Kiwi Property Group Ltd. · NZX:KPG
Kiwi Property — H1 FY2021 Earnings Presentation
59 slides from Kiwi Property's earnings presentation, Nov 23, 2020
Slide 1: 2021 half-year results presentation
Kiwi Kiwi Property Property 2021 2021half-year half-yearresults resultspresentation presentation
Slide 2: Disclaimer
Disclaimer Kiwi Property Group Limited has prepared this document. By accepting this document and to the maximum extent permitted by law, you acknowledge and agree to the following matters. No liability Kiwi Property Group Limited, its advisers, affiliates, related bodies corporate, directors, offic
Slide 3: Contents
Contents Page Business update 4 Half-year result 13 Appendix 1: Property update 21 Appendix 2: Financial update 40 Glossary 56 This half-year result presentation, for the six months ended 30 September 2020, should be read in conjunction with the NZX announcement and financial statements also release
Slide 4: Business update
Business update
Slide 5: 2021 half-year result highlights
2021 half-year result highlights $55.2m $11.8m $54.2m 57 2.20cps Operating profit Property portfolio Net profit New stores at 2021 before tax fair value gain1 after tax Sylvia Park Level 1 interim dividend -$5.0m (-8.4%) $1.29 NTA per share +$17.5m (+47.5%) 1. Includes gross up of lease liabilities.
Slide 6: A strategic response to COVID-19
A strategic response to COVID-19 Grow Diversify Stabilise 6
Slide 7: Navigating COVID-19
Navigating COVID-19 > Kiwi Property took a number of steps to help mitigate the significant impact of COVID-19 on the Company: – 20% temporary pay reductions taken by the board and executive. – Board made the difficult decision not to pay a full-year dividend. – Non-essential projects and operating
Slide 8: Resilience through COVID-19
Resilience through COVID-19 Investment portfolio Top 20 tenants % of gross income % of gross income Essential services1 38% Essential services1 68% Everyday essentials2 12% Everyday essentials2 15% Discretionary 50% Discretionary 18% 1. Essential services include supermarkets, pharmacies, medical se
Slide 9: Launching Sylvia Park Level 1
Launching Sylvia Park Level 1 > The $277m, 20,000 square metre Sylvia Park Level 1 development opened on 15 October, featuring 57 stores and ‘The Terrace at Sylvia Park’ dining district. > Successful launch highlights Sylvia Park’s resilience and standing as New Zealand’s favourite shopping centre1.
Slide 10: Moving forward on strategy
Moving forward on strategy Office optionality at Sylvia Park Reducing retail exposure Residential under design > Tower 2 design is ongoing and > The Plaza (Palmerston North) sale > First build-to-rent concept design resource consent now granted. process initiated in October. progressing. > Tower 3 d
Slide 11: Embedding ESG
Embedding ESG > Kiwi Property has always put significant focus on ESG issues. We are building on this foundation, following the launch of the environmental, social and governance (ESG) board committee in April 2020. > New ESG strategy ratified, with the aim of establishing Kiwi Property as a leader
Slide 12: Interim dividend and guidance
Interim dividend and guidance > Following a relative stabilisation of trading conditions, an interim dividend will be paid for the period ended 30 September 2020. > The payout of 2.20 cents per share has been set at 95% of AFFO, in line with the new dividend policy. > In addition, the company has pr
Slide 13: Half-year result
Half-year result
Slide 14: Half-year result
Half-year result $84.9m > Net rental income (NRI) increased across the office portfolio (+2.5%), but decreased for mixed-use (-9.8%) and retail (-16.2%), driven by COVID-19 Net rental income1 related rent abatements. Total COVID-19 impact on NRI in the period was -$9.7m. -$4.7m (-5.3%) > Adjusted Fu
