2014 HALF YEAR RESULTS PRESENTATION 13 August 2014 DAVID KEIR - - PowerPoint PPT Presentation

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2014 HALF YEAR RESULTS PRESENTATION

13 August 2014 DAVID KEIR Managing Director & CEO CRAIG BELLAMY Chief Financial Officer

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2012 - 2013 FULL YEAR RESULTS

DISCLAIMER

2014 HALF YEAR RESULTS PRESENTATION

13 August 2014

While every effort is made to provide accurate and complete information, Devine does not warrant or represent that the information in this presentation is free from errors or omissions or is suitable for your intended use. The information provided in this presentation may not be suitable for your specific situation or needs and should not be relied upon by you in substitution of you obtaining independent advice. Subject to any terms implied by law and which cannot be excluded, Devine accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in information in this presentation. All information in this presentation is subject to change without notice. The material contained in this presentation is for information purposes only and does not constitute financial product advice. The information contained in this presentation had been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Before making any investment decision, you should consider, with or without the assistance of a financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. Nothing in this presentation is a promise or representation as to the future. Statements or assumptions in this presentation as to future matters may prove to be incorrect and the differences may be material.

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2012 - 2013 FULL YEAR RESULTS

CONTENTS

2014 HALF YEAR RESULTS PRESENTATION

13 August 2014 1. Overview 2. Corporate Sale Update 3. Period Highlights 4. Financial Performance 5. Business Unit Performance 6. Strategy 7. Market Snapshot 8. Pipeline Summary

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Half year results

• Total revenue up 21% to $175.2 million
• Pre-tax profit of $5.6 million (compared to a pre-tax loss of $6.9 million for same period last

year)

• Delivered positive operating cash flow surplus of $41.8 million (compared to $10.3 million for

the same period last year)

• Balance sheet enhanced with debt reduction and gearing reduced to 16%
• No dividend declared for the period
• Company sale process commenced in August 2014
• 1. OVERVIEW
• Land settlements of 392 allotments for the period
• 314 home commencements in the six months
• Construction work-in-hand of $179 million secured
• Development business delivered strong profit result

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Company sale process established and commenced

• 2. CORPORATE SALE UPDATE
• On 25 June 2014, Devine (DVN) announced that majority shareholder Leighton Holdings

Limited (LEI) was seeking potential purchasers for its 50.6% investment in DVN

• The Company advised that given the stated desire of its majority shareholder, Directors

believe a company led process examining the sale of all shares was warranted

• DVN and LEI have entered into arrangements in relation to the sale process
• The process will be administered solely by DVN and overseen by an Independent Board

Committee of DVN in consultation with LEI and its advisers

• The Expressions of Interest process has commenced, with EOI’s to be lodged

by 25 August 2014

• Shortlisted proponents will be granted access to due diligence, subject to appropriate

confidentiality arrangements, during September 2014

• There are no assurances that a sale of DVN will be finalised or what form the transaction (if

any) will ultimately take

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Recovery on track

• Residential land settlements of 392 lots met expectations for the period; with 85% of the full

year target settled or subject to contract as at 30 June 2014

• Housing commencements on target with 314 starts; and 80% of the full year forecast

construction commencements either started or subject to contract

• Settlements at Hamilton Harbour remained strong; with only 1 apartment of 660 in total

remaining unsold

• Sale and settlement of the Camelot CBD site and the KSD1 Commercial and Central Retail

Buildings at Hamilton Harbour achieved during the period

• DoubleOne3 sales nearing 90% of total project. Settlements commenced in July 2014 with

78 apartments settled during the month

• The Company sold its 50% share in the Parramatta apartment opportunity in Sydney during

the period

• Pre-sales commenced at the157 apartment Mode project in the Brisbane, with 70% pre-sold
• r reserved as at 30 June 2014
• Devine Constructions awarded the contract to deliver the Westmark Milton project in

Brisbane, with construction expected to commence in 2014

• Devine Constructions’ work-in-hand of $179 million, with projects to be delivered over the

next 24 months

• 3. PERIOD HIGHLIGHTS

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Capital recycling plan activated

• Capital recycling plan initiated in late 2013 to reduce

debt and provide for higher margin opportunities in the future

• All transactions initiated under the plan have been sold

at or above book value

• The “trade-out” of impaired projects remains ongoing

with improved sales volumes across numerous projects

• Capital recycling plan has resulted in significant debt

reduction and modest gearing level at 16%

• As an outcome of the capital recycling plan and the

subsequent debt reduction, the company has accelerated activities across a number of projects as well as identified new opportunities.

