Report from the Chairman and Managing Director

DHA has had a successful year. It managed the housing needs of 19,000 Defence families, off-base accommodation for 14,000 Defence members and on-base living-in accommodation comprising 31,000 rooms (40,000 beds).

Key outcomes for the year included:

• Achieving Net Profit After Tax (NPAT) of $90.1 million, $5.8 million above budget. The land sales from major residential developments generated revenue of $112.5 million, with a gross margin of 33.7% (the budget estimate was 29.2%). A dividend of $54.0 million has been proposed, $3.5 million above the budget estimate.
• Providing a portfolio of houses available to Defence members of 17,590 properties as at 30 June 2014. This exceeded the Corporate Plan requirement of 17,348 and was above the Key Performance Indicator (KPI) of 98.5% of the provisioning schedule figure.
• Exceeding all KPIs. This included 92% tenant satisfaction with overall customer service (against a KPI of 80%) in the housing survey, 95% satisfaction with maintenance services (against a KPI of 90%) and 89% tenant satisfaction with their Service Residences (against a KPI of 80%).
• Receiving exemption from the Parliamentary Standing Committee on Public Works.
• Receiving a contract extension from Defence for the Members Without Dependants and Members With Dependants (Unaccompanied) Choice Accommodation (MCA) Agreement for the period December 2017 to December 2022.
• Expanding the national footprint of the MCA program. There are now properties in Adelaide, Melbourne, Perth, Rockingham, Townsville, Sydney, Brisbane, Canberra and Darwin.
• Implementing the first stage of improved workforce structures in regional offices and enhancements to allocation and tenancy services. This provided considerable benefits to Defence members in finding a property and improved efficiencies within DHA.
• Implementing more cost-effective services providing Defence with an annual rebate of $10 billion.
• Constructing and purchasing 662 new dwellings for Defence families and a further 120 apartments for MCA.
• Delivering 353 properties in the construction program with a market value of $214.0 million.
• Establishing DHA's first property investment fund, the DHA Residential Property Fund No.1, which closed at $47.1 million.

During the year, 662 new dwellings were acquired for Defence families by construction or purchase at a cost of $319.0 million and 120 apartments were acquired for Defence members at a cost of $49.0 million. This program was funded without additional borrowings, mainly through the sale and lease back of DHA properties, disposal of properties no longer required and the sale of surplus land. Total revenue from these sources was $555.0 million. This was a very pleasing result in a difficult property market against a backdrop of global economic uncertainty. There were 729 properties sold in the property investment program, with revenue of $386.4 million, $6.8 million better than the budget estimate.

Land development remained a major feature of DHA's program of work. In 2013–14, a portfolio of 14 major projects, and expenditure on developments of more than $1.7 billion, was pursued in line with the Corporate Plan. The sale of land at major residential developments, not required to meet the Defence housing requirement, contributed to DHA's success and generated revenues of $112.5 million.

DHA is continuing with $300.0 million worth of upgrades to, and replacements of, Defence-owned on and off-base housing in order to satisfy the revised Defence minimum standard by 2017. During 2013–14, houses at Larrakeyah (NT) and RAAF Base Tindal (NT) were upgraded. The Department of Defence received Parliamentary approval for the construction of 50 tropically-designed dwellings at RAAF Base Tindal. Approval is also being sought for the development of 80 houses on RAAF Base Darwin to help mitigate housing-market pressure in that area.

DHA is pleased to have continued to support Defence-related initiatives including Legacy, Defence Families Australia, Soldier On and the Australian Defence Association.

In 2013–14 sustainability and innovation programs were undertaken with a focus on providing more attractive products for Defence members. Six-Leaf EnviroDevelopment certification was awarded to six current residential developments. DHA delivered three tropically-designed modular factory-built houses in Darwin to test this new form of construction and reduce building costs and construction schedules. These houses were accepted by the Department of Defence and Defence Families Australia as suitable for Defence members. By the end of 2014–15, another modular house will be completed that implements off-the-grid technologies to meet DHA's objective to provide environmentally-sound housing with the intention of also saving money on energy costs for the occupants.

The Government announced a scoping study into future ownership options of DHA that is being undertaken by the Department of Finance and will be considered as part of the 2015–16 Budget. No decision has been made by Government on ownership options for DHA.

DHA will continue business-as-usual by pursuing the acquisition and construction of dwellings in well located areas for Defence members and their families and meet its legislative requirements, maintain a strong balance sheet and achieve its Corporate Plan objectives.

There were a number of changes to Board Membership in 2013–14. Mr Peter Sharp and Air Vice Marshal (Retired) Gary Beck retired from the Board. The latter was replaced by Commodore Vicki McConachie RANR (in December 2013). As at 30 June 2014, Mr Sharp had not been replaced.

Under Section 9 of the Commonwealth Authorities and Companies Act 1997, the Directors are responsible for the preparation and content of this report, in accordance with the Finance Minister's Orders. This report is made in accordance with a resolution of the Directors.

The Directors of DHA are pleased to present this Annual Report for the financial year ended 30 June 2014.

Peter Howman
Managing Director