Slide 15: Rental growth, occupancy and WALE
Rental growth 1.5% Rental growth > Overall rental growth was 1.5% driven by rent reviews (+3.0%) partially offset by reversions on new Total rental growth leasing (-10.0%) in the wake of COVID-19. FY20: 4.0% > Positive spreads recorded in the office portfolio (+2.0%), led by new leases at Vero Centr
Slide 16: Retail sales
Retail sales For the twelve months All centres Shopping centres > Retail sales for the year ended 30 September 2020 (incl. large format centres) (excl. large format centres) ended 30-Sep-201,2 have been heavily impacted by COVID-19 Actual sales Adjusted sales3 Actual sales Adjusted sales3 lockdowns
Slide 17: Capital management
Capital management 4.29% > $361m of bank debt facilities were refinanced and effective from 1 April 2020. Weighted average > KPG010 $125m bond matures in August 2021, cost of debt covered by $268m of undrawn bank debt facilities. FY20: 4.35% 3.4 years Weighted average term to maturity of debt FY20:
Slide 18: Balance sheet
Balance sheet $3.2b > Portfolio fair value gain of $11.8m, after accounting for acquisitions and capex during 1H (including $2.6m gross up of lease liabilities). Property assets > Valuation assumptions have remained stable on FY20: $3.1b (+$0.1b) FY20. The unwinding of COVID-19 abatements and a firm
Slide 19: FFO and AFFO per share
FFO and AFFO per share 3.54 cps > Funds from operations (FFO) per share decreased 1.7%. FFO > AFFO per share decreased by 27.6%, due to the cash cost of COVID-19 rent abatements and -0.06 cps (-1.7%) deferrals, and the increased weighted average number of shares following the November 2019 2.32 cps
Slide 20: A clear focus
A clear focus Stabilise Grow > Effectively mitigate • Advance Drury private plan operational impacts of change application, with a COVID-19, maintaining a view to accelerating the healthy tenant portfolio development timeline. through the pandemic. • Recycle capital and grow Diversify > Strengthen a
Slide 21: Appendix 1: Property update
Appendix 1: Property update
Slide 22: Contents
Contents Appendix Title Page 1.1 Our portfolio 23 1.2 Property portfolio summary 24 1.3 Portfolio statistics 25 1.4 Net rental income 26 1.5 Capitalisation rate history 27 1.6 Geographic diversification 28 1.7 Sector and tenant diversification 29 1.8 Mixed-use portfolio diversification 30 1.9 Retail
Slide 23: 1.1 Our portfolio
1.1 Our portfolio Sylvia Park Sylvia Park Sylvia Park Lifestyle LynnMall The Base (50%) The Base (50%) Westgate Lifestyle Centre Place North Vero Centre ASB North Wharf The Plaza Northlands The Aurora Centre 44 The Terrace KEY: Mixed-use portfolio Retail portfolio Office portfolio 23
Slide 24: 1.2 Property portfolio summary
1.2 Property portfolio summary 30-Sep-20 31-Mar-20 Mixed-use Retail Office Total Mixed-use Retail Office Total Number of assets (appendix 1.3) 4 4 4 12 4 4 4 12 Value ($m)1,2 (appendix 1.3) 1,550.8 469.0 950.3 2,970.1 1,499.3 480.5 910.4 2,890.2 % of total portfolio by value (appendix 1.7) 48 15 30
Slide 25: 1.3 Portfolio statistics
1.3 Portfolio statistics Adopted value $m Capitalisation rate % NLA sqm Occupancy % WALE years As at 30-Sep-20 31-Mar-20 30-Sep-20 31-Mar-20 30-Sep-20 31-Mar-20 30-Sep-20 31-Mar-20 30-Sep-20 31-Mar-20 Sylvia Park 1,045 982.0 5.50 5.50 86,199 84,714 99.6 99.9 3.6 3.8 Sylvia Park Lifestyle 77.3 74.3 6
Slide 26: 1.4 Net rental income
1.4 Net rental income 30-Sep-20 30-Sep-19 variance Year ended $m $m $m % > Net operating income (NOI) reduced $6.2m Sylvia Park 20.0 21.8 -3.3 -8.3 year-on-year. Sylvia Park Lifestyle 2.5 2.6 -0.1 -4.5 LynnMall 8.2 9.4 -1.2 -12.9 > Total COVID-19 NOI impact was -$9.7m The Base 5.5 6.4 -0.8 -12.4 inc
