Stockland · ASX:SGP
Stockland — H1 2012 Earnings Presentation
59 slides from Stockland's earnings presentation, February 2012
Slide 1: 1H12 Results Pack
Index to Results Pack Pages Financial Management 33 to 48 Commercial Property 49 to 61 Residential Communities 62 to 82 Retirement Living 83 to 90 Stockland Rockhampton, Qld 1H12 Results Pack www.stockland.com
Slide 2: Financial Management
Settlers Hills, WA Financial Management www.stockland.com
Slide 3: Historical profit summary
Historical profit summary 1H12 ($m) 1H11 ($m) 1H10 ($m) • Residential profit skew greater in 1H12 than 1H11 Residential Communities EBIT 115.5 128.6 107.0 • FY11 last meaningful year of Apartments result (before interest in COGS) (mainly Hyde and Tooronga) Apartments EBIT 10.2 59.1 23.1 (before inte
Slide 4: Underlying Profit reconciliation
Underlying Profit reconciliation Gross Tax Net 1H12 Net 1H11 ($m) ($m) ($m) ($m) Underlying Profit1 344.5 6.3 350.8 380.3 Non-cash adjustment to inventories and development profits Inventory adjustments – Australia - - - 2.1 Inventory adjustments – UK - - - (6.6) Development profit adjustment on The
Slide 5: Segment Note to Underlying Profit reconciliation
Segment Note to Underlying Profit reconciliation Residential Retirement Commercial UK Other1 Total ($m) Living Property ($m) ($m) ($m) ($m) ($m) Total external segment revenue 516.7 53.3 341.5 63.5 2.4 977.4 Segment result before interest, share of profits of 125.02 23.0 222.1 8.9 2.4 381.4 investme
Slide 6: Net interest
Net interest Interest expense - $m 1H12 1H11 Gap between interest paid and interest expense increased; expect contraction for Interest paid1 103.6 86.6 FY12 Less: capitalised interest • Interest in COGS decreased as - Commercial Property development projects (7.6) (0.6) significant Apartment sales i
Slide 7: Continue to leverage scale and achieve operating efficiencies
Continue to leverage scale and achieve operating efficiencies Maintained focus on overheads Prudent Cost Management • Residential overheads up 1.5% due to additional marketing $m 1H12 1H11 1H10 spend from launching 8 new projects Commercial Property1 13 17 19 • Retirement Living realised ~20% synerg
Slide 8: Cash flow
Cash flow Net operating cashflow FY13 movement Operating 1H11 to 1H12 Cashflow • FY11 was the last year of significant contribution from Apartments - 1H12 $m Primarily lower 1H12 cash outflow includes Residential land acquisitions revenue $83m (1H11: $293m) Apartments contribution offset by Brookfie
Slide 9: Strong balance sheet and liquidity management
Strong balance sheet and liquidity management S&P rating A- / Stable Long-dated drawn debt maturity profile4 Drawn debt1 $3.0b $m 700 EMTNs refinanced Cash on deposit $0.1b with long 600 term bank Available undrawn committed debt facilities $0.7b debt 500 Gearing (net debt2 / total tangible assets)
Slide 10: Gearing movement from June 2011
Gearing movement from June 2011 FY13 Gearing Operating Operating movement Cashflow Cashflow Jun-11 movement to Dec-11 FY12 - FY13 0.8% 0.4% 22.0% 22.0% 22.8% 23.2% FY11 Gearing Brookfield land 1 Reduction in TTA 1H12 Gearing acquisition from asset sales to fund share buyback • Increase in gearing (N
Slide 11: Debt summary
Debt summary Facility limit Amount drawn Facility ($m)1 ($m)1,2 •A Commercial paper matured in January Bank Debt 895.0 165.0 2012 and rolled over to April 2012 as Other3 175.0 175.0 B part of ongoing liquidity management Commercial paper 42.0 42.0 A •B EMTNs have been reduced by $470m; $295m bought
Slide 12: Debt summary (continued)
Debt summary (continued) Facility Issued debt ($m)1 Facility maturity Facility Issued debt ($m)1 Facility maturity Commercial paper (CP) 42.0 Jan 20122 US Senior Term Note Facility (STN) - US STN 51.4 Jul 2012 Total Commercial Paper 42.0 - US STN 45.8 Oct 2012 Domestic Medium Term Note Facility (MTN
Slide 13: Debt and hedging profile
