Stockland · ASX:SGP
Stockland — H1 2009 Earnings Presentation
43 slides from Stockland's earnings presentation, Feb 11, 2009
Slide 1: 1H09 Results Presentation
For personal use only 1H09 Results Presentation 11 February 2009 www.stockland.com.au Key messages • We are meeting these unprecedented and challenging times head on with: − strong focus on risk management − proactive capital management – debt, equity and cash flow − operational and cost efficiencie
Slide 2: Agenda
Agenda For personal use only • Overview Matthew Quinn • Summary of results Matthew Quinn • Capital management and accounting Hugh Thorburn • Operating businesses − Commercial Property John Schroder − Residential Denis Hickey • Strategy Matthew Quinn • Outlook and summary Matthew Quinn -3- Overview C
Slide 3: Summary of group results
Overview For personal use only Challenges and opportunities Our Response • Reduce debt through deferral of capex and asset Very challenging debt and sales equity markets • Strengthen balance sheet through recent placements and DRP underwrite • Opportunistically renegotiate debt facilities and extend
Slide 4: Capital management / Profit summary
Capital management For personal use only Hugh Thorburn – Finance Director • Profit summary • Debt portfolio • Debt covenants • Cash flow management • Accounting matters • Distribution -7- Profit summary Significant items $m Cash ($m) Non-cash ($m) Profit from operations as assessed by the Directors
Slide 5: Debt portfolio and covenants
Debt portfolio For personal use only 31 Dec 08 30 Jun 08 S&P Rating A-/Stable A-/Stable Weighted average debt maturity 5.8 years 6.1 years Debt fixed / hedged 74% 70% Weighted average cost of debt 6.8% 6.7% Headroom within debt covenants $1.6bn $1.2bn Committed available facilities - 31 December 08
Slide 6: Cash flow management
Cash flow management For personal use only • Capital markets remain volatile and the following initiatives are in place to ensure Stockland has strong liquidity: - No restocking of residential inventory (average spend of $200m pa in FY06-FY08) - Deferral of uncommitted Commercial Property, Apartment
Slide 7: Accounting matters
Accounting matters For personal use only Goodwill • $107.4m impairment of goodwill from the UK acquisition ($31.4m remains) • A portion ($8.1m) of ADP goodwill has been written off in accordance with accounting standards on sale of investment properties - The balance ($194.8m) will be further review
Slide 8: Distribution
Distribution For personal use only • Estimated FY09 DPS is 34.0c, in line cents with previous guidance and current Current FY09 distribution forecast 34.0 distribution policy FY09 Trust taxable income – current 33.2 • Legal requirement to pay minimum estimate distribution equal to Trust taxable inco
Slide 9: Office & Industrial financial results
Office & Industrial financial results For personal use only OFFICE & INDUSTRIAL Performance Operating Profit $136m Comparable rental income growth 4.1% Net Revaluations ($264m) 1H09 asset sales $140m Office Portfolio (36 properties) $3.2bn Average cap rate - 31 December 08 7.3% - change since 30 Jun
Slide 10: Office & Industrial – market conditions
Office & Industrial – market conditions For personal use only Demand Supply • Broad based deterioration in office • Supply cycle to peak in 2009 demand has increased vacancy levels – • New supply is diminishing as projects are most notably in Sydney CBD and delayed or abandoned Canberra • Total amou
Slide 11: Office & Industrial – development pipeline
Office & Industrial – development pipeline For personal use only • Projects in progress are well leased (80%) • No new projects to commence until markets improve • DAs will continue to be secured for selected projects Project Status No. of Estimated Forecast Forecast Current % projects total cost co
