Stockland : Half Year Accounts 31 Dec 2015

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- INTERIM FINANCIAL REPORT

31 December 2015

CONTENTS

Directors' Report 1

Operating and Financial Review 1

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 14

Consolidated Statements of Profit or Loss and Other Comprehensive Income 15

Consolidated Balance Sheets 16

Consolidated Statements of Changes in Equity 17

Consolidated Cash Flow Statements 19

Consolidated Notes 20

Directors' Declaration 48

Independent Auditor's Report 49

STREAMLINED FINANCIAL STATEMENTS

These financial statements have been organised into the following six sections to make them less complex and more relevant to unitholders/ securityholders:

• Basis of preparation

• Results for the period

• Operating assets and liabilities

• Capital structure and financing costs

• Group structure and

• Other items.

KEEPING IT SIMPLE …

The aim of the text in 'Keeping it simple' boxes is to provide commentary on more complex sections, or notes, in plain English.

Notes to the financial statements provide information required by statute, accounting standards or ASX Listing Rules to explain a particular feature of the financial statements. The notes to the financial statements which follow will also provide explanations and additional disclosure to assist readers' understanding and interpretation of the financial report.

The Directors of Stockland Corporation Limited (ACN 000 181 733) and the Directors of Stockland Trust Management Limited (ACN 001 900 741, AFSL 241190), the Responsible Entity of Stockland Trust (ARSN 092 897 348), present their report together with the Financial Report of Stockland and the Financial Report

of Stockland Trust Group for the half year ended 31 December 2015 and the Independent Auditor's Report thereon. The Financial Report of Stockland comprises the consolidated Financial Report of Stockland Corporation

Limited ('the Company') and its controlled entities, including Stockland Trust ('the Trust') and its controlled entities ('Stockland' or the 'Group'). The Financial Report of Stockland Trust Group comprises the consolidated Financial Report of the Trust and its controlled entities ('Stockland Trust Group').

Operating and Financial Review1 About Stockland

Stockland is one of the largest diversified property groups in Australia with more than $15.4 billion of real estate assets. We own, manage and develop shopping centres, logistics centres and business parks, office assets, residential communities, and retirement living villages.

The company was founded in 1952 with a vision to "not merely achieve growth and profits but to make a worthwhile contribution to the development of our cities and great country". Today Stockland leverages its diversified model, to help create thriving communities where people live, shop and work.

This approach is underpinned by our Group's purpose "we believe there is a better way to live" and is brought to life by our employees who are guided by Stockland's values of community, accountability, respect, and excellence (CARE).

Our primary objective is to deliver earnings per security growth and total risk-adjusted securityholder returns above the Australian Real Estate Investment Trust index average, by creating quality property assets and delivering great customer experiences.

To optimise value to securityholders we are structured as a stapled security; a combination of a unit in a trust and a share in a company that are traded together on the Australian Securities Exchange. This allows the Group to undertake both property investment (via Stockland Trust) and property management and development (via Stockland Corporation) to create sustainable risk/reward outcomes.

Stockland strategy

1 All measures of revenue and profit throughout this section are calculated based on underlying profit unless otherwise stated.

We focus on three strategic areas:

• Growing asset returns and our customer base - driving returns in our core businesses

• Operational excellence - improving the way we operate across the Group to drive efficiencies and effectiveness

• Capital strength - actively managing our balance sheet to maintain diverse funding sources and an efficient cost of capital

  
  

  Stockland strategic priorities 1H16 Progress

  Grow our assets and customer base

• Valuation uplift of $433m including $127m from recent developments

• 4.5% growth in comparable FFO across Commercial Property

• $651m of retail development underway and future pipeline of $1bn

• Strong retail MAT sales growth of 5.5%

• Over 4,100 residential contracts on hand

• Improvement in return on assets on our core residential portfolio to 18% (excludes impaired projects)

• Over 80% of residential capital employed in projects actively selling

• Broadening our customer reach with seven medium density projects launched across four states

• Over 300 Retirement Living reservations on hand

• 9.2% increase in Retirement Living operating profit

• Launch of unique selling proposition 'Retire Your Way'

  
  

  Operational excellence • 'Always on' marketing campaign driving website traffic increase of 25%

  • Recognised as Global Real Estate Sector Leader on the Dow Jones Sustainability Index for 2015-16

  • Retained our Employer of Choice for Gender Equality WGEA citation

  • Launched Flexibility@Stockland, a program to improve flexible working practices

  • Significant progress improving Group system capabilities including commitment to implement SAP as our core enterprise resource planning system. The deployment is subject to the completion of an appropriate implementation plan.

    
    

    Capital strength • Maintained A-/stable credit rating for over ten years and gearing within our target

    range

  • Reduced average FY16 cost of debt by 50bp

  • Extended weighted average debt maturity

  • Diversified our funding sources

Risks and opportunities

Stockland adopts a rigorous approach to understanding and proactively managing the risks we face in our business. We recognise that making business decisions that involve calculated risks, and managing these risks within sensible tolerances, is fundamental to creating long-term value for securityholders and meeting commitments to its employees, tenants, customers, business partners, consultants and the communities in which it does business.

More information on Stockland's risk management policy is available at stockland.com.au.