Palace Capital Plc · LSE:PCA
Palace Capital — H1 2017 Earnings Presentation
30 slides from Palace Capital's earnings presentation, November 2016
Slide 1: Interim Results Investor Presentation - Nov 2016
INTERIM RESULTS INVESTOR PRESENTATION - NOV 2016 Chief Executive - Neil Sinclair Finance Director - Stephen Silvester Executive Director - Richard Starr
Slide 2: Contents
CONTENTS Introduction & Highlights NEIL SINCLAIR, CHIEF EXECUTIVE Financial Results STEPHEN SILVESTER, FINANCE DIRECTOR Portfolio Review RICHARD STARR, PROPERTY DIRECTOR Conclusions NEIL SINCLAIR, CHIEF EXECUTIVE Q&A 1
Slide 3: Introduction: Who are Palace Capital plc?
INTRODUCTION LSE: PCA WHO ARE PALACE CAPITAL plc? Palace Capital is a listed property investment company that focuses on real estate outside London. Our Modus Operandi is to generate income & capital returns to deliver a progressive dividend and net asset value growth. PROGRESSIVE INCOME & MAXIMISE
Slide 4: Our Strategy
OUR STRATEGY To invest in regional commercial property outside of London, through corporate & direct property investment, diversified by sector and location. ACTIVE ASSET MANAGEMENT INCOME & CAPITAL GROWTH We enhance income returns and reduce vacant We generate income and capital growth through cost
Slide 5: Growth Story
GROWTH STORY OCT 11 OCT 13 AUG £1.8m Hockenhull Estates portfolio acquisition 14 APR £39.2m Signal portfolio acquisition 15 £23.5m equity fundraising at 200p JUN £32m PIH portfolio acquisition 15 £20m equity fundraising at 310p AUG 15 £10m Bank House, Leeds acquisition Funded from cash Portfolio gro
Slide 6: Highlights: Sep-2016
HIGHLIGHTS: 30 SEP-2016 OPERATIONAL HIGHLIGHTS • Completion of Boulton House, Manchester acquisition for £10.6m in August 2016 FINANCIAL HIGHLIGHTS • £13.7m contracted gross rental income at 30 Sep-16 (31 • NAV per share growth +1.2% to 419p Mar-16: £13.5m) • Profit before tax £3.9m • Sale of 5 smal
Slide 7: Peer Group Performance Comparison
PEER GROUP PERFORMANCE COMPARISON NAV per share since Sequel transaction (3 years) to 30 Sep-16 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Arden Partners plc Palace Capital have outperformed the above peer group over the past 3 years, when measuring NAV per share growth. 6
Slide 8: Financial Results
FINANCIAL RESULTS H1 Sep-16 H1 Sep-15 FY Mar-16 BALANCE SHEET Property Portfolio £184.8m £140.4m £174.5m Net Assets £107.5m £104.9m £106.8m EPRA NAV per Share 419p 407p 414p Loan to Value 39% 23% 37% INCOME STATEMENT Profit Before Tax £3.9m £7.6m £11.8m Adjusted Earnings After Tax* £2.8m £2.1m £4.6m
Slide 9: Earnings
EARNINGS H1 Sep-16 H1 Sep-15 FY Mar-16 £000’s £000’s £000’s Net Rental Income 5,936 4,484 9,797 Administrative Expenses (1,274) (985) (1,938) Net Finance Costs (1,419) (983) (2,264) Adjusted Earnings Before Tax 3,243 2,516 5,595 Tax Charge (464) (396) (953) Adjusted Earnings After Tax 2,779 2,120 4,
Slide 10: Dividends – Track Record of delivering progressive dividend
