2012 2013 FULL YEAR RESULTS PRESENTATION 14 August 2013 DAVID KEIR Managing Director & CEO PAUL COCHRANE Chief Financial Officer
2012-2013 FULL YEAR RESULTS 2012 2013 FULL YEAR RESULTS PRESENTATION 14 August 2013 CONTENTS 1. Overview 2. Financial Performance 3. Business Unit Performance 4. Strategy and Outlook 5. Pipeline Summary 6. Summary 2
1. OVERVIEW Results reflect challenging market conditions Consistent underlying results achieved in challenging market conditions reflect foundations of the Group s diversity strategy Total revenue from operations of $311.1 million (compared to $313.9 million in FY12) excludes $45.8 million of revenue representing Devine s share of apartment settlements at Hamilton Harbour Underlying after-tax profit of $6.4 million (compared to $11.1 million in FY12) prior to impairments of $7.0 million after tax A statutory net loss after tax of $0.6 million after impairments (compared to a loss of $12.9 million in FY12) Delivered positive operating cash flow surplus of $26.5 million Balance sheet and capital efficiency maintained with gearing level of 25.5% No final dividend has been declared for FY13 The pool deck at the recently completed Riverside at Hamilton Harbour Ariel view of works to-date at Riverstone Rise, Gladstone in Queensland 3
1. OVERVIEW Modest trading improvement reflects success of diversity strategy Increase in residential land settlements to 978 lots, up 30% on prior year Housing commencements increased 45% to 706 starts Commencement of settlements in the third residential tower at the Hamilton Harbour project in December 2012; resulting in 92% of the total apartments in the Hamilton Harbour project now being settled First settlements recorded at signature community developments; Orleana Waters (Adelaide), Riverstone Rise (Gladstone) and Parks Edge (Melbourne) Completion by Devine Constructions of the KSD1 commercial and retail centre at Hamilton Harbour 75% sales of DoubleOne3; triggering construction commencement in March 2013 Commenced 130 wholesale builds, and attracted a further 87 to the wholesale building pipeline for delivery over the next two years Secured new 157 apartment project site at Wyandra Street (Newstead) in the Brisbane CBD fringe growth area Successfully negotiated a preferred tender position on key development opportunity in New South Wales with 350 plus apartment site in Parramatta 4
Index 1. OVERVIEW Underlying market fundamentals starting to show improvement Consumer confidence is improving albeit slowly, while uncertainty exists with regard to job security and softening employment conditions Strong population growth is continuing Residential market remains in a state of undersupply in most regions Positive rental yields and tight vacancy rates maintain interest from the investor markets Low interest rate environment expected to further stimulate activity Prices of established homes appear to have stabilised Housing approvals continue to track below long term averages Consumer Consumer Sentiment Sentiment Index Index Dwelling Approvals 130.0 120.0 110.0 100.0 5 80.0 70.0 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Sources: ABS, BIS Shrapnel, RPData Rismark, REIA, Westpac Economics, Melbourne Institute 90.0
2. FINANCIAL PERFORMANCE FY13 Financial Overview $ millions Full Year to 30 June 2013 Full Year to 30 June 2012 Revenue - Housing and Land 238.7 198.0 - Apartments and Other 78.5 1 124.8 1 Statutory Net Profit / (Loss) after Tax (0.6) (12.9) Underlying Operating Profit after Tax 6.4 11.1 Earnings Per Share (0.4) cents (8.1) cents Dividend Per Share nil 4.0 cents 1 Excludes revenues from equity accounted joint ventures Statutory profit impacted by impairments in both FY12 and FY13 Reduction in underlying profit reflective of timing and number of settlements in Apartments business and tight margins in housing operations No Dividend declared for FY13 6
2. FINANCIAL PERFORMANCE FY13 Divisional Results Housing & Land 2013 $ millions 2012 $ millions Revenue Segment Revenue 238.7 198.0 Underlying Profit Before Tax 3.8 (1.0) Apartments & Construction 1 Segment Revenue 1 76.7 123.1 Underlying Profit Before Tax 8.3 21.9 1 Excludes revenues from equity accounted joint ventures Increases in Housing & Land revenue as a result of improved land settlements, offset by a decrease in apartment settlements Profitability impacted by challenges in housing operations driven by the increased incentives and marketing costs required to secure sales and site starts One apartment tower commenced settlements in the period, as compared to two towers in the prior period 1 Excludes revenue from joint ventures Inventories and Property Investments 7
