
Retirement Living Operating Profit flat but cash metrics growing For personal use only Customer demand robust but prices flat due to Operating profit and cash metrics broader residential market conditions $m • Operating profit impacted by nil price growth in 35 321 10% 30 1H12 compared to 2% in 1H11
Slide 26: Established portfolio has strong reservations on hand
Established portfolio has strong reservations on hand For personal use only Expect to settle more units in 2H12 Established settlement volumes skewed to 2H12 • ~80% of FY12 forecast already settled or reserved 1H12 1H111 Established settlements 230 249 8% • Improved cash flow from unit turnovers:
Slide 27: Future growth underpinned by large development pipeline
Future growth underpinned by large development pipeline For personal use only Strong organic growth through development Development settlement volumes skewed to 2H121 • Pipeline on track to settle >250 units in FY12: 1H12 1H11 New unit settlements 100 76 32% - Production going well - 10 projects i
Slide 28: Other businesses: 1% of Total Assets
For personal use only 1% of Other businesses Total Assets www.stockland.com
Slide 29: Other businesses - orderly wind down on track
Other businesses - orderly wind down on track For personal use only Apartments Apartment wind down nearly complete • All but one site under contract and due to settle 1H12 1H11 over the next two to three years Operating profit $2m $32m • No further profit expected Net Funds Employed $94m $308m UK 1H
Slide 30: Summary and outlook
For personal use only Summary and outlook www.stockland.com
Slide 31: Business model provides earnings resilience and growth potential
Business model provides earnings resilience and growth potential For personal use only Strategic Asset weighting How we build resilience • Focus on the broad “mass market” customer segment • Deliver needs based, affordable products • Solid backbone of recurring rental income • Large, capital efficie
Slide 32: Summary
Summary For personal use only Market conditions remain challenging with credit markets tight, the Australian economy under pressure and tough property markets Strategic focus on short term resilience and future growth: • Affordable products for the mass market segment • Reweighting recurring income