Slide 27: 1.5 Capitalisation rate history
1.5 Capitalisation rate history 8.50% 8.00% 8.05% 7.50% 7.00% 6.50% 6.00% 6.00% 5.83% 5.50% Global Christchurch COVID-19 5.27% Financial Crisis earthquakes 5.00% Sep-20 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Key: Mixed-use Retail Office Inve
Slide 28: 1.6 Geographic diversification
1.6 Geographic diversification ($2.38b) Auckland Geographic diversification Auckland region: Pop. 1,572,000 by portfolio value (Largest region, 33.4% of NZ) 3 x mixed-use assets 1 x retail asset 2 x office assets ($226m) Hamilton Waikato region: Pop. 458,000 (4th largest region, 9.7% of NZ) 1 x mixe
Slide 29: 1.7 Sector and tenant diversification
1.7 Sector and tenant diversification Sector diversification Tenant diversification by portfolio value by investment portfolio gross income Mixed-use 48% Specialty stores 47% Mini-majors 12% Retail 15% Banking 8% Government 7% Office 30% Department stores and DDS 6% Legal 5% Other 7% Supermarkets 4%
Slide 30: 1.8 Mixed-use portfolio diversification
1.8 Mixed-use portfolio diversification Property type Geographic diversification Tenant diversification by mixed-use portfolio value by mixed-use portfolio value by mixed-use portfolio gross income Regional centres1 95% Auckland 88% Specialty stores 60% Large format centres 5% Hamilton 12% Mini-majo
Slide 31: 1.9 Retail portfolio diversification
1.9 Retail portfolio diversification Property type Geographic diversification Tenant diversification by retail portfolio value by retail portfolio value by retail portfolio gross income Regional centres 74% Christchurch 38% Specialty stores 65% Large format centres 18% Palmerston North 36% Mini-majo
Slide 32: 1.10 Office portfolio diversification
1.10 Office portfolio diversification Property type Geographic diversification Tenant diversification by office portfolio value by office portfolio value by office portfolio gross income Premium 50% Auckland 76% Government 25% A-grade campus 26% Wellington 24% Banking 24% A-grade 18% Legal 20% B-gra
Slide 33: 1.11 Rent reviews and new leasing
1.11 Rent reviews and new leasing Rent reviews Mixed-use Retail Office Total Rent reviews No. 187 108 31 326 > High percentage of structured reviews (82%) NLA (sqm) 51,271 33,707 35,553 120,531 has provided consistent uplift, averaging +2.5% % investment portfolio NLA 12 8 8 28 on a compound annual
Slide 34: 1.12 Lease expiry profile
1.12 Lease expiry profile Lease expiry profile Mixed-use and retail % of investment portfolio gross income > The retention of mixed-use and retail portfolio 50% tenants is a focus. 43% > We have agreed most rent relief 40% arrangements, helping tenants through this difficult period. 30% > Level of h
Slide 35: 1.13 Tenant diversification
1.13 Tenant diversification Tenant diversification Top 20 tenants Our top 20 tenants % of investment portfolio gross income % of investment portfolio gross income ● Department stores and DDS 6 ASB Bank 7.1 ● Supermarkets 4 Ministry of Social Development 5.0 occupy ● Cinemas 2 Farmers 2.7 ● Home and
Slide 36: 1.14 Retail sales by centre - actual
1.14 Retail sales by centre - actual Actual sales MAT $m % var. from Sep-19 Specialty sales2,3 Ped. count > On a like-for-like basis, shopping centre sales Year ended 30-Sep-201,2 total like-for-like $/sqm GOC% million pa were down 10.3% compared to 1H20. Sylvia Park 550.0 LynnMall 254.3 The Base –
Slide 37: 1.14 Retail sales by centre - adjusted
1.14 Retail sales by centre - adjusted Adjusted sales MAT $m % var. from Sep-19 Specialty sales2,3 Ped. count > After adjusting for lost trade due to the Year ended 30-Sep-201,2 total like-for-like $/sqm GOC% million pa lockdown periods, like-for-like sales were in line Sylvia Park 626.8 with 1H20.
