Burstone Group Limited · JSE:BTN
Burstone — Investec Property Fund — H1 FY2019 Earnings Presentation
47 slides from Burstone's earnings presentation, November 2018
Slide 1: Results presentation for the period ended 30 September 2018
Results presentation For the period ended 30 September 2018
Slide 2: Contents
Contents 1. Highlights and key events 2. Portfolio review 3. Investments 4. Financial review 5. Balance sheet management 6. Projects 7. Conclusion and guidance 8. Annexures
Slide 3: Highlights and key events
Highlights and key events Out of the Ordinary® & Investec Property Fund Limited
Slide 4: Highlights – FY19 H1
Highlights – FY19 H1 Performance underpinned by offshore investments 5 .4% .1% Balance sheet Normalised .9% composition 86 distribution growth Increase in .3% NAV (Mar 2018: 4.0%) South Africa .81 Vacancy1 68 Cents per share 6 (Mar 18: 65.27%) .0% 25 .1% 2 Australia .7% EUR .1% .0% 1 91 Total return
Slide 5: Strategic pillars
Strategic pillars Achieved progress, however there remains room for improvement 1 Revenue security and growth 2 Client service excellence • Low vacancies (decreased from 4.0% to 3.1%, excluding • IPF differentiator development vacancies) • Client engagement strategy and formal client feedback strate
Slide 6: Progress on strategic pillars
Progress on strategic pillars Achieved progress, however there remains room for improvement 1 Revenue security and growth 2 Client service excellence 1 .0% 91 Formal feedback programme in place that provides Of space expiring measurable and actionable objectives in the period renewed or re-let Not r
Slide 7: Progress on strategic pillars
Progress on strategic pillars Achieved progress, however there remains room for improvement 3 Value add asset management and 4 Cost efficiency and system capital allocation optimisation 6 Expenses increased .2% 13 .7% R1.6bn due to increase in rates, tenant installations, letting Offshore Increase i
Slide 8: Portfolio review
Out of the Ordinary” & Investec Property Fund Limited Portfolio review
Slide 9: Balance sheet construct
Balance sheet construct Diversified balance sheet across SA & developed markets Actual Actual 30 Sep 2018 31 Mar 2018 R'm % R’m % SA Investment property 17 633 84.4 17 599 91.8 Ingenuity 116 0.6 115 0.6 Izandla 278 1.3 206 1.1 South African assets 18 027 86.3 17 920 93.5 Investec Australia Property
Slide 10: Summarised distribution statement
Summarised distribution statement 5.4% normalised distribution growth Actual Actual 30 Sep 2018 30 Sep 2017 +/- R'm R'm % Net property income (excluding straight lining) 720.7 741.4 (2.8) 4 Base net property income 685.1 673.9 1.7 Acquisitions and disposals 35.6 67.5 (47.3) Income from Investments1
Slide 11: Dividend bridge
Dividend bridge 5.4% normalised distribution growth 570,000 1,608 1,553 970 737 155 8,160 8,519 550,000 8,596 11,862 32,584 61,810 530,000 506,615 510,000 490,000 1 468,741 470,000 450,000 1Excluding one off IAPF antecedent of R22.2m in HY18 11
Slide 12: Portfolio overview
Portfolio overview 30 September 30 September +/- 2018 2017 % Despite an extremely challenging operating environment the Rm Rm base property portfolio delivered net property income (‘NPI’) growth of 1.7% Gross income 853.1 810.6 5.2% Gross expense (327.7) (280.7) 16.7% The growth in NPI was driven by
Slide 13: Office
Office 30 September 30 September +/- 2018 2017 % — Challenging environment - over supply and subdued demand for space Rm Rm Gross income 344.1 321.8 6.9% — Contractual rental growth of 4.7% due to an increase in vacancy to 6.5% (from 5.7%) and lower reversions Gross expense (116.1) (88.9) 30.6% Gros
Slide 14: Industrial
Industrial 30 September 30 September +/- 2018 2017 % — The industrial sector is experiencing weak tenant demand as businesses struggle to run profitable operations Rm Rm Gross income 166.1 167.2 (0.7)% — Contractual rental growth of negative 1.3% due to an increase in void periods and lower reversio
Slide 15: Retail
Retail 30 September 30 September +/- 2018 2017 % — The retail sector to date has proved its resilience in a Rm Rm challenging market Gross income 342.9 321.6 6.6% — Contractual rental growth of 5.9% due to low Gross expense (153.5) (139.9) 9.7% vacancies and positive reversions Gross recoveries 86.0
Slide 16: Retail trading performance
