Shareholders Bulletin 09.indd

ACN 010 769 365
SHAREHOLDERS’
BULLETIN December 2008 Half
Devine Homes QLD • Devine Homes VIC • Devine Homes SA • Property Development Division
Devine Constructions • Commercial Division • Body Corporate & Property Management
CHAIRMAN’S MESSAGE
grant, the level of enquiry from first home buyers has increased
significantly in all three states in which we operate. These preliminary
sales are currently being processed and we are confident they will
result in a material increase in land settlements and housing starts
over the balance of the calendar year.
In relation to the company’s Property Development activities, the
Devine Constructions team performed well in completing the 333
Ann St office development in the Brisbane CBD and smaller office
development in inner city Herston, with both finishing ahead of
schedule and below budgeted costs. The company’s other major
project, the pre-sold serviced apartment hotel in Bourke St in
Melbourne, is progressing well and the contracted builder is on
schedule to complete this by September 2010.
Doug Ridley
Chairman
This publication continues our practice of formally communicating
to you at least twice a year on the company’s results and activities.
Having been re-elected as Chairman of Devine Limited at the
company’s AGM held in October 2008, I am pleased to again be
providing an introduction to the Shareholders’ Bulletin reporting on
the December 08 half-year results and key points of interest on the
company’s operations.
The profit result reported for the six months ending 31 December
2008 was $11.595M, an increase of 15% on the profit reported for
the corresponding period to 31 December 2007. This was earned
on revenue of $203.971M which was 17.6% down on the revenue
declared for the six months to December 2007. The results were in
line with profit guidance provided at the AGM and re-confirmed in
January of this year.
Directors have declared a fully franked interim dividend of 3 cents
per share (last year 4 cents). The dividend will be paid on the 30
April 2009 with the record date determining entitlement being the
6 April. Shareholders can participate in the company’s Dividend
Reinvestment Plan with shares being issued under the plan at a
discount of 5% to the weighted average share price.
Whilst it was pleasing to report a solid lift in profits for the Housing
& Land Division over the six months, trading conditions remained
difficult in the Queensland market and contrasted with the more
affordable new housing market in Victoria and South Australia.
Following the Federal Government’s welcome initiative to stimulate
the housing sector through an increase in the first home buyers
Devine and its joint venture partner, Leighton Properties Pty Ltd,
continue to progress the three joint venture projects that have
previously been announced. One of these is the Hamilton Harbour
mixed-use development located adjacent to Brisbane’s cruise ship
terminal and it is pleasing to report a strong level of interest from
prospective buyers in the pre-launch phase of the first residential
unit tower in the development. Shareholders who qualify, will have
an opportunity to purchase a unit in the development at a discount
to the retail price. Details of this offer will follow separately.
Trading conditions for the company’s Body Corporate and Property
Management Division, SSKB Pty Ltd were difficult in the first half.
The business was however successful in winning a number of new
body corporate clients in already established developments and
this will contribute to revenue growth in subsequent periods.
As shareholders and readers of this bulletin will know, companies
across all business sectors are experiencing extremely challenging
economic conditions both here in Australia and overseas. This
has made forecasting activity levels and the timing of project
commencements very difficult. Nevertheless, we remain confident
that the increased grant and lower interest rate environment will see
the recent improvement in enquiry levels from first home buyers
continue and enable the company to continue trading profitably.
Further details and comments relating to the operations of Devine’s
various divisions can be found in the Directors’ Comments which
have been replicated in full on the following pages. I trust that you
will find the remaining articles in this bulletin informative.
Doug Ridley
Chairman
Devine Limited
1
DIRECTORS’ COMMENTS
Half-Year Ended 31 December 2008
Results Summary
A summary of the half-year’s results and related commentary
follows:
$000’s
Half-Year Ended
Dec. 2008
Revenue
Dec. 2007
203,971
247,502
Profit Before Tax
16,792
13,641
Net Profit After Tax
Attributable to Shareholders
11,595
10,044
EPS Basic
4.0 cents
4.2 cents
EPS Diluted
4.0 cents
4.1 cents
Interim Dividend – (Fully Franked)
3.0 cents
4.0 cents
Housing Division
David H. T. Devine
Managing Director
The Directors of Devine Limited are pleased to announce an after
tax profit of $11.595 million for the half-year ended 31 December
2008. The profit result is 15.4% up on the corresponding six-month
period to December 2007. The result was derived from revenue of
$203.971 million, which was 17.6% lower than that reported for the
six months to December 2007.
