Shaftesbury Capital Plc · LSE:SHC
Shaftesbury Capital — FY2023 Earnings Presentation
50 slides from Shaftesbury Capital's earnings presentation, Feb 29, 2024
Slide 1: 2023 Annual Results
2023 Annual Results 29 February 2024 Investing to create thriving destinations in London’s West End where people enjoy visiting, working and living
Slide 2: Clear purpose, strategy and priorities
Clear Delivering Excellent Well- purpose, financial operating positioned to strategy and performance performance drive total priorities returns
Slide 3: Clear purpose, strategy and priorities
Clear purpose, strategy and priorities
Slide 4: A year of significant progress
A year of significant progress Strong performance across the business • High footfall, customer sales +10% year-on-year • Significant growth in ERV and annualised rents • Recurring cost savings well ahead of target • Asset disposals ahead of valuation • Early refinancing completed • Progressive divi
Slide 5: Our strategy
Our strategy To deliver long-term income and value growth from our unique portfolio of properties through investment, curation and responsible stewardship Creative and active approach Place our customers at the heart of the business Disciplined financial management Sustainable and community minded B
Slide 6: Investing in and managing iconic destinations located in the heart of the West End
Investing in and managing iconic destinations located in the heart of the West End 2.9m sq. ft. c.2,000 c.660 £4.8bn Lettable space Lettable units1 Buildings Portfolio value % of wholly-owned portfolio ERV Covent Garden 52% Carnaby | Soho 32% Chinatown 14% Fitzrovia 2% Metrics as at 31 December 2023
Slide 7: London, a leading global city; unrivalled appeal and features
London, a leading global city c. 700,0002 >200 million1 Unrivalled appeal and features Annual visits to the West End Working population in the City of Westminster Attractive growth prospects • Leading European city for foreign direct investment • Continued international visitor growth projected West
Slide 8: Group headline financials
Group headline financials A year of performance and progress Strong leasing activity delivering rental growth • Significant evidence (526 leasing transactions; 10% +10% L-f-L +7% L-f-L Annualised gross income ERV ahead of Dec 22 ERV) £193m £237m Progression in underlying and cash earnings £4.8bn (-0
Slide 9: Delivering financial performance
Delivering financial performance
Slide 10: Growth in underlying earnings
Growth in underlying earnings H1 2023 H2 2023 2023 £m1 £m £m Rental income 78.0 101.9 179.9 Property costs (14.6) (18.3) (32.9) Net rental income 63.4 83.6 147.0 Other income 2.6 0.1 2.7 Administration costs (17.9) (21.4) (39.3) Net finance costs (21.5) (30.4) (51.9) Share of associate profit 0.9 1.
Slide 11: Significant reversionary potential
Significant reversionary potential £m 23% Net under rented EPRA vacancy Under Of which £6.2m refurbishment Contracted is under offer, Realised on L-f-L resulting in completion and Realised on available to let letting of schemes +6.9% L-f-L expiry of rent- free periods, and vacancy of 2.1% in progres
Slide 12: Clear focus on enhancing margin
Clear focus on enhancing margin Growing rental income • Significant reversionary potential as well as the opportunity to grow rents in line with our medium-term targets Enhancing gross margin • Further opportunities from scale, more holistic approach and being a partner of choice Reducing administra
Slide 13: EPRA balance sheet
EPRA balance sheet 20221 2023 2023 2022 £m £m £m £m 31 Dec 31 Dec 30 Jun 31 Dec Pro forma Property portfolio 4,760 4,865 4,829 1,715 Investment in joint ventures and associates 83 84 87 - Financial assets at fair value2 - - – 357 Net debt (1,499) (1,554) (1,488) (634) Other3 136 159 98 124 Net asset
Slide 14: Valuation driven by strong ERV growth and some yield movement
