Slide 1: Annual results to 30 June 2013: Positioned for earnings growth
For personal use only Annual results to 30 June 2013 Positioned for earnings growth 30 August 2013 arenainvest.com.au
Slide 2: Presenters
Presenters For personal use only Bryce Mitchelson James Goodwin Vin Harink Joint Managing Director Joint Managing Director Senior Portfolio Manager • Joined Arena in 2009. • Joined Arena in 2011. • Joined Arena in 2009. • Previously held senior • Previously held senior • Previously CEO of positions
Slide 3: Agenda
Agenda For personal use only 1 Key achievements 4 2 Financial highlights 5 3 FY13 Financial results 6 4 Capital management 9 5 Childcare portfolio update 10 6 Strategy and FY14 outlook 19 7 Investment case 20 8 Questions 21 9 Annexures 22 Arena Investment Management | arenainvest.com.au 3
Slide 4: Key achievements: A landmark year
1. Key achievements A landmark year For personal use only Continued to provide steady income return (>9%) and capital growth (2.7%) over Property portfolio the period. Completed refinancings of debt facility on improved terms (extended term Debt facility and reduced margin). Broadened investment man
Slide 5: Financial highlights
2. Financial highlights Solid improvement in earnings and a strengthened financial position For personal use only Performance for year ended FY13 FY12 Change Statutory net profit (million) $17.2 $15.7 9.8% Distributable income (million) $11.2 $8.5 31.8% Distributable income per unit 8.2 cents 6.4 ce
Slide 6: FY13 Financial results – income statement
3. FY13 Financial results – income statement FY13 distributable income increased by 31.8% For personal use only $million FY13 FY12 Change Rental income is slightly down due to the sale of the New Zealand portfolio in April Income 2012. Adjusting for the NZ sale, total Lease rental income 21.3 21.7
Slide 7: FY13 Financial results – FFO
3. FY13 Financial results – FFO FFO increased by 31.8% For personal use only FFO same as distributable income. $m FY13 FY12 Change Distributable income 11.2 8.5 31.8% AFFO reflects the close out of interest rate derivatives. Other adjustments 0.0 0.0 0.0% Funds from operations 11.2 8.5 31.8% F
Slide 8: FY13 Financial results – balance sheet
3. FY13 Financial results – balance sheet Balance sheet gearing reduced from 41.7% to 10.4% For personal use only $75 million of equity raised in June 2013. $ million FY13 FY12 Change Cash 5.0 5.6 (10.2%) Investment properties increased through Trade and other receivables 1.9 3.0 (36.7%) increas
Slide 9: Capital management
4. Capital management Substantial headroom and redraw capacity to fund acquisitions Interest Rates For personal use only 5.0% As at 30 June 2013 2012 Average hedge Average Interest rate 4.5% *Forecast Floating Rate Facility limit $110.0m $110.0m 4.0% Drawn amount $25.0m $100.2m 3.5% Undrawn amount $
Slide 10: Childcare portfolio update – overview
5. Childcare portfolio update – overview Geographically diverse portfolio of property assets For personal use only Portfolio overview By Number of Centres % Freehold 99.5% % Purpose built 91.3% % Metropolitan 58.0% Median age of centre (years) 9 Lease expiry by income 100% 78.2% 80% 60% 40% 19.8% 20
Slide 11: Childcare portfolio update – overview continued
5. Childcare portfolio update – overview continued Quality portfolio of high yielding assets For personal use only Portfolio overview June 2013 June 2012 Change Weighted Average Lease Expiry Leased childcare centres 167 170 -3 (WALE) fell by less than 1 year due to completion of Mernda on a new 15
Slide 12: Childcare portfolio update – valuation summary
5. Childcare portfolio update – valuation summary Revaluation gain of $5.75 million For personal use only Number Carrying Valuation type Number Portfolio overview of value Rent (pa) Passing (for 12 months to 30 of Change Change (as at 30 June 2013) assets ($’000) $’000 yield June 2013) assets ($’000
Slide 13: Childcare portfolio update – general activity
5. Childcare portfolio update – general activity Continuous portfolio remixing For personal use only New leases – North Ipswich centre leased after reinstatement following the Brisbane floods. Progress with the 5 properties handed back by Goodstart: 1 property subject to unconditional sale con
Slide 14: Childcare portfolio update – developments
5. Childcare portfolio update – developments Small development pipeline For personal use only Mernda, Vic Undertaking development on childcare centres has various advantages: generally better quality centres can be built in selected locations generally larger centres with more flexible configu
Slide 15: Market update: Government support increasing
5. Childcare portfolio update – market update Government support increasing For personal use only 6-8% pa growth in funding over next 4 years. Funding expected to increase to $22.1 billion FY14-17. Source: DEEWR administrative and forward estimates data. Arena Investment Management | arenainvest
Slide 16: Market update: Usage of childcare services increasing
5. Childcare portfolio update – market update Usage of childcare services increasing For personal use only As at 30 September 2012, 23.4% of children in 0-5 age group used accredited childcare/early learning services. Demand underpinned by increasing number of children in 0-5 age group (1% pa).
