EQUITY RAISING. Rights Issue

Transcription

1 EQUITY RAISING Rights Issue DETAILS OF A 3 FOR 4 NON-RENOUNCEABLE PRO-RATA RIGHTS ISSUE OF DEVINE LIMITED ORDINARY SHARES AT AN OFFER PRICE OF $0.20 PER NEW SHARE THIS RIGHTS ISSUE CLOSES AT 5.00 PM (SYDNEY TIME) ON MONDAY, 22 MARCH 2010 This is an important document which is accompanied by an Entitlement and Acceptance Form for you to subscribe for new ordinary shares in Devine Limited. Please read this document carefully and call your professional adviser or the Devine Share Registry if you have any queries. NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS

2 DIRECTORY Company Secretary Viv Grayson Registered Office 3 Westmoreland Boulevard Springwood QLD 4127 PO BOX 2181 Logan City, D.C. QLD 4114 Stock Exchange Listing Devine ordinary shares are listed on the Australian Securities Exchange (ASX) (code: DVN). Website To view annual reports, shareholder and company information, news announcements, background information on Devine s businesses and historical information, visit Devine s website at Devine Share Registry Computershare Investor Services Pty Limited Level 19, 307 Queen Street Brisbane QLD 4000 Telephone: (for callers outside Australia ) Open 8.30am to 5.00pm (Sydney time) Monday to Friday during the Rights Issue period. Shareholders who make payment via cheque, bank draft or money order should mail their completed personalised Entitlement and Acceptance Form together with Application Monies to: Devine Share Registry C/- Computershare Investor Services Pty Limited GPO Box 5240 Brisbane QLD 4001 TABLE OF CONTENTS 1 Chairman s letter 1 Key dates for the Rights Issue 3 2 ASX Offer Announcements 4 3 How to Apply 57 4 Important Information

3 1 Chairman s letter 22 February 2010 Dear Shareholder, Devine Equity Raising Rights Issue On behalf of Devine Limited (Devine), I am pleased to invite you to participate in a 3 for 4 non-renounceable pro-rata rights issue of new Devine ordinary shares (New Shares) at an offer price of $0.20 per New Share (Rights Issue). New Shares issued under the Rights Issue will rank equally with existing Devine ordinary shares. The Rights Issue forms part of the fully underwritten $66.3 million capital raising conducted by Devine as announced to the market on 22 February 2010 (Capital Raising). A placement of New Shares to institutional investors also forms part of the Capital Raising (Placement). The net proceeds of the Capital Raising will be used to fund the continued growth of Devine s Housing and Land business, to support the recently concluded refinancing of its key debt facilities and to boost liquidity reserves. Devine expects to receive a very strong response from institutional investors and is seeking to raise approximately $11.8 million under the Placement at an issue price of $0.25 per New Share. Devine expects to announce the results of the Placement on Tuesday, 23 February This booklet relates to the Rights Issue, which will raise approximately a further $54.4 million. The offer price of $0.20 per New Share under the Rights Issue is lower than the issue price paid by institutional investors under the Placement. The structure of the equity raising is in the form of a pro-rata right issue, providing the opportunity for all eligible shareholders to participate. This booklet contains important information about the Rights Issue under the following headings: Key Dates for the Rights Issue; ASX Offer Announcements; How to Apply; and Important Information. With this booklet you will also find your personalised Entitlement and Acceptance Form which details your rights, to be completed in accordance with the instructions provided on the Form and the instructions under the heading How to Apply in this booklet. It is important to note that the Rights Issue closes at 5.00pm (Sydney time) on Monday, 22 March To participate, you need to ensure that your completed Entitlement and Acceptance Form and your Application Money is received by the Devine Share Registry before this time and date OR you have paid your application monies via BPAY pursuant to the instructions that are set out on the Entitlement and Acceptance Form. Please refer to the instructions under the heading How to Apply in this booklet for further information. Registered to BPAY Pty Limited ABN

4 Rights are non-renounceable and will not be tradeable on ASX or otherwise transferable. Shareholders who do not take up their rights in full will not receive any value in respect of those rights they do not take up. You should consult your stockbroker, accountant or other independent professional adviser to evaluate whether or not to participate in the Rights Issue. For further information regarding the Rights Issue, please call the Devine Share Registry on (for callers from inside Australia) or (for callers from outside Australia) at any time from 8.30am to 5.00pm (Sydney time) Monday to Friday, during the Rights Issue period. On behalf of the Board of Devine, I invite you to consider this investment opportunity and thank you for your ongoing support of our company. Yours sincerely Doug Ridley Chairman NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS. Forward-looking statements, opinions and estimates provided in this booklet are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements including forecasts, projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. This booklet, including the ASX announcements produced in it and the Entitlement and Acceptance Form do not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or to, or for the account or benefit of, any U.S. person (as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the Securities Act)) (U.S. Person). None of this booklet, the ASX announcements produced in it nor the Entitlement and Acceptance Form may be distributed to, or relied upon by, persons in the United States or who are, or are acting for the account or benefit of, U.S. Persons. Neither the rights nor New Shares offered in the Rights Issue have been, or will be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States. The rights may not be taken up by persons in the United States or by persons who are, or are acting for the account or benefit of a U.S. Person. The New Shares may not be offered, or sold, or resold, in the United States or to, or for the account or benefit of, a U.S. Person except in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and any applicable securities laws of any state or other jurisdiction of the United States. 2

5 KEY DATES FOR THE RIGHTS ISSUE Event Date Shares quoted on an ex basis Thursday, 25 February 2010 Record Date for the Rights Issue 7.00pm (Sydney time) Wednesday, 3 March 2010 Rights Issue opens Friday, 5 March 2010 Rights Issue closes 5.00pm (Sydney time) Monday, 22 March 2010 Shares quoted or deferred settlement basis Tuesday, 23 March 2010 Allotment of New Shares under the Rights Issue Monday, 29 March 2010 Despatch of confirmation of issue Tuesday, 30 March 2010 Normal trading of New Shares issued under the Rights Issue expected to commence on ASX Wednesday, 31 March 2010 Note: Devine reserves the right, subject to the Corporations Act 2001 (Cth) (Corporations Act), ASX Listing Rules and other applicable laws to vary the dates of the Rights Issue, including extending the Rights Issue or accepting late applications, either generally or in particular cases, without notice. You cannot, in most circumstances, withdraw the application once it has been accepted. No cooling off rights apply to the Rights Issue. Applicants for the Rights Issue (Applicants) are encouraged to submit their Entitlement and Acceptance Form as soon as possible after the Rights Issue opens. Enquiries If you have any questions, please call the Devine Share Registry on (for callers from inside Australia) or (for callers from outside Australia) at any time from 8.00am to 5.00pm (Sydney time) Monday to Friday during the Rights Issue period, or consult your stockbroker, accountant or other independent professional adviser. Website: 3