Slide 38: 1.15 Retail sales by category - actual
1.15 Retail sales by category - actual Actual sales MAT $m % var. from Sep-19 > On a like-for-like basis, supermarkets – being an Year ended 30-Sep-201,2 total like-for-like essential service - were unsurprisingly the only ● Supermarkets 358.7 +5.6 +5.6 category to record a sales improvement year- ●
Slide 39: 1.15 Retail sales by category - adjusted
1.15 Retail sales by category - adjusted Adjusted sales MAT $m % var. from Sep-19 > After adjustment, a number of categories have Year ended 30-Sep-201,2 total like-for-like recorded like-for-like sales improvement over ● Supermarkets 358.7 +5.6 +5.6 the prior comparable period. ● Department stores
Slide 40: Appendix 2: Financial update
Appendix 2: Financial update
Slide 41: Contents
Contents Appendix Title Page 2.1 Profit after tax 42 2.2 Operating profit before income tax 43 2.3 Interest and finance charges 44 2.4 Management expense ratio (MER) 45 2.5 Funds from operations (FFO) 46 2.6 Adjusted funds from operations (AFFO) 47 2.7 Dividends 48 2.8 Balance sheet 49 2.9 Investmen
Slide 42: 2.1 Profit after tax
2.1 Profit after tax 30-Sep-20 30-Sep-19 Variance Six months ended $m $m $m % Property revenue 111.3 117.3 -6.0 -5.1 > Property revenue decreased 5.1%, driven by Property management income 0.9 0.9 +0.0 +5.7 rent abatements for COVID-19, partially offset by higher rental income in office, ANZ Raranga
Slide 43: 2.2 Operating profit before income tax
2.2 Operating profit before income tax 30-Sep-20 30-Sep-19 Variance Six months ended $m $m $m % Profit before tax (Appendix 2.1) 64.2 47.3 +16.9 +35.6 Adjusted for: Net fair value gain on investment properties (Appendix 2.1) -11.8 - -11.8 N/A Net fair value loss on interest rate derivatives (Appendi
Slide 44: 2.3 Interest and finance charges
2.3 Interest and finance charges 30-Sep-20 30-Sep-19 Variance > Interest on bank debt reduced relative to prior Six months ended $m $m $m % year following November 2019 equity issue. Interest on bank debt -10.2 -12.8 +2.7 +20.9 Interest on bonds -11.6 -11.6 +0.0 +0.0 > Interest on lease liabilities
Slide 45: 2.4 Management expense ratio (MER)
2.4 Management expense ratio (MER) 30-Sep-20 31-Mar-20 > Weighted average assets decrease driven by 12 months ended $m $m fair value loss in March 2020, partially offset by Employment and administration expenses (Appendix 2.1) 22.4 22.6 new acquisitions and completed Less recovered through property
Slide 46: 2.5 Funds from operations (FFO)
2.5 Funds from operations (FFO) 30-Sep-20 30-Sep-19 Variance > 7.2% favourable FFO movement from the Six months ended $m $m $m % prior period. Profit after tax (Appendix 2.1) 54.2 36.8 +17.5 +47.5 Adjusted for: > Includes positive impact of tax depreciation Net fair value gain on investment properti
Slide 47: 2.6 Adjusted funds from operations (AFFO)
2.6 Adjusted funds from operations (AFFO) 30-Sep-20 30-Sep-19 Variance > AFFO has reduced 21.1% from the prior period, Six months ended $m $m $m % driven by the cash impact of COVID-19 rent Funds from operations (FFO)1 (Appendix 2.5) 55.6 51.9 +3.7 +7.2 relief offered. Adjusted for Maintenance capit
Slide 48: 2.7 Dividends
2.7 Dividends 30-Sep-20 30-Sep-19 30-Sep-20 30-Sep-19 > Kiwi Property revised its dividend policy in May Six months ended $m $m cps2 cps2 2020 and now aims to pay out 90% to 100% of Cash dividend 34.5 50.9 2.20 3.525 AFFO. Dividends were previously based on FFO. Imputation credits 13.4 13.0 0.856 0.