Valuation driven by strong ERV growth and some yield movement ERV growth by use Valuation £4.8bn +6.7% +8.4% +5.1% +6.1% Retail Hospitality Offices Residential L-f-L valuation movement -0.8% & leisure H1 +0.2% Equivalent yield by use H2 -1.0% 4.4% 4.7% 4.8% 2.8% ERV £236.9m Retail Hospitality & Offi
Slide 15: Strong balance sheet and debt metrics
Strong balance sheet and debt metrics £1.6bn Asset Secured term loans value - £585m term loans 31% 5 years Weighted average EPRA LTV1 maturity (drawn) £1.7bn Shaftesbury Capital Covent Garden Asset PLC unsecured group value £486m >2.0x - £475m private placements - £275m exchangeable - £300m undrawn
Slide 16: Diversified sources of funding
Diversified sources of funding Debt maturity profile £m • Early refinancing of the £576m facility through long-term bilateral 300 and medium-term bank loans £450m currently undrawn1 • Access to a broad range of public and private capital and financing markets 350 The senior unsecured loan facility h
Slide 17: Access to significant liquidity
Access to significant liquidity £m Liquidity £485.7m1 +£88.1m disposals -£54.6m capex and acquisitions 116.5 Dec 23 1. Pro forma liquidity is £542 million (adjusted for 2024 disposal proceeds) 2. Closing cash excludes £14.5 million of tenant deposits 17 2023 Annual Results
Slide 18: Key financial priorities and metrics
Key financial priorities and metrics Rental growth prospects • Medium-term rental growth target of 5–7% p.a. • Capturing reversion and growing NRI at least in line with ERV Operating efficiencies • Rigorous management of irrecoverable property costs and admin costs, to reduce EPRA cost ratio towards
Slide 19: Excellent operating performance
Excellent operating performance
Slide 20: Strong leasing momentum throughout 2023
Strong leasing momentum throughout 2023 Strategy translating into performance 188 Commercial lettings/renewals 338 Residential lettings/renewals High occupancy £24.2m £12.8m 2.1% +11.2% vs Dec-22 ERV +7.9% vs Dec-22 ERV +13.0% vs previous rent ERV available to let +11.7% vs previous rent 20 2023 Ann
Slide 21: Retail
Retail £78.4m 33% £108 415 ERV ERV per Units of total ERV Continued polarisation of demand to vibrant +6.7% L-f-L sq.ft. 0.7m sq .ft. locations with high amenity value Selection of 2023 signings and openings • Strong leasing activity and pipeline • Customer sales on average 10% ahead of 2022 levels
Slide 22: Significant opportunity to grow rents
Significant opportunity to grow rents Retail ITZA rental tones by street • Average SHC Zone A retail rents significantly below West End average H. £270 I. £200 G. £260 J. £380 • Broad range of price A. £980 K. £475 points B. £380 E. £280 F. £420 C. £620 • Affordable rent to D. £760 sales across port
Slide 23: Hospitality & leisure
Hospitality & leisure £82.0m 35% ERV of total ERV +8.4% L-f-L Robust customer and consumer demand across a range of price points 423 £82 • High occupancy, 0.6% of ERV available to let Units ERV per sq.ft. 1m sq .ft. Strong trading prospects • 13 new concepts introduced in Covent Garden from casual t
Slide 24: Offices
Offices £50.2m £74 418 ERV 21% ERV per Units of total ERV +5.1% L-f-L sq.ft. 0.7m sq .ft. Good demand for high quality space in vibrant locations • Increasing number of occupiers moving from other London locations Selection of upcoming completions • Attracted to high amenity value and excellent envi
Slide 25: Residential
Residential £26.3m 11% £59 709 ERV ERV per Units of total ERV +6.1% L-f-L sq.ft. 0.5m sq .ft. Sustained demand across our West End portfolio • Apartments typically go under offer within days • Interest from a broad range of customers 338 new lettings and renewals completed • £12.8m new contracted in
Slide 26: Active portfolio management