• 3. PERIOD HIGHLIGHTS

New terrace homes at Devine’s Orleana Waters Community in South Australia Spacious interiors add to the appeal of Devine’s DoubleOne3 apartments in Brisbane

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HY14 Financial Overview

144.2 (4.7) (6.9)

6 months to June 2013

0.5 Statutory Net Profit / Loss (after Tax) 175.2

1

Total Revenue $ millions

6 months to June 2014

Net Profit before Tax 5.6 (3.0) Earnings Per Share (cents) 0.3

• 4. FINANCIAL

PERFORMANCE

1 Excludes revenues from equity accounted joint ventures

• Total revenue up 21% on corresponding comparative period
• Improved profit outcome recorded before and after tax
• Tax expense high for the period due to sales of previously

impaired assets

• No tax was payable despite increased tax expense

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Revenue

HY14 Divisional Results

• 4. FINANCIAL

PERFORMANCE

1 Excludes revenue from joint ventures

1

3.3 (4.2) 16.6 57.2 (0.9) (10.5)* 5.4 Profit / (Loss) Before Tax 0.4 3.1 66.8 Segment Revenue 6 months to June 2013 ($ millions) (1.9) 2.1 6.6 (2.1) 1.0 Profit / (Loss) Before Tax 0.6 42.6 10.4 54.8 66.9 Segment Revenue 6 months to June 2014 ($ millions) Other Constructions Development 1 Housing Communities

• Communities’ result impacted by volume of

settlements from impaired projects and slowing of Adelaide and Gladstone markets

• Housing performance improving through structural

and operational changes. Current result includes completion of existing workbook at lower margins

• Development result includes sale of 50% interest in

Parramatta apartment project

* Note: includes impairment charge of $10.0M

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2.8

• Profit distributions received from joint ventures

$ millions Six months to 30 June 2014 Six months to 30 June 2013 Cash flows from operating activities Receipts from customers (inclusive of GST) 183.5 160.5 Payments to suppliers and employees (inclusive of GST) (134.9) (148.4) Net finance costs (6.8) (4.9) Income taxes

• 0.3

Net cash inflow from operating activities 41.8 10.3

Operating cash flow

• 4. FINANCIAL

PERFORMANCE

• Receipts from customers improved 14% on the

corresponding comparative period

• Operating cash surplus of $41.8 million for the six

months

• Re-investment opportunities emerging and being

considered

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HY14 Balance Sheet Summary

$ millions As at 30 June 2014 As at 31 December 2013 Assets - Cash 23.5 11.3

• Receivables

73.5 82.1

• Inventories/Investments

316.4 357.8

• Other

11.4 17.8 Total Assets 424.8 469.0 Liabilities - Trade and other payables 85.8 64.8

• Interest bearing debt

63.4 123.5

• Non-interest bearing debt

25.5 30.0

• Other

4.6 6.0 Total Liabilities 179.3 224.3 Net assets/shareholder funds 245.5 244.7 Net Tangible Assets (NTA) 242.2 241.4 NTA per share $1.53 $1.52 Gearing1 16% 31%

1 Gearing is defined as (interest bearing & non-interest bearing debt – cash held) / (total assets – cash held)

• 4. FINANCIAL

PERFORMANCE

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Improved position to pursue new opportunities

• 4. FINANCIAL

PERFORMANCE

123.5 63.4 Total Interest Bearing Debt 31% 16% Gearing 1 Key Metrics $ millions As at 30 June 2014 As at 31 December 2013 Cash 23.5 11.3 Available facility 2 100 44

1 Gearing is defined as (interest bearing & non-interest bearing debt – cash held) / (total assets – cash held) 2 Subject to satisfactory security

Gearing (%) 1

• Gearing at low levels as consequence of interest

bearing debt being reduced by $60 million (49%)

• Improved capacity to fund acquisitions to improve

future earnings

• Core debt facility matures August 2015
• Facility to be renegotiated over the next six months

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Residential Communities

• First half performance reflects uplift in areas of the

Queensland and Victorian property markets

• 392 land settlements nationally for the period; with

85% of the full year target secured

• Other first half CY14 highlights include:
• 5. BUSINESS UNIT

PERFORMANCE

• Final stage release at Edenbrook in Victoria (600 lot

project nearing completion)

• Englobo sale of Stage 8 Mountview; the equivalent
• f approximately 90 allotments
• Approval of Orleana Waters revised masterplan

delivering an additional 50 future dwellings

• Accelerated delivery of Parks Edge (Victoria),

Woodvale and Waverly Parks (Queensland) due to strong trading performances

• Shortlisted as preferred party for approximately 200

dwelling infill project South Australia

• First settlements and home construction

commencements at Mawson Green (SA)