6 2 ASX Offer Announcements 4

7 ASX/MEDIA ANNOUNCEMENT 22 FEBRUARY, 2010 DEVINE TO RAISE $66.3M TO STRENGTHEN BALANCE SHEET AND PURSUE RESIDENTIAL OPPORTUNITIES Devine to raise $66.3 million in equity capital through an Institutional Placement and Rights Issue (the Offer ) Funds will be used to strengthen Devine s balance sheet and accelerate residential sector growth strategy Pro forma 31 December 2009 gearing reduced from 39.5% to 28.4% 1 David Devine and Ken Woodley to sell their shareholding in Devine to Leighton and to retire from the Devine Board Leighton Holdings Limited has committed to take up all of its rights in the Rights Issue which, together with the acquisition from David Devine and Ken Woodley, will increase its shareholding from 43.7% to 49.7% Leading Australian developer Devine Limited today announced a $66.3 million equity capital raising to provide the capital flexibility to pursue growth opportunities in the residential property sector as part of its re-focused strategy as well as to support the recently concluded refinancing of its key debt facilities and to boost liquidity reserves. The company will undertake an underwritten Institutional Placement to raise approximately $11.8 million at 25 cents per share and an underwritten non-renounceable 3 for 4 pro rata Rights Issue to raise approximately $54.4 million at 20 cents per share. Shares issued under the Institutional Placement will be eligible to participate in the Rights Issue. Devine s largest shareholder, Leighton Residential Investments Pty Ltd, a subsidiary of Leighton Holdings Limited (ASX: LEI), has shown strong support by committing to take up all of its rights in the Rights Issue and has also advised that it intends to acquire all of David Devine and Ken Woodley s shareholdings in Devine following the completion of the Offer at the Rights Issue offer price. The acquisition of these shares has been negotiated pursuant to the existing Pre- Emptive Rights Deed under which David Devine and Ken Woodley have granted Leighton preemptive rights over their shares. Together, the take up of rights and acquisition of David Devine and Ken Woodley s shareholdings which will include the new shares that David Devine and Ken Woodley intend to acquire as a result of taking up 100% of their respective entitlements under the Rights Issue, will increase Leighton s shareholding in Devine to approximately 49.7% post the completion of the Offer. 2 The Record Date for the Rights Issue will be 7pm (Sydney time) on Wednesday 3 March 2010 and the offer will close at 5pm (Sydney time) on Monday 22 March Both the Institutional Placement and the Rights Issue are underwritten by Joint Lead Managers, Goldman Sachs JBWere Pty Ltd (GSJBW) and RBS Morgans Corporate Limited (RBSM). 1 Pro forma metrics in this announcement give effect to the Offer and the application of the proceeds of the Offer as though they occurred on 31 December 2009 unless stated otherwise. Gearing is defined as (interest bearing and noninterest bearing debt less cash held) / (total assets less cash held). 2 Leighton is not participating in the Institutional Placement. HEAD OFFICE SHARE REGISTRY Devine Limited (ASX Code: DVN) Computershare Investor Services Pty Limited Level 18, 175 Eagle Street Level 19, 307 Queen Street Brisbane QLD 4000 Brisbane QLD 4000 Website: Telephone: Telephone: (07)

8 Devine s Chairman, Mr Doug Ridley, said the funds raised would allow the company to progress its recently reviewed strategy to re-focus on the residential sector both through its Housing and Land activities and its medium and high-density residential Property Development Division. The strategy includes increasing the company s presence in higher growth states like Victoria and opportunistically re-entering the NSW market in the medium to high-density sector over the next few years. We have highlighted to shareholders over recent months that we see a significant opportunity to increase the scale and scope of our residential business. The capital injection provided by these initiatives will give the company the flexibility to facilitate this strategy, Mr Ridley said. The Institutional Placement offer price of 25 cents per share represents a discount of 38% to the last closing price on 19 February and a 51% discount to the 31 December 2009 pro forma net tangible assets (NTA) per share. The Rights Issue offer price to current shareholders of 20 cents per share represents a discount of 50% to the last closing price on 19 February and a 61% discount to the 31 December 2009 pro forma NTA per share. The capital raised will reduce pro forma gearing at 31 December 2009 from 39.5% to 28.4%. Devine has also concluded negotiations with its principal lender, the ANZ, with a binding terms sheet 3 having been executed in relation to the company s core debt facilities. This has resulted in the refinancing of its current $160 million core debt facility and the maturity date for the new facilities being extended to July 2012 (previously February 2011). In addition, a revised covenant package better suited to Devine s ongoing business has been negotiated. 4 Following his announcement at the company s 2009 AGM in October 2009 that he would be stepping down from his role as Managing Director, Mr Devine vacated that position in January of this year. Given the sale of his shareholding in the company, Mr Devine has also decided to retire from the Devine Board with this to take effect on 31 March Devine s newly appointed CEO, David Keir, will commence with the company on 1 March 2010, allowing for a short transitional period to occur. Mr Woodley s decision to also retire from his Executive Director position of Marketing Director was announced on 10 February The effective date for this will also be 31 March Placement and Rights Issue Timetable The Rights Issue will give all shareholders the opportunity to participate in the capital raising without incurring brokerage, commission or other transaction costs. Devine has entered into an Underwriting Agreement with GSJBW and RBSM to underwrite the Offer. The Offer timetable is outlined below. 3 Subject to normal conditions precedent, including the completion of the Offer and documentation. 4 The agreement with respect to the revised covenants, which also includes a permanent waiver of Devine s previously disclosed covenant breaches, is not conditional on the completion of the Offer. HEAD OFFICE SHARE REGISTRY Devine Limited (ASX Code: DVN) Computershare Investor Services Pty Limited Level 18, 175 Eagle Street Level 19, 307 Queen Street Brisbane QLD 4000 Brisbane QLD 4000 Website: Telephone: Telephone: (07)

9 Institutional Placement Placement conducted Monday 22 February 2010 Settlement Date Friday 26 February 2010 New shares commence trading on ASX Monday 1 March 2010 Rights Issue Record Date Wednesday 3 March 2010 Offer opens Friday 5 March 2010 Offer closes (5pm) Monday 22 March 2010 New shares commence trading on deferred basis Tuesday 23 March 2010 New shares commence trading on normal basis Wednesday 31 March 2010 * All times refer to Sydney time. Further information Further details of the Rights Issue, including details of the use of proceeds, the timetable and the key risks associated with the Rights Issue and Devine, are included in the investor presentation and offer booklet released to ASX and available on Devine s website. The offer booklet is expected to be dispatched to eligible shareholders by 5 March Shareholder enquiries For further information regarding the Rights Issue, please call the Devine Share Registry on (for callers from inside Australia) or (for callers from outside Australia) at any time from 8.00am to 5.00pm Sydney time) Monday to Friday, during the Rights Issue period. NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS. Forward-looking statements, opinions and estimates provided in this announcement are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements including forecasts, projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or to, or for the account or benefit of, any U.S. person (as defined in Regulation S under the U.S. Securities Act of 1933, as amended (Securities Act)) (U.S. Person). This announcement may not be distributed to, or relied upon by, persons in the United States or who are, or are acting for the account or benefit of, U.S. Persons. Neither the rights nor shares offered in the Rights Issue have been, or will be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States. The rights may not be taken up by persons in the United States or by persons who are, or are acting for the account or benefit of a U.S. Person. The shares offered in the Rights Issue may not be offered, or sold, or resold, in the United States or to, or for the account or benefit of, a U.S. Person except in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and any applicable securities laws of any state or other jurisdiction of the United States. ENDS Media enquiries: Viv Grayson Ben Ready Acting CEO Crook Publicity Devine Limited (07) HEAD OFFICE SHARE REGISTRY Devine Limited (ASX Code: DVN) Computershare Investor Services Pty Limited Level 18, 175 Eagle Street Level 19, 307 Queen Street Brisbane QLD 4000 Brisbane QLD 4000 Website: Telephone: Telephone: (07)

