Charter Hall Social Infrastructure Reit · ASX:CQE
Charter Hall Social Infrastructure Reit — FY2018 Earnings Presentation
36 slides from Charter Hall Social Infrastructure Reit's earnings presentation, Aug 8, 2018
Slide 1: Folkestone Education Trust Full Year Results
FOLKESTONE EDUCATION TRUST Full Year Results ASX:FET 30 June 2018 FULL YEAR RESULTS \\ 30 June 2018 Page 1
Slide 2: Contents
CONTENTS Nick Anagnostou 1. Full Year Performance Review 4 5. Operational Performance 12 Chief Executive Officer 2. FET’s Performance 5 6. Outlook 27 Travis Butcher 3. Childcare Overview FY 2018 6 7. Appendices 30 Chief Financial Officer 4. Financial Results 8 Directory 36 Cover Photo: Only About Ch
Slide 3: Folkestone Education Trust
FOLKESTONE EDUCATION TRUST • Some industry re-calibration occurring to recognise new • FET’s Portfolio Enhancement Program, seeks to continually Government funding formula and short term uncertainty of the strengthen the core value fundamentals of demographic, subsidy/applicability for parents opera
Slide 4: Full Year Performance Review
1 FULL YEAR PERFORMANCE REVIEW CONTINUED PERFORMANCE BUILT ON STRONG FUNDAMENTALS $103.1m $41.9m 16.5 cpu 15.1 cpu $2.78 Statutory Profit Dist. Income EPU1 Distribution NTA Per Unit 15.1% +10.8% +8.6% +6.3% +10.8% PORTFOLIO MANAGEMENT ASSET MANAGEMENT CAPITAL MANAGEMENT $43.1m / 7.2% 9.9 yrs / 100%
Slide 5: FET's Performance
2 FET’S PERFORMANCE FET TOTAL RETURN PERFORMANCE VS S&P/ASX 300 A-REIT INDEX: • Continued performance driven by execution of a well formulated TO 30 JUNE 2018 and clear strategy 30.0 • FET has consistently outperformed the S&P/ASX300 25.0 A-REIT Accumulation Index across 3, 5 and 10 year periods 20.
Slide 6: Childcare Overview FY18
3 CHILDCARE OVERVIEW FY18 Demand & Participation Government Funding & Economy • Increased supply brings choice for parents and • Funding certainty via $37bn Jobs for Families a flight to quality. Package should improve affordability (July 2018) • Australian long day care participation rate now • Inc
Slide 7: 4. Financial Results & Capital Management
4. FINANCIAL RESULTS & CAPITAL MANAGEMENT Only About Children, Camberwell, VIC FULL YEAR RESULTS \\ 30 June 2018 Page 7
Slide 8: Financial Results
4 FINANCIAL RESULTS KEY FINANCIAL METRICS • Statutory profit decrease of $18.3m or 15.1% Income For the Year Ended % 2018 2017 30 June Change • Distributable income increase of $4.1m or 10.8% Statutory Profit ($m) 103.1 121.4 (15.1) • EPU growth of 8.6% Distributable Income ($m) 41.9 37.8 10.8 • DPU
Slide 9: Profit & NTA Contributions
4 PROFIT & NTA CONTRIBUTIONS • Improvement in FY18 distributable income due to: DISTRIBUTABLE INCOME: FY17 TO FY18 45 • organic income growth of 2.8% ($1.4m increase) 40 • increased income from acquisitions / developments, less 35 disposals ($2.9m increase) 30 • interest capitalisation on developmen
Slide 10: Capital Management – Debt & Hedging
4 CAPITAL MANAGEMENT – DEBT & HEDGING As at 30 JUNE 2018 30 JUNE 2017 • Debt refinance of facilities completed in August 2018 resulting in weighted average debt maturity of 5.0 years Debt Facilities Limit ($m) 347.0 317.0 Debt Drawn Amount ($m) 300.0 245.0 • New $100m, 7 year facility with Australia
Slide 11: 5. Operational Performance
5. OPERATIONAL PERFORMANCE Only About Children, Brighton East, VIC FULL YEAR RESULTS \\ 30 June 2018 Page 11
Slide 12: Portfolio Key Highlights
5 PORTFOLIO KEY HIGHLIGHTS VALUATIONS DEVELOPMENT PIPELINE • 355 properties re-valued • 23 settled development sites with an end value of • $56.7m increase in valuations $132.5m • 40 basis point improvement in portfolio yield • 4 development sites contracted with an end • Overall passing yield of 6.
