PEET LIMITED — Interim / Quarterly Report 2012

Feb 23, 2012

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1H12 Results Presentation February 2012

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Success through experience

Summary

• » Expect FY12 operating earnings to be cyclical low point, although at upper end of guidance of $15‐20 million

• » 1H12 revenue and profit impacted by slowdown in sales in Victoria and delays in receiving titles due to inclement weather on eastern seaboard

• » 2H12 revenue to be impacted by deferral of Greenvale (VIC) major infrastructure costs announced in November 2011, however expect improvement in lot sales flowing into FY13 settlements as development recommences

• » Key focus for Peet in short‐term is reduction of debt

• » Gearing[1 ] of 38.8% at 31 December 2011 the result of acquisition of Flagstone City and lower settlement revenue

• » Gearing to fall in next 12 months towards medium‐term target of 20‐30%, driven by

• » Operating cash flows from settlement revenue

• » Contracts on hand of 1,053 lots, down 6%, however approximately 70% expected to settle by 30 June 2012

• » Supplemented by super lot and non‐core asset sales

• » Key projects to support earnings in FY13 include Greenvale / Craigieburn (VIC), Yanchep (WA), Caboolture (QLD) and Gladstone (QLD)

1 (Total interest bearing liabilities (including deferred payment obligations) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets)

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N o t es:

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Financial summary

	1H12			1H11
S P fi tatutory ro t	$8 7 . m	▼	(60 8%) .	$22 2 . m
Operating Profit	$8.7m	▼	(60.8%)	$22.2m
Operating Earnings per Share	2.7 cents	▼	(63.5%)	7.4 cents
NTA per Share1,2	$1.48	▲	7.2%	$1.38
Gearing (incl convertible notes)3 .	38 8% .	▲	5 3% .	33 5% .

Notes:

• 1 Net tan g ible assets ( ad j usted for market value of inventor y as at 30 June 2011 ; subse q uent develo p ment costs incurred ; and settlements achieved )

• 2 Does not account for value of Funds Management business / earnings 3 (Total interest bearing liabilities (including deferred payment obligations) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets)

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Group key financial summary

• » Group revenue of $63.8m

• » Operating EBITDA of $18 . 5m

• » Operating NPAT of $8.7m

• » Statutory NPAT of $8.7m

• » NTA per share[3 ] of $1.48

• » does not account for value of funds management usiness earnings b /

• » Gearing[2 ] of 38.8%

• » Based on revised covenant definition

• » Includes convertible notes

• » No interim dividend

$m 1H12 1H11 Var (%)	$m 1H12 1H11 Var (%)	$m 1H12 1H11 Var (%)	$m 1H12 1H11 Var (%)
Revenue	63 8 .	98 7 .	(35%)
EBITDA	18.5	41.3	(55%)
Net EBITDA margin	29%	42%	(13%)
Operating NPAT	8 7 .	22 2 .	(61%)
Operating EPS (¢)	2.7	7.4	(64%)
ROCE1(%)	8.5%	12.7%	(4.2%)
ROE1(%)	11.4%	17.5%	(6.1%)
Statutory NPAT	8.7	22.2	(61%)
Statutory EPS (¢)	2.7	7.4	(64%)
Gearing2 (%)	38.8%	33.5%	5.3%
NTA per share3	$1.48	$1.38	7.2%

Notes:

• 1 Based on average balance of assets and equity for the year

• 2 (T o t a n l i t eres t ear ng a b i li biliti es nc u (i l di ng e d f erre d paymen t o bli ga ti ons ) ess cas l h) o / (T t a asse l t s a dj us t e d or mar f k e t va ue o l f nven i t ory ess cas l h , ess n l i t ang ibl e asse t s )

• 3 Net tangible assets (adjusted for market value of inventory as at 30 June 2011; subsequent development costs incurred; and settlements achieved)

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Group operating performance

1H12 EBITDA composition by business type(%)

• » Funds Management business provides recurring earnings

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51
35
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28
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14 7
7
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• » 25 s y ndicates / JVs contributin g to p rofit

• » Improved performance in WA supplements softening in Victoria

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1H11
1H12
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	7 7 14 1H12	7 7 14 1H12	7 7 14 1H12	7 7 14 1H12	7 7 14 1H12	7 7 14 1H12
	1H12 1H11 Var (%) Development (owned) Other
	Lot sales 870 1,179 (26%) Lot settlements 872 1,125 (22%) 1H12 EBITDA composition by geography (%) JV’s Funds Management
	Lot sales	870	1,179	(26%)
	Lot settlements	872	1,125	(22%)
	No. of syndicates/JVs contributing to profit	25	18		17 74 33 46
	No. of owned projects
	contributing to profit	7	9		9 21	1H11

