Shaftesbury Capital Plc · LSE:SHC
Shaftesbury Capital — Capital & Counties Properties — FY2018 Earnings Presentation
43 slides from Shaftesbury Capital's earnings presentation, Feb 27, 2019
Slide 1: Capital & Counties Properties PLC Annual Results 2018
Capital & Counties Properties PLC Annual Results 2018 27 February 2019 www.capitalandcounties.com
Slide 2: Forward-looking statements
This presentation includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Capital & Counties Properties PLC to be materially different from a
Slide 3: Introduction
Introduction 1. INTRODUCTION Financial Review Ian Hawksworth 2. FINANCIAL REVIEW Situl Jobanputra Operating Update 3. COVENT GARDEN Ian Hawksworth Looking Ahead 4. EARLS COURT PROPERTIES Gary Yardley 5. LOOKING AHEAD Q&A Ian Hawksworth 6. Q&A Capco Annual Results 2018 www.capitalandcounties.com
Slide 4: Introduction
Introduction Financial Review Operating Update Ian Hawksworth Looking Ahead Q&A Capco Annual Results 2018 www.capitalandcounties.com
Slide 5: Two prime central London estates, backed by a strong balance sheet
The Company has two prime central London estates, backed by a strong balance sheet Preparations for a possible demerger are well advanced and could be implemented promptly Evaluating a number of proposals from parties interested in Earls Court The Board is considering various options having regard t
Slide 6: Covent Garden, Earls Court investment, strong financial position
Covent Garden – a leading global destination – Represents over 80% of group portfolio value – Driving rental growth and capturing income Covent Garden Earls Court investment – Mixed-use development opportunity in central London Earls Court – Realising value over time Strong financial position with a
Slide 7: EPRA NAV 326p per share, total return -2.0%
Initial yield: 2.4% Equivalent yield: 3.6% -15.6% lfl EPRA NAV 326p per share, a decrease of 2.4% Total return -2.0% Underlying earnings 0.9 pence Total dividend per share 1.5 pence Note: All numbers shown at Group share. Capco Annual Results 2018 www.capitalandcounties.com
Slide 8: Covent Garden rental growth and value realisation at Earls Court
Covent Garden driving rental growth and – 17.5% growth in NRI (9.6% lfl) capturing income – 103 new leases and renewals, 7.5% above December 2017 ERV – 3% lfl increase in ERV to £108m – Further high quality concepts and flagship names secured – Record year of openings with 21 brands introduced – Inc
Slide 9: Financial Review
Introduction Financial Review Operating Update Situl Jobanputra Looking Ahead Q&A Capco Annual Results 2018 www.capitalandcounties.com
Slide 10: Net rental income and underlying earnings
2018 2017 Var £m £m £m Net rental income - Recurring 59.6 49.6 10.0 Net rental income - Empress State 3.9 16.6 (12.7) Group net rental income 63.5 66.2 (2.7) Administration costs (36.7) (38.7) 2.0 Net finance costs (19.2) (19.8) 0.6 Other 1.8 2.3 (0.5) Tax (1.4) (2.7) 1.3 Underlying earnings from co
Slide 11: ERV and gross income bridge
£m 110 £13.4m 100 £8.4m 90 £2.7m £6.2m 80 £1.3m £7.7m 70 £107.7m 60 50 £83.2m £68.0m 40 30 20 10 Dec-18 Gross Rent-frees & Stepped Turnover & Other Contracted & Under Total Contracted & Vacancy Development & Reversion Dec-18 ERV Income rents income Offer Under Offer Refurbishment Note: Development &
Slide 12: Net debt and EPRA NAV
2018 2017 Var £m £m £m Investment & trading property 3,198 3,441 (243) Unrecognised surplus on trading property 26 32 (6) Net debt (573) (734) 161 Other 126 100 26 EPRA NAV 2,777 2,839 (62) Number of shares in issue (diluted) 853m 851m 2m EPRA NAV per share 326p 334p (8p) EPRA NNNAV 327 pence per sh
Slide 13: Net debt movement
£m 400 £302m 350 300 250 £109m 200 150 100 £166m 50 £52m £29m £50m 0 Dec-17 Disposals Investment Financing Operating cash flow, Dec-18 Dividend & Other Note: All numbers shown at Group share. Capco Annual Results 2018 www.capitalandcounties.com
Slide 14: Debt structure, credit metrics and liquidity
Flexible, predominantly unsecured debt structure with access to substantial liquidity Strong credit metrics, with significant covenant headroom No significant near term maturities Modest capital commitments of £53m Dec-18 Dec-17 Net debt £573m £734m LTV 18% 21% Group undrawn facilities and cash £854
Slide 15: Operating Update