2. FINANCIAL PERFORMANCE FY13 Impairments Devine had a conditional contract in place to sell a development asset and had been confident of finalising a binding contract prior to 30 June 2013 However the contract was terminated by Devine when the purchaser could not satisfy its conditions precedent The total impairment of $7.0 million after tax on this property asset reflects the current status of Brisbane CBD office market and broad market sentiment The company is pursuing a sale of the asset to recycle capital into new opportunities 8
2. FINANCIAL PERFORMANCE Resilient operating cash flow $ millions Full Year to 30 June 2013 Full Year to 30 June 2012 Cash flows from operating activities Receipts from customers (inclusive of GST) 348.6 363.9 Payments to suppliers and employees (inclusive of GST) (316.3) (331.6) Joint venture profit distributions received 4.0 11.5 Net finance costs (10.1) (14.3) Income taxes 0.3 (2.0) Net cash inflow from operating activities 26.5 27.5 Cashflow benefited from some asset sales Further capital recycling initiatives are underway 9
2. FINANCIAL PERFORMANCE FY13 Balance Sheet Summary $ millions As at 30 June 2013 As at 30 June 2012 Assets - Cash 21.0 20.1 - Receivables 73.6 84.8 - Inventories/Investments 443.8 458.9 - Other 6.0 5.6 Total Assets 544.4 569.4 Liabilities - Trade and other payables 65.1 64.9 - Interest bearing debt 119.2 132.9 - Non-interest bearing debt 35.1 41.9 - Other 7.5 8.2 Total Liabilities 226.9 247.9 Net assets/shareholder funds 317.5 321.5 Net Tangible Assets (NTA) 314.2 318.2 NTA per share $1.98 $2.00 Gearing 1 25.5% 28.2% 1 Gearing is defined as (interest bearing & non-interest bearing debt cash held) / (total assets cash held) Balance sheet mainatined with conservative gearing at 25.5% 10
2. FINANCIAL PERFORMANCE Prudent capital management Key Metrics As at 30 Jun 2013 As at 30 Jun 2012 Gearing 1 25.5% 28.2% Undrawn facilities plus cash $58 million $74 million 1 Gearing is defined as (interest bearing & non-interest bearing debt cash held) / (total assets cash held) Maturity of core debt facilities extended to October 2015 Modest gearing levels maintained Capital recycling to fund future opportunities remains a key priority Debt Maturity Profile ($ millions) Gearing (%) 1 11
3. BUSINESS UNIT PERFORMANCE Residential Communities 12 FY13 remained a tough year for the residential property markets in which the Group operates 978 land settlements nationally; up 30% on prior year Signature projects in each region made significant contribution accounting for 440 settlements, with first settlements achieved at Riverstone Rise (Gladstone), Parks Edge (Melbourne) and Orleana Waters (Adelaide) Other FY13 highlights include: Securing approval for the 871 lot Newbridge community at Wallan, Victoria. The project is expected to launch in early 2014 Significant progress on delivery of key infrastructure across signature projects, and first residents welcomed to Stonehill (Vic), Riverstone Rise (Qld) and Orleana Waters (SA) master planned communities Shortlisted by RenewalSA to negotiate the acquisition of a key landholding adjacent Devine s Orleana Waters community Devine s Stonehill at Bacchus Marsh is impressing visitors with its progress The adventure playground at the entry to Corimba Village at Devine s Riverstone Rise in Gladstone
3. BUSINESS UNIT PERFORMANCE Residential Communities Case Study: Orleana Waters, South Australia 13 Devine s 59 hectare community launched to the market in February 2012 with the first two (2) stages 85% sold The community is expected to become home to over 2,000 people over the next six years A range of allotment types assist in creating a diversity of product and price points to this large scale master planned community Much of the community desired amenity has already been delivered in the existing surrounding area; including: Public and private schools (including the well regarded Trinity College) Convenience and market place retail centres Sporting and recreational clubs and amenities Commuter rail station to Gawler and Adelaide CBD The opportunity to extend the project life if successful in negotiating an outcome for the adjacent landholding The project is managed under a capital efficient land management model Attention to detail is helping establish Orleana Waters as the benchmark community in the city s north The entry drive into Orleana Waters, South Australia
