Acting Managing Director's review

I have often been asked why I came out of retirement in November 2015 to take the position of DHA's Acting Managing Director. My answer is simple—I had the opportunity to directly contribute to the wellbeing of ADF members and their families, and help shape the direction of one of Australia's most successful Government Business Enterprises (GBE). It also allowed me to build on my previous experience in the Department of Finance overseeing DHA and other GBEs.

Since commencing, I have enjoyed the opportunity to meet with staff and Defence-related stakeholders around the country, to discuss how DHA delivers quality outcomes for ADF members and how we can further improve our performance. I explain my role as having two main areas of focus:

To ensure sustainable government ownership for the long-term following confirmation in May 2015 that DHA would not be privatised
To help rebuild DHA's foundation stones to ensure that, as a government-owned business, it operates commercially.

I am very pleased with the progress we have made to date, and to provide this review of DHA's performance in 2015–16.

Acting Managing Director, Ms Jan Mason, Chief of the Defence Force, Air Chief Marshal Mark Binskin AC, and our Chairman, the Hon Sandy Macdonald.

Our performance

Reflecting on the year, it was a challenging period but there is much to be proud of. We achieved or exceeded most corporate objectives and key performance indicators (KPIs) and successfully implemented mitigation strategies where targets could not be met. This ensured that our service delivery was not affected. A summary of significant achievements is as follows:

Provide housing and related services that meet stakeholder needs

We continued to provide excellent customer service to ADF members, their families and our lessors. This was evidenced by our customer satisfaction results remaining very positive, with most KPIs being met or exceeded. Likewise, our relationships with stakeholders, including the Department of Defence (Defence) and Department of Finance (Finance) are strong following implementation of recommendations from a Forensic Review of DHA's operations. We were also recognised by the CSIA for our customer service focus by being recertified against international standards for the sixth consecutive year and awarded multiple national and ACT division awards for service excellence.

Provide a housing portfolio that will meet stakeholder needs now and through to 2025–26

At 30 June 2016, we managed 18,767 properties Australia-wide for ADF members and their families. We continued to diversify our portfolio through a $2.5 billion development pipeline and property construction, acquisition, leasing and upgrade activities. Our commitment to building sustainable communities was evidenced by our Breezes Muirhead (Darwin, NT) development winning an Urban Development Institute of Australia (UDIA) award for environmental excellence and continuing to showcase innovation through solar energy and 'off the grid' construction. We are also proud to be part of the Prince's Terraces Adelaide development (SA) which was the first residential project in Australia to receive the Green Building Council of Australia's 6 Star Green Star design rating.

Develop our people, business model and system delivery

Our staff are critical to the organisation's success. Our achievement of almost all Corporate Plan objectives in challenging market conditions provides evidence of the calibre of our staff and the strength of our service culture. By finalising and implementing a new enterprise agreement, our staff will continue to enjoy competitive remuneration and attractive working conditions. We are also well-placed to develop the skills of our staff—helping them to be the best they can be—through improved succession planning and by better embracing gender diversity and flexible working arrangements at all levels of the business.

I have been very encouraged by the positive attitude demonstrated by staff in relation to business changes during 2015–16. The Forensic Review recommendations and subsequent business transformation program expedited refinement of our business processes to ensure better alignment with whole-of-government and commercial best practice. The Review also contributed to the development of more sophisticated modelling, forecasting and reporting tools, which has resulted in more robust corporate planning and budgeting, and improved our transparency with shareholders.

Meet agreed shareholder financial requirements, operate commercially, efficiently and sustainably

Our financial results were generally strong in the reporting period, despite tight borrowing conditions and weaker property market conditions negatively impacting our revenue streams. Earnings before interest and tax (EBIT) and net profit after tax (NPAT) were both above the Corporate Plan targets, contributing to a dividend payment of $62.7 million. Through increased business efficiency, we continued to achieve cost savings that strengthen our financial sustainability and add to shareholder value.

Our priorities for the year ahead

Relative to 2015–16, our 2016–17 Corporate Plan reflects a substantial reduction in our business risk profile and associated profits as a result of:

contracted growth of the Member Choice Accommodation (MCA) program¹
reduced exposure to large-scale apartment developments
revised Sale and Leaseback (SLB) targets, relative to levels achieved in previous years
implementation of improved internal processes and governance arrangements.

We will press ahead to deliver the additional program of work we elected to pursue beyond the Forensic Review recommendations. By taking a whole-of-business approach and staff continuing to deliver against their own areas of responsibility, we will further improve our operational and personal effectiveness, mature our business model and continue to meet the needs of our shareholders and customers.

I look forward to working with my fellow Board Directors and staff to deliver quality outcomes for our customers, clients, investors and shareholders in the year ahead.