Slide 1: Speaker's notes from 2012 Interim Result presentation
For personal use only THE GPT GROUP Speaker’s notes from 2012 Interim Result presentation 13 August 2012 Michael Cameron, CEO and Managing Director 1
Slide 2: Welcome and presentation overview
For personal use only Good morning and welcome to the GPT 2012 Interim Result presentation. Today I will talk about our strategy and the performance of the business, as well as the outlook for the remainder of the year. Michael O’Brien will provide an overview of the financial results and capi
Slide 3: Business model producing strong performance
For personal use only GPT’s business model continues to produce strong performance and we are well positioned to deliver long term investment value. Our active portfolio management is producing results, and We continue to add to our capabilities while optimising the business. Our effective c
Slide 4: A busy six months
For personal use only It’s been a busy six months… In the first half we delivered EPS growth of 6.2% and DPS growth of 11.8%… Income growth from the portfolio at 4.3%. Our major developments at One One One Eagle Street and 5 Murray Rose were completed. We sold a 50% interest in Casuarina
Slide 5: Three performance targets aligned with investor goals
For personal use only Our three performance targets are designed to align with our investor goals. EPS growth of 6.2% for the first half exceeded our target of CPI + 1%. Total return of 9.2% has improved and is on track for the full year. Total shareholder return was 10.4%. 5
Slide 6: Strategic focus: Optimise and Grow
For personal use only Our strategic focus remains unchanged: Optimise and Grow. We continue to optimise the business to achieve our targets through: - Strong rental growth - Tight expense disciplines, and - Active capital and portfolio management In addition, to accelerate our performance, we
Slide 7: Optimisation: Fit for Growth review
For personal use only Firstly, Optimisation. Today we can announce that we have completed a significant review of GPT’s cost base and structure. This has resulted in 70 people leaving the business over the last week representing around 15% of our work force. A small number of new roles have al
Slide 8: Growth focus progress
For personal use only The second area of our strategic focus is growth. There has been good progress since the start of this year. - We have achieved growth of 16% in GPT’s funds under management; - Resources are in place to grow our development activity in logistics and business parks; - Our st
Slide 9: Changes to Leadership Team
For personal use only I am pleased to announce changes to GPT’s Leadership Team that will establish further capability around our growth focus and will bring additional experience to the team. I believe active career development and succession planning are vital and these changes are part of thi
Slide 10: Operating performance for first half 2012
For personal use only I’ll start with the operating performance of the Group for the first half of 2012. Realised Operating Income per security, which reflects our underlying operational earnings, was up 6.2% over the previous corresponding period, a strong result, ahead of the guidance we gave
Slide 11: Composition of the operating result
For personal use only Turning now to the composition of the operating result. Retail income was up 3.9% on a like for like basis, driven by strong growth at Charlestown Square as a result of a reduction in development related vacancies; and at Melbourne Central reflecting the successful completi
Slide 12: Composition of EPS growth
For personal use only This waterfall chart shows the composition of the growth in EPS. You can see that the majority of the uplift was driven by income growth through the portfolio, with some benefit coming from a lower cost of debt compared to the June half last year, and some earnings accretio
Slide 13: Expense base and jaws
For personal use only Our focus on our expense base continues – and on keeping as big a gap as possible between our income and our expense growth. Management expenses are up marginally on the first half last year, and with the implementation of our ‘Fit for Growth’ program we anticipate that the
Slide 14: Fit for Growth cost review
For personal use only As Michael mentioned earlier, we implemented the results of a major review of our cost and resource base last Friday, which we called ‘Fit for Growth’. The review built on the work that we have been doing to streamline the business over the past couple of years. With proces
Slide 15: Balance sheet gearing and ratings
For personal use only The balance sheet remains in great shape, with gearing as a proportion of total tangible assets at 20.2% following the completion of the sale of our interest in Woden and half of our interest in Casuarina to the GPT Wholesale Shopping Centre Fund. Look through gearing is on