10 Devine Limited Equity Raising Presentation 22 February 2010

11 Disclaimer This Presentation has been prepared by Devine Limited (ABN ) (Devine or the Company). Summary information This Presentation contains summary information about Devine and its subsidiaries (Devine Group) and their activities current as at 22 February The information in this Presentation is a general background and does not purport to be complete. It should be read in conjunction with Devine Group s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange, which are available at Not financial product advice This Presentation is for information purposes only and is not a prospectus or product disclosure statement under Australian law, financial product or investment advice or a recommendation to acquire Devine securities. It has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek legal and taxation advice appropriate to their jurisdiction. Devine is not licensed to provide financial product advice in respect of Devine securities. Cooling off rights do not apply to the acquisition of Devine securities. Financial data All dollar values are in Australian dollars (A$) and financial data is presented as at or for the half year ended 31 December 2009 unless stated otherwise. The pro forma historical financial information included in this Presentation does not purport to be in compliance with Article 11 of Regulation S-X of the rules and regulations of the US Securities and Exchange Commission. Past performance Past performance and pro forma financial information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. The historical information included in this Presentation is, or is based on, information that has previously been released to the market. Future performance This Presentation contains certain forward-looking statements. The words expect, should, could, may, predict, plan and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Forward-looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements, including projections, guidance on future earnings and estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. This Presentation contains such statements that are subject to risk factors associated with the property development and construction industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a range of variables which could cause actual results or trends to differ materially, including but not limited to the following risks: development, planning and construction, property market downturn risk, bring-forward effect of and potential reduction or cessation of, the First Home Owner Grant, land bank valuation risk, joint ventures, documentation and completion, increases in the unemployment rate, decreases in migration and risks associated with the adequacy of insurance and litigation, as well as earnings, capital expenditure, cash flow and capital structure risks and general business risks. Investment risk An investment in Devine securities is subject to investment and other known and unknown risks, some of which are beyond the control of Devine Group, including possible delays in repayment and loss of income and principal invested. Devine does not guarantee any particular rate of return or the performance of Devine Group, nor does it guarantee the repayment of capital from Devine or any particular tax treatment. Persons should have regard to the risks outlined in this Presentation. Not an offer This Presentation is not and should not be considered an offer or an invitation to acquire Devine securities or any other financial products and does not and will not form any part of any contract for the acquisition of Devine securities. This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or to, or for the account or benefit of, any US person (as defined in Regulation S under the US Securities Act of 1933, as amended (Securities Act) (US Person)). Devine securities have not been, and will not be, registered under the Securities Act or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States or to any US Person without being so registered or pursuant to an exemption from registration. Underwriters and advisors The Company s underwriters and advisors have not authorised, permitted or caused the issue, lodgement, submission, dispatch or provision of this Presentation and do not make or purport to make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by the underwriters and advisors. The underwriters and advisors and their respective affiliates, officers and employees, to the maximum extent permitted by law, expressly disclaim all liabilities in respect of, make no representations regarding, and take no responsibility for, any part of this document and make no representation or warranty as to the currency, accuracy, reliability or completeness of information. 2

12 Contents 1. #1 Overview 2. #2 Details of the Offer 3. #3 Business Overview 4. #4 Strategy and Market Opportunity 5. #5 Capital Management and Financial Summary 6. #6 Summary of Key Risks 7. #7 Appendices 3

13 1. Overview 4

14 Executive Summary Equity Raising Fully-underwritten 3 for 4 non-renounceable Rights Issue and Institutional Placement to raise a total of approximately $66.3 million (the Offer ) Net proceeds will be used to fund the continued growth of Devine s Housing and Land business, to support the recently concluded refinancing of its key debt facilities and to boost liquidity reserves Leighton Holdings has shown strong support by committing to take up 100% of its rights under the Rights Issue as well as agreeing to acquire shares, which has been negotiated pursuant to the existing agreement with David Devine and Ken Woodley, which together will result in it increasing its ownership from 43.7% to 49.6% Reduces 31 December 2009 pro forma gearing from 39.5% to 28.4% 1 Debt Refinancing Devine has agreed a permanent waiver of previously reported covenant breaches with its principal financier, ANZ A revised covenant package that better reflects the nature of Devine s business going forward is now in place 2 Negotiations with ANZ for an extension of the $168 million core debt facility have now been successfully concluded with the signing of a binding terms sheet 3 With this capital raising, the maturity of Devine s core debt facility has been extended to July 2012 and the revised covenant package referred to above will continue to apply Strategic Focus Devine recently concluded a detailed strategic review of both the business and the markets in which it operates Identified the Housing and Land business as core to Devine and determined to refocus on this division given the favourable ongoing market dynamics Established a target of 10,000 lots, either owned or controlled Will maintain an interest in medium and high density residential developments, and move towards a more stable and recurring income business 5 1 Gearing is defined as (interest bearing & non-interest bearing debt cash held) / (total assets cash held). Pro forma data in this Presentation gives effect to the Offer and the application of the proceeds of the Offer as though they occurred on 31 December 2009 unless stated otherwise. No reduction in interest expense has been assumed in any pro forma calculations. 2 The permanent waiver and revised covenants are not conditional on the completion of the Offer. Refer to slide 29 for further detail. 3 The terms sheet is subject to normal conditions precedent, including the completion of the Offer and documentation. Refer to slides 25, 28 and 29, as well as the disclosure of key risks on, slides 43 to 46.

15 Why Invest in Devine? Refocused business model with greater stability of earnings expected and strong growth potential Exposure to experienced residential home builder and developer with a geographically diversified portfolio Current positive market dynamics in Australian residential sector, especially low density development The Offer repositions Devine with a stronger balance sheet and places it in a more favourable position to exploit current market opportunities The Institutional Placement price of $0.25 per share represents 51% discount to 31 December 2009 pro forma net tangible assets (NTA) 1 per share 38% discount to last closing price on 19 February 2010 Forecast FY10 P/E of 7.6x 2 The Rights Issue price of $0.20 per share represents 61% discount to 31 December 2009 pro forma net tangible assets (NTA) 1 per share 50% discount to last closing price on 19 February % discount to TERP 3 Forecast FY10 P/E of 6.0x 2 The Board has reaffirmed its intention to target a dividend payout ratio of 65% of reported after-tax earnings, recommencing with a final dividend for the full year ending 30 June 2010 Leighton Holdings, which currently has a 43.7% stake in Devine, has indicated it intends to subscribe for its full entitlement under the Rights Issue 1 Pro forma NTA of $0.513 per share is based on Devine s pro forma 31 December 2009 balance sheet. Refer to slide See slide 30 for details, including key assumptions, of the Company s forecast earnings for FY10. 3 The theoretical ex-rights price is the theoretical price at which Devine shares should trade immediately after the ex-date for the Offer assuming 100% take up of the Offer. TERP of $0.314 per share based on Devine last close of $0.40 on 19 February 2010 and excludes the impact of the Institutional Placement at the issue price of $0.25 per share. 6

16 Leighton Holdings In February 2007, Leighton Holdings announced the acquisition of a strategic stake of 40% in Devine as a means of entering the Australian residential market Leighton s stake has subsequently increased to 43.7% (before the Offer) Devine and Leighton maintain a strong relationship Leighton has committed to taking up 100% of its rights under the Rights Issue Leighton has advised that it intends to acquire David Devine and Ken Woodley s shareholdings in Devine at the Rights Issue offer price of $0.20 following the completion of the Offer. The acquisition of these shares has been negotiated pursuant to the existing Pre-Emptive Rights Deed The existing Pre-Emptive Rights Deed was previously approved by shareholders on 26 April 2007 Leighton will acquire approximately 74.1 million shares pursuant to these arrangements following the completion of the Offer, including the new shares that David Devine and Ken Woodley intend to acquire as a result of taking up 100% of their respective rights under the Rights Issue As a consequence of its commitment to take up 100% of its rights under the Rights Issue and the intended acquisition of David Devine and Ken Woodley s shareholdings, Leighton s shareholding will increase from 43.7% to approximately 49.7% post the completion of the Offer The two organisations are currently working together on the Hamilton Harbour and Townsville Southbank joint ventures 7

17 2. Details of the Offer 8

18 Offer Structure Placement Fully underwritten Institutional Placement to sophisticated and professional investors to raise approximately $11.8 million through the issue of approximately 47.3 million new shares at $0.25 per share - Shares issued under the Institutional Placement will also be eligible to participate in the Rights Issue Rights Issue Fully underwritten non-renounceable Rights Issue to raise approximately $54.4 million through the issue of approximately million new shares at $0.20 per share - 3 new shares for every 4 shares held at the Record Date of 7.00pm Wednesday 3 March