Slide 17: Market update: Quality of centres improving market wide
5. Childcare portfolio update – market update Quality of centres improving market wide For personal use only Rating NQF Services % rating Recent market transactions Exceeding 588 22.9 Most sales off-market. Meeting 850 33.2 Yields firming - Recent transactions Working towards 1,119 43.6 have cen
Slide 18: Labor and Coalition childcare policies
5. Labor and Coalition childcare policies Both parties support childcare funding For personal use only Issue Labor Coalition Affordability • Retain means tested CCB plus no means tested • Proposed Productivity Commission Inquiry into CCR funding • Funding for parents on income support • No means tes
Slide 19: Strategy and FY14 outlook
6. Strategy and FY14 outlook An active year ahead Focused on adding value to and improving For personal use only quality of the portfolio. Seeking to grow and diversify the portfolio • Actively • Considering gradually over time into sectors such as considering medical centres healthcare, educati
Slide 20: Investment case
7. Investment case Compelling return and risk profile For personal use only Knowledgeable and experienced fund manager. Portfolio with stable cash flow: landlord favourable leases – long and net rent basis strong underlying demand for childcare services relatively low gearing. Tenant and co
Slide 21: Questions
For personal use only 8. Questions Arena Investment Management | arenainvest.com.au 21
Slide 22: Annexures
For personal use only 9. Annexures Arena Investment Management | arenainvest.com.au 22
Slide 23: Annexure - about Arena
Annexure 1 - about Arena Specialist property fund manager For personal use only • One of Australia’s leading property funds management companies managing approximately $1.0 billion in funds on behalf of over 15,000 investors. • Manages 211 commercial property investments in Australia and New Zealand
Slide 24: Annexure – detailed profit and loss statement
Annexure 2 – detailed profit and loss statement For personal use only $m FY13 FY12 Variance Property rental 21.8 22.5 (3.1%) Interest 0.1 0.2 (39.7%) Fair value gains on financial assets at fair value through profit or loss 1.4 1.4 2.3% Distribution income 0.3 0.6 (50.0%) Revaluation of investment p
Slide 25: Annexure – cash flow statement
Annexure 3 – cash flow statement $m FY13 FY12 Variance Cash flows from operating activities For personal use only Property rental receipts 21.0 21.3 (1.1%) Payments to suppliers (4.8) (5.0) (4.4%) Finance costs paid (6.4) (8.6) (26.1%) Interest received 0.1 0.2 (39.7%) Other receipts from operations
Slide 26: Annexure - FY13 actual results compared to PDS
Annexure 4 - FY13 actual results compared to PDS FY13 FY13 Variance For personal use only $m Actual PDS forecast % Income Net property income 20.8 20.8 (0.1%) Other income 0.6 0.6 2.3 % Expense Management fees (2.4) (2.4) (1.1%) Other operating expenses (0.8) (0.7) 21.2 % EBIT 18.2 18.3 (0.7%) Net i
Slide 27: Annexure - typical Arena childcare lease
Annexure 5 - typical Arena childcare lease Lease term and option For personal use only • Initial term: 15 years. • Option term(s): 2 terms of 5 years each. • Exercise of option: The tenant is required to give the landlord notice of its intention to exercise the option not less than 5 years prior to
Slide 28: Annexure - major childcare operators (long day care)
Annexure 6 - major childcare operators (long day care) Tenants (By Value) For personal use only NurtureOne Vacant Low concentration with Goodstart having an 11% market share. Preschool 3.8% 2.5% Services 3 types of operators: not-for-profit, profit and government. 5.6% Increase acquisition act
Slide 29: Annexure - useful links and references
Annexure 7 - useful links and references • Goodstart Early Learning website: www.goodstart.org.au For personal use only • G8 Education website: www.g8education.com • Mychild Government website: www.mychild.gov.au – Report - Child Care in Australia, August 2013: www.mychild.gov.au/pages/ResourcesRepo
Slide 30: For further information
For further information Please contact: For personal use only James Goodwin Investor and Adviser Services Joint Managing Director Ph. 1800 008 494 Ph. 0421 275 525 info@arenainvest.com.au james.goodwin@arenainvest.com.au www.arenainvest.com.au Bryce Mitchelson Joint Managing Director Ph. 0408 275 37
Slide 31: Important notice
Important notice This presentation has been prepared by Arena Investment Management Limited ACN 077 235 879 AFSL No. For personal use only 233190 (“Arena") for general information only. It does not constitute personal financial product advice as it does not take into account your current or future f