Slide 12: Retail financial results
Retail financial results For personal use only RETAIL Performance Operating Profit $121m Comparable rental income growth 5.8% Net Revaluations ($124m) 1H09 asset sales $81m Retail Portfolio (37 properties, 2,500 tenants) $4.0bn Total MAT* $4.8bn Comparable MAT growth 4.3% Specialty occupancy costs 1
Slide 13: Retail – market conditions
Retail – market conditions For personal use only Demand Supply • Supply cycle now past peak • Diminishing consumer confidence impacting retail spending • Minimal oversupply – trade area specific • December retail sales boosted by • Rate of new supply contracting stimulus package • Retailer margins a
Slide 14: Retail – development pipeline
Retail – development pipeline For personal use only • Projects under construction are on program and well leased • No new projects to commence until markets improve • DAs will continue to be secured for selected projects Project Status No. of Estimated Forecast Forecast Current % Leased projects tot
Slide 15: Residential / Communities financial results
Residential For personal use only Denis Hickey - CEO • Operational Performance • Market Overview • Business Outlook North Lakes, QLD - 29 - Communities financial results Portfolio Summary COMMUNITIES Total Active Projects 42 Performance Projects launched in 1H09 5 Lot sales (31%) ▼ 1,434 Projects co
Slide 16: Apartments and Retirement Living financial results
Apartments financial results For personal use only APARTMENTS Performance Units settled 59 Revenue $95m The Village, NSW Operating loss ($5m) Assets / Pipeline Gross assets $0.8bn Projects Under Construction No. of projects 12 Sold Project Revenue Units controlled 2,169 % $M Prince Henry (Part) NSW
Slide 17: Residential - national outlook
Residential - national outlook For personal use only No oversupply Rising Rents Underlying Underlyingdemand Demand& supply & Supplyof dwellings (‘000) of Dwellings Growth in rents (% yoy) Australia ('000) 12% Grow th in Rents 200 (yoy) Completions 10% 150 8% Highest since 1989 Other Demolitions 6% 1
Slide 18: Residential outlook – by market segment
Residential outlook – by market segment For personal use only SGP current purchaser profile* Renters • Differential of own vs rent is shrinking dramatically N/A due to rising rents and lower interest rates • Affordability improving due to: 65% - First Home Owners Boost First Home Buyers - Interest r
Slide 19: Case Study: Comparison of Stockland H & L packages
Case Study: Comparison of Stockland H & L packages For personal use only Package FHOB Mortgage Rental Gap to Home & Price (Fed. & State) Repayments * Equivalent ** Own vs Rent 4 Bed, 2 Bath Highlands, $26,000 $347 pw $320 pw +$27 pw Craigieburn $299,000 VIC 4 Bed, 2 Bath Lakewood, $24,000 $502 pw $4
Slide 20: Residential Communities - strong net cashflow generator
Residential Communities - strong net cashflow generator For personal use only Revenue Utilisation Example Residential Communities Cash Profile From each lot disposal, we realise proceeds for distribution or reinvestment. The following is an example of how revenue is distributed: Revenue split per lo
Slide 21: Outlook – Retirement Living / Summary
Outlook – Retirement Living For personal use only Retirement Living Development Pipeline • Business performing well – exceeding (Generated from existing projects) expectations 600 500 Number of ILU's • Continue to unlock embedded growth 400 from existing villages (revenue and asset 300 management) 2
Slide 22: Stockland UK financial results