Dividend
Directors have declared an interim dividend of 3.0 cents per share
fully franked (last year 4.0 cents) which will be payable on 30th April
2009. The record date for determining entitlement to the dividend
is the 6th April 2009. The company’s Dividend Reinvestment Plan
(DRP) is active for shareholders who wish to receive their dividend
by way of an issue of Devine’s shares. The shares will be issued at
a discount of 5% to the company’s weighted average share price in
the 10 trading days post the record date.
Highlights for the Half-Year
The following are key highlights for the half-year and up to the date
of this report:
• Profits for the Housing and Land Division up 200% on last year.
• Profits for the Property Development Division up 15% on last year.
Despite a flat housing market over the six months to December,
Devine’s Housing and Land Division generated increased
profits with a profit before tax of $6.482 million being recorded.
This compared with a profit of $2.150 million in the December
2007 half.
The company’s Victorian and South Australian operations both
performed well reflecting that housing affordability in these markets
remained at reasonable levels. Depressed market conditions
persisted in Queensland. This was largely a result of the significant
increase in the cost of land over the last few years and the adverse
impact this has had on housing affordability in the state. Material
increases in infrastructures charges imposed by local authorities
have been a major contributor to the increased cost of land.
Another important factor contributing to the improved result for
the Housing & Land division is the strategy adopted by Devine to
actively market developed lots to other builders. This supplements
sales made to Devine’s housing customers in the owner occupier
and investor segments. Six hundred and seventy-six lots settled in
the December 08 half compared to the 643 lots that settled in the
corresponding period for 2007.
The increase in the First Home Owners Grant (FHOG) available
to purchasers of new homes from $7,000 to $21,000 which was
announced in October 08 was welcome news. The 4% fall in
interest rates (cash rate) from their peak of 7.25% in the current
cycle to the current 3.25% has also contributed to improved
affordability. This has seen a significant lift in the level of enquiry
from first homebuyers, including in Queensland, which it is hoped
will translate into confirmed sales and increased land settlements
and housing starts in the latter part of the June 09 half.
• Completion in September 08 of the company’s first city fringe
commercial development at Herston in Brisbane.
Property Development Division
• Receipt of a Development Approval on the company’s proposed
Brisbane CBD office development, “King George Central”, which
is to be undertaken in a joint venture with Leighton Properties.
This division reported a profit before tax of $12.319 million for
the six months (corresponding period last year $10.703 million)
an increase of 15.1%. The following projects contributed to the
half-year’s results:
• Roll-over of the Group’s core debt facilities with the ANZ for a
further two years to February 2011.
Completion and settlement occurred on the company’s inner-city
office development ICB Central at Herston in Brisbane. The project
was completed ahead of schedule and well within budget.
continued next page.
2
continued.
The 333 Ann St office development also contributed to the
half-year result. Final settlement occurred in this half-year and
additional profits were released on finalisation of the project in the
December 08 half-year.
Bourke Street, Melbourne - This 398 room serviced apartment
hotel project was pre-sold to The Ascott Group for $136 million.
Multiplex, who are contracted to build the hotel, commenced
construction in June 08 and the structure was 14% complete at
31 December 08 and on schedule to be completed by September
2010. Revenue and profits are being declared progressively as
Devine is in receipt of monthly progress payments on the project.
A brief update on other Devine property development sites
follows:
Body Corporate and Property Management
The Body Corporate and Property Management Division, SSKB,
recorded a profit before tax for the six months of $0.422 million.
Due to the economic slow down and deferral of a number of large
projects by other developers, new projects that were anticipated
to add to the 23,500 “lots” currently under body corporate
management have not eventuated in this period. The division
continues to trade profitably and the June 09 half result is forecast
to show an improvement on the first half.
Capital Management & Debt Profile
96 Albert Street, Brisbane – This site has been sold and settlement
is scheduled to occur in this financial year.
As noted above, the Devine Group’s $180 million “Evergreen” core
debt facility with the ANZ was rolled over for a further two years
until February 2011. The balance of the company’s debt is project
specific. That is secured by individual land holdings and projects.