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9
21
1H11
1H12
WA VIC QLD
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Contracts on hand

Contracts on hand

• » Contracts on hand of

• 1 , 053 lots for $279 million

• » Down 6% since

• 30 June 2011 due to

• Victoria slowdown

• » 70% of contracts on hand due to settle by 30 June 2012

• » Due to decision to limit time between pre‐sales and titles being available

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1200 1,125 $300 $289 [1] $279 [1]
1,053 $21
95 $13
57
1000 $250 $41
178 $50
223
800 $ 200
600 $150
$227
400 852 773 $100 $216
200 $50
0 $0
30 June 2011 31 Dec 2011 30 June 2011 31 Dec 2011
Lots Contract Value
Lots
Millions
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Development (owned) Funds Management JV’s

Notes: 1 Includes GST

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Capital management

• » Available cash and debt facilities of $57m

• » Gearing[1 ] increased to 38.8% due to

• » Acquisition of 50% interest in Flagstone City

• » Development expenditure on major new projects including Craigieburn, Gladstone and Greenvale pre‐start costs

• » Decreased cash flow due to delayed settlement revenue

• » Balance sheet actively managed in 1H12 to ensure secure long ‐ term capital position

• » Medium‐term gearing target of 20‐30% with gearing to be reduced due to

• » Positive operating cash flows from Craigieburn and Gladstone

• » Non‐core and super lot asset sales over next 18 months

• » No requirement for near term on‐balance sheet investment in land bank

Notes:

• 1 (Total interest bearing liabilities (including deferred payment obligations) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets)

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Capital management

• » Interest cover ratio of 2.3x versus covenant of 1.5x

	31 Dec 11 30 June 11 Cash at bank $26.2m $57.2m Net debt (includes convertible note) $291m $217m	31 Dec 11 30 June 11 Cash at bank $26.2m $57.2m Net debt (includes convertible note) $291m $217m	31 Dec 11 30 June 11 Cash at bank $26.2m $57.2m Net debt (includes convertible note) $291m $217m
	Cash at bank	$26.2m
	Net debt (includes convertible note)	$291m
	1 Gearing	38.8%	33.5% 3.7x 3.3 years
	Interest cover2	2.3x
	Weighted average debt maturity	2.6 years
	Weighted average hedge maturity	3 0 years .
	Debt fixed/hedged	78%
	Weighted average cost of debt3	8.59%

Notes:

• 1 (Total interest bearing liabilities (including deferred payment obligations) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets)

• 2 EBIT (pre write‐downs) / Total cash interest cost (including capitalised interest)

• 3 Including all costs, fees and margins and convertible notes

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Key projects underpinning outlook for FY12 and beyond

Development (owned)

Greenvale/Craigieburn, VIC

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Vantage Gladstone, QLD

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Flagstone, QLD

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GDV: $715m Lots remaining: 433

GDV: $101m

Lots remaining: 3,588

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Lots remaining: 13,270 GDV: $1,924m

• » Located in the strong Hume growth corridor

• » Historical acquisitions – low underlying cost base

• » Range of product types and price points having broad market appeal

• » Historical acquisition, low cost base

• » Leveraged to one of Australia’s strongest markets

• » 3+ years project life remaining

• » Fast‐tracked planning under ULDA

• » Government assistance with start‐ up infrastructure funding

• » Opportunity to drive long‐term value from a large, integrated master‐planned community

• » Owned in 50/50 JV with MTAA Super

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Key projects underpinning outlook for FY12 and beyond

Funds Management

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Shorehaven at Alkimos, WA Yanchep Golf Estate, WA Riverbank Caboolture, QLD
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GDV: $786m

Lots remaining: 2,924

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GDV: $345m

Lots remaining: 1,477

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GDV: $189m

Lots remaining: 1,320

• » Located in the City of Wanneroo, in the north western coastal growth corridor of Perth

• » Strong project commencement . Compelling overall project vision – 256 lots settled with a further 118 under contract

• » Coastal stages and village centre detailed design and negotiations with builder/bulk purchaser partners being progressed now to deliver the coastal vision

• » Attractive location in the north western coastal growth corridor of Perth

• » Bordering the Yanchep Country Club

• » Pre‐release sales have commenced, strong builder interest

• » Unique project location, adjacent to the existing town centre and bordering the Caboolture river with extensive parklands

• » Affordable housing corridor, with the project assisted by the Federal Government’s Housing Affordability Fund

• » Access bridge to be completed in 2H FY12, with buyer access and retail sales commencing in FY13