Debt and hedging profile1 Long dated and hedged debt $b 3.5 3.0 +70bps BBSW +69bps BBSW 2.5 2.0 1.5 5.3% 5.8% 6.0% 6.3% 6.5% 1.0 0.5 8.0% 8.0% 8.2% 8.1% 7.9% 0.0 FY12 FY13 FY14 FY15 FY16 Current fixed rate debt 2 Hedged debt Floating debt - 44 - 1. Excludes line fees of approximately 30 basis points
Slide 14: Proforma balance sheet
Proforma balance sheet 31 December 2011 30 June 2011 ($m) ($m) Cash 95.2 194.6 Real estate assets - Commercial Property 8,128.7 8,484.7 - Residential 2,741.7 2,383.0 - Retirement Living Communities (including Aged Care) 1,098.6 1,018.4 - UK 112.6 168.8 Retirement Living Communities gross up 1,610.6
Slide 15: Covenant calculations
Covenant calculations Gearing All lenders have consistent covenants: Statutory Covenant As at 31 December 2011 Balance Adjustments Balance • Total liabilities / total tangible assets (TL/TTA): 45%. No Sheet ($m) Sheet ($m) adjustment made for cash held ($m) Assets • Interest cover: 2:1 (write-downs
Slide 16: Group strategic weightings
Group strategic weightings Operating Profit 1H12 Assets 31 December 2011 Strategic Strategic Actual Actual weighting weighting Recurring Retirement Living 6% 7% Commercial Property 71% 67% Unallocated corporate overhead (3%) - Total recurring 74% 60-80% 74% 70-80% Trading Residential 25% 23% Retirem
Slide 17: Stockland Corporation statutory income tax calculation
Stockland Corporation statutory income tax calculation 1H12 ($m) 1H11 ($m) Statutory Group profit before tax 297.7 452.6 Less: Trust profit (344.5) (326.8) Add/(less): Intergroup eliminations 8.9 (27.9) Corporation (loss)/profit before tax (37.9) 97.9 Net add back non-deductible expenses/less Austra
Slide 18: Commercial Property
Rockhampton, Qld Commercial Property
Slide 19: Retail NOI growth and cost efficiencies offset by Office disposals
Retail NOI growth and cost efficiencies offset by Office disposals Key movements between 1H11 and 1H12 Operating Profit down 2.2% to $258m $m 300 • Retail NOI increased 6.0% 9 from acquisitions and 0 4 developments coming on 250 (14) (4) line • Office down due to $730m1 200 263 258 of asset sales •
Slide 20: Stockland specialty shop productivity well above benchmark
Stockland specialty shop productivity well above benchmark MAT comparable growth remains strong, higher than FY11 6.0% 5.2% 4.9% 4.7% 5.0% 3.9% 4.0% 3.5% 3.2% 2.8% 3.0% 2.2% 2.2% 1.8% 1.8% 2.0% 1.5% 1.0% 0.0% Total MAT Growth Comparable Growth 6 Month Comparable Growth 3 Month Comparable Growth 1H11
Slide 21: Retail performance is solid in challenging trading environment
Retail performance is solid in challenging trading environment Retail NOI movements between 1H11 and 1H12 Retail NOI up 6% to $152m $m 154 2 • Strong Retail result driven by acquisitions and developments coming on line, high occupancy of 99.6%, 152 8 (1) low trade debtors1 of 0.5% 150 • 99% of speci
Slide 22: Portfolio weightings and Valuation Movements
Portfolio weightings and Valuation Movements Commercial Property assets - $7.7b Retail - $4.8b Office - $1.9b Industrial / Intermodal - $1.0b 41 properties 24 properties 14 properties 873,440 sqm gross lettable area 487,198 sqm net lettable area1 1,200,073 sqm gross lettable area1 Vic WA ACT 2 12% 1
Slide 23: Income growth driving positive revaluations
Income growth driving positive revaluations Commercial Property book values ($b)1 Retail income growth supporting valuation gains $b • Retail valuations up $57m reflecting 9 income growth and low vacancy 0.2 • 34% of investment property assets were 0.0 independently valued in December 2011 8 0.1 • T
Slide 24: Tenancy retention and new leasing
Tenancy retention and new leasing: Incentives still high (Syd/Bris) Operational Portfolio Weighted Weighted NLA Leased Retention Increase on New Leases Increase on Office (sqm)1 (sqm)1 Base rents Average (sqm)1 Base rents Average Incentives Incentives Sydney CBD 5,656 1,734 3% 17% 3,922 6% 24% Sydne
Slide 25: Key Office and Industrial leasing deals - 1H12