Stockland UK financial results For personal use only STOCKLAND UK Performance Operating loss - before inventory write-downs ($0.3m) - after inventory write-downs ($75.2m) Portfolio Summary Equity accounted investments $52.2m Inventory - direct $352.5m Assets under management $1.8bn Gracechurch Stree
Slide 23: Strategy – responding to changing market dynamics
Strategy – responding to changing market dynamics For personal use only Diversity • As urban consolidation increases, our diversification drives competitive advantage with both customers and governments Earnings Mix • Increase weighting to annuity income by acquisition of investment property and ret
Slide 24: Summary
Summary For personal use only • Market conditions will be volatile and unpredictable for some time to come • We are de-risking our asset base, deferring capex and reducing costs • We still have earnings momentum with most of our profits and underpinned by rental contracts and presales • Our balance
Slide 25: Strategic weightings / Summary of results
Strategic weightings For personal use only 1H09 EBIT* 31 Dec 08 Assets 15% 26% 85% 74% Recurring Income (Strategic Weighting 60-80% ) Recurring Income (Strategic Weighting 70-80% ) Trading Income (Strategic Weighting 20-40% ) Trading Income (Strategic Weighting 20-30% ) - 49 - * Before asset write-d
Slide 26: Segment result
Segment result For personal use only Residential Retail Office & Unlisted Stockland Other Eliminations Consolidated Industrial Property UK Funds $m $m $m $m $m $m $m $m External segment revenue 453.4 177.8 142.7 2.1 18.0 6.0 800.0 Inter-segment revenue 5.7 (5.7) Unallocated revenue 0.3 Total Revenue
Slide 27: AFFO reconciliation – 1H09
AFFO reconciliation – 1H09 For personal use only Summary of Results – 1H09 $m Operating profit before certain significant items 127.9 Less: Maintenance capex (17.5) Less: Capitalised interest (101.7) Add: Capitalised interest released through COGS 20.9 Add: Straight lining of rent (3.6) Add: Amortis
Slide 28: Revaluations
Revaluations For personal use only Valuation Previous Book Movement ($m) Value ($m) ($m) Retail 3,212 3,336 (124) Office 2,285 2,471 (186) Industrial 506 563 (57) Other 211 232 (21) TOTAL 6,214 6,602 (388)* * As per segment note – Commercial Property - 55 - Retail portfolio sales 12 Months 6 Months
Slide 29: Retail and Office – top tenants
Retail – top 20 tenants For personal use only % Rank Tenant Portfolio 1 Woolworths 13.7% 2 Westfarmers 11.9% 3 Angus & Coote 1.8% 4 The Just Group 1.5% 5 API (Priceline, Soul Pattinson etc) 1.4% 6 Best & Less 1.3% 7 Australian Discount Retail 1.2% 8 Luxottica (Sunglass Hut, OPSM etc) 1.2% 9 Specialt
Slide 30: Industrial – top tenants
Industrial – top 20 tenants For personal use only % Rank Tenant Portfolio 1 Department of Defence 9.7% 2 Toll Holdings Limited 8.8% 3 ACI 7.4% 4 Australian Wool Handlers 3.9% 5 Westgate Logistics 3.9% 6 Visy Industrial 3.2% 7 Wesfarmers 2.7% 8 P&O 2.3% 9 CRT Group 2.1% 10 Envotec 1.8% 11 Queensland
Slide 31: Retail sales – portfolio summary (continued)
Retail sales – portfolio summary (continued) Retail Sales – Portfolio Summary For personal use only % Speciality Property % MAT Specialities Occupancy Total MAT ($m) Growth MAT ($/m2) Cost Stockland Bull Creek 115.7 1.0 8,252 13.8 Stockland Baulkham Hills* 113.3 N/A N/A N/A Stockland Riverton* 109.1
Slide 32: Retail - development pipeline
Retail - development pipeline For personal use only Forecast cost to complete ($m) UNDER CONSTRUCTION Forecast Cost 2H09 FY10 FY11 Forecast ($m) Yield (%) Cairns – Coles Remix 15 4 - - 7.3% Merrylands (Stages 1&2) 169 25 37 - 7.5% Rockhampton 96 36 17 - 8.5% Riverton (50% share) 16 9 4 - 7.8% Balgow
Slide 33: Retail - revaluations