99 Mary Street, Brisbane – Various options are being progressed
in relation to this small Brisbane CBD site.
The company has a Dividend Reinvestment Plan (DRP) available
to shareholders.
Carrington & Camelot sites (French Quarter), Brisbane
– These sites are situated on the corners of Alice, Albert and
Margaret Streets in the Brisbane CBD opposite the Botanical
Gardens. The amalgamation of a total of 48 existing residential
units in two older style low-rise unit developments together with
two small immediately adjacent sites provides an exciting future
redevelopment opportunity.
The following is a brief update on the status of projects being
undertaken in Joint Venture with Leighton Properties:
Hamilton Harbour, Brisbane – This is a mixed-use residential,
commercial and retail development being undertaken in a
Joint Venture with Leighton Properties. It will be developed over a
number of stages and has an estimated end value when completed
of approximately $500M. Development approval for the site has
now been received and marketing of the first stage of the residential
component is scheduled to commence in March 09.
King George Central, 145 Ann Street, Brisbane – Development
approval for the planned 35 level office tower was received in the
December 08 half and preleasing of the project is underway.
QLD Rail Land, Townsville – Following a successful tender for
this strategic site adjacent to Townsville’s CBD, Leighton Properties
and Devine will jointly develop this mixed-use project in stages over
the next seven to ten years. Following extensive consultation with
the Townsville City Council, a development application has been
lodged and will be progressed over the coming months.
Company Outlook
Much has been written about the sudden and material
deterioration in the economic environment both here in Australia
and to a greater degree overseas.
Devine is in a fortunate position whereby it is well placed to
benefit from the economic stimulus being given by the Federal and
State Governments to the new home sector through the increased
First Home Owners Grant. In addition, the recent reduction in
interest rates will also make a significant contribution to improving
housing affordability. This, at a time when there is a growing deficit
in Australia’s housing stocks which is evidenced by low vacancy
rates in most markets and increased rents.
Nevertheless, the overall economic environment is uncertain and
will inevitably result in some deferral of planned projects that have a
commercial or retail component. Forecasting in this environment is
very difficult. Directors have however provided guidance in relation
to the expected result for the 2008/09 financial year with a profit
after tax in the range of $23 million to $25 million projected. This
is subject to a number of transactions being completed prior to
30 June and the recent improvement experienced in sales in the
Housing and Land division continuing over the coming months.
Devine Constructions
Following completion in September of the ICB Central office
development, Devine Constructions were awarded the fit out
contract for the building by the Queensland Health Department.
Work is progressing well on the $14M project and is scheduled
to be completed in March 09. Devine Constructions has also
been awarded the construction contract for the Devine/Leighton
Properties joint venture development, Hamilton Harbour,
discussed above.
David H T Devine
Managing Director
Devine Limited
3
King George Central development
approved for Brisbane’s CBD
Joint venture project King George Central, consisting of
37,500 sqm of A-grade office space has received development
approval as well as strong tenant interest.
A number of tenants including Corporate Executive Offices and
Preschool Services Australia Pty Ltd have already pre-committed
to the project, with others advanced in their negotiations.
Despite the current difficult economic conditions leading to many
developments being abandoned or put on hold, King George
Central is on track and receiving consistently strong interest from
potential tenants.
Preschools Australia Director, Karen Williams, said her decision
to lease the 890 sqm childcare tenancy on level two of King
George Central was straightforward considering the high demand
for childcare facilities within the city.
“Increasingly, parents are seeking to enrol their children in city
based childcare centres,” Ms Williams said.
“Being able to drop off and pick up their children close by or even
within their place of employment eases the stress of the day for a
lot of working parents. Being in the heart of the city, and so close
to Central railway station and King George Square bus station,
King George Central is ideally located to reduce that stress.”
Michael Sayers, Director of Corporate Executive Offices,
Australia’s largest privately owned serviced office provider, said
the determining factor in pre-committing to 3,217 sqm across
levels 26 to 28 inclusive was the transport connectivity
advantages that King George Central will provide.
“By locating in a contemporary, well positioned building, our
organisation will be better placed to provide our occupants with
flexible transport options, something that I believe is imperative in
attracting and retaining staff.” he said.
Mr Sayers also said “Our commitment to the exciting King
George Central project further confirms Corporate Executive
Offices belief in the strength of the Brisbane CBD market.”