19 Discount to Trading Price The Offer price represents a significant discount Rights Issue price: $0.20 Institutional Placement price: $ % discount to last closing price 51% discount to 5-day VWAP 36% discount to TERP 1 38% discount to last closing price 39% discount to 5-day VWAP 51% discount to pro forma NTA 2 61% discount to pro forma NTA 2 $0.40 $0.41 Institutional Placement Price: $0.25 Rights Issue Price: $0.20 $0.31 Last Close (19 February 2010) 5-day VWAP TERP¹ 1 The theoretical ex-rights price is the theoretical price at which Devine shares should trade immediately after the ex-date for the Offer assuming 100% take up of the Offer. TERP of $0.314 per share based on Devine last close of $0.40 on 19 February 2010 and excludes the impact of the Institutional Placement at the issue price of $0.25 per share. 2 Pro forma NTA of $0.513 per share is based on Devine s pro forma 31 December 2009 balance sheet. Refer to slide

20 Indicative Timetable Summary of Key Dates Trading Halt and Offer documents lodged with ASX Monday 22 February 2010 Institutional Placement conducted Monday 22 February 2010 Trading Halt Lifted Tuesday 23 February 2010 Settlement of shares issued under the Institutional Placement Friday 26 February 2010 Shares issued under the Institutional Placement commence trading Monday 1 March 2010 Record date for determining rights 7.00pm (AEDT) Wednesday 3 March 2010 Offer opens and document despatched to eligible shareholders Friday 5 March 2010 Offer closes 5:00pm (AEDT) Monday 22 March 2010 Shares quoted on a deferred settlement basis Tuesday 23 March 2010 Allotment of New Shares Monday 29 March 2010 Despatch of holding statements Tuesday 30 March 2010 Shares commence trading on a normal basis Wednesday 31 March 2010 Note: These dates are indicative only. Devine reserves the right to vary the dates of the Offer, which includes closing the Offer early, without prior notice. 11

21 3. Business Overview 12

22 Structure Diagram Board of Directors Management Team CEO, CFO, Company Secretary, Marketing Director, National GM Housing and Land, GM Property Development Housing and Land Property Development Corporate 13 QLD VIC SA Construction Development Accounting, Finance and IT HR and Secretarial

23 New CEO Announced Following the announcement in October 2009 by Managing Director and founder of the Company, David Devine, that he was going to step down, David Keir was appointed as Devine s new CEO on 1 February David Keir will commence on 1 March 2010, with Acting CEO Viv Grayson holding the position until he commences - Viv Grayson will then continue in the role of Company Secretary - David Keir is the former Delfin Lend Lease CEO and has over 20 years experience in the urban development industry, including 6 years in various town planning roles - During his time with Delfin, David Keir held a variety of roles including Chief Operating Officer, General Manager Built Form, Operations Manager for Queensland and the Northern Territory and Project Director - David Keir holds a Bachelor of Applied Science, Built Environment from the Queensland University of Technology and holds a number of post graduate qualifications. He is a member of the Australian Institute of Company Directors and a Board Member of the Residential Development Council of Australia David Keir s appointment reinforces the Company s strategic focus on the Housing and Land business Devine s CFO, Paul Cochrane, and the newly appointed CEO have an established professional relationship through over 5 years working together at Delfin Lend Lease 14

24 Other Board and Management Changes Recent Senior Management Changes Luke Hartman was promoted to National General Manager of Housing and Land in July 2009 In October 2009, Devine announced the appointment of a new CFO, Paul Cochrane, who has over 20 years of finance and senior management experience with major companies including PriceWaterhouseCoopers and Delfin Lend Lease From 1 March, Viv Grayson will return to his role as Company Secretary and assist in the transition of David Keir to his new role Marketing Director Ken Woodley has advised that he will cease employment on 31 March An orderly transition to either an internal or external replacement will be facilitated Board Changes David Devine will retire from his non-executive director Board position on 31 March 2010 Ken Woodley will also step down from his position on the Board on 31 March 2010 The Board s intention is to maintain the current number of directors and to review its composition, which will include a third Leighton-nominated director 15

25 Business Snapshot PROFILE Head Office Brisbane Areas of Operations Queensland, Victoria, South Australia Employees 257 Operations Contract home builder, residential land developer, property developer, construction division ASX DETAILS Listed November 1993 Total Shares on issue million Market Capitalisation $126 million (as at 19 February 2010) Share Price on 19 February 2010 (52-week high / low) 40 cents (62 cents / 37.5 cents) LARGEST SHAREHOLDERS AS AT 19 FEBRUARY 2010 HOLDING Leighton Holdings 43.7% Devine Industries Pty Ltd (David Devine former Managing Director, and immediate family members) 10.6% Larrapinta Pty Ltd (Ken Woodley Marketing Director, and immediate family members) 3.4% Dimensional Fund Advisors 2.1% KEY EXECUTIVES Appointed CEO (commencing 1 March 2010) David Keir Acting CEO & Company Secretary Viv Grayson CFO Paul Cochrane National GM Housing & Land Luke Hartman Marketing Director Ken Woodley Manager Property Development Terry Conway National Manager Commercial Jim Watson Manager Devine Constructions John Kerr General Manger South Australia Steve Weightman DIRECTORS Mr Doug Ridley Non-Executive Chairman Mr David H.T Devine Non-Executive Director Mr Peter J Ferris AM, KCSG Non-Executive Director Hon. Terry Mackenroth Non-Executive Director Mr Graeme E McOrist Non-Executive Director Mr Richard (Rick) W Parris Non-Executive Director Mr Vyril A Vella Non-Executive Director Mr Kenneth (Ken) M Woodley Executive Director 16

26 4. Strategy and Market Opportunity Devine announced in October 2009 that Housing and Land will be the core focus for the Company; and, the ancillary Property Development business will continue to pursue selected opportunities in medium and high density residential developments. 17

27 Refocused Strategy What does it mean for Devine? Previous Strategy Current Strategy To pursue a wide range of opportunities in the real estate sector, including: Large scale property development, such as the French Quarter Commercial developments, such as King George Central (145 Ann St) Mixed-use precincts that include residential, commercial and retail components Construction of Devine s large-scale commercial developments and medium to high density residential projects Property management and body corporate services through SSKB Traditional housing and land business The Housing and Land division services the Queensland, Victorian and South Australian markets Leverage Devine s competitive advantage in developing housing and land projects, with a focus on: First home buyers First and second time move-up buyers Investors Sale of land to other builders Refocus the business away from large-scale and commercial developments Release capital tied-up in large, single projects Increase the predictability of cashflows and earnings Sale of King George Central (145 Ann St) and Carrington; exit process is being considered for Camelot Continue to seek opportunities in the medium and high density residential space, for example, the successful Hamilton Harbour development Continue to build and develop lots through a mix of wholly-owned estates, joint ventures, deferred settlement contracts and purchase options Increase presence in higher growth states like Victoria Opportunistically re-enter the NSW residential market in the medium to high density sector Pursue selected opportunities in the Devine Constructions business (eg. recent work as part of the Building the Education Revolution school works programme) Exit property management and body corporate services (sale of SSKB completed in August 2009) 18

28 Housing and Land Refocus Devine has carried out a detailed strategic review of its business The Board together with management has decided to refocus the business on Housing and Land projects to enhance shareholder value and allow Devine to take advantage of favourable market conditions in the residential sector over the coming years where it has a long and established track record Access to affordable debt capital for large-scale and commercial development projects has diminished Devine s core competitive advantage is in developing residential projects, where the capital demand is lower Increase the predictability of cashflows and earnings A focus on the Housing and Land division will allow Devine to pursue growth opportunities, such as Taking advantage of a shortage in affordable housing and favourable supply / demand dynamics, which are expected to remain in place over the medium to long-term Increasing its presence in the higher-growth Victorian market and assess potential to re-establishing a presence in NSW Selected medium and high density residential or mixeduse developments where Devine has a competitive advantage 12,000 10,000 8,000 6,000 4,000 2,000 0 Total Lots Under Control Strategic growth target of ~10,000 lots FY03 FY05 FY07 FY09 FY12 19