Slide 13: Property Portfolio – Valuations
5 PROPERTY PORTFOLIO – VALUATIONS • Eastern states of Australia and New Zealand continue to be VALUATIONS NO. VALUED VALUE ($m) MOVEMENT (%) YIELD (%) attractive due to strong economic and population growth NSW/ACT 76 200.6 7.3 5.9 • Average yield of 5.7% achieved on market transactions in the easte
Slide 14: Property Portfolio – Asset Management
5 PROPERTY PORTFOLIO – ASSET MANAGEMENT • WALE increased from 9.1 years to 9.9 years ANNUAL RENT REVIEW PROFILE BY % OF RENT1: FY19 – FY212 100.0 • 100% occupancy; 26 five year options renewed 90.0 • 19 non-core assets disposed of resulting in a 8.9% premium to 80.0 book value 70.0 • 34 market revie
Slide 15: Portfolio Enhancement FY13 – FY18
5 PORTFOLIO ENHANCEMENT FY13 – FY18 Acquisitions & Repositioning & Quality Outcome Development Disposals Competitive disposal yields Increased metropolitan Effective redeployment of exposure by 24%, investor’s capital to for smaller non-metro centres provides positive strengthening the portfolio Dem
Slide 16: Continual Portfolio Enhancement FY13 – FY18
5 CONTINUAL PORTFOLIO ENHANCEMENT FY13 – FY18 • Increase in fixed/minimum 3% annual rental growth – ANNUAL RENT REVIEW PROVISIONS: FY13 TO FY18 reduced reliance on CPI growth by 25% 100 Lower Higher 90 Performance Performance 80 • Total annual rental income has increased from $35.2m as at Limit Limi
Slide 17: Continual Portfolio Enhancement
5 CONTINUAL PORTFOLIO ENHANCEMENT 2018 FET PORTFOLIO DISTRIBUTION V COMPETITOR CENTRES BY LDC • FET Portfolio has more Centres of the Preferred Size compared to the market competition, making 30% • FET Centre Average for sound risk adjusted returns 83 Places • $100 Day Average • Centres of 50 to 120
Slide 18: Continual Portfolio Enhancement
5 CONTINUAL PORTFOLIO ENHANCEMENT CHANGE IN FET PORTFOLIO DISTRIBUTION, 2013 TO 2018 • Centres of 50 to 120 Children are the - BY AVERAGE CENTRE SIZE preferred economic size, for return on capital and low operating risk 100 + 63% • Though strategic acquisitions, disposals and 90 development, FET has
Slide 19: Demand Update
5 DEMAND UPDATE % POPULATION CHANGE 0-5 YEAR OLDS & EMPLOYED PERSONS: JUNE 2008 TO 2017 25.0 • Population of children aged 0-5 years across Australia has increased by 246,000 or 15% over the last 10 years 20.0 • Australian population growth remaining steady at 1.6% (12 month 15.0 period to December
Slide 20: Supply Update
5 SUPPLY UPDATE • There are currently 7,282 Long Day Care (LDC) centres in • Supply is forecast to increase by approximately 30 LDC Australia, growing 3.9% across 2017 (calendar year). centres per month, to add 300+ centres in 2018. • A breakdown of new supply indicates Victoria and NSW saw the • Op
Slide 21: FY18 Pipeline Activity
5 FY18 PIPELINE ACTIVITY 5 FY18 Completed Developments Pipeline FY19 to FY21 6 FET is now Australia’s leading developer of Completed $43.1m 28.3% 6.7 childcare centres, with a disciplined development Completion Development Average SEIFA approach focussing on quality sites, sites Value Margin operato
Slide 22: FET Development Profile
5 FET DEVELOPMENT PROFILE DEVELOPMENT PIPELINE INCLUDING COST TO COMPLETE AS AT 30 JUNE 2018 Settled Contracted Killarney Heights, NSW Noarlunga Central, SA Armstrong Creek, VIC Baldivis Grove, WA $64.2m Black Forest, SA expenditure to Balwyn North, VIC Belmont, VIC date and $71.2m Oran Park, NSW fo
Slide 23: Industry / Operator Profile
5 INDUSTRY / OPERATOR PROFILE • The industry has seen a shift in operators since 2015 with “for GROWTH IN LDC FEES & AVERAGE HOURS UTILISATION PER WEEK IN LDC profit” operators increasing by 8.2% of market share. The largest 29.5 10.0% decrease being community and council LDC centres which have 29.0
