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While our results clearly show the impact of falling Asset prices And trading conditions, We ended the year with our operating business In good shape.
Managing Director’s Review

Matthew Quinn Managing Director


It goes without saying that last year presented challenges for businesses around the globe, and Stockland was not immune from this. While our results clearly show the impact of falling asset prices and tough trading conditions, I’m pleased to report that we ended the year in a very strong financial position and with our key operating businesses in good shape. In this review I’d like to provide you with the background behind the numbers and our plans for the future. Residential our residential Communities business delivered an operating profit of $184 million, down 33 per cent from last year. We had a slow first half reflecting the very soft market conditions following a period of rising interest rates, and although the second half was much better it didn’t bridge the gap. Slightly higher sales volumes for the year were offset by lower average prices as we reconfigured our product to capitalise on the strong first homeowner segment. Our revenue was down as a result, but we did achieve a pleasing margin of 21 per cent. Our Apartments business did not perform well recording an operating loss of $9 million. This business faces the challenge of being capital intensive and it has historically produced returns below our hurdle rates. This is partly due to our poor execution and partly a reflection of the significant barriers to development that various levels of government place against urban consolidation. We have therefore decided to finish the projects underway and then review the viability of projects not yet commenced. We will only proceed with development if we can achieve the required returns and capital is available – if not we’ll sell the sites. Impairment We conducted a thorough review of our residential Communities and Apartments inventory carrying values in light of the market downturn, unfortunately resulting in pre-tax impairment of $425 million. The problems occurred in two sections of our business – NSW where the market was particularly soft and projects pitched at the high end of the market where prices have fallen. While this is very disappointing and had a substantial impact on our headline profit, we have been thorough in our approach and we expect no further impairments unless market conditions materially deteriorate. Retirement living retirement living continued to perform well delivering an operating profit of $43 million, consistent with last year. In order to provide a stronger focus on this business we have recently restructured our reporting lines to create a separate retirement living business unit. This will improve our focus on providing high quality villages to cater for the growing ageing demographic and provide greater transparency and accountability for the business. Our new villages under development are selling well and we will accelerate growth of this business over the next year. Commercial property our Commercial property business performed well delivering an operating profit of $541 million, and comparable income growth of a healthy 5.9 per cent. Our retail assets performed better than expected and vacancies have not materially increased.