Retail Trading performance Like-for-like turnover growth on a rolling 12-month basis1 Trading density by centre 3,500 3,140 3.5% 3.2% 3.3% 3.1% 3.0% 3,000 2,320 2,160 2,300 2,290 2,290 3.0% 2,500 2,080 2,200 2.5% 1,810 2.5% 2.3% 2,000 1,670 1,500 2.0% 1,000 1.5% 500 1.0% - 0.5% 0.0% Apr-18 May-18 Ju
Slide 17: Letting activity H1
Letting activity H1 91% of space that became available in FY19 H1 was let Expiries & Renewals & Gross expiry Gross new Rental Average cancellations new lets rental rental reversion escalation WALE Retention YTD GLA GLA R/m2 R/m2 % % Years % Office 26 339 22 696 183.9 154.8 (15.8)1 7.4 4.6 77.6 Indus
Slide 18: Property valuations
Property valuations Conservative valuations at a yield of 8.7% Carrying amount Revaluation & Other Capital Directors Valuation Revaluation & 31 Mar 2018 Total Change Forward Yield2 31 Mar 2018 Straight lining Movements1 30 Sep 2018 Straight lining yield R'm R'm R'm R'm % % % % Office 6 362.7 (56.6)
Slide 19: Lease expiry – By revenue
Lease expiry – By revenue 50% 44% 45% 40% 35% 30% 25% 20% 18% 17% 18% 13% 14% 15% 12% 10% 8% 8% 8% 7% 5% 5% 5% 6% 5% 5% 2% 3% 1% 1% 0% 2019 2020 2021 2022 April 2022 Onwards Office Industrial Retail Portfolio 215 053m2 expiring in FY19 of which 65% has already been let 19
Slide 20: Investments
Out of the Ordinary® Investments o Investec Property Fund Limited
Slide 21: European logistics portfolio
European logistics portfolio Performance Performance Investment • Completed the initial investment of €71.9m Deal case 10.5% • Funded though a combination of existing ZAR facilities 11.2% income (uplift as a result of stronger leasing • and a €40 million secured term loan at all in rate of 1.98% 100
Slide 22: IAPF
IAPF Quality asset base Performance Key portfolio metrics 30 Sep 31 Mar Including FX uplift 4.0% growth on net IAPF 2018 2018 - 0% growth in Total value of property (million) AUD1.0bn AUD987m returns, post funding AUD Value of investment R1.3bn R1.0bn Distribution return p.a. (AUD) 8.2% 8.0% Discoun
Slide 23: Investec Argo UK
Investec Argo UK Remains a strategic investment – only R11m deployed YTD UK Market Key portfolio metrics Deployed £681k • Extremely difficult to price due to Brexit during the year uncertainty 30 Sep 31 Mar UK Fund 2018 2018 Total value of property (million) £233.8 £233.8 Investment Value of investm
Slide 24: SA Investments: Ingenuity and Izandla
SA Investments Ingenuity and Izandla Ingenuity Izandla Attractive investment Further investment of R71m underpinned by quality Western Cape property - R71m further investment - Glyn street acquisition and Sasol development - Total investment of R115.8m - Interest on the mezzanine loans - only includ
Slide 25: Financial Review
Financial Review Out of the Ordinary® & Investec Property Fund Limited
Slide 26: Summarised income statement
Summarised income statement Actual Actual 30 Sep 2018 30 Sep 2017 +/- R'm R'm Rm Net property income (including straight-line adjustment) 744.3 757.9 (13.6) Other operating expenses (46.1) (37.5) (8.6) Fair value adjustments 367.2 0.9 366.3 Mark to market – derivatives 10.5 (118.0) 128.5 Foreign exc
Slide 27: Summarised balance sheet
Summarised balance sheet Actual Actual 30 Sep 2018 31 Mar 2018 +/- +/- R'm R'm R'm % Property related investments 20 881 19 164 1 717 9.0 South Africa – Property1 17 633 17 599 34 0.2 IAPF2 1 251 1 052 199 18.9 UK 223 192 31 16.1 Europe 1 379 - 1379 - Ingenuity 116 115 1 0.9 Izandla3 279 206 73 35.4
Slide 28: Net asset value bridge
Net asset value bridge NAV per share growth of 2.9% 31 37 25 71 1,342 201 157 78 1,144 1 2 26 73 10 13,103 12,644 1 The working capital increased mainly as a result of increased tenant installations and commission 28 2 MTM on derivatives
Slide 29: Balance sheet management
Out of the Ordinary” & Investec Property Fund Limited Balance sheet management
Slide 30: Highlights – FY19 H1
Highlights – FY19 H1 36 .3% Gearing 1 R3.0bn Debt imminently refinanced Blended rate 1.75bps above Driven by investment into 3-month JIBAR European logistics portfolio Average tenor 4.7 years (Mar 18: 32.6%) R81.1m 8.0% all in cost 83% hedged Equity raised of funding (Mar 18: 8.6%) (Mar 18: 84%) At
Slide 31: Balance sheet metrics
Balance sheet metrics Balance sheet well positioned 30 Sep 20181 31 Mar 2018 Average all in cost of funding 8.0% 8.6% 30 Sep 2018 31 Mar 2018 Average debt margin - ZAR 1.65% 1.64% % CCS of AUD investment 43.7% 51% Average swap rate – ZAR 7.57% 7.56% % CCS of GBP investment 36.4% 50% Average all in f