Slide 49: 2.8 Balance sheet
2.8 Balance sheet 30-Sep-20 31-Mar-20 Movement > Investment property value increased due to As at $m $m $m % Sylvia Park capital expenditure and an $11.8m Investment properties (Appendix 2.9) 3,206.7 3,114.7 +92.0 +3.0 fair value gain. Cash (Appendix 2.11) 13.5 21.3 -7.8 -36.7 > Trade and other rece
Slide 50: 2.9 Investment properties movement
$m As at Mar-20 =$3,114.7 Sylvia Park adjoining property Acquired Sylvia Park LynnMall Capex 2.9 Investment properties movement Drury Fair value change IFRS movement Gross up of lease liabilities Other As at Sep-20 50
Slide 51: 2.10 Debtors
2.10 Debtors 30-Sep-20 31-Mar-20 Variance > Debtors increased from $5.7m to $15.0m (GST As at $m $m $m % inclusive) between the FY20 and 1H21 balance Trade debtors (including GST) 22.2 6.8 +15.4 +227.2 dates, driven by COVID-19. Provision for doubtful debts -3.4 -1.0 -2.4 -227.9 Accrued COVID-19 ren
Slide 52: 2.11 Net finance debt movement
1,000 1,100 1,200 400 500 600 700 800 900 As at Bonds Bank debt net Cash on deposit finance As at Mar-20 debt $988.6 Mar-20 Net finance debt (Appendix 2.8, 2.12) net Net rental rental -$87.7 income income and Interestinterest and finance finance +$15.2 charges charges 2.11 Net finance debt movement
Slide 53: 2.12 Finance debt facilities
2.12 Finance debt facilities 30-Sep-20 Debt sources Debt maturity profile as at $m % FY21 - - 11% FY22 125.0 125 9.6 FY23 32.5 25.0 33.0 32.5 123 9.5 37% 14% FY24 27.5 20.0 100.0 67.5 27.5 125.0 367.5 28.2 FY25 31.5 47.0 56.0 31.5 125.0 291 22.4 FY26 52.5 109.0 80.0 52.5 100.0 394 30.3 Total facilit
Slide 54: 2.13 Capital management metrics
2.13 Capital management metrics Finance debt metrics as at 30-Sep-20 31-Mar-20 Weighted average term to maturity 3.4 years 3.9 years Weighted average interest rate (Incl. of bonds, active interest rate derivatives, margins and line fees) 4.29% 4.35% Covenants – gearing as at 30-Sep-20 31-Mar-20 Gear
Slide 55: 2.14 Fixed-rate debt profile
2.14 Fixed-rate debt profile Fixed-rate profile (inclusive of bonds on issue Sep-20: $475m, Mar-20: $475m) 30-Sep-20 31-Mar-20 Percentage of drawn finance debt at fixed rates 70% 67% Weighted average interest rate of active fixed-rate debt (excl. fees and margins) 3.11% 3.31% Weighted average term t
Slide 56: Glossary
Glossary
Slide 57: Glossary
Glossary Adjusted funds from operations AFFO is a non-GAAP performance measure used by Kiwi Property. AFFO is a measure commonly used by real estate entities to describe their (AFFO) underlying and recurring cash flows from operations. Broadly, AFFO adjusts FFO by deducting the cost of lease incenti
Slide 58: Glossary
Glossary Like-for-like retail sales Only includes sales from those tenancies who have traded for the past 24 months. Management expense ratio MER is a non-GAAP measure used by Kiwi Property to assist investors in assessing the company’s underlying operating costs. MER is a measure (MER) commonly use
Slide 59: Thank you
Kiwi Property Thank you
Kiwi Property Group — H1 FY2021 Earnings Presentation on 6ix