Slide 16: Capital management levers
For personal use only Capital management has been a big focus for us over the last few years and has created a lot of value for security holders. There are 4 principal levers we are focussed on to drive Return on Equity. Firstly Active Portfolio Management: we discussed our preferred sectoral
Slide 17: Average cost of debt
For personal use only You can see on this graph how we have worked down the average cost of debt over the last couple of years - and we have achieved that through a combination of treasury initiatives as well as benefitting from a reduction in interest rates over this period. In the 6 months to
Slide 18: Debt maturity profile
For personal use only Our debt maturity profile remains long and relatively flat with a weighted average term to maturity of 5 years following the $100m extension to our 7 year bond issue which we completed in July at an all-in rate of 5.5%. That extension doubled our weighting to domestic bonds
Slide 19: EPS growth and total return
For personal use only Driving returns for security holders within a disciplined, relatively low risk framework is ultimately what we are working to achieve. These two graphs illustrate that we are making progress. We have achieved strong EPS growth by removing a number of the drags that were h
Slide 20: Target portfolio weightings
For personal use only Thanks Michael. At our Investor Day on 27 June we provided insights into our target portfolio weightings. As you can see, we have already made progress in shifting the portfolio towards our targets of 50% retail, 35% office and 15% logistics & business parks. The strate
Slide 21: Balance sheet portfolio performance
For personal use only In the first half, GPT’s $8.4 billion balance sheet portfolio performed well. Comparable income growth was 4.3% and the average lease expiry remains long at 4.7 years. The weighted average cap rates all tightened to an average of 6.61%. Together with high occupancy, eac
Slide 22: Retail operating performance
For personal use only Retail continues to deliver a solid operating performance Comparable income growth was up 3.9% even though sales growth remained virtually flat. This pushed occupancy costs slightly higher. Specialty sales grew to $8,981 per square metre, and occupancy moved marginally, b
Slide 23: Retail occupancy and leasing detail
For personal use only Looking at a further level of detail, 99.1% occupancy represents only 40 vacancies out of 3,700 tenancies. We are pleased with the leasing progress at Charlestown, reducing from 25 vacancies to 10. Re-leasing spreads year to date are -6% but are a result of us insisting
Slide 24: Retail sales growth at cycle low
For personal use only Retail sales growth is at a low point in the cycle due to economic uncertainty and subdued consumer sentiment. Even month to month there is significant volatility reflecting events such as the timing of Easter and the impact of the carbon tax compensation payments. Despit
Slide 25: Structural changes in retail
For personal use only Of more significance are the structural changes occurring within retail, such as the growth in online sales, the potential harmonisation of prices, and changing consumption patterns. These present both threats and opportunities for GPT. We are continually evolving our sho
Slide 26: Highpoint expansion
For personal use only A good example of the strength of quality centres is Highpoint in Melbourne where the centre is currently expanding 25% in size. Leasing for the new space at Highpoint is progressing well with 70% of the 100 new specialty shops already leased to high quality domestic and in
Slide 27: Office portfolio performance
For personal use only In our Office portfolio, income growth was strong in the first half, although this was boosted by the timing of leases and is expected to be closer to more normal levels for the full year. Similarly, occupancy at the 30th of June was affected by 111 Eagle Street coming on l
Slide 28: Sydney market supply and lease expiry profile
For personal use only There is currently a lot of focus on the Sydney prime market, however, the GPT expiry profile sits favourably against changes in market supply over the next few years. As you can see, supply will peak in 2015 following the completion of the first two towers at Barangaroo, b
Slide 29: CBD office market outlook
For personal use only The outlook across the CBD markets is mixed, with demand in Melbourne slowing quicker than expected, Sydney being impacted by downsizing in the financial services sector whilst Brisbane is still experiencing positive net absorption. We expect Sydney rental growth to remain
Slide 30: One One One Eagle Street opening
For personal use only One One One Eagle Street was officially opened by the Queensland Premier, Campbell Newman, on 1 August in front of 400 people. The launch was a milestone event. When I joined GPT in May 2009 in the middle of the GFC many of our stakeholders questioned why we didn’t shut dow
