Stockland · ASX:SGP
Stockland — H1 2013 Earnings Presentation
43 slides from Stockland's earnings presentation, Feb 13, 2013
Slide 1: 1H13 Results Presentation
1H13 Results Presentation For personal use only 13 February 2013 Stockland Townsville, Qld
Slide 2: Agenda
Agenda For personal use only Introduction Mark Steinert Financial update Tim Foster Residential Communities Mark Hunter Commercial Property John Schroder Retirement Living David Pitman Summary and outlook Mark Steinert 2
Slide 3: Overview of 1H13
Overview of 1H13 For personal use only Business performance reflects soft housing market Positioning the Group for stronger returns and portfolio transition Disappointing result with Underlying Profit down 26% to $255m and Changed application of residential capitalised interest policy EPS down 20% t
Slide 4: Financial Update
Financial Update For personal use only Tim Foster Stockland Shellharbour, NSW
Slide 5: Group profit
Group profit For personal use only $m 1H13 1H12 Statutory (Loss) / Profit ($147.1m) 148% $307.6m Statutory Earnings per Security (6.7 cents) 151% 13.1 cents Underlying Profit1 $255.0m 2 26% $342.3m 3 Underlying Earnings per Security 11.6 cents 20% 14.5 cents4 Distribution per Security 12.0 c
Slide 6: Profit summary
Profit summary For personal use only 1H13 1H12 Change Commentary Retail 159 152 5% 3.5% comparable NOI growth (4.4% pre AIFRS), development completion of Townsville, Merrylands Office 60 80 25% 6.2% comparable NOI growth (9.7% pre AIFRS) however asset disposals impact result Industrial 32 38 1
Slide 7: Changed application of residential capitalised interest policy
Changed application of residential capitalised interest policy will deliver more consistent returns over time For personal use only Overview Residential interest expensed in cost of goods sold Applied consistent policy since new Borrowing Cost Accounting Pre review Post review Standard introduced in
Slide 8: Residential review reflects focus on core portfolio
Residential review reflects focus on core portfolio For personal use only Overview Residential portfolio review Conducted our regular residential portfolio review 13 projects impaired for wholesale disposal $234m Review objective: to maximise shareholder value with best use of capital 7 projects imp
Slide 9: Continue to drive efficiency and cost management
Continue to drive efficiency and cost management For personal use only Good progress on reducing overheads Prudent cost management Reduction in overheads – down 8% $m 1H13 1H12 1H111 Ongoing savings achieved through: Commercial Property2 12 13 17 Centralisation Residential 65 68 67 Automation of pro
Slide 10: Cash flows impacted by tough Residential market
Cash flows impacted by tough Residential market For personal use only 1H13 cash inflows and outflows ($m) Commercial Property asset sales of $271m exchanged to date $1,123m $1,093m with $194m invested in retail development 74 Deferred residential payments Additional debt 161 Successful opening of Me
Slide 11: Continuing to maintain a strong balance sheet
Continuing to maintain a strong balance sheet For personal use only Commercial Property non-core asset sales Key debt metrics Asset sales of $271m in 1H13 S&P rating A- stable Additional two assets held for sale4 for $221m Drawn debt1 $3.5b Average exit yield 7.4% Slowing further asset sales for fle
Slide 12: Residential
Residential For personal use only Mark Hunter Highlands, Vic
Slide 13: Residential performance impacted by challenging market conditions
Residential performance impacted by challenging market conditions For personal use only 1H13 performance Residential Communities 1H13 1H12 Volumes solid with over 2,000 settlements despite entering FY13 Lots settled 2,085 2,209 6% with 700 fewer contracts on hand Revenue - Retail $381m $419m 9%
Slide 14: Margins impacted by volume, project mix and price pressure
Margins impacted by volume, project mix and price pressure For personal use only Settlement volumes declined Project mix impacts margins Project margins declined in each state Decline led by soft Victorian market, Lower settlements from high margin Victorian No price growth to offset inflationary co
Slide 15: Reviewed and repositioned portfolio
Reviewed and repositioned portfolio For personal use only Review reflects core portfolio focus Projects identified for disposal do not fit core portfolio 13 projects identified as more suited to wholesale disposal – State No. Previously In Strategic Capital Year $234m impairment: Projects impaired c