DIVIDENDS – Track Record of delivering progressive dividend 9p 9p 7p 7p 6p 2.5p Jul-14 Dec-14 Jul-15 Dec-15 Jul-16 Dec-16 Proposed interim dividend of 9p , up 29% on December 2015 interim dividend. Ex-dividend date 8 December 2016, record date 9 December 2016, payment date 30 December 2016. 9 palace
Slide 11: Balance Sheet
BALANCE SHEET 30 Sep-16 31 Mar-16 £000’s £000’s Property Portfolio 184,787 174,542 Cash 9,347 8,576 Borrowings (80,760) (71,944) Other Net Assets / (Liabilities) (5,838) (4,359) Net Assets 107,536 106,815 NAV per share 419p 414p LTV % 39% 37% 10
Slide 12: EPRA NAV
EPRA NAV Pence Movements in EPRA NAV per ordinary share 430.0 9.0 425.0 10.8 420.0 2.2 7.0 9.8 3.4 415.0 1.8 2.0 410.0 6.0 421.2 419.4 419.0 419.0 405.0 415.8 416.0 413.0 414.0 414.0 414.0 407.0 407.0 400.0 395.0 EPRA NAV Revaluation Earnings Dividends Purchase EPRA NAV Revaluation Profits on Earnin
Slide 13: Debt Summary
DEBT SUMMARY Debt Facility Debt Drawn Debt Portfolio/Asset Lender Years (£m) (£m) Maturity Broad Street Plaza, Halifax Scottish Widows 15.2 15.2 9.8 04/07/2026 PIH and Properties Portfolios NatWest 29.8 26.2 4.4 09/03/2021 Signal Portfolio Nationwide 19.2 19.2 4.1 30/09/2020 Sol Central, Northampton
Slide 14: Property Portfolio
PROPERTY PORTFOLIO PROPERTY £183.7m VALUATION CONTRACTUAL £13.7m OFFICE 42% RENTAL INCOME OFFICE 41% LEISURE 24% LEISURE 25% INDUSTRIAL 20% NET RENTAL INDUSTRIAL 19% £11.7m INCOME RETAIL 10% RETAIL 10% RETAIL WAREHOUSE 4% RETAIL WAREHOUSE 5% OCCUPANCY 89% WAULT 5.8 years (to break) 13
Slide 15: Portfolio Metrics
PORTFOLIO METRICS The portfolio is diversified by both sector and geographically and has no exposure to Central London. The top 10 tenants contribute 32.6% of all contractual income, providing security of income streams on the basis of strong credit ratings and low risk of default. TOP 10 TENANTS GE
Slide 16: Hudson House, York
HUDSON HOUSE, YORK | OFFICE HUDSON HOUSE, YORK ∙ 102,000 sq ft ∙ Well located in the heart of York ∙ Fast non-stop train service into London ∙ Approval secured for change of use to 139 residential apartments in February 2016 ∙ Resolution to grant permission in April 2016 from City of York Council to
Slide 17: Broad Street Plaza, Halifax
BROAD STREET PLAZA, HALIFAX | LEISURE BROAD STREET PLAZA, HALIFAX ∙ Purchased for £24.2m in March 2016. ∙ 118,000 sq. ft. ∙ Key tenants: Vue Cinema, Pizza Express, JD Wetherspoon, Apcoa, NHS, Mitchells & Butlers, TGI Fridays ∙ WAULT: 13.5 years ∙ ROE: 16% in 2017 ∙ New 10 year debt facility £15.2m ,
Slide 18: Sol Central, Northampton
SOL CENTRAL, NORTHAMPTON | LEISURE SOL CENTRAL, NORTHAMPTON ∙ Purchased for £20.7m in June 2015 ∙ 189,000 sq. ft. ∙ Key tenants: Vue Cinema, Accor Hotels ∙ WAULT: 9.5 years ∙ Approval granted in October 2016 for a planning application to convert Gala space to restaurants/cafes ∙ Architect appointed
Slide 19: Boulton House, Manchester
BOULTON HOUSE, MANCHESTER | OFFICE BOULTON HOUSE, MANCHESTER ∙ Purchased for £10.6m in August 2016 ∙ 75,000 sq. ft. ∙ Key tenants: Learn Direct, Trillium, Northern Rail ∙ WAULT: 1.8 years ∙ Vacant space and entrance refurbishment underway ∙ Medium term development potential 18
Slide 20: Bank House, Leeds