Devine’s 600 lot Edenbrook Community in Victoria will sell its final allotment prior to December 2014 Riverstone Rise (Gladstone) continues to set the benchmark for quality community development in the region

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Residential Homes

• 314 homes commenced construction in the first half;

with a further 250 home starts already under contract for commencement in CY14

• The national launch of the new Devine Cottage in

January was received enthusiastically by all markets

• Centralisation of some business activities is generating

productivity gains, with delivery timeframes improving

• Medium density housing beginning to deliver outcomes

with projects completed in South Australia and Victoria, and soon to be underway in Queensland

• Launch of the adaptive Evolution Home to the Victoria

market in March

• Profitability not yet achieved however some indicators

across the housing business provide support to improved outlook

• 5. BUSINESS UNIT

PERFORMANCE

New affordable housing solution, the Cottage by Devine Adaptive living spaces are a key design feature of Devine’s new Evolution Home

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Residential Apartments and Mixed-Use

• 5. BUSINESS UNIT

PERFORMANCE

• 88% of CY14 settlement target secured as at 30 June

2014

• Strong sales results for new Mode Apartments project

in Newstead, with 70% of apartments sold or reserved prior to the public sales campaign

• Hamilton Harbour project progressing to sale and

settlement completion with only one (1) apartment remaining unsold

• 90% sales of DoubleOne3 as at 30 June, with 80% of

sold apartments on-track to settle in July

• Sold 50% interest in Parramatta project capitalising on

value uplift since acquisition

• Settlement of the Camelot development site in

Brisbane CBD, and KSD1 and Central Retail building in Hamilton Harbour; per the capital recycling plan

• Currently investigating a number of new apartment
• pportunities in Brisbane market
• Hamilton Harbour awarded best mixed use project by

both the National Property Council and the Urban Taskforce at their respective award ceremonies

Streetview of Devine’s DoubleOne3 Apartment development in Brisbane Apartment design makes the most of available views and aspects at DoubleOne3

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Construction

• Awarded construction contract on Westmark Milton

project for Walker Corporation

• Practical completion of Devine’s DoubleOne3

apartments to enable settlements to commence in July 2014

• Commenced construction of 144 apartment project

(Vida) for Pointcorp Developments and 143 apartment Alex Perry Residential project, with both progressing

• n program
• Completion of $1.7 million Leichardt Street Office

Building refurbishment project for external clients

• Secured contract to deliver 12 independent living units

for Aveo in Brisbane

• Construction work-in-hand of $179 million to be

delivered over the next two years

• Maintaining a strong pipeline of potential work, with

further new construction project wins anticipated

• 5. BUSINESS UNIT

PERFORMANCE

Devine Constructions will commence works on Walker Corporation’s Westmark Milton in 2014

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Strategy for growth

• 6. STRATEGY
• A review of the Company’s long-term growth strategy

has examined all parts of the business and established a clear plan for investment, divestment, and growth for the future

• Focus will be applied to:
• Applying a faster, lighter capital investment

strategy and introducing partners to projects as applicable

• Rebuilding within our current geographic footprint

before looking to extend to new markets

• Leveraging housing and land capability to enable

delivery of smaller build out opportunities

• Increasing investment in more apartment and

mixed-use projects of varying scales

• Balanced expansion of Devine Constructions

Devine’s Mode Apartments at Newstead has recorded strong sales in advance of the public sales campaign

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• Market summary
• 7. MARKET SNAPSHOT

Population growth and lowest interest rates in 50 years is unlocking pent up demand Forecasters calling the current recovery as record breaking; expecting it to run for 2 years Investors and 2nd plus homebuyers driving demand; with first home buyers ‘sidelined’ for the moment Sentiment has some fragility; yet time to buy as dwelling index shows market support

• M ay-

92 M ay- 93 M ay- 94 M ay- 95 M ay- 96 M ay- 97 M ay- 98 M ay- 99 M ay- 00 M ay- 01 M ay- 02 M ay- 03 M ay- 04 M ay- 05 M ay- 06 M ay- 07 M ay- 08 M ay- 09 M ay- 1 M ay- 1 1 M ay- 1 2 M ay- 1 3 M ay- 1 4

% 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 140.0 150.0 160.0 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Index

Housing Approvals First Home Buyers (as % of dwellings financed) Dwelling Commencements (Qtrly) Time to Buy a Dwelling Index