Slide 16: Residential projects impaired for disposal, primarily lifestyle
Residential projects impaired for disposal, primarily lifestyle For personal use only Location Project Lots remaining to sell Acquisition Comment (as at 1H13) date Murrays Beach 270 Dec-04 Trade out existing stock, whilst marketing for disposal Englobo land. Potential to market for wholesale disposa
Slide 17: ROA down in short term and expected to improve from FY14
ROA down in short term and expected to improve from FY14 For personal use only Capital Landbank employed1 Total 1H13 ROA2 9% Delivering 33 Active projects $1.3b (12 months to 31 December 2012) current earnings 26,850 lots (-4k lots vs. FY12) ROA to improve from FY14, as medium and long- term capital
Slide 18: Disciplined execution of our strategic criteria
Disciplined execution of our strategic criteria For personal use only Residential strategic criteria since 2009 Core projects deliver superior returns Focused on geographic diversity Growth corridor strategy – attractive demand/supply Masterplanned EBIT margin (%) communities Wyndham (Vic) / Allura
Slide 19: East Leppington is set to deliver on our strategy
East Leppington is set to deliver on our strategy For personal use only East Leppington reflects the new projects East Leppington structure plan coming to market Geographic diversity Leppington Station Key identified growth corridor of SW Sydney 1.5km Entrance Supported by State infrastructure inves
Slide 20: Residential market remains challenging; underlying fundamentals are positive
Residential market remains challenging; underlying fundamentals are positive For personal use only Recovery will be gradual Approvals around 16% below long-term average Consumers still cautious Annual private sector houses building approvals (Trend) Vic remains subdued 130,000 Qld soft, impacted by
Slide 21: Commercial Property
Commercial Property For personal use only John Schroder Stockland Townsville, Qld
Slide 22: Solid comparable growth from Commercial Property
Solid comparable growth from Commercial Property For personal use only Retail Office Industrial Redevelopments driving scale and market Higher occupancy and improved WALE Asset sales impacted headline result share through focused leasing effort Forecast growth and WALE set to improve Active asset ma
Slide 23: Retail sales grew despite consumer caution
Retail sales grew despite consumer caution For personal use only Strong Retail lease profile Moving annual turnover growth2 Maintaining high occupancy of 99.4% (99.6% in 1H12) 4.7% Increased tenant retention at 78% (72% in 1H12) Executed 135 renewals: annualised growth of 2.6% with no 3.3% 2.9% 3.0%
Slide 24: Retail strategy: market leader or clearly differentiated in trade area
Retail strategy: market leader or clearly differentiated in trade area For personal use only Strategic objectives Highly productive centres well positioned for growth Enhance returns by moving assets up the retail hierarchy Specialty MAT per sqm Be the landlord of choice for key national chains and
Slide 25: Diverse and resilient retail portfolio
Diverse and resilient retail portfolio For personal use only Sales growth driven by: Limited exposure to highly discretionary retail categories Composition of our centres proving resilience to online leakage Gross rent - total portfolio Total Australian retail online spend now 6%; growth deceleratin
Slide 26: Creating high quality retail assets with a focus on regional Australia
Creating high quality retail assets with a focus on regional Australia For personal use only Neighbourhood Sub regional1 Regional1 Major regional1 Super regional Stockland’s Our “sweet spot” “sweet spot” Big enough to be “first choice” whilst still offering convenience and community focus Merrylands
Slide 27: Shellharbour: creating a leading major regional centre
Shellharbour: creating a leading major regional centre For personal use only Forecast financial metrics Development Total development cost $330 million Value on completion $660 – 690 million Enhanced valuation $60 – 90 million Incremental yield 7.6% Post development incremental IRR ~14.5% Total retu
Slide 28: Wetherill Park: a successful regional centre
Wetherill Park: a successful regional to become a leading food, lifestyle, service and community focused centre For personal use only Forecast financial metrics Development Total development cost $195 million Value on completion $620 – 640 million Enhanced valuation $60 – 80 million Incremental yiel
Slide 29: Actively managing our Office portfolio to improve performance