Introduction Financial Review Operating Update Ian Hawksworth Looking Ahead Q&A Capco Annual Results 2018 www.capitalandcounties.com
Slide 16: Capco Annual Results 2018 www.capitalandcounties.com
Capco Annual Results 2018 www.capitalandcounties.com
Slide 17: Covent Garden: portfolio value, ERV and NRI
Portfolio value ERV NRI (vs Dec-17) Acquisitions £2.6bn +3.0% (lfl) +9.6% £18.7m +1.6% like-for-like £107.7m like-for-like Driving rental growth and capturing income Positive leasing activity across all uses – 103 new leases and renewals, 7.5% ahead of Dec-17 ERV – £12.9m of rent contracted Record y
Slide 18: Covent Garden 2009 vs 2018
Covent Garden 2009 Covent Garden 2018 750k sq ft, 44 buildings, 300 units 1.2m sq ft, 78 buildings, 517 units ERV £33m ERV £108m Gross income £29m Gross income £68m Capco Annual Results 2018 www.capitalandcounties.com
Slide 19: High quality brands attracted to estate
High quality brands attracted to estate – Tiffany & Co. – Peloton Expansion and investment from existing tenants – Apple flagship refurbishment – Henrietta Hotel, Oystermen, Whittard Strong demand for office portfolio – High occupancy – Regal House fully let Capco Annual Results 2018 www.capitalandc
Slide 20: High quality differentiated dining offer
High quality differentiated dining offer across all price points 10 new restaurant openings including: – SushiSamba: opened on Opera Terrace – RedFarm: first venture outside Manhattan – Petersham in Floral Court: West End re-creation – Buns&Buns: from Miami to Covent Garden’s Market Building – Avoba
Slide 21: Completion of Floral Court and strategic investments
Completion of Floral Court – Connecting courtyard between King and Floral Street open – Increased footfall and enhanced pedestrian flow – Substantially all commercial space let or under offer One of London’s premier residential addresses – Heritage residential on King Street fully let (16 apartments
Slide 22: 2018 Openings, Encouraging Start to 2019
2018 OPENINGS ENCOURAGING START TO 2019 Capco Annual Results 2018 www.capitalandcounties.com
Slide 23: Earls Court Properties
Introduction Financial Review Operating Update Gary Yardley Looking Ahead Q&A Capco Annual Results 2018 www.capitalandcounties.com
Slide 24: Earls Court development opportunity and strategy implementation
Creation of one of London’s most important development opportunities – Amongst London’s prime postcodes – Excellent connectivity Successful implementation of strategy – Land assembly – Planning consent implemented – Strategic partnerships formed – Land enablement works complete ECPL land available f
Slide 25: ECPL, Lillie Square and other valuations
H1 H2 FY 2018 2018 2018 £m % % % 1 ECPL £461m (9.0)% (12.1)% (20.0)% ECPL 3LBD LSQ LSQ £159m - (2.3)% (2.3)% CLSA2 OTHER £38m (4.9)% (4.3)% (8.9)% £658m (7.0)% (9.4)% (15.6)% In addition, Capco has paid £90 million of the £105 million cash consideration payable to OTHER LBHF under the CLSA with the
Slide 26: ECPL primary objective
ECPL primary objective – To maximise economic value – Enable development of the consented Masterplan Development to be brought forward through the introduction of third-party capital Interest from potential occupiers and investors – Senior living, diplomatic, educational and other uses Capco Annual
Slide 27: Lillie Square Phase 1 and Phase 2 progress
Delivery of Phase 1 substantially complete – £258m cumulative sales proceeds received (Capco share £129m) Phase 2 construction well progressed – Over 80% reserved or exchanged – Sales pricing achieved at a modest premium to comparable units in Phase 1 – Completion expected in 2020 Award-winning prod
Slide 28: Capital management and sale of Empress State Building
Disciplined approach to capital management – Realising value Sale of the Empress State Building (ESB) to the Mayor’s Office for Policing and Crime – Priced at a £30 million premium to valuation – Consented Earls Court Masterplan based on retention of ESB’s current structure In excess of £670 million
Slide 29: Looking Ahead
Introduction Financial Review Operating Update Ian Hawksworth Looking Ahead Q&A Capco Annual Results 2018 www.capitalandcounties.com
Slide 30: Looking ahead: Covent Garden, Earls Court, balance sheet