3. BUSINESS UNIT PERFORMANCE Residential Homes While home commencements increased over FY13, the performance of the housing business was impacted by pressures on selling prices and subsequently margins A detailed review of the housing business has resulted in the appointment of a General Manager (Housing) and a realignment of staff numbers to reflect activity 706 homes commenced construction in FY13; up 45% on FY12 Wholesale building operations played a key role in maintaining volumes with 130 commencements, offsetting the slow down in retail business The wholesale building pipeline was maintained with new work secured for key clients including Places Victoria, Defence Housing Australia and other retirement and mining industry partners New cost base and operational structure has been established; and market responsive housing product is being introduced in FY14 Devine s new Loft House design, the first of many new products to be delivered The Vibe display home at Stonehill, Victoria 14
3. BUSINESS UNIT PERFORMANCE Residential Apartments and Mixed-Use 15 Commencement of settlements in the third residential tower at Hamilton Harbour in December 2012; resulting in 179 apartment settlements for the year 92% of total apartments in Hamilton Harbour project are now sold and settled Retail and commercial elements of Hamilton Harbour well advanced with major retail tenants now trading 75% sales of DoubleOne3; triggering construction commencement in March 2013 Sold 50% interest in DoubleOne3 project into a joint venture with Investec; releasing capital to pursue new opportunities Secured new 157 apartment project site at Wyandra Street (Newstead) in the Brisbane fringe growth area Successfully negotiated a preferred tender position on key opportunity in New South Wales with a 350 apartment multi-stage site in Parramatta The Group is committed to expanding its apartment operations via further projects in New South Wales and new mid-scale projects in south-east Queensland Artist impression of the new Wyandra Street, Newstead apartment project
3. BUSINESS UNIT PERFORMANCE Construction Completion by Devine Constructions of the KSD1 commercial and retail centre at Hamilton Harbour Commencement of Devine s DoubleOne3 Apartments project (Brisbane) in March 2013; with a forecast completion date in May 2014 The Construction business is actively increasing its focus on delivering projects for clients external to the Devine Group Appointed experienced construction industry leader to the position of General Manager, Devine Constructions KSD1 at Hamilton Harbour is fulfilling the promise of a true mixed use development 16
4. STRATEGY AND OUTLOOK Focused strategy The Group s growth strategy remains focused on: Expanding the Apartment business through re-entering the NSW market Increasing land only transactions across Devine Communities to partner builder clients and investors Innovative product offerings from the Group s Communities and Homes business Expanding the wholesale building operations to supplement challenging retail environments Continuing to diversify the Devine Construction business by securing build contracts for external clients within targeted sectors of capability Devine s new Queensland headquarters at KSD1, Hamilton Harbour 17
4. STRATEGY AND OUTLOOK Diversity approach removes reliance on any one geography, buyer segment or product type Across the communities and apartments businesses, Devine s diversity strategy is playing to the market s desire for choice Devine has continued to grow it s presence in key geographic corridors across Australia, delivering on its goal to re-enter the New South Wales market Buyer segment diversity has been achieved by addressing the needs of a number of different market segments including First Home Buyers, Investors and Up-graders; plus servicing the retirement sector via the Group s wholesale building operations This multi-layered market reach, coupled with the integration of operations across residential delivery streams provides a point of difference to the business Product development and the geographic growth plan will further strengthen penetration in key trading corridors The current platform maintains the ability for the business to grow in multiple directions From affordable terrace homes to exclusive penthouse living (above), Devine caters to diverse market segments 18 The Vibe display home at Stonehill, Victoria