Active portfolio management Accelerating value creation Selection of current refurbishments Investment opportunities across the portfolio • Refurbishments which enhance our assets • 185k sq. ft. (5.8% of ERV) under refurbishment • Improving sustainability profile of our assets • Average annual capex
Slide 27: Creating sustainable and healthy places
Creating sustainable and healthy places Where people enjoy visiting, working and living Commitment to become Net Zero Carbon by 2030 • Combined Pathway published in Nov 2023 Future proofing our heritage buildings • Reuse, renew, improve • 80% of units have an EPC grade of A-C • Enhancing environment
Slide 28: Well-positioned to drive total returns
Well-positioned to drive total returns
Slide 29: Our priorities over the next 3-5 years
Our priorities over the next 3-5 years 1. Deliver growth in rents, earnings and dividends 2. Realise long-term potential of our assets 3. Accelerate cost savings and operating efficiencies 4. Accretive investment into our portfolio 5. Active asset rotation through capital recycling 6. Maintain a str
Slide 30: Q&A
Q&A
Slide 31: Appendices
sim: 4 TIANFU Cucky Foods 7 Appendices. + AN
Slide 32: Well balanced, diverse mixed-use portfolio
Well balanced, diverse mixed-use portfolio 14% 34% Residential Retail 709 415 Apartments Shops £4.8bn Portfolio valuation 34% -0.8% L-f-L 18% Hospitality Offices 418 & leisure Offices 423 Units Percentage of wholly-owned portfolio valuation as at 31 December 2023 Units and area have been amended to
Slide 33: Mixed-use portfolio: well balanced, diverse income streams
Mixed-use portfolio Well balanced, diverse income streams Valuation Annualised gross income ERV Equivalent yield 14% 12% 11% 34% 34% 33% Dec 2023 16% 21% 18% £4.8bn £193m £237m 4.34% 34% 38% 35% 14% 12% 11% June 20232 34% 34% 33% 16% 22% 18% £4.8bn £186m £229m 4.18% 34% 38% 34% 12% 11% 15% Pro forma
Slide 34: Retail ITZA rental tones by street
Retail ITZA rental tones by street Significant opportunity to grow rents ITZA £psf 1,500 1,250 1,000 750 500 250 0 SHC West End James St King St Covent Carnaby St Long Acre Royal Opera Foubert's Floral St Monmouth Neal St Earlham St Foubert's Newburgh Berwick St average average* Garden House Place W
Slide 35: Historical reversionary potential and ERV growth
Historical reversionary potential and ERV growth £m 252 258 239 237 225 221 227 205 208 187 193 185 181 178 175 165 165 156 153 145 143 131 129 122 115 121 108 94 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Covid-19 Annualised gross income ERV Numbers reflect the combined r
Slide 36: Portfolio summary by use
Portfolio summary by use Retail Hospitality & Offices Residential Total leisure 34% 34% 18% 14% 100%1 Valuation (£m)2 1,605.0 1,621.7 879.1 687.4 4,793.2 Annualised gross income (£m) 64.8 72.7 31.5 23.8 192.8 ERV (£m) 78.4 82.0 50.2 26.3 236.9 ERV psf (£) 108 82 74 59 83 Net initial yield 3.6% 4.2%
Slide 37: Portfolio valuation summary by destination
Portfolio valuation summary by destination Covent Garden Carnaby | Soho Chinatown Fitzrovia Total 53% 31% 14% 2% 100%1 Valuation (£m) 2,521.6 1,482.2 689.5 99.9 4,793.2 Annualised gross income (£m) 97.4 59.0 31.2 5.2 192.8 ERV (£m) 122.3 76.1 33.0 5.5 236.9 Net initial yield 3.4% 3.4% 4.0% 4.5% 3.5%
Slide 38: Portfolio leasing summary by use
Portfolio leasing summary by use Retail Hospitality & Offices Residential Total leisure 34% 34% 18% 14% 100%1 2023 transactions2 84 37 67 338 526 New contracted rent (£m) 11.6 4.7 7.9 12.8 37.0 % above Dec 22 ERV 9.3% 14.1% 12.4% 7.9% 10.0% % above previous passing rent 15.9% 7.4% 11.7% 11.7% 12.5%
Slide 39: Portfolio leasing summary by destination
Portfolio leasing summary by destination Covent Garden Carnaby | Soho Chinatown Fitzrovia Total 53% 31% 14% 2% 100%1 2023 transactions2 227 151 106 42 526 New contracted rent (£m) 17.4 13.3 4.6 1.7 37.0 % above Dec 22 ERV 8.7% 11.6% 11.9% 7.0% 10.0% % above previous passing rent 15.4% 8.6% 14.0% 10.