Covent Garden – World-class retail and dining destination – Driving rental growth and capturing income reversion – Attracting the best brands to ensure the estate is positioned to meet consumer demand – Continued strategic investment Earls Court investment – One of London’s most important mixed-use
Slide 31: Capco Annual Results 2018 www.capitalandcounties.com
Capco Annual Results 2018 www.capitalandcounties.com
Slide 32: Appendix: Financials, Covent Garden, Earls Court Properties
1. FINANCIALS 2. COVENT GARDEN 3. EARLS COURT PROPERTIES Capco Annual Results 2018 www.capitalandcounties.com
Slide 33: Underlying earnings by half year
H1 H2 FY 2018 2018 2018 £m £m £m Continuing operations: Net rental income 33.1 30.4 63.5 Administration costs (19.2) (17.5) (36.7) Net finance costs (9.4) (9.8) (19.2) Other 0.9 0.9 1.8 Tax (1.1) (0.3) (1.4) Underlying earnings from continuing operations 4.3 3.7 8.0 Note: All numbers shown at Group
Slide 34: Net rental income bridge
£m 80 £1.4m £8.6m 70 £66.2m £63.5m £12.7m Earls Court Properties 60 £6.0m Earls Court Properties £17.3m 50 40 30 Covent Garden Covent Garden £48.9m £57.5m 20 10 0 Dec-17 Covent Garden Other Earls Court Properties Empress State Dec-18 Note: All numbers shown at Group share Capco Annual Results 2018 w
Slide 35: Group share to IFRS reconciliation
Add back: Less: Joint Non-controlling Group share Ventures1,2 interest3 IFRS £m £m £m £m Investment & Trading Property 3,198 (133) 271 3,336 Net Debt (573) 9 (21) (585) Other assets and liabilities 123 112 (3) 232 Non-controlling interest - - (247) (247) NAV 2,748 (12) - 2,736 1. This consists of th
Slide 36: Property valuation by segment
FY H1 H2 2018 2018 2018 £m Covent Garden 2,610 1.6% 0.1% Earls Court Properties ECPL 461 (9.0%) (12.1%) Lillie Square 159 - (2.3%) Other 38 (4.9%) (4.3%) 658 (7.0%) (9.4%) Total Property 3,268 (0.4%) (2.0%) Capco Annual Results 2018 www.capitalandcounties.com
Slide 37: EPRA NNNAV 327 pence per share
Pps 345 340 4.6p 335 330 0.9p 3.5p 333.8p 1.5p 325 1.8p 13.8p 325.7p 320 Dec-17 Covent Garden Earls Court Disposal of Underlying Profits Dividend Other Dec-18 revaluation Properties Empress State revaluation Building EPRA NNNAV 327 pence per share Capco Annual Results 2018 www.capitalandcounties.com
Slide 38: Debt maturity and covenants
Maturity Loan LTV Interest cover outstanding1 covenant covenant Covent Garden2 2022 – 2037 £550m 60% 120% ECPL 2026 £42m 40% n/a Lillie Square3 2021 £30m 75% n/a Total £622m 1. The loan values are the nominal values at 31 December 2018 shown on a Group share basis. The balance sheet value of the loa
Slide 39: Tax on income and capital gains
1. Tax on income The underlying tax rate is 19% which is in line with the statutory corporation tax rate for 2018. The main rate of corporation tax is expected to be 17% from April 2020. Medium-term underlying tax rate for the Group is expected to remain broadly in line with UK statutory tax rates.
Slide 40: Rental growth since 2010
ITZA psf (£) – 31 December 2018 £1,600 £1,400 Growth since 2010 £1,200 2010 £1,000 £800 £600 £400 £200 -- * Based on 30ft Zone A, includes Old Bond Street, Oxford Street West and Regent Street (Covent Garden based on 20ft Zone A) ** Covent Garden average based on all streets, including Market Buildi
Slide 41: Lease expiry profile, gross income and portfolio mix
LEASE EXPIRY PROFILE1 ANNUAL GROSS INCOME 2018: 1% Retail: 51% 2019: 15% F&B: 24% WALE 2020: 10% 7.6yrs £68m Offices: 15% 2021: 10% Leisure: 4% 2022: 10% Residential: 6% 2023+: 54% 1. Lease expiry profile based on the earlier of lease break and lease expiry PORTFOLIO VALUE TOTAL FLOOR AREA Retail: 5
Slide 42: Value creation and ERV progression
£m VALUE CREATION £m ERV PROGRESSION 3,000 120 £1,198m £107.7m £104.8m 2,500 100 £96.0m 2,000 £86.2m £344m 80 £75.1m 1,500 £641m £121m £2,610m £58.0m 60 1,000 £51.9m £45.8m £37.5m 40 £33.7m 500 £548m 0 20 Dec-09 Acquisitions Capex Disposals Valuation Dec-18 2009 2010 2011 2012 2013 2014 2015 2016 20
Slide 43: Earls Court Masterplan key areas
Earls Court Partnership Limited; Investment vehicle with TfL – Capco share 63% Lillie Square – 50:50 JV with KFI Land subject to CLSA – Option exercised and binding agreement in place Lillie Bridge Depot – 100% owned by TfL Earls Court Masterplan – key areas ECPL1 CLSA2 LBD3 Total sqft (m) sqft (m)
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