Stockland Delivers Another Record Result

COMMENTARY

Stockland Managing Director Matthew Quinn said “We have again delivered quality earnings growth with a record profit result and increased returns to our security holders.”

“Our continued success is driven by the strength and diversity of our business model and asset base, coupled with our sound property skills and strong balance sheet, which stand us in good stead to deliver FY08 earnings per security growth of 5 per cent.”

“Our Office, Industrial and Retail businesses delivered quality results with impressive rental income and property revaluation gains across the portfolio.”
“Our Residential business posted another record profit, with solid EBIT margins and record pre-sales, underpinning our full year profit result,” Mr Quinn said.

STRONG BALANCE SHEET

�� Gearing ratio of 28.5%
�� Average weighted debt maturity of 6.2 years
�� $462.4 million of investment property revaluations, an increase of 10.8% on previous book value (64% from rental growth, 36% from change in cap rate since last valuation)
�� Net Tangible Assets per security increased by 6.6% to $5.68

OPERATIONAL HIGHLIGHTS
Residential: operating profit increased to $151.5 million
�� Impressive Residential Communities margin of 25%
�� Solid contribution from Apartments and high pre-sales carried forward to future reporting periods
�� Successful integration of ARC, with the Retirement Living business performing ahead of expectations
�� Diversity by product type and location continues to underpin business growth and
provide a key competitive advantage

Mr. Quinn said “Residential market drivers are generally favourable with low unemployment, rising wages and strong population growth.”

“Despite the prospect of future interest rate rises there is a structural undersupply in our key markets which should underpin their continued strength.”
“With a high volume of contracts on hand and increasing contributions from Apartments and Retirement Living, our residential business is poised to gain greater market share, strengthening our market leading position in this sector.”

Retail: operating profit increased to $128.2 million

�� Comparable net rental income growth of 5.5%
�� Low vacancy rate of 0.1%, with only 11 shops vacant out of 3,300
�� Strong leasing activity with 236 leasing transactions completed at an average increase of 27% on prior rents
�� Contracted to sell $475 million of non-core assets at an average yield of 5.7%, settling in 2H08

Mr. Quinn said “Our retail centres continue to deliver excellent sales results.”

“Our low occupancy costs position us well to deliver further operational upside, and we have a solid development pipeline which will add considerable future value.”

Office and Industrial: operating profit increased to $157.7 million

�� Comparable net rental income growth of 4.9%
�� High portfolio occupancy of 98%
�� Solid contribution of $11.5 million from the trading business

Mr. Quinn said “With very favourable office market conditions set to continue into 2008, we will leverage our property expertise to deliver significant organic growth from rising rents in the key CBD markets.”

Capital Partners: $3.5 billion assets under management

�� Over $900 million of wholesale and retail assets under management in Australia
�� Over $2.5 billion of assets under management in UK/Europe
�� Delivery of key joint venture and co-investment projects, including $120 million in
the Moorebank JV

Stockland Halladale: operating profit of $6.5 million

�� Integration completed successfully
�� Strong team and platform
�� Development pipeline in excess of $1 billion

Mr. Quinn said “Property and capital market conditions in the UK are tough, and even though our short-term performance is affected by this, the impact on our overall performance is not material given our relatively small investment in this market.”

“We plan to grow our UK business in line with our diversification strategy and the strength of our platform and balance sheet puts us in a great position to capitalise on buying opportunities created by the weak UK market conditions,” Mr. Quinn said.

OUTLOOK

Mr. Quinn said “We have delivered an impressive first half result, demonstrating the strength of our business model and our strategy of leveraging our value adding property skills.”

“Diversity, by asset class and geography, continues to underpin our strong performance through changing market cycles.”

“The recent volatility in capital markets has had no material impact on our operating results or financial strength and our strong balance sheet and capital management position stand us in good stead to deliver solid long-term future growth.”

“We remain on track to achieve our target earnings per security growth of 5% for FY08,” said Mr. Quinn.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.

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