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Land bank – key projects

L1 ii
ots remanng Project name Location GDV (at 31 Dec 11) Owned projects Greenvale VIC $402m 1,943 Craigieburn VIC $313m 1,645	FY12 FY13		FY14 FY15 FY16
Gl d Q $ 0 33 a stone LD 1 1m 4 Chase WA $87m 506 Brigadoon WA $120m 214 Other $1,722m 9,629 Total owned projects $2,744m 14,370
Funds Management Flagstone City QLD $1,872m 12,997 Flagstone East QLD $52m 273 Alkimos WA $786m 2,924 Yanchep Golf Estate WA $345m 1,477
Lakelands WA $269m 1,866 Caboolture QLD $189m 1,320 Botanic Village VIC $129m 1,006 Oakford WA $179m 1,001 Cranbourne Central VIC $156m 831
Burns Beach WA $361m 771 Cranbourne West VIC $141m 744 Forrestdale WA $139m 719 Other $1,195m 6,367 Total FM projects $5,813m 32,296
Joint Ventures Wellard WA $372m 2,040 Quattro Values WA $27m 133 Total JV projects $399m 2,173 TOTAL PIPELINE $8956m 48839
, , Notes: 1 Lots equivalent

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Residential market overview

Peet has product with geographic balance and positioned at price points to achieve volume from improving markets

• » The affordable to mid‐market segment is maintaining price stability, whilst the higher end of the market has seen a decline

• » More positive indicators in the medium to long‐term ‐ household savings high, dwelling approvals below long‐term average, population growth, shortage of skilled labour, wages growth and low unemployment

VIC

VIC
Weighting	»	High‐performing market in recent years
20%	»	Market softened materially during 1H12. Activity beginning to stabilise.
	»	Prices and volumes moderating
	»	Longer‐term fundamentals remain sound
WA
Weighting	»	Residential market soft in FY11 – slowdown in dwelling starts and falling home prices
42%	»	P iti i f d t l i l di l ti th os ve econom c un amen a s nc u ng popu a on grow
	»	Strong mining and engineering sectors boosting	the labour market and income growth
	»	Most key market indicators point to the “bottoming” of the market and the start of a recovery
QLD	»	Jan / Feb sales strong across the market
Weighting	»	Poor performing market in FY11 – suffering the	impact of natural disasters and flow‐on effects
38%	»	Strong resource sector with good longer‐term fundamentals
	»	Enquiry levels improving since November 2011
Notes:
State weighted by land bank by		lots equivalent

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Outlook

FY12 to remain challenging, however expect improved sales and settlements in 2H12

• » Expect FY12 to be cyclical low point, with an improvement in lot sales in 2H12 vs 1H12

• » Improved cash flow expected over next 18 months which will significantly reduce gearing

• » Recommencing key projects which will increase revenue, significant capex already spent

• » No incremental balance sheet capital commitments – Peet’s existing land bank is well diversified and will support profitability in the medium‐term

• » Sale of non‐core assets and su p er lots will be used to reduce debt over next 18 months

• » Diversified pipeline ensures Peet is well placed for steady improvements in the residential property market

• » Funds management division continues to support profitability in a difficult operating environment

• » Ex p ect to be at u pp er end of o p eratin g earnin g s g uidance of $ 15‐20 million for FY12

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13

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Success through experience

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FY11 Annexures

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Success through experience

Summary income statement

	Summary income statement	Summary income statement	Summary income statement	Summary income statement	Summary income statement
	$m 1H12 1H11 Var (%) Fdt 155 216 28%
	Fdt	155	216	28%
	uns managemen	.	.	()
	Development	36.0	66.1	(46%)
	Other1	12.3	11.0	12%
	Revenue	63.8	98.7	(35%)
	EBITDA (pre inventorywrite‐downs)	18.5	41.3	(55%)
	Finance costs2	(7.6)	(8.5)	(11%)
	Depreciation and amortisation	(1.1)	(0.8)	(38%)
	NPBT (pre‐inventorywrite‐down)	9.8	32.0	(69%)
	Income tax expense	(1.1)	(9.8)	(89%)
	OperatingNPAT3	8.7	22.2	(61%)
	OperatingEPS (cents)	2.7	7.4	(64%)
	StatutoryNPAT3	8.7	22.2	(61%)
	StatutoryEPS(cents)	2.7	7.4	(64%)

Notes:

1 Includes joint ventures, interest income and elimination entries

2 Finance costs inc u l d es interest an d inance costs expense f d t h roug h cost o f sa es l 3 Attributable to the owners of Peet Limited