29 Robust Demand for Housing and Land Demand is underpinned by favourable demographic, macroeconomic and public policy dynamics - Strong population growth: 2.1% in the year to 30 June 2009 driven by net migration (contributing to 64% of the gain) and total fertility rates at a 30 year high - Net migration of 230,000 expected in FY10 (vs. 285,000 in FY09) - Low levels of unemployment and robust economic growth contributing to the demand factors - Government incentives for first-home-owners of up to $18,000 are still available in some states until 30 June Affordability 1 has declined from recent highs but is still 35.7% above September 2008 levels - Social housing initiatives are creating additional demand pressures: - Up to 19,200 new dwellings to be built, with only ~2,300 dwellings commenced to date - Program to run until 2012, with $5.2 billion of funds allocated under the Federal Government s Nation Building Plan Population Growth Unemployment 3.0% Victoria Queensland South Australia National 2.5% 2.0% 1.5% 1.0% 2.63% 2.14% 2.07% 1.21% 7.5% 6.5% 5.5% 4.5% Unemployment Rate (%) Consensus Forecast 10 year average = 5.6% 0.5% % Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Source: Australian Bureau of Statistics, Bloomberg, Housing Industry Association. Source: Australian Bureau of Statistics, Bloomberg, Housing Industry Association. 1 Housing Industry Association Affordability Index. 20

30 Favourable Market Conditions Land shortages continue to constrain supply and underpin prices - There is a chronic under-supply of developmentapproved land Delays in planning approvals, rezoning and difficulty securing finance is exacerbating shortages of approved land in metropolitan growth areas Australia is expected to experience an increasing shortage of dwellings as demand is forecast to outstrip supply by approximately 24,000 lots per year - favourable demographic, macroeconomic and policy trends are likely to continue Several years of catch-up will be required as a result of built-up undersupply - Recent government policy initiatives will take some time to impact the supply of zoned, approved lots Forecast Cumulative Gap between Dwelling Demand and Supply 350, , ,000 The shortage is expected to grow between now and , , , , , , , , ,000 50,000 0 FY09 FY10 FY11 FY12 FY13 FY18 Source: National Supply Council (annual State of Supply Report 2009). 21 Dwellings Developers with market-ready land and a flexible product delivery capability will benefit the most

31 Devine is Well Placed to take Advantage of this Opportunity Devine is an integrated developer - Experienced in home building, land development and sales and house and land packages - Flexibility to tailor products to suit different markets (eg. first-home buyers, investment buyers, social housing etc.) - Ability to deliver an efficient and seamless development of land and home constructions - Strong position to tender for social housing work The majority of Devine s lots are approved for development and market-ready - Lots are ready to develop and build on, and are located in key growth areas - Devine s growth strategy is focused on the acquisition and delivery of lots in growth corridors 22

32 Housing and Land Division Business Performance Devine has a proven track-record of delivering lots to market and building homes on both its own land bank and other developers land - Sales volumes have increased considerably in the last 2.5 years - Housing and Land margins remain strong The Housing and Land business has strong momentum going into Devine has benefited from economies of scale as it brings a greater volume of land to market - 1H 2010 saw strong levels of land deposits Solid deposits in 1H 2010 will underpin revenues and cashflows in 2H 2010 as contracted lot sales are settled and house building contracts signed in the first half are completed 12 months rolling Net Land Deposits 12 months rolling Housing Starts + 98% 2,296 2, ,551 1, % ,364 1,274 1,171 1,193 1, , Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Note: Net deposits represent gross deposits received from customers for the purchase of land lots less any cancellations. Housing starts refer to the number of lots where Devine has commenced building a house. Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 23

33 5. Capital Management and Financial Summary 24

34 Capital Management Initiatives Equity Raising $66.3 million equity raising to fund the continued growth of the Housing and Land business, to support the recently concluded refinancing of key debt facilities and to boost liquidity reserves - Provides increased liquidity for the business - Reduces 31 December 2009 pro forma gearing from 39.5% to 28.4% 1 Debt Refinancing Successfully agreed a terms sheet to extend the maturity of the core debt facility 2 - Maturity of the $160 million 3 core debt facility extended to July $8m project facility expiring in January Revised covenant package better adapted to Devine s ongoing business 4 Refocused Strategy Devine has refocused its strategy on its core business Housing and Land - This is expected to reduce the volatility of cash flows going forward as well as reducing the capital intensity of the business 1 Gearing is defined as (interest bearing & non-interest bearing debt cash held) / (total assets cash held). 2 Refer to slide 28 for details. The terms sheet is subject to normal conditions precedent, including the completion of the Offer and documentation. Refer to slides 28 and 29 for further detail, as well as the disclosure of key risks on, slides 43 to Including a bank guarantee facility maturing in October This facility is renewed annually and it is expected that this facility will be extended as part of the annual review of the evergreen core debt facility. Refer to slide 28 for further detail on Devine s bank guarantee facilities. 4 Revised covenants are not conditional of the completion of the Offer. Refer to slide 29 for details 25

35 Gearing The Offer will further reduce Devine s gearing Debt to Equity Ratio 1 Gearing Ratio 2 120% 52% 49% 100% 40% 70% 28% 39% 31-Dec Jun Dec-09 Pro-forma 31-Dec Jun Dec-09 Pro-forma Note: Balance sheet debt does not include Devine s share of JV debt. 1 Interest-bearing debt to shareholders funds. Pro forma ratio assumes $62 million net proceeds (after expenses) are applied to debt. For illustration only. 2 Gearing is defined as (interest bearing & non-interest bearing debt cash held) / (total assets cash held). 26

36 Net Tangible Assets Pro forma NTA per share is 51.3 cents The majority of Devine s balance sheet is invested in Housing and Land assets Gross Asset Value Pro forma NTA 1 per share 5% 2.6 cents 15% cents 80% cents = 51.3 cents NTA Housing and Land Property Development Corporate/Other² 1 NTA is allocated to business units based on relative gross asset values with debt facilities assumed to be managed centrally. Based on 31 December 2009 balance sheet values, pro forma for the Offer. For illustrative purposes only. 2 Includes receivables managed by corporate (not Housing and Land or Property Developments). 27

37 Debt Refinancing At 31-Dec-2009 Post Raising Description Drawn Limit Maturity Drawn Limit Maturity Comments Core: Multi-Option Facility Feb Jul-12 Covenant limits renegotiated and maturity extended Other House and Land Facilities: Alberi Park Riverparks Lakeside Dec-10 Mar-11 Jan Dec-10 Mar-11 Feb-10 Other Housing and Land Facilities are expected to be fully repaid from trading activities Core: Project Facility N/A N/A N/A Jan-11 Previously provided as part of the Core Multi-Option Facility Project Facility 9 9 Jan Jan-11 To renegotiate/refinance once development is approved Currumbin Facility Jul Jul-13 Funded via a $40 million receivable Hamilton Harbour JV (Devine s share) Townsville Southbank Project JV (Devine s share) 9 9 Dec Mar-10 Currently negotiating extension/refinancing 6 7 Jun Jun-10 Expected to be refinanced in 2010 Core: Bank Guarantees Oct Oct-10 Annual facility expected to be extended Other Bank Guarantees Various 9 11 Various Bank guarantees under Other House and Land Facilities and Townsville Southbank Project JV Insurance Bond Mar Mar-10 Negotiations underway to extend this facility to Mar-11 Guarantees and Insurance Bonds Property Development House and Land Insurance Bond Feb Feb-10 Negotiations underway to extend this facility to Feb-11 Note: Vendor funding not included as it is not interest bearing debt - $31.6 million of vendor funding at 31 December Hamilton Harbour and Townsville Southbank JV s are equity accounted and therefore are not included in interest bearing debt on Devine s consolidated balance sheet at 31 December Excludes Bank Guarantees which are shown separately. 2 Assumes $42m of proceeds from the Offer are applied to the core multi-option facility and the remaining $20m held as cash on balance sheet. 3 Recently refinanced ANZ facilities totalling $168 million (including guarantees). 28

