Strategic priorities

  • Maintain a strong balance sheet to support future growth
  • Maintain diverse funding sources
  • Maintain disciplined capital allocation

FY16 progress

TickSymbol B  

Maintained A-/stable credit rating for over ten years and gearing remains within our target range

TickSymbol CORP   Extended pro forma weighted average debt maturity from 5.3 to 5.9 years
TickSymbol CORP Reduced average FY16 cost of debt by 40bp to 5.8%
TickSymbol CORP Significant improvement in operating cash flows, from $401 million to $787 million

Our progress



Balance sheet

Stockland maintained a strong balance sheet and A-/stable credit rating, supporting investment in the future growth of the business. Gearing at the end of FY16 was 23.8%, at the lower end of our 20–30% target range, due to disciplined capital management, strong operating cash flows and growth in the value of our investment portfolio.

Our active debt management program has seen us improve our weighted average cost of debt and, partly as a result of our post year-end US Private Placement, increase our average weighted debt maturity to 5.9 years on a pro forma basis.

Our fixed/hedged ratio has increased to 96% at 30 June 2016 (2015: 72%) as we continue to take advantage of low fixed interest rates. The weighted average cost of debt for the year ended 30 June 2016 has decreased to 5.8% (2015: 6.2%) following the termination of three swaps during the first half, funded from gains on asset sales.

Interest cover has increased to 4.5:1 (2015: 4.0:1) due to stronger earnings across the business.

BALANCE SHEET
$m

FY16

FY15

Change 
Cash 208 170 ↑ 22.4%
Real estate assets1
  • Commercial Property
9,706 8,942 ↑ 8.5%
  • Residential
2,517 2,552 ↓ 1.4%
  • Retirement Living
3,589 3,335 ↑ 7.6%
  • Other
- 7
Other assets 922 723 ↑ 26.6%
Total assets 16,942 15,729
Interest bearing loans and borrowings 3,800 3,823 ↑ 15.7%
Resident loan obligations 2,427 2,211 ↑ 9.8%
Other liabilities  1,461 1,448 ↑ 0.9%
Total liabilities 7,688 6,942  
Net assets/total equity 9,254 8,787  

1 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.

The Commercial Property investment portfolio has increased by $764 million to $9,706 million primarily due to valuation uplift across all three asset classes (up $432 million including equity accounted joint venture investments). The overall increase also reflects continued capital and development expenditure predominantly on the Retail development pipeline, and acquisitions across Retail, and Logistics and Business Parks. The valuation gains were largely in Retail assets in New South Wales, namely Green Hills ($35 million), Merrylands ($32 million), Balgowlah ($21 million), Glendale ($21 million) and Wetherill Park ($87 million), all benefitting from income growth and capitalisation rate compression. The Group’s Office portfolio recorded a net valuation gain of $21 million, while Logistics and Business Parks similarly delivered strong valuation gains of $77 million during the period. Valuation gains across the portfolio saw the Group’s weighted average capitalisation rate reduce from 6.9% to 6.4%.

Residential assets (mainly land under development) decreased slightly to $2,517 million at 30 June 2016. Strong settlement volumes in FY16 led to a reduction in inventory, while a disciplined approach to development expenditure throughout the year ensured that production did not exceed sales. Land acquisitions reflect our focus on acquiring land on capital efficient terms. Finished goods' levels remain appropriate.

The value of the Retirement Living assets, net of resident loan obligations, was $1,162 million, an increase of $38 million from June 2015. This primarily reflects capital expenditure on the development pipeline, partly offset by an increase in resident loan obligations created on first sales of development units.

Total debt increased by $517 million to $3,800 million at 30 June 2016 as a result of increased operating activity satisfied by the issuance of Domestic Medium term notes and US Private Placement notes, partly offset by the repayment of bank facilities and Asian Private Placement notes. Unfavourable foreign exchange and fair value movements on debt were largely offset by net favourable movements in derivative financial instruments. Movements in other assets and liabilities  mainly reflect the changes in value of the Group’s financial instruments and intangibles.




Operating cash flows are up significantly on the prior year, primarily as a result of improved trading revenues across the business combined with a disciplined approach to residential development spend and lower land acquisitions in Residential during the year.

Net cash outflows from investing activities reflect lower proceeds from the sale of investment properties and investments in the current year. FY16 includes investment proceeds from the disposal of Waterfront Place while the prior year includes disposal proceeds from the 50% disposal of Townsville ($223 million), the remaining assets in the UK ($44 million), aged care ($20 million) and our investment in Australand ($506 million). Overall net cash payments in relation to Commercial Property and Retirement Living capital expenditure are in line with the prior year.

Net financing cash outflows reflect the net proceeds from borrowings to fund acquisitions and development expenditure, as well as payments for the termination of derivatives. The prior year included the net repayment of borrowings from the proceeds on the sale of our investment in Australand.

CASH FLOWS
$m

FY16

FY15

Change 
Operating cash flows 787  401  ↑ 96.3%
Investing cash flows (508) 184 
Financing cash flows, including FX on cash (241) (646) ↓ 62.7%
Net change in cash and cash equivalents 38  (61) ↑ 37.7%
Cash at the end of the period 208  170 ↑ 22.4%

 

Cash flows




Equity

Dividend/Distribution Reinvestment Plan

On 20 June 2016, Stockland announced that the DRP would operate for the final distribution to 30 June 2016 and that investors participating in the DRP will be entitled to receive a full distribution.

The DRP security price was determined to be $4.85, being the average for 15 daily volume weighted average prices of Stockland securities for the 15 trading days from 5 July 2016 to 25 July 2016  inclusive, with a discount of 1.0% on the securities acquired under the DRP.




Distributions

The dividend and distribution payable for the full year ended 30 June 2016 is 24.5 cents per security. Our distribution policy in FY16 is to pay the higher of 100% of Trust taxable income or 80–90% of underlying profit. For FY17, we are targeting distribution per security of 25.5 cents, which reflects the higher of 100% of Trust taxable income or 75-85% of FFO, within our distribution policy.

The distribution for the full year comprises:

Stockland Consolidated Group FY16 Cents FY15 Cents
Trust distribution 24.5 24.0
Corporation divident, fully franked - -
Total dividend and distribution 24.5 24.0



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