BANK HOUSE, LEEDS | OFFICE BANK HOUSE, KING STREET, LEEDS ∙ Purchased for £10m in April 2015 ∙ 88,000 sq. ft. ∙ Key tenants: Bank of England, Walker Morris Solicitors ∙ WAULT: 3.0 years ∙ Occupancy: 75% ∙ Vacant space refurbishment underway to make 17,000 sq ft available early 2017 19
Slide 21: Solaris House, Milton Keynes
SOLARIS HOUSE, MILTON KEYNES | OFFICE SOLARIS HOUSE, MILTON KEYNES ∙ Adjoining units refurbished and let to Rockwell on 12 year lease to Dec 2026 ∙ Vacant unit currently being refurbished to same specification ∙ Available for letting early 2017 20
Slide 22: Valuations
VALUATIONS Market Value Market Value Surplus/ Movement 30 Sep-16 31 Mar-16 (deficit) % £m £m £m Offices £66.0 £66.0 £0.0 0.02% Industrial £37.4 £36.7 £0.7 1.71% Leisure £42.8 £42.6 £0.2 0.58% Retail £18.9 £17.4 £1.5 7.64% Retail Warehouse £7.5 £7.8 -£0.3 -4.01% Like-for-like £172.6 £170.5 £2.1 1.23%
Slide 23: Portfolio Analysis
PORTFOLIO ANALYSIS Gross WAULT Market Value % of Portfolio by No. No. Area ERV Rental Income To Break (£) Market Value Properties Leases (sq. ft.) (£ p.a.) (£ p.a.) (yrs) Retail 18,880,000 10.28% 13 51 109,860 £1,647,412 £1,657,940 3.6 Offices 77,125,000 42.00% 18 94 685,624 £5,051,883 £7,404,506 3.
Slide 24: Lease Expiries
LEASE EXPIRIES Weighted average unexpired lease term of 5.8 years at 30 September 2016 Lease Expiries by gross rental income (%) 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2016 2017 2018 2019 2020 2021+ Retail Offices Leisure Industrial Retail Warehouses The portfolio
Slide 25: Top 10 Assets
TOP 10 ASSETS TOP 10 ASSETS MAKE UP 60% OF OUR TOTAL PORTFOLIO % of Market Area Gross WAULT Portfolio by Value (Sq. ft.) Rental Income To Break Market Value 30 Sep-16 (£ p.a.) (yrs) Broad Street Plaza, Halifax 13% £24.25m 117,767 £1,785,285 13.5 Sol Central, Northampton 10% £18.55m 129,703 £1,741,13
Slide 26: Conclusions
CONCLUSIONS • Palace Capital has consistently out-performed the market – NAV up 92% in 3 years • Property valuations are up 1.2% like for like in the 6 months despite the shock of the Brexit vote • We have established a top class team and platform with a scalable business model and ambition to match
Slide 27: Highlights: Sep-2016
HIGHLIGHTS: 30 SEP-2016 LSE: PCA FINANCIAL HIGHLIGHTS - HI SEPT 2016 • Market cap of c. £90m • Profit before tax £3.9m • Dividend per share of 9p (+29%) • Annualised dividend yield 5% • NAV per share 419p (+1.2%) INVESTMENT PORTFOLIO • LTV of 39% • £183.7m property portfolio across the UK • Cost of
Slide 28: Selection from the Portfolio
SELECTION FROM THE PORTFOLIO A&B, BRIDGE RETAIL PARK, EAST GRINSTEAD WINCHESTER STREET, SALISBURY SANDRINGHAM HOUSE, HARLOW THE COPPERFIELDS, DARTFORD POINT 4 INDUSTRIAL ESTATE, AVONMOUTH THE FORUM, EXETER 27
Slide 29: Selection from the Portfolio
SELECTION FROM THE PORTFOLIO IMPERIAL COURT & IMPERIAL HOUSE, FRASER HOUSE, STAINES LEAMINGTON SPA OVEST HOUSE, BRIGHTON ICS BUILDING, MALDON PRINCETON HOUSE, FARNBOROUGH 28
Slide 30: Presentation Team
PRESENTATION TEAM NEIL SINCLAIR RICHARD STARR STEPHEN SILVESTER CHIEF EXECUTIVE PROPERTY DIRECTOR FINANCE DIRECTOR 29