38 Covenants Devine has agreed a revised covenant package that Devine considers better adapted to its business going forward 1 - There will be no market capitalisation covenant - The breach of two covenants at 30 June 2009, as previously disclosed, has been permanently waived by the ANZ The following covenant package for the core debt facility has been agreed: Definition Test Date Covenant Total Liabilities / Net Tangible Assets 2 From Jun-10 <1.50x Debt / EBITDA 3 From Jun-10 <5.00x EBIT 3 / Interest Expense 4 (ICR) At Jun-10 >1.75x From Dec-10 >2.00x Net Tangible Assets From Jun-10 >$275m All financial covenants will be tested semi-annually Following the completion of the Offer, Devine believes there is sufficient headroom under these revised covenants going forward 1 The permanent waiver and revised covenants are not conditional on the completion of the Offer. The covenants described on this slide will continue to apply under the terms sheet agreed for the extension of the core debt facility. 2 Devine has interests in certain equity-accounted joint ventures and this covenant will be calculated on a look-through basis. 3 Excludes certain impairments and other abnormal items. 4 Includes a number of adjustments, as agreed under the documentation. 29

39 Financial Outlook Key Assumptions Earnings Guidance and Key Metrics Distributions - The Board has re-affirmed its intention to target a payout ratio of 65% of after tax earnings, re-commencing with a final dividend for the full year ending 30 June 2010, payable in October 2010, and to maintain this target payout by way of six-monthly dividends for subsequent years. Distributions are subject to performance Housing and land - Contracted acquisitions of land parcels proceed as planned with new acquisitions occurring progressively as profitable opportunities arise ad hoc - Targeted dates for the registration of key land subdivisions are achieved allowing lots to settle and housing site starts to occur in the June 2010 half Property development - Construction commences in the June 2010 half on the first stage of the Hamilton Harbour JV project Operating and corporate/administration costs to remain broadly in line with FY09 - Interest expense is expected to be higher than FY09 due to higher land settlements and revenue and the resultant previously capitalised interest emerging as interest expense No significant impairments are expected in 2H 2010 $ millions (unless stated otherwise) NPAT FY09A FY10F Revenue Underlying NPAT Basic underlying EPS 2 (cents) Shares outstanding 2 (millions) Underlying P/E 2 (at 20 cents) NA 6.0x Housing Site Starts 923 1,043 Land Settled - Lots 1,669 2,256 Note: The achievement of forecast earnings by Devine is inherently uncertain and subject to risks. Refer to Appendix B for a summary of key risks. 1 Underlying NPAT was not specifically reported in FY09. Included in the $16.7 million are impairments on inventory and other one-off expense/loss items totalling $6.9 million after tax as well as certain profits on commercial development activities which are not recurring. FY10F underlying NPAT excludes gains or losses on the sale of projects including King George Central (145 Ann St), 96 Albert St and the Carrington site, as well as impairments on large-scale and commercial property development assets all shown on a post-tax basis. 2 Shares outstanding shown as at 30 June 2009 for FY09A and pro forma for the Offer for FY10F. 30

40 Pro Forma Balance Sheet ($ millions unless stated otherwise) Actual 31-Dec-09 Impact of Offer Pro forma 31-Dec-09 Cash Receivables Inventories Other Total Assets Trade and other payables Interest bearing (42.0) Non-interest bearing Other Total Liabilities (42.0) Net assets/shareholders funds Net Tangible Assets (NTA) Gearing % 28.4% NTA per share cents 51.3 cents 1 $62 million represents the approximate net proceeds, after expenses, from the Offer. 2 Gearing is defined as (interest bearing & non-interest bearing debt cash held) / ( total assets cash held). 3 The pro forma 31 December 2009 calculation is based on pro forma shares outstanding of approximately 634.9m. 31

41 6. Summary of Key Risks 32

42 Summary of Key Risks Key business risks Development, planning and construction Property market downturn risk effect on earnings Risks relating to the First Home Owner Grant Land bank Joint ventures Documentation and completion Unemployment rate Insurance Earnings, capital expenditure, cash flow and capital structure risks Earnings and capital expenditure expectations Property market downturn risk effect on cash flow Funding Refinancing Impact of financing covenants General business and market risks Inflation Environmental Risks relating to employees and OH&S Regulatory, tax and accounting Global economic downturn and exposure to the level of economic activity Equity markets and investment Litigation and reputation risk Note: Refer to Appendix B for details. 33

43 Appendix A: Portfolio Overview 34

44 Housing & Land Devine Communities designs and develops lifestyle residential communities and, in some instances, offers house and land packages in conjunction with other land developers. For many of its estates, the Company marries specific designs with particular allotments, enabling buyers to enjoy homes that have maximum harmony with the land and produce a desirable streetscape. Devine designers take into account the outlook, solar orientation and most advantageous position on the block when allocating home designs. Devine Homes designs, markets and builds a range of single and double storey homes to suit a range of budgets. The division provides product to meet the investor market as well as owner occupier markets, specifically first home buyers in Queensland, Victoria and South Australia. Devine Homes competitive difference includes fixed priced packages and attractive finance options. Devine Homes has won a range of awards including one of the industry s most prestigious award at the 2009 Master Builders Association Housing and Construction Awards. 35

45 Housing and Land Assets South Australia Victoria Lots: 1,210 Lots: 2,400 1 Includes River Parks estate Note: Total lot numbers represent equivalent lots when fully developed, owned or controlled, as at 31 Dec Townsville South East Queensland Lots: 3,

46 Housing and Land Case Study: Fallingwater JV Pakenham, Victoria PROJECT PROFILE Location Approx. 55 km SE of Melbourne CBD, Army Road, Pakenham Size Approx. 25 hectares Homesites 365 lots Project End Value $110 million (including housing construction) Gross Revenue of Land $49 million Population Approx residents (at completion) Product House and Land packages, with a mixture of 3-4 bedroom homes Land-only sales Developer Devine Communities Ideally located near community centres, schools, an aquatic centre and a golf course Facilities Shopping: nearby Fountain Gate and newly extended Pakenham Shopping Centre Cafes, restaurants and entertainment areas Surrounding parklands and lush recreational areas Fallingwater is a JV with Oracle Estates. JV s allow Devine to take advantage of its experience and expertise in residential development within an efficient funding structure; Off balance sheet Devine often contributes <50% of the equity for a greater share of the earnings Returns are generated through: - The sale of house and land packages and land-only sales - A fee structure with the JV partner For example, in the Fallingwater JV, Devine receives a range of fees for managing the planning, development, marketing and delivery of the estate to market. 37

47 Approx. 20 km from Melbourne CBD on Forsyth Road, Truganina Approximately 55 hectares 432 homesites $160 million (including housing construction) $80 million Approx residents (at completion) House and Land packages, with a mixture of 3-4 bedroom homes. Land-only sales Devine Communities Major shopping centre, Werribee Plaza, located nearby A school and childcare centre are on-site at Arndell Park Over $5 million Sports Pavillion and Community Complex Over $3 million outdoor sporting reserve Nearby off-road Federation Trail Sanctuary Lakes golf course is only 5 minutes drive away Location Size Homesites Project End Value Gross Revenue of Land Population Product Developer Facilities PROJECT PROFILE Arndell Park (100% owned) Truganina, Victoria Housing and Land Case Study: 38