Slide 24: Government Funding Changes
5 GOVERNMENT FUNDING CHANGES • “Jobs for Families” package came into effect from 1 July 2018 providing an additional $3.5 billion in funding to the early learning sector • Aimed at low to middle income families, with no cap for families earning less than $187,000. Over this amount the subsidy percen
Slide 25: Government Funding Changes
5 GOVERNMENT FUNDING CHANGES EFFECT OF CHANGE IN GOVERNMENT SUBSIDY TO FAMILIES Effect of July-18 Government Subsidy Change to Family Out-of-Pocket Costs for Long Day Care For 1 Child spending 50, 30 or 20 hours a week in Long Day Child Care $8,000 50 Child Hours per Week All Families with a combine
Slide 26: 6. Outlook
6. OUTLOOK Only About Children, Northcote, VIC FULL YEAR RESULTS \\ 30 June 2018 Page 26
Slide 27: FY19 Outlook
6 FY19 OUTLOOK • Some short-term industry distraction as operators and parents adjust to the new Government funding formula INDUSTRY • Expectation that parents who do not meet the requirements of the new activity test CONDITIONS may take some time before they requalify • Expect spotlight on Communit
Slide 28: 7. Appendices
7. APPENDICES Avenues Early Learning, Paddington, QLD FULL YEAR RESULTS \\ 30 June 2018 Page 28
Slide 29: FET Key Statistics
7 FET KEY STATISTICS FY14 FY15 FY16 FY17 FY18 NTA ($) 1.50 1.82 2.14 2.51 2.78 NTA Growth (Annualised) (%) 12.8 21.3 17.6 17.3 10.8 Weighted Average Passing Yield (%) 9.0 8.0 7.3 6.7 6.3 Weighted Average Lease Expiry (Years) 8.0 7.9 8.2 9.1 9.9 % Of Lease Income Expiring In Next 5 Years 3.4 5.6 11.3
Slide 30: Income Statement
7 INCOME STATEMENT • Statutory profit of $103.1m, down 15.1% on pcp: 30 June 30 June Income Statement for the Year Ended 2018 2017 • distributable income of $41.9m, an increase of 10.8% on ($m) ($m) pcp Lease Income 60.3 56.0 • property acquisitions and rental growth have grown lease income by $4.3m
Slide 31: Balance Sheet
7 BALANCE SHEET • Strong balance sheet: Balance Sheet as at June 2018 June 2017 ($m) ($m) • property revaluations of $56.7m driven by yield compression and rent escalations Cash 2.3 2.4 • acquisition of portfolio of 9 existing centres for $63.2m Investment Properties – To Be Sold 4.9 8.7 • developme
Slide 32: Portfolio Overview
7 PORTFOLIO OVERVIEW • 4101 properties - 387 operational early learning centres and Value % of Total Passing As at 30 June 18 No. 23 developments ($m) Property Assets Yield (%) ACT/NSW 76 200.6 20.4 5.9 • Majority of leases are triple net leases - net effective rents QLD 127 313.9 31.9 6.4 VIC 64 22
Slide 33: Childcare Regulations and Funding
7 CHILDCARE REGULATIONS AND FUNDING GOVERNMENT FUNDING CHANGES Current Government Funding Structure Government Funding Structure post 1 July 2018 • “Jobs for Child Care Package” passed by Parliament in April 2017 Childcare Rebate • Not means tested Activity Tested Fortnightly assessment of work / st
Slide 34: Only About Children, Hawthorn, VIC
Only About Children, Hawthorn, VIC FULL YEAR RESULTS \\ 30 June 2018 Page 34
Slide 35: Only About Children, Hawthorn, VIC
Northcote Aquatic & CBD Recreation Centre Northcote Plaza 160m 850m 5.4km Dennis Railway Station Only About Children, Santa Maria College 920m Hawthorn, VIC 800m Westgarth Primary School 720m Only About Children, Northcote, VIC FULL YEAR RESULTS \\ 30 June 2018 Page 35
Slide 36: Directory
INDEPENDENT BOARD OF JOINT COMPANY SECRETARIES DIRECTORY DIRECTORS Chairman Grant Hodgetts Scott Martin – Telephone: +61 3 9046 9910 Travis Butcher – Telephone: +61 3 9046 9904 FOLKESTONE EDUCATION TRUST Independent Non-Executive Director INVESTOR RELATIONS ASX Code: FET Vic Cottren Lula Liossi www.
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