Region Group · ASX:RGN
Region — FY2019 Earnings Presentation
41 slides from Region's earnings presentation, Aug 6, 2019
Slide 1: FY19 Results Presentation
FY19 RESULTS PRESENTATION 5 August 2019 slide
Slide 2: Agenda
AGENDA 1. OVERVIEW OF FY19 RESULTS 2. FINANCIAL PERFORMANCE 3. OPERATIONAL PERFORMANCE 4. GROWTH INITIATIVES 5. KEY PRIORITIES AND OUTLOOK 6. QUESTIONS 7. APPENDICES slide
Slide 3: Overview of FY19 Results
1 OVERVIEW OF FY19 RESULTS Anthony Mellowes Chief Executive Officer slide 3
Slide 4: FY19 Highlights
FY19 HIGHLIGHTS FINANCIAL CAPITAL ACTIVE PORTFOLIO PERFORMANCE MANAGEMENT MANAGEMENT FFO per unit 1 Gearing 3 Portfolio occupancy6 Specialty vacancy 6 16.33 cpu, up by 6.7% 32.8%, up by 1.6% 98.2% 5.3% Distribution per unit 1,2 NTA per unit 4 Portfolio weighted average cap rate 7 14.70 cpu, up by 5.
Slide 5: Key Achievements
KEY ACHIEVEMENTS Delivering on strategy • Existing centres continue to perform well: – Supermarket MAT sales growth of 2.7%, Discount Department Stores 3.4%, Specialties 2.6% – Comparable NOI growth of 2.5% OPTIMISING THE • Centres acquired during FY19 are performing in line with our expectations: –
Slide 6: Financial Performance
2 FINANCIAL PERFORMANCE Mark Fleming Chief Financial Officer slide 6
Slide 7: Profit & Loss
PROFIT & LOSS For the year ended 30 June 2019 30 June 30 June • Net property income: $m 2019 2018 % Change Anchor rental income 120.0 102.7 16.8% 3 – Gross property income increase primarily due to acquisitions and the completion of developments, offset by divestments Specialty rental income 116.6 8
Slide 8: Funds From Operations
FUNDS FROM OPERATIONS For the year ended 30 June 2019 30 June 30 June $m 2019 2018 % Change • Funds From Operations (“FFO”) of $141.8m is up by 24.1% on the same period Net profit after tax (statutory) 109.6 175.2 (37.4)% last year, primarily due to acquisitions completed during FY19 – Non-cash and
Slide 9: Balance Sheet
BALANCE SHEET As at 30 June 2019 $m 30 June 2019 30 June 2018 % Change • Value of investment properties increased from $2,453.8m to $3,147.0m, primarily Cash 4.2 3.7 13.5% due to acquisitions and developments (see slide 34 for further detail) – Portfolio weighted average capitalisation rate of 6.48%
Slide 10: Debt and Capital Management
DEBT AND CAPITAL MANAGEMENT As at 30 June 2019 30 June 2019 30 June 2018 • Gearing of 32.8% is within target range of 30% to 40%. Our preference is for gearing to Facility limit ($’m) 1 1,257.1 964.8 remain below 35% at this point in the cycle – Look through gearing (including CQR and SURF investmen
Slide 11: Operational Performance
3 OPERATIONAL PERFORMANCE Anthony Mellowes Chief Executive Officer slide 11
Slide 12: Portfolio Overview
PORTFOLIO OVERVIEW Weighting towards food, medical and retail services (non-discretionary) As at 30 June 2019 Number of Number of GLA Occupancy Value WALE Weighted average centres specialties (sqm) (% GLA) ($m) (yrs) cap rate (%) Neighbourhood 75 1,276 458,478 98.2% 2,316.0 7.8 6.38% Sub-regional 10
Slide 13: Portfolio Occupancy
PORTFOLIO OCCUPANCY Remains healthy at 98.2% Portfolio Occupancy (% of GLA) • Total portfolio occupancy is 98.2% of GLA – Excluding FY19 acquisitions, specialty vacancy of 4.7% is within the target 98.6% 98.4% 98.4% 98.2% range of 3-5% and occupancy is at 98.5% – Including FY19 acquisitions, special
Slide 14: Sales Growth and Turnover Rent
SALES GROWTH AND TURNOVER RENT Existing centres continue to perform well • The sales numbers on this slide exclude acquisitions completed during the year to 30 Comparable Store MAT1 Sales Growth by Category (%) June 2019. Please refer to slide 16 for a breakdown between existing and acquired centres
Slide 15: Specialty Key Metrics
SPECIALTY KEY METRICS Sustainable rents enabling positive rental reversions in existing centres • The numbers on this slide exclude acquisitions completed during the year to 30 June Specialty Tenant Metrics 2019. Please refer to slide 17 for a breakdown between existing and acquired centres Existing