Key Office and Industrial leasing deals - 1H12 Building 1H12 Area Remaining Building Property Area Leased Leased to Vacancy WALE Comments (sqm) (sqm) (sqm) (years) 118 – 120 Pacific Highway 5,130 5,130 Clemenger - 6.8 Retained tenant in full 60 - 66 Waterloo Road 18,238 4,130 Jansen Cilag Pty Ltd -
Slide 26: Asset values - Retail
Asset values - Retail Val. 1H12 Val. 1H12 Book Incr/ Change AIFRS Book Retail Portfolio Value Cap Value Incr/ Cap AIFRS Decr (%) Retail Portfolio Decr Change ($m) Rate NOI ($m) (%) Rate NOI ($m) (%) ($m)2 ($m) (%) ($m)2 Stockland Wetherill Park 358.0 26.1 7.9 6.75 12.2 Stockland Hervey Bay 71.0 7.50
Slide 27: Asset values - Office
Asset values - Office Val 1H12 Val 1H12 Book Change Book Incr/ Change AIFRS Office Portfolio Value Incr/ Cap AIFR Office Portfolio Value Cap Dec (%) Rate S NOI Dec (%) Rate NOI ($m) ($m) ($m) ($m) (%) ($m)2 (%) ($m)2 Piccadilly Tower1 268.0 4.1 1.6 7.25-8.25 7.7 Macquarie Technology Ctr 35.1 (2.9) (
Slide 28: Asset values - Industrial
Asset values - Industrial Val 1H12 Book Val 1H12 Book Incr/ AIFRS Valu Incr/ AIFRS Industrial Portfolio Value Change Cap Assets held for sale Change Cap ($m) Dec Rate NOI e Dec Rate NOI ($m) (%) (%) ($m)1 ($m) ($m) (%) (%) ($m)1 Yennora Distribution Centre 335.4 - - 8.00 12.6 150 Charlotte St 24.7 -
Slide 29: Asset Disposals - 1H12
Asset Disposals - 1H12 Property Disposed Asset Class Settlement Date Disposal Value ($m) Bank West Tower Office Jul 2011 130.0 Lilydale Retail Jul 2011 28.0 Wacol Industrial Nov 2011 – Dec 2011 35.2 52 Martin Place Office Nov 2011 172.2 Riverside Plaza Office Nov 2011 193.6 Exchange Plaza Office Dec
Slide 30: Top 20 tenant customers
Top 20 tenant customers Retail Portfolio Office Portfolio Industrial Portfolio Rank Tenant Portfolio Tenant Portfolio Tenant Portfolio (%) (%) (%) 1 Wesfarmers 28.4% Singtel (Optus) 7.6% O-I 14.3% 2 Woolworths 22.9% IBM Limited 3.4% Department of Defence 12.0% 3 Retail Adventures 1.7% Stockland 3.2%
Slide 31: Residential
Highlands, Vic Residential
Slide 32: Delivering on our strategy
Delivering on our strategy Market share in active corridors1 Market Share slightly down but above our 25% target • Declined slightly due to new Stockland entrants emerging in existing 28% 1% corridors and new projects ramping up Closest • NSW and WA increased Smaller Competitor market share, whilst
Slide 33: Strong contracts on hand position underpins 2H12 profit
Strong contracts on hand position underpins 2H12 profit Residential Communities sales Volumes up 1% 6,000 • 1H12 lot settlements 2,209: 2,266 - Strong settlements from 4,000 new projects in Vic and Lots 401 WA 143 2,000 (2,209) - Qld settlements down 2,889 reflecting soft 2011 2,288 2,288 2,431 2,48
Slide 34: Focus on capital efficiency and visibility of future profits
Focus on capital efficiency and visibility of future profits Net Funds Rolling 12 month Return on Employed1 Net Funds Employed Pre2 39 Active projects interest 30% Delivering current earnings $1.4b 25,700 lots Post3 interest 19% Pre 14 New projects interest 22% Enhance near Commencing within 2 yrs $
Slide 35: Future profit underpinned by quality medium and long-term landbank
Future profit underpinned by quality medium and long-term landbank Efficient use of capital to support longer-term growth Medium and long-term land bank only 16% of NFE $2.5b 91,000 lots • Represents efficient use of capital (48,100 lots; $0.4b NFE) Active 47% projects • Provides access to large mas
Slide 36: Leading indicators point to improving housing activity in WA & Qld
Leading indicators point to improving housing activity in WA & Qld Perth Stock on Market levels falling WA market showing positive signs • Established stock on 18,000 -12% market down 12% from Monthly Houses on Market April 2011 peak 16,000 • Owner-occupied housing 14,000 finance up 13% year-on- 12,
Slide 37: Demand strong in NSW, VIC returning to long-term average