Interest is being driven by the quality of the development and
the excellent value for money, something which is increasingly
important to corporate occupiers in the current climate. King
George Central is one of the few projects today that is committed
to providing superior quality facilities while delivering significant
energy efficiencies and environmental benefits.
The project sits at the nexus of the ‘Golden Triangle’ and the
emerging North Quarter Precinct, well established as Brisbane
CBD’s legal hub. It’s a place that will become the true heart of
the CBD once the King George Square revitalisation is complete,
with Queen Street Mall as its spine.
The key attractor for tenants is the opportunity to lease brand
new prime office space at a cheaper rent than most
existing prime CBD buildings with new projects being delivered
at a level approximately 25% lower than the average prime
rent being paid today in existing prime buildings, as a recent
Jones Lang LaSalle study has shown.
4
t s
unlder
co eho
is ar
Dfor sh
Highly-rated green buildings, flexible housing options and a
local park are the central features of a Development Application
(DA) lodged on October 17 for the new $500 million mixeduse development on the Hamilton Harbour site, which has now
been approved. Marketing of the first stage residential
component is now underway.
3%
$500m mixed-use master plan
unveiled for Hamilton Harbour
The DA was lodged with the Urban Land Development
Authority (ULDA). The ULDA was established by the State
Government to oversee the future development of the Hamilton
Northshore precinct at Hamilton.
The DA approval is for a mixed-use development comprising 416
apartments in two residential buildings, two commercial office
buildings, retail showrooms, ground floor/retail/restaurant/café
tenancies, gymnasium, strata offices, public park and car parking.
Hamilton Harbour will be a landmark project, sympathetic to the
surrounding community and delivered to the highest standards of
environmentally-sensitive design and construction.
Hamilton Harbour will set a benchmark for all future development
in this vitally important precinct. In a joint venture with Leighton
Properties, Devine and Leighton Properties have endeavoured to
meet and exceed all the standards established by the ULDA for the
precinct and look forward to moving on to the construction stage.
The project will be staged with flexibility to deliver residential,
commercial and retail facilities over a number of years before final
completion in 2012/13.
The project’s location will be one of the key factors in its success as
there is a large pipeline of infrastructure projects either underway
or planned for Brisbane’s northside, supporting the strong
opportunities for mixed-use projects.
The Hamilton precinct between the CBD, Airport and Port is
quickly emerging as a very strong commercial destination.
It provides businesses with excellent access to the city and
the Australia Trade Coast. The office buildings will provide a
very high profile to Kingsford Smith Drive, one of the major
arterials in and out of the city.
The two 10-storey commercial office buildings will front Kingsford
Smith Drive with one building containing approximately 16,000 sqm
of A-Grade NLA, while the other building will have approximately
15,000 sqm of NLA.
The ground levels will have a mix of bulky goods retail showrooms
and retail tenancies aimed primarily at convenience shopping for
workers and residents on the site.
Two residential buildings are proposed over the south-western
and south-eastern parts of the site, complementing the existing
residential developments across Harbour Road and Hercules
Street at Bretts Wharf and Portside.
The 416 apartments will include a mix of one, two and three
bedroom apartments.
The residential and commercial components of the project will
incorporate leading environmental initiatives, working closely
with the Green Building Council of Australia’s rating tools. The
commercial buildings will target 4.5 Star rating under the National
Australian Built Environment Rating Scheme (NABERS) for office
energy and Australian Excellence Green Star rating.
A fully integrated water management plan for the development,
including greywater reuse and rainwater harvesting, will further
enhance the project’s environmental credentials.
The proposed local park will provide an attractive green space for
residents of Hamilton Harbour and the surrounding community.
The heart of the project is an internal neighbourhood street which
will link Harbour Road and Hercules Street. On completion, the
street will provide for small-scale retail tenancies and cafes, further
contributing to the precinct’s boutique shopping and lifestylefocused atmosphere.
The project’s architects are Cox Rayner and the landscape
architects are Gamble McKinnon Green, who worked with an
experienced team of technical consultants to formulate the
Development Application.
5
Southbank Townsville DA lodged
In October 2008, the Development Application for the $1 billion
waterfront mixed-use development. Southbank Townsville, was
lodged with Townsville City Council.
