1H10 Results Presentation – 10 February 2010 Matthew Quinn, Managing Director Hugh Thorburn, Finance Director www.stockland.com
Solid 1H10 results – upgrading full year guidance to 29c Operating results • Underlying Profit up 17% on 1H09, EPS down 21% due to equity raised in May 2009 • Residential Communities lots settled up 70% on 1H09 and record level of contracts on hand - up 56% • Commercial Property comparable NOI growth of 1.6% reflecting sound leasing and asset management outcomes despite tough conditions • Retirement Living Operating Profit definition changed to include only development profits and DMF earned based on normal accrual accounting; DMF creation and revaluation now below the line and excluded from Underlying Profit Strong balance sheet and long dated debt maturity • Gearing at 18% 1 remains below target range - average debt maturity > 6 years • Cash and undrawn facilities of $2.2b available to fund organic growth Focus on value-enhancing growth opportunities in line with strategy • Maintained disciplined assessment of growth opportunities in line with group strategic weightings • $205m of Residential Communities acquisitions – circa 3,550 lots; profit contribution from FY11 • Development of Retirement villages proceeding to plan – development pipeline of circa 3,000 units • Key Retail development projects to be activated – developments with total cost of $0.6b already underway Positive outlook • All businesses enter second half in strong position • FY10 EPS guidance upgraded to 29c (previously 28c) 1 Net of cash balance - 1 -
Underlying Profit up 17% on 1H09, EPS down 21% due to equity raised in FY09 Summary of key metrics 1H10 1H09 $213.7m ($726.9m) Statutory Profit / (Loss) $334.6m ▲ 17% $286.9m Underlying Profit 1 17.8 cents 2 14.1 cents ▼ 21% Underlying Earnings per Security 13.3 cents 2 12.7 cents ▼ 5% AFFO per security 10.8 cents 17.0 cents Distribution per security $3.59 $4.86 NTA per security 1 Underlying Profit reflects statutory profit as adjusted to reflect the Directors’ assessment of the result for the ongoing business activities of Stockland, in accordance with the AICD/Finsia principles for reporting underlying profit 2 Prior period EPS and AFFO per security have been adjusted for the dilutionary impact of the Equity Raising announced on 13 May 2009 as required by accounting standards, and also exclude inventory write-downs - 2 -
Residential
Residential market conditions - recovery underway in all states National Private detached house approvals • Major undersupply of housing continues to drive price growth (2007-2009, trend) 3,500 Approvals per month • End of FHOB was orderly – upgraders now the prominent buyer group Victoria 3,000 • Strong market recovery and ready supply of affordable housing • High domestic and offshore migration underpinning demand 2,500 Queensland • Suffered the greatest slowdown and the mildest recovery to date 2,000 • Difficult investment climate; government levies increasing • New housing starts remain below underlying demand New South Wales 1,500 • Solid market recovery driven by good demand • Recent price growth in Sydney inner ring expected to filter to greenfield developments in 2010 1,000 Oct-07 Oct-08 Oct-09 Aug-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Dec-09 Western Australia • Renewed investment by resource sector supporting residential demand VIC QLD NSW WA Source: ABS - 4 -