Demand strong in NSW, VIC returning to long-term average NSW FHB activity at strongest levels since December 20091 NSW market currently strongest in the country 40% • Housing Finance up 18% 35% year-on-year 30% • New Home sales up 23% 25% in November off low base 20% • First Home Buyers back 15% abo
Slide 38: Improvement in Leads driven by FHB segment
Improvement in Leads driven by FHB segment Leads1 by segment Lead mix reflecting product demand 75% 65% • Strong demand from First 59% Home Buyers 51% 50% 49% 39% 43% • Investors remain steady 53% 34% 41% between 15 – 20% 29% 25% 23% 22% 18% 19% 13% 13% 15% 16% 0% Jun-09 Oct-09 Feb-10 Jun-10 Oct-10
Slide 39: Net deposits up 13% on 2H11 results
Net deposits up 13% on 2H11 results Signs of recovery emerging Improving net deposits driven by FHB • First Home Buyer net Net deposits deposits up 42% vs. 2H11, 3,500 2,975 3,101 3,169 3,134 reflecting increasing appeal 3,000 328 568 of Stockland product to 738 780 2,500 2,266 value conscious custo
Slide 40: Leading the market with lower price points
Leading the market with lower price points High proportion of product Stockland projects providing more affordable product1 under $200k in all 4 states Proportion of sub $200k lots sold • Our customer insights tell 50% 45% us that $200,000 is a key 41% 40% price barrier for our buyers: 40% 35% 37% 3
Slide 41: Customers continue to move to more compact living spaces
Customers continue to move to more compact living spaces Demand for smaller house Average house sizes continue to decrease1 sizes 310 300sqm • As housing design 290 4 br continues to become 270 more efficient we are able to meet increasing 247sqm 250 241sqm customer affordability 230 3 br constraint
Slide 42: Own vs. rent gap narrowing substantially
Own vs. rent gap narrowing substantially Delivering affordable product in our corridors enticing new buyers into Stockland product Stockland Package Established Market Gap from Own to Rent (1)-(2) Package (1) Mortgage Median House Mortgage (2) Rental Price3 June 2011 Dec 2011 and Price1 Repayments2
Slide 43: 9 new project launches in FY12
9 new project launches in FY12 Summary of new projects1 Timing of first Approximate Approximate Project Launch Date settlements total lots in project life of project NSW Brooks Reach Oct-11 2H12 600 2-3 years Vale Sep-11 2H12 600 4-6 years QLD Bells Reach (formerly Bellvista II) Jan-12 2H12 650 4-6
Slide 44: Strong lot settlement growth in WA
Strong lot settlement growth in WA Lots settled by location (units) Increased investment in WA improving settlement volumes Lots • WA settlements up 115% on pcp 6,000 5,236 5,097 • Qld settlements down following softer market 5,000 744 729 conditions in 2011 as a result of natural disasters 4,000 1,
Slide 45: Breakdown of 1H12 margin
Breakdown of 1H12 margin Residential Communities EBIT margin Retail margins improving (before interest in COGS) • Higher retail margins on the back of strong price per 30% 0.6% sqm growth in NSW and (0.2%) Vic (1.6%) 26% (0.8%) • Overall margins impacted by: 28.8% 22% 26.8% - Skew of superlot settle
Slide 46: Retail average sales prices
Retail average sales prices Retail sales prices1 - Based on all lots settled FY11 Settlements 1H12 Settlements Av. size per lot Av. size per lot Av. Price per lot State No. lots sqm Av. Price per lot $k $/sqm No. lots sqm $k $/sqm NSW 650 542 230 425 191 539 250 464 QLD 1,664 518 219 423 659 520 211
Slide 47: Moving towards a portfolio of larger projects across all states
Moving towards a portfolio of larger projects across all states Major projects Total pipeline of 91,000 lots - Geographic mix Approximate Approximate State Project lot sales per remaining annum 1 project lots QLD North Shore 310 4,400 North Lakes 400 1,200 VIC Brightwater 180 800 26% QLD VIC Highlan
Slide 48: Market fundamentals driven by housing affordability and undersupply