Since acquiring the site in early 2008, the project has undertaken
extensive community consultation and market research to develop
the final master plan.
The former rail yards will be transformed into a thriving
waterfront precinct as an extension of the CBD. The staging of
this development over the next 7-10 years is designed to meet the
needs of a growing residential and business community.
There are also plans to create a three hectare city park for residents
and visitors to enjoy.
The development is planned to create a place for more than 5000
people to live, work, play and shop. Research indicates that by
2021, Townsville will need an additional 31,000 homes.
A proposed pedestrian bridge will connect the site with Flinders
Street allowing pedestrian and bicycle movement between
Southbank Townsville and the Townsville Mall.
This development will help meet this need, creating approximately
85 townhomes and more than 1,500 medium and high density
residential apartments.
Southbank Townsville will help to strengthen the local economy,
providing homes, shops and recreational facilities in one of
Queensland’s most important economic centres.
The development’s construction work will generate over 1,000
full-time jobs while the retail, trade and commercial activities will
add an additional $23 million in pay packets to the region.
Southbank will also generate additional longer term benefits for
the local economy with the ongoing retail and commercial
functions of the development creating flow on economic benefits
into the future with $36.3 million growth predicted annually in
Gross Regional Product.
Almost 10,000 residents were contacted to share their thoughts
and ideas for the project. Suggestions for residential, commercial
and neighbourhood retail were put forward by the community, with
a strong emphasis on sustainable and sub-tropical design.
rs
de
ol
eh
r
sh
ar
Devine SA achieves record first half profit
3%
fo
D
is
co
un
t
Boardwalks, bicycle paths and al fresco dining were popular public
features and there was strong community support for a cultural hub
on the site as well as pedestrian links to the CBD.
Devine is already receiving strong enquiry at Lakeside, where it is
constructing one of Adelaide’s premier display villages featuring
displays from the majority of Adelaide’s Top 10 builders.
The new village will build upon Devine’s track record of success in
display villages which was reinforced in the first half when Devine
took home two awards at the annual Housing Industry Awards Best Display Home in the $150,000-$175,000 price bracket and
Best Display Home between $175,000-$200,000.
The recently launched The Summit estate at Mt Barker
Devine South Australia has had an outstanding first half in the
2008/09 financial year, achieving a record profit and launching two
successful master-planned communities.
The excellent result was built on the strongest July sales in five
years, which established a foundation to see the division through
the first half as homebuyers put their purchasing plans on hold
amid concerns about the economy.
Devine SA General Manager, Steve Weightman, said he was looking
forward to continuing the division’s success in the second half of
the financial year.
“I am extremely proud of the division’s achievements in the first
half in the face of a challenging economic environment and I
am confident Devine SA will continue to make the most of its
opportunities in the coming half,” Mr Weightman said.
Subsequently, cuts to official interest rates and the effect of the
Government’s increased First Home Owners Grant reinvigorated
the South Australian market for affordable housing and Devine has
enjoyed strong sales and enquiry continuing into the New Year.
In a major step forward, the division launched the 192-lot Summit
community in the Adelaide Hills at Mt Barker and the 1,000-home
Lakeside development in Andrews Farm.
The landmark Lakeside project is located in the fast-growing
Northern Corridor of Adelaide where buyers can still enjoy affordable
homes within a short commute of the CBD.
6
The award winning Glenelg 220 on display at Reynella
t s
unlder
co eho
is ar
Dfor sh
3%
Devine display home interior
Devine unveils Sandstone Lakes Display Homes
Devine Homes has unveiled two stunning new display homes at
its $200 million Sandstone Lakes community at Ningi, near Bribie
Island, giving South-East Queensland residents the chance to see
the latest in cutting-edge home design.
It is the latest display village for Devine in Queensland where
it also has Display Centres at River Parks in Townsville, Alberi
Park at Holmview, Nautical Edge at Coomera and Belle Air
Gardens at Bellmere.
The Caprice 260 and Macquarie 280 at Sandstone Lakes were
designed by Devine’s in-house design division, Design Edge, and
feature its award-winning philosophy of open-plan living areas and
long sightlines to make the most of the available space.
Devine Queensland General Manager Paul Nash said the new
display homes, which were opened in mid-November, will give
homebuyers the chance to see the best of contemporary home
design in a convenient and scenic location.