48 Property Development Assets Property developments Hamilton Harbour, Brisbane, QLD (50% JV) Type: Residential / Commercial / Retail Status 90% of stage 1 apartments pre-sold, stage 2 successfully launched Southbank, Townsville, QLD (50% JV) Type: Residential / Commercial / Retail Status Planning approval progressing to schedule Non-Core developments King George Central, Brisbane, QLD (50% JV) Type: Commercial Offices Status Sold and settled SOLD 96 Albert Street, Brisbane, QLD Type: Commercial Status Sold and settled SOLD French Quarter, Brisbane, QLD Type: Residential/Mixed-use Status Carrington site sold and settled, exit process being considered for Camelot site PARTIALLY SOLD 39

49 JV Project Overview Hamilton Harbour PROJECT PROFILE Location Hamilton, Brisbane Site 2.1 ha JV Partner Leighton Properties Pty Ltd (50%) Style Mixed-use precinct with residential, office and retail components Value $475 million Commencement 2 nd quarter 2010 Est. Completion Staged development over approximately 5 years Hamilton Harbour is planned as a vibrant mixed-use community of apartment dwellers, urban office workers, stylish showrooms, lively cafes and other retail outlets. The project has received a positive response from both buyers and potential tenants. When complete, Hamilton Harbour is expected to consist of 650 residential apartments, approximately 18,500 square metres of prime green office space - PCA A-Grade and Five Star Green Star rating and 6,000 square metres of retail and showroom facilities. Bounded by Kingsford Smith Drive, Harbour Road and Hercules Street, the site is in the heart of the Australia TradeCoast region next to Multiplex s Portside Wharf and cruise-ship terminal project and very accessible to Brisbane Airport, the Gateway Motorway and the Brisbane CBD. Artist s impression. 40

50 Appendix B: Key Risks 41

51 Key Risks This section identifies some of the key investment risks associated with an investment in Devine. The risks highlighted in this section are not exhaustive. Before investing in Devine, you should consider carefully the risks described here, together with all other information in this Presentation and publicly available information, and consult your professional adviser. If any of the following risks materialise, Devine's business, financial condition and operational results are likely to suffer. In this case, the trading price of Devine s shares may fall and you may lose all or part of your investment, and/or the earnings of Devine may be lower than expected, with Devine s ability to pay dividends being reduced accordingly. 42

52 Key business risks Development, planning and construction As part of its property development and land development business, Devine identifies, analyses and invests in property development and land projects. Generally, property development and land projects have a number of risks including: the risk that planning consents and regulatory approvals are not obtained or, if obtained, are received later than expected, or are not properly adhered to; development costs escalating beyond those originally anticipated; project delays due to factors beyond the control of Devine; expected sales prices or sales rates are not achieved; a contractor or sub-contractor not performing their role or breaching their contract; and competing property development projects adversely affecting the overall return achieved by any property development projects undertaken by Devine, because they provide competitive alternatives for potential purchasers and lessees. Property market downturn risk effect on earnings A downturn in the property markets, particularly the residential property market, due to deterioration in the economic climate could result in reduced development profits through reduced selling prices or delays in achieving sales. Increases in supply or falls in demand in any of the sectors of the property market in which Devine operates or invests could influence the acquisition of sites, the timing and value of Devine sales and carrying value of projects. Market sentiment can impact the willingness of potential Devine clients to buy properties. The impact can be more pronounced in the short term, affecting for example, project enquiry levels or rates of sale, as compared to medium-term factors such as the likelihood of oversupply or undersupply in various market segments. Although projected rates of sale may not have a significant influence on the profitability of individual projects in the medium/long term, a decline in market sentiment which reduces rates of sale could adversely influence the amount of profit that can be brought to account in a particular financial period. First Home Owner Grant The Federal Government s First Home Owner Grant Boost has been phased out with the grant for new homes reducing from $14,000 to $7,000 on 1 January In addition, the Victorian Government s First Home Bonus, which provides additional grants of up to $11,000 to eligible first home buyers, will not apply to house and land purchase contracts entered into after 30 June There is a risk that the Boost had, and, in Victoria, the Bonus may continue to have, a bring forward effect on sales in the short term and that their reduction and discontinuation, respectively, may have a negative impact on sales relative to recent periods. There is also a risk that the Federal grant will be reduced or cancelled in its entirety, or that the additional grants given by other state governments such as South Australia may also be reduced or cancelled, any of which may have a negative impact on sales. 43

53 Key business risks Land bank Devine holds a significant amount of property in its land bank. As at 31 December 2009, Devine controlled approximately 6,940 lots of land. Factors affecting residential property values include, underlying demand for new dwellings, the level of dwelling stock deficiency/surplus, supply of land, economic factors, environmental issues, native title claims, land resumptions and infrastructure charges from local authorities. Any material reduction in land values which affects the value of Devine s land bank may result in Devine needing to book an impairment to the value of the land bank in its accounts. This, in turn, could have a material and adverse effect on Devine s financial position or financial performance. In addition, other factors associated with the cost of holding the land bank could affect Devine s financial performance. For example, an increase in interest rates could increase Devine s land holding costs which, in turn, could reduce Devine s profit margins. Following a detailed strategic review, Devine has altered its strategy so as to refocus on its Housing and Land division. As a part of this refocusing, Devine may seek to release capital currently employed in large single projects, such as the Camelot site, including by way of sale of those projects. A downturn in the property markets or changes in market sentiment could result in Devine achieving reduced sale proceeds or facing delays in completing any sale. Failure to sell these projects or sale at a price materially below their book value could have a material adverse effect on Devine s financial performance or position. Joint venture Devine holds interests in a range of joint ventures. The net asset value of Devine s investment in joint ventures may decrease if the value of the property assets in those joint ventures were to decline. Devine also derives income from providing property services to these entities. A number of the joint ventures bank loans have gearing and other financial covenants. Documentation and completion Many of the finance arrangements, investments, joint ventures and other arrangements to which Devine is party are complex and there is potential for error or differing interpretations in relation to documentation leading to outcomes which may adversely affect Devine s financial performance. Unemployment and migration rates Sales in residential projects may be negatively impacted by a sustained increase in the unemployment rate or decrease in the migration rate in Australia, particularly in key markets where Devine has residential projects. This impact could be through a reduction in the number of houses and lots sold, in the value of houses and lots sold and profit achieved. Insurance Developers and construction companies generally enter into contracts of insurance that provide a degree of protection over assets, liabilities and people. While such policies typically cover against material damage to assets, contract works, business interruption, general and professional liability and workers compensation, there are certain risks that can not be mitigated by insurance, either wholly or in part, such as nuclear, chemical or biological incidents or risks where the insurance coverage is reduced or unavailable, such as cyclones or earthquakes. Developers and construction companies also face the risk that insurers may not be able to meet indemnity obligations if and when they fall due, which could have an adverse effect on earnings. Further, insurance may be materially detrimentally affected by the current global downturn such that insurance becomes more expensive or, in some cases, unavailable. Earnings and capital expenditure expectations There can be no guarantee that the assumptions and contingencies contained within forward-looking statements, opinions or estimates (including projections, guidance on future earnings, and estimates) will ultimately prove to be valid or accurate. The forward-looking statements, opinions and estimates depend on various factors, many of which are outside the control of Devine. Accordingly, there is a risk that the assumptions in the financial information in this Presentation (such as settlement of development projects) may not hold such that Devine s expected earnings, distributions and asset write-downs may differ from those set out in this Presentation. 44