4. STRATEGY AND OUTLOOK Market outlooks BRISBANE tentative signs of a recovery House sale volumes increased 12.6% over the twelve months to March 2013 Dwelling approvals experienced strong growth, up 10.5% (June 12 to June 13) but still below long term average Housing affordability continues to improve; median price down 0.3% at March 2013 quarter Rental vacancies remain tight (1.7% June 13 Qtr), demonstrating the stock deficiency that is forcing rents and yields up SYDNEY continuing to improve Building approvals up 11% year on year to June 2013 and forecast to continue into FY14, adding to the housing stock deficiency Combination of low interest rates, higher consumer confidence and limited stock has contributed to median price increasing by 3.6% over 12 months to March 2013 Stock deficiency impacting on level of rental vacancy (2.1% June 13 Qtr) 19 Source: BIS Shrapnel, ABS, RPData Rismark, Residex (March 2013)
4. STRATEGY AND OUTLOOK Market outlooks (continued) MELBOURNE cooling of market continues Market conditions are expected to remain challenging throughout remainder of 2013 Sales volumes remain below five year average Melbourne dwelling prices up 1.1% over 12 months to March 2013 ADELAIDE cautiously improving Market appears to have reached bottom of property cycle and is entering early stages of recovery Combination of global uncertainty and struggling local economy having negative impact House prices have continued to fall, although the rate of decline has slowed, down 0.1% at March 2013 quarter Stimulus incentives have driven good enquiry levels and activity, however post-stimulus environment will likely deliver a slowdown in 2014 20 Source: BIS Shrapnel, ABS, RPData Rismark
5. PIPELINE SUMMARY Healthy pipeline to be enhanced as new opportunities are realised 21
5. PIPELINE SUMMARY PORTFOLIO SUMMARY Completion Trading Start Up REGION COMMUNITY NAME LOCATION BACKLOG JUNE 2013 STATUS PROJECT LIFECYCLE RESIDENTIAL 2013 2014 2015 2016+ COMMUNITIES QUEENSLAND Alberi Park Southern Corridor 13 Now Selling Arcadia Woods Southern Corridor 18 Now Selling Riverstone Rise Gladstone 2565 Now Selling Mountview Western Corridor 781 Now Selling Riverparks Townsville 561 Now Selling Sandstone Lakes Northern Corridor 355 Now Selling Waverley Parks Southern Corridor 322 Now Selling Western Lands, Redbank Western Corridor 1,069 Launch 2014 Woodvale Northern Corridor 180 Now Selling Sundry Various 5 Now Selling VICTORIA Eden Brook South-East Corridor 185 Now Selling Pennyroyal North-West Corridor 304 Now Selling Lakeland, Pakenham South-East Corridor 517 Launch 2014 Parks Edge Southern Corridor 477 Now Selling Stonehill Regional North-West 1,274 Now Selling Newbridge, Wallan Regional North 871 Launch 2014 Sundry (inc. Riverina, Moorookyle) North-West Corridor 56 Now Selling SOUTH AUSTRALA Orleana Waters at Evanston Gardens Northern Corridor 642 Now Selling Lakeside Northern Corridor 65 Now Selling Mawson Green at Meadows Adelaide Hills 203 Now Selling Munno Parra Downs (Unnamed) Northern Corridor 645 Planning The Glenn, Morphet Vale Sourthern Corridor 2 Now Selling The Summit Adelaide Hills, SA 20 Now Selling Sundry (inc. access agreements) Various 316 Now Selling 22
5. PIPELINE SUMMARY PORTFOLIO SUMMARY Completion Trading Start Up REGION PROJECT NAME LOCATION BACKLOG JUNE 2013 STATUS PROJECT LIFECYCLE APARTMENTS & MIXED USE Apartments / GFA (sqm) QUEENSLAND Camelot Brisbane CBD 420 / 1,587sqm For Sale / Development Options DoubleOne3 Brisbane CBD Fringe 111 / 475sqm Under Construction Hamilton Harbour One Brisbane City - North 0 / 186sqm Construction Complete Hamilton Harbour Two Brisbane City - North 6 / 246sqm Construction Complete 2013 2014 2015 2016+ Hamilton Harbour Three, Riverside Brisbane City - North 41 / 1,115sqm Construction Complete KSD One, Hamilton Harbour Brisbane City - North 8,500sqm Construction Complete KSD Two, Hamilton Harbour Brisbane City - North 12,500sqm Now Selling Wyandra Street Site Brisbane CBD Fringe 157 Planning Southbank Townsville Townsville 1,200 / 18,500sqm Planning NEW SOUTH WALES Turramurra Site Sydney (mid North- West) 86 Planning Parramatta Site Parramatta 350 Planning QUEENSLAND & VICTORIA Non-Residential Commercial Sites Various > 20,000sqm Now Selling 23
5. SUMMARY In summary FY13 results reflect challenging market conditions Success of diversity strategy demonstrated by: Improved trading outcomes in housing and land Resilient cash flows and strong balance sheet maintained Underlying market fundamentals showing early signs of improvement The Hill Top Park at The Summit community in Mt. Barker, South Australia Devine is well placed to benefit from improvement in the residential sector, with: Strong development and construction capabilities Market re-entry into New South Wales An attractive and evolving product portfolio A healthy development pipeline Stunning river and city views from Hamilton Harbour, Brisbane 24
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