Market fundamentals driven by housing affordability and undersupply in Australia Population growth diverging from dwelling starts 1 Net overseas migration rising2 375,000 500,000 120 Dwelling Commencements: Annualised (LHS) NSW VIC QLD WA Population Growth: Annualised (RHS) 450,000 325,000 100 Annua
Slide 49: Mortgage debt sustainability, bank mortgage lending is responsible
Mortgage debt sustainability, bank mortgage lending is responsible Rental vacancies remain at low levels1 Buyers are taking on sustainable levels of debt 5% 80% Average Loan-To-Value ratio2 Vacancy 4% rates below 75% long term average 70% 3% 65% 60% 2% 55% 50% 1% 45% NSW QLD VIC WA 40% Jun 07 Dec 07
Slide 50: Apartments wind down on track
Apartments wind down on track Apartments 1H12 1H11 Progress in 1H12 Apartments settled 89 286 • 1H12 volume predominantly from final Revenue $83m $293m settlements at Prince Operating Profit (incl. interest in COGS) 1,2,3 $2m $32m Henry Operating Profit margin (incl. interest in COGS) 3 2% 11% • Ope
Slide 51: Details of previously impaired projects settled in 1H12
Details of previously impaired projects settled in 1H12 • Projects reviewed quarterly to assess Estimated Impairment Final future revenue provision settlement recoverability: ($m) balance 31/12/11 – Inventory carried at lower of cost and net ($m) realisable value Residential Communities • No further
Slide 52: Retirement Living
Tarneit Skies Retirement Village, Vic Retirement Living
Slide 53: Business poised for growth
Business poised for growth Compelling demand drivers Growth of >65 year old demographic is an opportunity • Expect demand for new developments of circa Population aged 65+ years $35b over the next 20 years (at current prices) Millions of people 2.7% pa CAGR • Industry will struggle to meet demand, g
Slide 54: Retirement Living demand robust despite slower market
Retirement Living demand robust despite slower market Established villages reservations1 500 400 300 (230) 298 Units Reservations up 56% 200 over 30 June 2011 100 190 190 122 122 0 Jun 11 Reservations on Hand Net Reservations Settlements Dec 11 Reservations on Hand Development villages reservations1
Slide 55: Portfolio overview
Portfolio overview Portfolio Statistics 1H12 FY11 Net Funds Employed Established villages1 61 59 $1,216m $1,135m 31 Established units 7,769 7,535 31 117 117 National ranking #3 #3 242 199 Market share2 ~11% ~9% 112 108 Established units turned over 230 416 676 718 Occupancy3 4 93% 94% Average age of
Slide 56: Retirement Living - Operating Profit and Statutory Profit
Retirement Living - Operating Profit and Statutory Profit 1H12 Pro forma 1H111 New units settled (#) 100 76 Established unit turnovers (#) 230 249 Development Profit Settled 6 5 Unsettled 4 4 Accrued DMF 27 43 Conversion Profit 4 5 Net other income including Aged Care contribution 2 - Net overheads2
Slide 57: Significant organic growth through development pipeline
Significant organic growth through development pipeline Geographically diverse development pipeline Development pipeline Development villages2 26 WA 17% Qld 22% Total development pipeline units 3,600 - Greenfield pipeline units 2,900 - Village extension pipeline units 700 Average greenfield developm
Slide 58: Retirement Living - Development pipeline
Retirement Living - Development pipeline Yet to be Anticipated Settlements State Project released FY12 FY13 FY14 FY15 FY16+ Active Developments VIC Highlands 107 VIC Arilla 120 VIC Tarneit Skies 36 VIC Selandra Rise 202 QLD Fig Tree 97 QLD North Lakes 44 NSW Waratah Highlands 90 NSW The Willows 52 N
Slide 59: Valuation overview
Valuation overview Key valuation assumptions • Valuation assumptions and overall portfolio valuation validated by an independent valuer as at 1H12 FY11 30 June 2011 Discount rate 12.78% 12.78% • Established DMF asset valuation has increased Average growth rate1 3.9% 4.0% from $698m at 30 June 2011 t