54 Earnings, capital expenditure, cash flow and capital structure risks Cash flow: effect of property market downturn risk Devine s operating cash flow is influenced by, amongst other things, residential land sales to builders, home owners and investors. The proceeds of the Offer in isolation may not be sufficient to fund Devine s operating cash flow requirements, and a sustained downturn in the property market or the economic climate more generally has the potential to reduce or delay Devine s cash flow receipts from, among other things, sales of real estate. Timing and volume of sales are particularly dependent on market conditions. Delays in cash flows could adversely impact Devine s ability to fund its operations and may impact Devine s ability to comply with its debt obligations and covenants. Funding The real estate investment and development industry tends to be highly capital intensive. The ability of Devine to raise funds on favourable terms for future refinancing, development expenditure and site acquisitions depends on a number of factors including Devine s credit rating and general economic, political, capital and credit market conditions. The inability of Devine to raise funds on favourable terms for future site acquisitions, development of sites and refinancing could adversely affect its ability to acquire or develop new properties or refinance its debt. Refinancing The agreement by Devine s principal financier to refinance and extend its finance arrangements, but not the agreement to adopt new covenants, as described in this Presentation is reflected in a binding terms sheet, rather than fully documented facilities. This terms sheet includes conditions which Devine must satisfy, the non-satisfaction of which will affect the ability of Devine to complete the refinancing, restructure and Offer without the consent of, or the waiver of the relevant condition by, its financier. Any failure to complete the refinancing and restructure (including because of a failure to reach final agreement in respect of definitive documentation) or the Offer or completion of the refinancing and restructure on terms less favourable to Devine than those set out in the terms sheets could have a material adverse effect on Devine and may give its financiers the right to proceed against Devine. The conditions include the entry into definitive documentation in relation to the refinancing and restructure and related security packages by Devine and the lender. Once Devine s refinanced and extend finance arrangements are in place, Devine will be exposed to risk relating to the refinancing of those arrangements before they mature. In addition, Devine has certain nearer term debt maturities, as detailed in slide 28. If these debt facilities are not refinanced before they mature and are required to be repaid, it is possible that Devine will need to realise assets for less than their fair value in order to repay the facilities, which would impact Devine s future cash flows. If the amounts cannot be repaid, secured financiers could proceed against the security granted to them to secure debt owed. Changes in the availability (including because of financiers policies in relation to aggregation with Devine s major shareholder) or the cost of debt may impact Devine s earnings and may impact its financial performance and ability to conduct its operations. The underwriter of the Offer may terminate its obligations upon the occurrence of certain events including among other circumstances: a fall in the level of the ASX 200 Index by a specified amount; a misleading or deceptive statement (including by omission) in the Offer documents; a breach by Devine of any provision, undertaking or covenant of a material debt or financing arrangement which has a material adverse effect on Devine; an event of default or review event which gives a lender or financier the right to accelerate or require repayment of debt; a change in the directors or senior management of Devine (other than the changes referred to in this Presentation); a director of Devine being charged with an indictable offence or being disqualified from managing a corporation under the Corporations Act; ASIC issuing or giving formal notice of an intention to issue proceedings in relation to the Offer, the Offer documents or Devine; Devine ceasing to be listed on ASX or Devine withdrawing the Offer; a disruption in financial markets or political conditions in specified jurisdictions; a material adverse change in Devine s assets, liabilities, financial position or performance, profits, losses or prospects; Leighton does not take up its rights under the Rights Issue; or if either of Ken Woodley or David Devine do not take up their rights under the Rights Issue. There is a risk that if the underwriter exercises its right to terminate the underwriting agreement and the minimum Offer proceeds required by financiers are not raised, Devine s restructured finance arrangements will not become effective which will have a significant adverse effect on Devine. In particular, Devine will be subject to certain covenants contained in its existing facilities (as recently amended) that are not included in the restructured finance arrangements, including an undertaking to sell the Camelot site by 30 June Impact of financing covenants Devine s financiers require it to maintain certain gearing, interest coverage and secured asset covenants (collectively referred to as financial covenants). These financial covenants relate to Devine s earnings, cash flow and asset values, and an adverse movement in any of these may cause Devine to breach the financial covenants. A breach of these financial covenants without the consent of Devine s financiers is likely to have negative consequences for Devine, including the possibility that Devine may have to repay amounts owing to its financiers prior to the originally scheduled maturity. After giving effect to the refinancing and Offer, Devine expects to be in compliance with all of its debt facility covenants. 45

55 General business and market risks Inflation Higher than expected inflation rates could be expected to increase operating costs and development costs. Environmental The discovery of, or incorrect assessment of costs associated with, environmental contamination on any of the Devine projects could have an adverse effect on the profitability and timing of receipt of revenue from that project. Employees and OH&S The loss of key management personnel who have particular expertise may influence future earnings. A failure to comply with the necessary OH&S regulatory requirements could result in damage to Devine s reputation, fines, penalties and compensation for damages as well as poor employee morale and industrial action. Industrial disputes can affect the supply of building materials or delay scheduled completion dates. This may adversely affect the sunset dates in pre-committed leases. Regulatory, tax and accounting Devine is subject to a range of industry specific and general legal and other regulatory controls. Regulatory breaches may affect the operational and financial performance of Devine, through penalties, liabilities, restrictions on activities and compliance and other costs. Changes in local, state and federal government regulations and policies concerned with government land development, zoning, first home-buyer assistance, tenancy laws and delays in the granting of approvals or registration of subdivision plans, may affect the amount and timing of the future profits of Devine. Accounting standards may change. This may affect the reported earnings of Devine and financial position from time to time. You should be aware that future changes in Australian taxation law, including changes in interpretation or application of the law by the courts or taxation authorities in Australia, may affect taxation treatment of an investment in Devine securities, or the holding and disposal of those securities. Further, changes in tax law, or changes in the way tax law is expected to be interpreted, in the various jurisdictions in which Devine operates, may impact the future tax liabilities of Devine. Global economic downturn and exposure to the level of economic activity Devine s financial performance is sensitive to the level of economic activity within the industry in which Devine currently operates. The level of activity in this industry is sensitive to a number of factors, such as gross domestic product, interest rates, input cost inflation, foreign currency exchange rates and tax rates (all of which are outside Devine s control). Devine s revenues and earnings may fall, or its growth may be lower, during the downturns of the different industry cycles. Volatility in earnings may limit Devine s ability to pay dividends. Devine is not able to predict the timing, extent or duration of the activity cycles in the industry and markets in which it operates or will operate in the future. Equity markets and investment There are risks associated with investment in equities generally. The trading price and liquidity of Devine s securities will be affected by such factors as the relative demand for and supply of Devine s securities on the ASX, investor sentiment, general market and economic conditions and other factors beyond Devine s control. In recent times, the market prices for many listed entities have been subject to wide fluctuations reflecting, in many cases, a diverse range of non-entity specific influences including the general state of the global economy and financial markets. It should be noted that there is no guarantee that the new Devine securities will trade at or above the offer price. Investors should note that the past performance of Devine s securities on the ASX provides no guidance as to its future security price performance. Payment of dividends is subject to the discretion of the Devine Board and will depend on many factors, including Devine s earnings under its financing arrangements. Litigation and reputation risk From time to time, Devine may be subject to litigation or governmental, legal or arbitration proceedings and other contingent liabilities which, if they occur, may have a material adverse effect on Devine s financial position and results. There is ongoing litigation that was brought by Devine against DKL Property Investments Limited ( DKL ) in connection with a proposed sale of 96 Albert Street which did not proceed. DKL has filed a counter-claim seeking to recover from Devine the approximately $1.2m deposit paid in relation to the proposed sale. Devine believes that DKL s counter-claim is without merit and intends to defend its interests vigorously. In addition, the actions of Devine and/or any of its current or former directors or employees or agents (including the bringing of legal proceedings concerning their personal affairs) may adversely affect perceptions of Devine held by the public, shareholders, customers, regulators, financiers or ratings agencies. Damage to Devine s reputation may have wide-ranging impacts, including on Devine s financial position and profitability and may exceed direct costs through impacting on Devine s goodwill. 46

56 Appendix C: Foreign Selling Restrictions 47