Slide 32: Balance sheet metrics
Balance sheet metrics Debt Swap Expiry (post refinance) Weighted expiry profile (years) 3.8 3.7 3.6 3.3 25% 2.9 23% 24% 2.7 20% 17% 15% 15% 14% 14% 10% 8% 6% 3% 3% 2% 0% Debt Swaps Cross currency swaps Total debt Total swaps 30 Sep 2018 30 Mar 2018 32
Slide 33: Balance sheet metrics
Balance sheet metrics 1 Sources of funding Bank/ HQLA/ DMTN expiry 16% 7% 31% 12% 12% 23% 11% 7% 7% 7% 5% 5% 4% 4% 4% 34% 3% 3% 3% 2% 0%0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%0%0% DMTN Commercial paper FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 Bank debt HQLA Bank HQLA DMTN Commercial Paper Foreign d
Slide 34: Early debt refinance
Early debt refinance R3.0bn of bank debt imminently refinanced to limit liquidity and pricing risk R3.0bn of bank debt that was due to mature in next 2 years has been imminently refinanced ― Equates to 33% of total debt book and 66% of total bank exposure Debt package Post re-finance Existing Weight
Slide 35: Projects
Projects Out of the Ordinary” & Investec Property Fund Limited
Slide 36: Redevelopments and projects
Redevelopments and projects Milestones achieved in period Fleurdal The Firs Design Quarter Maintaining the malls position by Improving patron’s experience with a new contemporary and fresh look Refurbishment of centre, improving closing out the potential for and feel vertical communication, growing
Slide 37: Sustainability
Sustainability Milestones achieved in period Rooftop Solar PV Budgeted yield Actual Yield for the period % Fleurdal Mall (940kW) 8.9% 12.1% Musina Mall (1400kW) 11.0% 13.3% Rooftop Solar PV Green Building Council of South Africa Solar RFP completed - 6 MW’s Project has commenced across 9 sites (Tota
Slide 38: Conclusion
Conclusion Out of the Ordinary® & Investec Property Fund Limited
Slide 39: Guidance
Guidance — Strong FY19 H1 performance considering the challenging operating environment — 13.7% asset base offshore — Continued focus on four strategic pillars, but key focus is leasing — Revenue security and growth — Client services excellence — Value add asset management and capital allocation — C
Slide 40: Annexures
Annexures Out of the Ordinary” & Investec Property Fund Limited
Slide 41: Annexures
Annexures 1. IPF performance versus peers since listing 2. Fund snapshot 3. Vacancy Reconciliation – YTD 4. Portfolio compositions 5. Top 10 tenants 41
Slide 42: IPF performance versus peers since listing
110% 130% 150% 170% 190% 210% 50% 70% 90% Apr-11 Jul-11 Oct-11 Jan-12 Annexure 1 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Investec (160%) Jul-13 SA Corporate (119%) Oct-13 Jan-14 Apr-14 Jul-14 IPF performance versus peers since listing Oct-14 Jan-15 Vukile (143%) Apr-15 Growthpoint (134%) Jul-15 Oct-15 Ja
Slide 43: Fund snapshot
Annexure 2 Fund snapshot INVESTMENTS PROPERTY PORTFOLIO Market Capitalisation R12.4bn No. of properties 104 IAPF R1.3bn Share price R15.00 GLA (m2) 1 243 331 Europe R1.4bn 30 VWAP R14.93 Vacancy 3.1% UK Fund R0.2bn Gearing 36.3% WALE (years) 3.3 Izandla R0.3bn NAV R17.79 In-force escalation 7.6% Ing
Slide 44: Vacancy Reconciliation – YTD
Annexure 3 Vacancy Reconciliation – YTD 59 902m2 OPENING VACANCY OF 4.0% 12 494m2 NEW LETS ON MONTH LEASES MONTH 124 460m2 2 426m2 NEW GLALETS ADJUSTMENTS NEW LETS & CANCELLATIONS EXPIRIES (85 018)m2 NEW LETS RENEWALS 47 010m2 (67 254)m² STILL TO BE LET FOR HY19 NEW LETS 44
Slide 45: Portfolio compositions
Annexure 4 Portfolio compositions SA geographical spread -Revenue (%) Total geographical spread- Total Sectoral spread- Asset investments (%) Value(%) Gauteng -63% KZN -13% Australia-6% Europe-7% Western Cape -10% Free State -6% Office -37% Industrial -21% U.K-1% South Africa-86% Limpopo -3% Other -
Slide 46: Top tenants
Click to edit Master Annexure 5 title style Top 10 tenants OFFICE INDUSTRIAL RETAIL Tenant Name Gross revenue % Tenant Name Gross revenue % Tenant Name Gross revenue % of of total portfolio of total portfolio total portfolio 3.6% Pepsi Co Group 1.8% 4.3% Investec Massmart Hengtong (Aberdare) 1.5% Sh
Slide 47: Disclaimer
Disclaimer The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or professional advice. Although information has been obtained from sources believed to
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