Actively managing our Office portfolio to improve performance For personal use only Refurbished foyer at Waterfront Place, Brisbane Occupancy1 up to 96.3%2 (95.8% in 1H12) WALE improved to 4.6 yrs2 (4.1 yrs in 1H12) Executed ~33,000 sqm of leases in 1H13 Weighted average base rent growth of 4%; weig
Slide 30: Industrial reletting progressing well
Industrial reletting progressing well For personal use only Development of Toll warehouse, Yennora Occupancy of 93.3% (99.5% in 1H12) WALE stable at 2.8 yrs (2.8 yrs in 1H12) Executed ~127,000 sqm of leases in 1H13 Over 80,000 sqm of leases pending execution Weighted average base rent growth of 6%;
Slide 31: Retirement Living
Retirement Living For personal use only David Pitman Selandra Rise, Vic
Slide 32: Retirement Living continued to grow in a challenging market
Retirement Living continued to grow in a challenging market For personal use only Development portfolio Key metrics 131 new units settled 1H13 1H12 Price realisation in-line with project plans New unit settlement 131 100 31% Margins slightly lower due to project/product mix Established unit turnov
Slide 33: Volumes and improved occupancy drives profit growth
Volumes and improved occupancy drives profit growth For personal use only Established portfolio Operating Profit and returns 2 1H13 1H12 Operating Profit ROA 4.2% 4.2% Established unit turnover 249 230 8% - Average re-sale price $315k $312k 1% $12.0m $11m 1 -Turnover cash per unit $82k $80k 3%
Slide 34: Retirement Living business progressing well
Retirement Living business progressing well For personal use only Development pipeline providing growth Project home builder strategy now implemented Selandra Rise launched with a record sales rate Commenced development at Mernda (Vic) Improving customer offering Property and relocation consultation
Slide 35: Summary and outlook
Summary and outlook For personal use only Mark Steinert Stockland Shellharbour, pre development Stockland Shellharbour, under construction
Slide 36: Macro view
Macro view For personal use only Global Stockland is well positioned and has a diverse portfolio Global macro economic outlook is improving, underpinned by ongoing recoveries in US housing and Asian economic growth Key risks: renewed social upheaval in Europe and US political impasse regarding the d
Slide 37: Residential expected to remain challenging in FY13
Residential expected to remain challenging in FY13 For personal use only Capital city house prices stabilised 60% NSW VIC QLD WA Victoria is expected to lag due to increased supply in growth Rolling Annual corridors, lack of new housing incentives and the residual pull Growth(%) forward effect from
Slide 38: Stockland's Retail portfolio well placed for growth
Stockland’s Retail portfolio well placed for growth For personal use only Annual sales growth by industry1 43% of rent from food & Developments in growing markets services where growth is 2x avg with capacity for more supply 6.0% 12% Avg ~1.1 sqm 3yr forecast growth in retail spend Baldivis 5.0% 10%
Slide 39: Office and Industrial has core strength
Office and Industrial has core strength For personal use only Office Industrial 88% of Stockland portfolio in Sydney CBD, Sydney metro and Top five assets represent 75% of the portfolio, geographic diversification Brisbane CBD broadly aligned with Gross State Product, overweight NSW and underweight
Slide 40: Retirement Living: strong underlying demand tempered by housing market challenges
Retirement Living strong underlying demand tempered by housing market challenges For personal use only Short-term challenges remain due to soft Australian population aged 65 or older (Millions of people) residential market 6.7m Volumes to remain subdued despite increased enquiry due 5.6m to customer
Slide 41: Group outlook
Group outlook For personal use only FY13 will continue to be challenging Business in transition as we position ourselves for growth in FY14 and beyond Expect FY13 full year EPS to be 20-25% below FY12 after impact of capitalised interest application change Distribution for FY13 maintained at 24 cent
Slide 42: Strategic review
Strategic review For personal use only A comprehensive review of the whole business to determine the optimum resource allocation to maximise securityholder returns within an acceptable level of risk Focus on emphasising centres of excellence: creating communities and developing/managing shopping cen
Slide 43: Disclaimer of liability
Stockland Corporation Limited For personal use only 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