“We have used the same approach with the Macquarie where,
upon entering the casual living zone, your eye is drawn through
to the outdoor room making the space feel enormous. This is the
philosophy behind the Devine ‘smart design’ approach which has
been recognised time and again in industry awards for our display
homes,” Mr Battistella said.
The display village will continue to grow over coming months
and was further enhanced in January with other leading builders
Metricon and Plan Build opening display homes in January.
Sandstone Lakes has been designed to make the most of its
natural surroundings with well-considered active public space
and amenities including parks, bicycle-tracks, playgrounds and
even a special billabong-viewing area. All areas are generously
landscaped.
“These beautiful homes will provide first and second home
buyers with examples of Devine Homes at a great value for
money price integrating modern design and effective construction
methods,” Mr Nash said.
“The fact that the display homes are located within one of Devine
Communities’ most attractive master planned residential estates,
just minutes from Bribie Island and the recreational paradise of
Pumicestone Passage, is a bonus.”
Both display homes at Sandstone Lakes will feature never-beforeseen facades, with the Caprice 260 having a Tropical facade, while
the Macquarie 280 has a Modern facade.
Devine’s Design Manager, Michael Battistella, said the homes
had a spacious and relaxed feel that integrated the outside
and indoor living areas making them especially suited to the
Queensland lifestyle.
“As soon as you enter the Caprice your eye is drawn through the
outdoor room to the casual living area, giving the home a sense of
space and the depth of a much larger home,” Mr Battistella said.
Sandstone Lakes facilities
7
er
s
co
ho un
ld t
sh
ar
e
D
is
fo
r
3%
Central Park, Deer Park
Devine Victoria building a bright future
Devine’s Victorian operations delivered a stunning performance
during the first half of the 2008/09 financial year with record-low
interest rates and increased assistance from the Federal and State
Governments fuelling high demand from first home buyers.
Central Park’s success has been mirrored at the nearby
Moorookyle community, where buyers snapped up 150
homesites in the five months to December 31 and demand
continues unabated this year.
Devine’s Victorian General Manager, Luke Hartman, said the
company had been overwhelmed with the level of demand from
buyers over the final months of 2008 and the early part of 2009.
Meanwhile, at its $160 million Arndell Estate community at
Truganina, 19km from the CBD, Devine has negotiated an
innovative land swap with the City of Wyndham Council which
will see residents gain access to $8 million worth of new
community facilities, including three new soccer fields and a
new community centre.
“The demand for Devine’s product in Victoria is testament to
our core strengths in community development and customer
service,” he said. “We hope to continue the momentum gathered in
2008 throughout the current year.”
Devine’s masterplanned communities in Melbourne’s southeast and western suburbs have all been beneficiaries of the
Government’s stimulus measures, with buoyant demand for both
land and home-and-land packages.
The strength of demand was evidenced by the sellout success of
The Rise, situated in the City of Lyndhurst, with all 125 available
homesites selling within six months of the estate’s launch.
The land swap was popular with existing residents and means
Devine will now commence sales at the estate in April with
a greatly-improved masterplan to show potential buyers. A 24
lots display village is planned for the estate which will be in
operation from January 2010.
Mr Hartman said the all-round success of Devine in 2008
was testament to the dedication of his team, which continued to
raise the bar despite the challenges and competition that exists in
the market place.
Meanwhile, the Cardinia Grove estate to the east of Melbourne
at Pakenham also proved popular with the last of the 200
homesites in the community selling out, just two years after it was
launched. At the Fallingwater estate, also at Pakenham, 80 per
cent of homesites in Stage 8 have sold, prompting the release of
Stage 9 in February, 2009.
The final stage has just been released with all 39 homesites
expected to sell out in less than a month. The community’s
attractive features include over two hectares of parkland and a new
childcare centre, which is owned and operated by industry-leader,
Pelican Childcare.
Devine Limited ACN 010 769 365
Level 18, 175 Eagle Street, Brisbane QLD 4000
PO Box 7087, Riverside Centre, Brisbane QLD 4001
Telephone: (07) 3233 1444 • Facsimile: (07) 3233 1440
Moorookyle, Tarneit
CORP614583.
In the west, Devine Communities’ $250 million Central Park
development, located 18km from Melbourne’s CBD, sold more
than 190 homesites in the six months to December 31, with strong
sales continuing this year.