Slide 16: FY19 Acquisitions – Key Metrics
FY19 ACQUISITIONS – KEY METRICS Sales growth, turnover rent, portfolio occupancy, WALE • We owned the centres acquired from Vicinity for less than nine Sales MAT Growth Existing Centres FY19 Acquisitions Total Group months of the year. Remixing strategies in relation to these centres are well advanc
Slide 17: FY19 Acquisitions – Key Metrics
FY19 ACQUISITIONS – KEY METRICS Specialty key metrics • Remixing project is progressing in line with our expectations Spec Tenant Metrics Existing Centres FY19 Acquisitions Total Group Comparable sales MAT growth (%) 1 2.6% 0.0% 1.8% • Occupancy cost moving to more sustainable level of below 12% – R
Slide 18: Growth Initiatives
4 GROWTH INITIATIVES Anthony Mellowes Chief Executive Officer slide 18
Slide 19: Portfolio Management
PORTFOLIO MANAGEMENT Twelve acquisitions and five divestments in year to 30 June 2019 VICINITY ACQUISITION OVERVIEW • Ten convenience-based shopping centres located in NSW, QLD, VIC and WA • Acquisition completed in Oct 2018 for $573.0m (7.47% implied fully let yield) • % of income from anchors: 38%
Slide 20: Portfolio Management
PORTFOLIO MANAGEMENT Twelve acquisitions and five divestments in the year to 30 June 2019 OTHER ACQUISITIONS Sturt Mall (Wagga Wagga, NSW) Miami One (Gold Coast, QLD) • Acquisition completed in Aug 2018 • Acquisition completed in Oct 2018 for $73.0m (6.93% implied fully let for $31.9m (6.89% implied
Slide 21: Convenience Based Centres
CONVENIENCE BASED CENTRES Fragmented ownership provides acquisition opportunities CONVENIENCE BASED CENTRE LANDSCAPE Ownership of Convenience Based Centres • There are approximately 1,200 Coles and Woolworths anchored (number of centres) neighbourhood and sub regional centres in Australia Indicative
Slide 22: Indicative Development Pipeline
INDICATIVE DEVELOPMENT PIPELINE Over $110m of development opportunities identified at 23 of our centres over the next 5 years1 Estimated Capital Investment (A$m) DEVELOPMENT TYPE CENTRE(S) FY19 FY20 FY21 FY22 FY23 FY24 New centre developments Bushland Beach, Shell Cove 9.7 - - - - - Belmont, Central
Slide 23: Funds Management Business
FUNDS MANAGEMENT BUSINESS – AUM$186.4M Potential to deliver additional earnings growth in the future • First fund “SURF 1” was launched in October 2015, and is expected to successfully close by December 2019, in line with 5-year term set out in the original PDS – Contracts exchanged in relation to t
Slide 24: Key Priorities and Outlook
5 KEY PRIORITIES AND OUTLOOK Anthony Mellowes and Mark Fleming Chief Executive Officer & Chief Financial Officer slide 24
Slide 25: Core Strategy Unchanged
CORE STRATEGY UNCHANGED Defensive, resilient cashflows to support secure and growing long term distributions to our unitholders WEIGHTED TO FOCUS ON CONVENIENCE- LONG LEASES TO NON-DISCRETIONARY BASED RETAIL CENTRES QUALITY ANCHOR TENANTS RETAIL SEGMENTS APPROPRIATE GROWTH CAPITAL STRUCTURE OPPORTUN
Slide 26: Potential Earnings Growth Trends
POTENTIAL EARNINGS GROWTH TRENDS Continued solid earnings growth expected over time Indicative Contribution to FFO Growth Rate (% pa) Description and Assumptions – medium to longer term – Anchor • Anchor rental income represents about 50% of overall gross property income 0 - 1% Rental • Once turnove
Slide 27: Key Priorities and Outlook
KEY PRIORITIES AND OUTLOOK Continue to deliver on strategy in FY20 • Completion of remixing project for centres acquired in FY19 OPTIMISING THE • Leasing focused on sustainable tenants at sustainable rents CORE BUSINESS • Explore additional “other income” opportunities • Manage expenses both at cent
Slide 28: Questions
6 QUESTIONS slide 28
Slide 29: Appendices
7 APPENDICES slide 29