Retail - revaluations For personal use only Property Retail - Revaluations Valuation (continued) Previous BV (adjusted for Capex) % Change Cap Rate % ($m) ($m) Stockland Baulkham Hills 123.0 137.0 (10.2) 7.25 Stockland Cleveland 80.0 87.8 (8.9) 7.00 Stockland Wendouree 110.0 114.8 (4.2) 7.00 Stockla
Slide 34: Office & Industrial – revaluations
Office & Industrial – revaluations For personal use only Property Office and IndustrialValuation - Revaluations ($m) Previous BV (adjusted for Capex) % Change Cap Rate % ($m) Office Piccadilly Tower 263.1 274.2 (4.0) 6.75 Piccadilly Court 41.3 44.1 (6.3) 7.25 Colonial Centre (50%) 192.5 209.6 (8.2)
Slide 35: Office & Industrial – revaluations (continued)
Office & Industrial – revaluations (continued) For personal use only Previous BV Property Office and Industrial –Valuation Revaluations ($m) (continued) (Adjusted for Capex) ($m) % Change Cap Rate % Industrial 42 Birnie Avenue, Lidcombe 13.4 13.8 (2.9) 8.50 11 Amour Street 14.3 13.6 5.1 8.50 1 Amour
Slide 36: Office & Industrial – revaluations / Lease expiry profile – Office
Office & Industrial – revaluations For personal use only Previous BV Valuation Property (Adjusted for Capex) % Change Cap Rate % ($m) ($m) Assets Exchanged Edmund Barton Building 108.7 116.6 (6.8) N/A 81-95 Waymouth Street 51.0 51.9 (1.7) N/A Chesser House 34.5 39.6 (12.9) N/A 514 Boundary Road, Ric
Slide 37: Lease expiry profile – Industrial / 1H09 disposals
Lease expiry profile – Industrial For personal use only Lease Expiry Profile – Industrial June-08 Dec-08 Vacant Vacant 5% FY09 4% FY09 13% 13% FY13+ FY13+ 39% 38% FY10 FY10 14% 14% FY11 FY11 FY12 13% FY12 14% 16% 17% WALT: 4.0 Years WALT: 3.5 Years - 73 - Office & Industrial – 1H09 disposals Disposa
Slide 38: Office & Industrial - development pipeline
Office & Industrial - development pipeline For personal use only Forecast cost to complete ($m) UNDER CONSTRUCTION Forecast 2H09 FY10 FY11 Forecast Cost ($m) Yield (%) Durack Two, Perth, WA 50 16 - - 8.4% 78 Waterloo Rd, Macquarie Park, NSW 71 26 - - 6.6% Edmund Barton Building, ACT 110 66 10 - 7.2%
Slide 39: Residential – geographic diversity
Residential – geographic diversity For personal use only National Queensland TOTAL Lots: 67,991* WA 11% Gold Coast VIC 16% 11% Brisbane 14% Sunshine Sunshine Coast QLD 55% 63% 63% North NSW & QLD ACT 18% 12% 31 December 2008 - 77 - * Excluding Retirement Living Retirement Living Income Gross profit
Slide 40: Residential - average age of lots sold (1H09)
Residential - average age of lots sold (1H09) For personal use only Residential Communities - Lots Sold Average Age of Lots Sold 80% 70% 60% 50% 40% 30% 20% 10% 0% 1-3 yrs 4-6 yrs 6+ yrs - 79 - Communities – projects launched Projects Released 1H09 McKeachies Run, NSW Freshwater, QLD Bundilla (Brigh
Slide 41: Residential outlook – by state
Residential outlook – by state For personal use only Market Outlook - Next 12 Months Volumes softer in 2008 – underlying demand still positive. Expected to remain at QLD current levels VIC Strong performer in 2008 – expect to soften slightly in 2009 Remain flat. Pent up demand in rental product coul
Slide 42: Communities – lots sold
Communities – lots sold For personal use only 1H09 1H08 Avg Price Price No. Lots Avg Size No. Lots Avg Size Avg Price* Price* per m2 per m2 Sold (m2) Sold (m2) $(000) $(000) $ $ New South Wales 98 527 282 535 99 658 366 556 Victoria 427 502 149 297 395 543 150 276 Queensland 729 613 221 361 1,289 62
Slide 43: Apartments - deferred development pipeline
Apartments - deferred development pipeline For personal use only Project DA Status / Expiry Lots 4, 15, 18, 24 - approved (expiry 2012) Prince Henry Lots 28, 29, 30 - approved (expiry 2013) Lots 11, 13 – approved (expiry 2014) Gordon Approved (expiry Feb 2010) Entire site - Priority Development Zone