Strong Residential Communities revenue and profit growth Revenue • Retail lots settled up 70% on 1H09 Residential Communities 1H10 1H09 • Settlements up in all states and market segments Lots settled 2,437 1,434 • Super lot settlements impacted by buyer inability Revenue $425m 4 $352m 4 to secure finance – only 3% of revenue in 1H10 EBIT (before interest in COGS) $107m $92m versus circa 15% historically Operating Profit (incl. interest in COGS) 2 $84m $77m 1 • Revenue up 21% on 1H09 Contracts on hand 3 - no. 1,879 1,205 Profit - $ $408m $225m • Communities performance now also shown as EBIT before capitalised interest expensed in COGS: Residential Communities sales – Interest in COGS makes it difficult to compare 5,000 5,000 the underlying performance of the business 4,500 4,500 across reporting periods 4,000 4,000 • EBIT up 16% on 1H09, Operating Profit up 9% 3,500 3,500 • Higher EBIT and Operating Profit expected in 2,437 2,437 3,000 3,000 3,101 3,101 No. lots No. lots 2H10 than 1H10: 2,500 2,500 409 409 2,000 2,000 – High level of lots under production at 1,500 1,500 31 December to be completed in 2H10 2,288 2,288 1,000 1,000 1,879 1,879 – Significant portion of 2H10 revenue already 1,215 1,215 500 500 contracted – record contracts on hand 0 0 30 June 09 contracts 30 June 09 contracts Deposits taken Deposits taken 1H10 settlements 1H10 settlements 31 Dec 09 contracts 31 Dec 09 contracts Net deposits Jan-10 Net deposits Jan-10 Contracts on hand Contracts on hand 3 – Higher super lot sales expected in 2H10 on hand on hand on hand on hand (at 31 Jan 2010) (at 31 Jan 2010) 1 Pre write-down 2 Pre-tax 3 1,739 contracts on hand due to settle in 2H10, 140 due to settle in FY11 4 Excludes other revenue of $5m (1H09: $6m) included in Residential segment revenue - 5 -
Residential Communities buyer composition close to target mix First Home Buyers (FHBs) Buyer composition (# of deposits) • Very high leads and deposits in 1H10 Deposits up 66% on underpinned by First Home Owners Boost 1H09 3,500 2,975 3,101 3,000 • Leads now returning to 20% - 30% target range 328 568 2,500 1,870 • Remain buoyant in Victoria with State grant in 942 2,000 1,236 place until 30 June 2010 224 1,500 805 Upgraders 1,000 1,705 1,297 500 • Now the majority of leads and deposits with 841 volumes at their highest level in 18 months 0 1H09 2H09 1H10 • Rising established house prices driving positive F irst H o me B uyers Upgraders Investo rs sentiment Leads 1 by segment (%) • Rising interest rates and affordability are a growing concern, but not a barrier to purchase if Target Target Target Target 75% 75% affordable product is delivered 65% 65% 63% 63% 50-60% • In many locations, the cost difference of building 57% 57% new versus existing house prices is negligible 47% 47% 50% 50% 39% 39% Investors 25% 25% 31% 31% 22% 22% • Volumes at highest level in 18 months 25% 25% 20-30% 18% 18% 14% 14% 13% 13% 15-25% • Rents likely to continue to rise in most capital 6% 6% cities 0% 0% Jul-08 Jul-08 Aug-08 Aug-08 Sep-08 Sep-08 Oct-08 Oct-08 Nov-08 Nov-08 Dec-08 Dec-08 Jan-09 Jan-09 Feb-09 Feb-09 Mar-09 Mar-09 Apr-09 Apr-09 May-09 May-09 Jun-09 Jun-09 Jul-09 Jul-09 Aug-09 Aug-09 Sep-09 Sep-09 Oct-09 Oct-09 Nov-09 Nov-09 Dec-09 Dec-09 • Leads moving towards target range of 15% - 25% 1 Potential purchasers who have expressed interest in a specific Stockland project - 6 -
Recent Residential Communities price growth to benefit 2H10 margins Retail lot settlements - average price per m 2 Prices • Average price per sqm of lots settled up 7% due 400 to price increases and product mix Average sale price per m 2 ( ) 4 10 380 • Price growth in 2Q10 deposits to flow through in 2H10 settlements 19 360 Margins 384 Residential Communities 1H10 1H09 340 359 EBIT margin (before interest in 25% 26% COGS) 320 Operating Profit margin (incl. 20% 22% FY09 settled Price growth Product mix Clearing aged inventory 1H10 settled interest in COGS) • Margins down slightly from 1H09 Residential Communities 1H10 EBIT margin (before interest in COGS) • Price growth and overhead savings offset by: 36% 10% – Settlement of $95m low margin aged inventory 30% 4% 24% – Negligible margin from settlement of lots (2%) from impaired projects – revenue $24m (13%) 18% 26% 25% – Lower superlot sales (high margin in 1H09) 12% • Margins expected to increase by 1% -1.5% in 6% 1H09 EBIT Margin % Impaired Projects and Higher Retail Gross Lower Superlot Gross Lower 1H10 EBIT Margin % 2H10 Aged Inventory Margin Margin Overheads - 7 -
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