Slide 40: Available to let, under offer, under refurbishment
Available to let Hospitality Retail1 & leisure Offices Residential Total ERV (£m) 1.3 1.4 1.8 0.2 4.7 % of portfolio 0.6% 0.6% 0.8% 0.1% 2.1% Area (‘000 sq. ft.) 17.9 20.6 25.1 4.0 67.6 1. Includes 5 units let on a temporary basis (ERV £0.7m) Under offer Hospitality Retail & leisure Offices Resident
Slide 41: Future proofing our heritage buildings
Future proofing our heritage buildings Enhancing energy efficiency at low capex Simple interventions delivering efficiency EPC Status (by ERV) A-C improvements: • Energy efficient equipment (heating, cooling, LED lighting) 80% 68% • Remove fossil fuels, generate on-site renewable electricity • Smart
Slide 42: A sustainable and responsible business
A sustainable and responsible business Benchmarks1 Carbon Disclosure Project EPRA sustainability reporting awards Standing Investments Assessment Gold 74/100 with 2 Green Stars ISS ESG Corporate Rating: 1st Decile Memberships2 1. Benchmark scores primarily based on legacy Capco data. This will be up
Slide 43: Primary accounting implications of merger
Primary accounting implications of merger Accounting implications: Impact: Fair value of property resulting in -£42m (NTA neutral) derecognition of Shaftesbury PLC tenant lease NTA reflects market value rather than carrying value. incentives and letting fees Results in lower amortisation through und
Slide 44: EPRA NTA per share movement
EPRA NTA per share movement Pence Merger impact Driven by full consolidation and share discount at point of merger completion 1. Underlying earnings 3.3 pence per share based on 1.8 billion shares, equivalent to 3.7 pence based on 1.6 billion weighted average number of shares 44 2023 Annual Results
Slide 45: Per share metrics; number of shares
Per share metrics Number of shares Per share metric No. of shares (million) H1 23 Underlying earnings (Jan - June 2023) Weighted average number of shares 1,473 H2 23 Underlying earnings (July – Dec 2023) Weighted average number of shares 1,822 FY 23 Underlying earnings (Dec 2023) Weighted average nu
Slide 46: Debt covenants summary
Debt covenants summary Nominal Average Test ICR LTV Maturity Value interest rate Frequency Covenant Covenant 2030: £130m Aviva term loan £450m 4.7% 2033: £200m Half yearly 1.35x 65% 2035: £120m Canada Life term loan £135m 4.5% 2029 Quarterly 1.4x 60% Exchangeable bond1 £275m 2.0% 2026 - - - Senior u
Slide 47: Joint ventures and associates
Joint ventures and associates We own a 50 per cent interest in Lillie Square and Longmartin; all figures represent our 50 per cent share Lillie Square (Joint venture) Continuing to progress sales • 4 units sold during the year representing £3.4m Valuation • 10.3% decline (like-for-like) to £65.3m Li
Slide 48: Principal risks
Principal risks • Impact of ‘higher for longer’ interest rates and lack of availability or increased cost of debt or equity funding • Inflationary pressures on operating costs, including energy and the cost-of-living crisis • Adverse impact on business and consumer confidence, increased material cos
Slide 49: Important notices
Important notices This presentation contains “forward-looking statements” regarding the belief or current expectations of Shaftesbury Capital PLC, its Directors and other members of its senior management about Shaftesbury Capital PLC’s businesses, financial performance and results of operations. The
Slide 50: Shaftesbury Capital PLC
Shaftesbury Capital PLC Regal House, 14 James Street London, WC2E 8BU T 020 3214 9150 shaftesburycapital.com