Slide 31: Logistics & Business Parks performance
For personal use only Our recently renamed Logistics & Business Parks portfolio performed solidly over the half with income growth of 2.5% and good leasing activity. Occupancy remains high at 99% with a long weighted lease expiry of 6.1 years. The portfolio has benefitted from cap rate compres
Slide 32: Expanding logistics & business parks portfolio
For personal use only Since the beginning of the year we have added $178 million of assets to our logistics & business parks portfolio. The further expansion of this portfolio will be achieved by more acquisitions, as well as the development of our land banks at Erskine Park, Somerton and Sydney
Slide 33: Logistics and business park market fundamentals
For personal use only Underlying fundamentals remain positive in the logistics and business park market with limited supply, low vacancy and positive demand. Pre-lease enquiry has also improved but has been slow to convert into deals. 33
Slide 34: Murray Rose development completed
For personal use only As I mentioned, 5 Murray Rose was completed in April, fully leased to the Lion Group for 12 years. The stabilised development yield is 8.5% and we made a $5 million development profit. 34
Slide 35: Growth platforms
For personal use only Let me now complete the story on the growth initiatives. As we have shown, the core business can deliver EPS growth of CPI + 1%. But opportunities exist to exceed those expectations. For investors, while GPT will continue to provide direct exposure to high quality propert
Slide 36: Funds management growth
For personal use only In funds management, our target is to double the profit contribution from the business. This will be achieved via two pathways: Firstly, growing the existing funds. This will be achieved through both acquisitions and developments. Secondly, the creation of new funds, st
Slide 37: Growth in existing funds
For personal use only We are already delivering on our plans to increase the size and quality of our existing funds. We grew by $890 million in the first half of 2012. With these acquisitions, along with selected divestments, the quality of the funds continues to improve. We also commenced a
Slide 38: Development approach
For personal use only With development, we have a dual approach. Firstly, we will continue to enhance and preserve the value of our existing assets with a focus mainly on retail. Secondly, we are building further capability for logistics and business park development. This will help us achieve
Slide 39: New profit sources and GPT Energy
For personal use only We identified new profit sources as a growth platform and earlier this year we appointed Sam Nickless to accelerate these opportunities. Sam’s background with McKinsey, and several major corporates, positions him well to bring these activities to life. We have talked previo
Slide 40: Culture renewal program
For personal use only A culture renewal program has been underway over the last year. The exercise was commenced to shift us further towards a culture of achievement and accountability. As part of this program, GPT has adopted seven cultural values which are now being embedded throughout the b
Slide 41: Earnings and value driver outlook
For personal use only Before I conclude, a couple of comments on the outlook for our earnings and value drivers. Structured rental increases and high occupancy will drive steady growth in income, particularly following the completion of 111 Eagle and the Newcastle CBD sale. Fee income will inc
Slide 42: Upgraded full-year guidance
For personal use only At the start of the year I said we would deliver at least CPI + 1% in EPS growth. Having exceeded our target in the first half, I am now confident GPT will deliver at least 7% EPS growth for the full year. Our payout ratio will be no less than 80%. 42
Slide 43: Conclusion
For personal use only In conclusion, GPT is well positioned to deliver long term investment value. Our active portfolio management has delivered strong performance, and We continue to add to our capabilities. Our effective capital management has again enhanced our performance and together
Slide 44: Contact Information
44 Contact Information Michael Cameron Chief Executive Officer and Managing Director Tol: 4612 8230 3565, Mob: +61 410 437 597 Email: michael cameron@gpt. com au Michael O'Brien Chief Financial Officer Tel: 461 2.8239 3544 Mob: +61 417 691 028 Email: michael o'bnen@gpt.com.au rN Judy Barraclough Hea
Slide 45: Disclaimer
Disclaimer The information provided in this presentation has been prepared by The GPT Group comprising GPT RE Limited (ACN 107 426 504) AFSL (286511), as responsible entity of the General Property Trust, and GPT Management Holdings Limited (ACN 113 510 188), The information provided in this presenta