Sources: ABS, Westpac Melbourne Institute

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Market outlooks

• 7. MARKET SNAPSHOT
• Year on year growth on dwellings values at 6.9%
• Rental vacancy rates remain tight at 2.3%
• Apartment gross yields at 5.3% are outperforming Melbourne and Sydney; generating a

greater appetite from investment markets

• March 2014 quarter building approvals up 25% on same period last year

BRISBANE – volumes improving as it enters an upswing

• Dwelling approval slow down has arrested, but remains below long term averages
• Price growth (up 18.5% since June 2012) on the back of the established home market
• Rental yields are tight, with Melbourne the lowest of any capital city (3.4% gross) with

investors relying on potential capital gains as the catalyst to invest

• Market corridors remain segmented in their performance, however previously challenged

growth corridors are showing signs of improvement

• Building approvals continue to grow, although the most significant increase is via high

density projects MELBOURNE – most sub-markets have stabilised and expected to show steady growth

Sources: ABS, BIS Shrapnel, REIA, REIQ

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Market outlooks

• 7. MARKET SNAPSHOT
• The Adelaide market remains challenging since withdrawal of the State’s new construction

grant ($8,500); with new homes sales falling 8.4% for the June quarter

• Confidence remains fragile, fuelled by the unemployment rate in South Australia at 7.4%; a

13 year high

• $15,000 first home owners grant only applies to newly constructed homes as at 1 July,

providing an incentive toward new construction for this segment ADELAIDE – current activity subdued by strong pull forward initiated by prior stimulus

• 2013/14 is expected to record the highest number of multi-unit approvals on record; with

very strong investor demand

• Dwelling commencements forecast to grow 9% over 2014/15
• Sydney’s median house price increased to $783,000 at the March quarter; up 16.9% on the

prior year

• Rental vacancy rate very tight at just 1.4%

SYDNEY – strong momentum continuing to lead Australian property markets GLADSTONE – early signs of emerging recovery

• The decline in home values has slowed; down 0.6% for the March quarter
• Likewise vacancy rates are falling from post boom ‘highs’ as rental properties are absorbed
• Net vacant land sales have improved throughout the June quarter following a poor prior

period

Sources: ABS, BIS Shrapnel, REIA, REIQ, NLSP Survey

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• 8. PIPELINE SUMMARY

Completion Trading Start Up

• Now Selling

580 Ipswich Land Mountview

• Now Selling

180 Adelaide Hills Land Mawson Green at Meadows

• Now Selling

120 Brisbane Nth. Land Woodvale CONSTRUCTIONS COMMUNITIES AND DEVELOPMENT Commencing 2014 12 living units Brisbane Nth. Retire Aveo Albany Creek (Aveo) QUEENSLAND

• Under Construction

143 apts. Brisbane Apt Alex Perry (Chrome Properties)

• Practical Completion

111 apts. Brisbane Apt DoubleOne3 (Devine)

• Planning

157 apts. Brisbane Apt Mode (Devine)

• Under Construction

144 apts. Brisbane Apt Vida (Pointcorp)

• Commencing 2014

277 apts. Brisbane Apt Westmark Milton (Walker Corp) 11,002 dwellings TOTAL DWELLINGS 844 dwellings TOTAL DWELLINGS

• Now Selling

40 Various Land Other

• Now Selling

587 Adelaide North Land Orleana Waters STH AUSTRALIA

• Now Selling

1,252

• Melb. – Regional

Land Stonehill

• Now Selling

273 Melbourne Nth-West Land Pennyroyal

• Now Selling

396 Melbourne Sth Land Parks Edge

• Englobo Sale

893

• Melb. – Regional

Land Newbridge, Wallan

• Englobo Sale

514 Melbourne Sth-East Land Lakeland

• Now Selling

83 Melbourne Sth-East Land Edenbrook VICTORIA

• Now Selling

42 Various Land Other

• Planning

1,069 Ipswich Land Western Lands

• Now Selling

256 Gold Coast Nth. Land Waverley Parks

• Now Selling

2,517 Gladstone Land Riverstone Rise

• Now Selling

537 Townsville Land Riverparks

• Planning

1,200 Townsville Apt. Southbank Townsville

• Planning

157 Brisbane Apt Mode Newstead

• Planning

190 Brisbane Apt. KSD Two, Hamilton Harbour

• Complete

5 Brisbane Apt Hamilton Harbour - Riverside

• Under Construction

111 Brisbane Apt DoubleOne3 QUEENSLAND 2016+ 2015 2014 PROJECT LIFECYCLE STATUS PIPELINE * AT JUN 14 LOCATION TYPE PROJECT NAME REGION

* Pipeline is defined as dwellings or allotments inventory that are yet to settle

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• 8. PIPELINE SUMMARY

Communities and Development Portfolio

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2014 HALF YEAR RESULTS PRESENTATION

13 August 2014 DAVID KEIR Managing Director & CEO CRAIG BELLAMY Chief Financial Officer