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Summar balance sheet y

	$ 31 D 11 31 D 10 m ec ec Assets Cash 26.2 28.3 Receivables 774 61.4
	Assets
	Cash	26.2	28.3
	Receivables	774	61.4
		.
	Inventories	436.1	421.9
	Investments accounted for using the equity method	92.2	32.1
	Other	14.1	13.2
	Asset classified as held for sale	70.7	103.6
	Total assets	716.7	660.5
	Liabilities
	Trade and other payables	30.5	25.6
	Land vendor liabilities	45.2	51.3
	Interest bearing liabilities	317.3	231.1
	Other	350	312
		.	.
	Liabilities directly associated with assets classified as held for sale	19.5	58.9
	Total liabilities	447.5	398.1
	Net assets	269.2	262.4
	Gearing1 (%)	38.8%	33.5%
	NTA per share2,3($)	1.48	1.38

Notes:

• 1 (Total interest bearing liabilities (including deferred payment obligations) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets)

• 2 Net tangible assets (adjusted for market value of inventory as at 30 June 2011; subsequent development costs incurred; and settlements achieved) 3 Does not account for value of Funds Management business / earnings

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Development operating performance

Key performance statistics

1H12 revenue composition by geography (%)

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||||||
|---|---|---|---|---|
|$m|1H12|1H11|Var (%)|
|49|
|Revenue|36.0|66.1|(46%)|
|11|
|Operating expenses|[1]|(30.9)|(44.5)|31%|
|12|41|
|EBITDA|5.1|21.6|(76%)|77|
|Net EBITDA margin|14%|33%|(19%)|
|1H11|
|1H12|
|Key operating statistics|
|10|

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||||||
|---|---|---|---|---|
|1H12|1H11|Var (%)|
|WA|VIC|QLD|
|Lot|sales|182|222|(18%)|
|Lot settlements|140|307|(54%)|
|No. of contract on hand|
|223|254|(12%)|
|at|31|Dec|
|No. of owned projects|
|7|9|
|contributing to profit|

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Notes:

1 Excludes interest and finance costs expensed through cost of sales

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Composition of development pipeline

• » Targeted towards affordable home‐ buyer market

Geographic composition of Company‐ owned land bank by value (%)

• » Land bank located in strong markets

• » Strong presence in resource states of WA & QLD

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WA VIC QLD
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FM operating performance

Key performance statistics

1H12 FM revenue composition by type

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$m 1H12 1H11 Var (%)	$m 1H12 1H11 Var (%)	$m 1H12 1H11 Var (%)	$m 1H12 1H11 Var (%)
Revenue	15.5	21.6	( ) 28%
Operating expenses	(6.0)	(7.0)	14%
EBITDA	9.5	14.6	(35%)
Net EBITDA margin	61%	68%	7%

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34
25
67
8
1H11
6 1H12
Project Management Selling Fees Other
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Management Performance Fees

Key operating statistics

1H12 FM revenue composition by geography

	1H12 1H11 Var (%) 8 revenue composon y geograpy	1H12 1H11 Var (%) 8 revenue composon y geograpy	1H12 1H11 Var (%) 8 revenue composon y geograpy	1H12 1H11 Var (%) 8 revenue composon y geograpy	1H12 1H11 Var (%) 8 revenue composon y geograpy
	Lot sales	576	915	(37%) (24%) (18%) 54 25 47
	Lot settlements	582	762
	No. of contract on hand at31Dec	773	940
				21 45	1H12 1H11
	No. of syndicates contributing to profit	23	16

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1H11
45 21
1H12
WA VIC QLD
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JV operating performance

Key performance statistics

	Key performance statistics	Key performance statistics	Key performance statistics	Key performance statistics	Key performance statistics
	$m 1H12 1H11 Var (%)
	Revenue	9.7	8.5	14%
	Operating expenses	(8.4)	(5.8)	(45%)
	EBITDA	13	27	(52%)
		.	.
	Net EBITDA margin	13%	32%	(19%)

Key operating statistics

	K ti t ti ti ey opera ng s a s cs	K ti t ti ti ey opera ng s a s cs	K ti t ti ti ey opera ng s a s cs	K ti t ti ti ey opera ng s a s cs
	1H12 1H11 Var (%) Lotsales 112 42 167%
	Lotsales	112	42
				168% 6%
	Lot settlements	150	56
	No. of contracts on	57	54
	hand at 31 Dec
	No. of JV projects contributing to profit	2	2

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Composition of FM and JV managed pipeline

• » Funds management business is well positioned

Geographic composition of FM and JV land bank by value (%)

• » Land bank located in right growth markets

• » WA, VIC and QLD

• » T argete d towar d s t h e a ff or d a bl e mar k et

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WA VIC QLD
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Disclaimer

• » While every effort is made to provide accurate and complete information, Peet does not warrant or represent that the information in this presentation is free from errors or omissions or is suitable for your intended use. Subject to any terms implied by law and which cannot be excluded, Peet 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 .

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