Slide 30: FY20 FFO Per Unit Guidance
FY20 FFO PER UNIT GUIDANCE Initial guidance is 16.70cpu Increase in corporate costs Higher weighted average and tax payable debt outstanding due to on funds acquisitions management Lower cost of debt Comparable NOI income Comparable NOI Increase in grew at 2.5% in to grow by 1.6% in corporate costs
Slide 31: Sustainability
SUSTAINABILITY We continue to focus on long-term sustainable performance SCP has continued to implement it’s sustainability strategy (environment, Our Sustainability Objectives social and governance), focusing on improving energy efficiency, supporting its communities and reducing risk. SCP has: • A
Slide 32: Long Term Leases to Woolworths, Coles and Wesfarmers
LONG TERM LEASES TO WOOLWORTHS, COLES AND WESFARMERS Overall Lease Expiry (% of Gross Rent) • 49% of gross rent is generated by anchor tenants (Woolworths 33%, Coles 11%, 29.2% Wesfarmers 3% and Other majors 2% on a fully leased basis), with an Anchor WALE of 10.3 years • Overall, a 7.9 year portfol
Slide 33: Anchor Tenants
ANCHOR TENANTS 30 June 30 June 30 June 30 June 30 June 2015 2016 2017 2018 2019 • All of our centres are currently anchored by either Woolworths Woolworths Limited Limited, Coles Group Limited or Wesfarmers Limited retailers Woolworths 53 53 54 54 58 Big W 9 8 7 7 9 • We are gradually increasing our
Slide 34: Investment Properties Value
INVESTMENT PROPERTIES VALUE • Acquisitions include the VCX portfolio for $573.0m, Sturt Mall ($73.0m), Miami One ($31.9m) and $36.9m of stamp duty and other transaction costs • A partial disposal of Highett was made during the period for $2.4m (properties divested to SURF 3 were under contract and h
Slide 35: Debt Facilities & Interest Rate Hedging
DEBT FACILITIES & INTEREST RATE HEDGING Facility Limit Drawn Debt Financing capacity Maturity / Notes $m (A$m) (A$m) (A$m) Bank Facilities Bank bilateral 225.0 62.0 163.0 FY 2023 (refer below & note 1) Bank bilateral 25.0 - 25.0 FY 2024 Bank bilateral non-rev olv ing 50.0 50.0 - FY 2024 Sy ndicated
Slide 36: Acquisitions During the Period
ACQUISITIONS DURING THE PERIOD year to 30 June 2019 Anchor Specialty Total Total Purchase Implied Acquisition % GLA Centre Type GLA GLA GLA Price Fully Let Date Committed (sqm) (sqm) (sqm) ($m) Yield Acquired Properties Sturt Mall, NSW Sub Regional Aug 2018 9,857 5,469 15,326 97.1% 73.0 6.93% Laving
Slide 37: Divestments During the Period
DIVESTMENTS DURING THE PERIOD year to 30 June 2019 Anchor Specialty Total Total Sale Divestment % GLA Divestment Centre Type GLA GLA GLA Price Date Committed Cap Rate (sqm) (sqm) (sqm) ($m) Divested Properties Moama Marketplace, NSW Neighbourhood 10 July 2018 3,623 891 4,514 99.3% 14.0 7.00% Swansea
Slide 38: Portfolio List (I)
PORTFOLIO LIST (I) Valuation Completion Total GLA Occupancy Number of WALE Valuation June 2019 Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Lavington Square NSW Sub-Regional WOW; Big W 2005 20,233 96% 58 4.7 7.75% 52.3 Sturt Mall NSW S
Slide 39: Portfolio List (II)
PORTFOLIO LIST (II) Valuation Completion Total GLA Occupancy Number of WALE Valuation June 2019 Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Annandale Central QLD Neighbourhood Coles 2007 6,655 93% 22 5.8 7.25% 29.1 Ayr QLD Neighbourho
Slide 40: Portfolio List (III)
PORTFOLIO LIST (III) Valuation Completion Total GLA Occupancy Number of WALE Valuation June 2019 Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Properties Under Management - SURF 1 Burwood DM NSW Freestanding Dan Murphy's 2009 1,400 100%
Slide 41: Contact Details and Disclaimer
CONTACT DETAILS AND DISCLAIMER For further information please contact: Anthony Mellowes Mark Fleming Chief Executive Officer Chief Financial Officer T: +61 2 8243 4900 T: +61 2 8243 4900 E: anthony.mellowes@scaproperty.com.au E: mark.fleming@scaproperty.com.au Disclaimer This presentation has been p