Gpt Group · ASX:GPT
Gpt — The GPT Group — H1 2013 Earnings Presentation
46 slides from Gpt's earnings presentation, Aug 12, 2013
Slide 1: Interim result presentation
For personal use only Good morning everyone and thank you for joining us for GPT’s interim result presentation. 1
Slide 2: Presenters and questions
For personal use only Today you will also hear from Mark Fookes and Carmel Hourigan, and there will be plenty of time for questions at the end of the presentation. 2
Slide 3: Capital allocation to deliver returns
For personal use only The most important thing the team at GPT can do is allocate capital to deliver the best returns to securityholders. We try not to be bound by conventional wisdom, and our objective is to make sure every dollar invested drives total returns. We seek to be hyper-efficient a
Slide 4: Returns through capital allocation and portfolio management
For personal use only The returns on our assets are maximised through capital allocation and portfolio management. Our earnings are underpinned by stable income streams, which are enhanced by our growth platforms. Our management expense ratio is one of the lowest in the sector and we remain disc
Slide 5: Value per share and buy-backs
For personal use only The objective is to increase value per share and, not focus on size. This is reflected in our acquisition and divestment strategy where we remain very disciplined about where the next dollar will be spent. Buying back shares does not signal a lack of investment opportunity,
Slide 6: Five year strategy
For personal use only We have invested time this year on our five year strategy, and I look forward to providing an update in October. Recognising we already do a lot of things right, the strategy will be about evolution, not revolution. It’s obvious to us that the allocation of capital is the
Slide 7: Half year highlights
For personal use only It was another busy six months. We completed $690 million of transactions, exiting Erina Fair and our Homemaker portfolio. We acquired Figtree Drive, and GWOF acquired half of 8 Exhibition Street in Melbourne. We made progress diversifying our sources of debt and lengthen
Slide 8: EPS growth and total return
For personal use only The EPS growth for the six months was 6%. Total return of 8.6% was just below the target of 9% reflecting the impact of valuations for Dandenong and Charlestown. TSR was 10.2%. The decisions we have been making will enable us to achieve our target of leading the sector.
Slide 9: Operating performance
For personal use only Thank you Michael. I’ll start with our operating performance for the half. Realised operating earnings per security, which reflects our underlying performance, was up 6%. This is ahead of our guidance for the year, with a solid contribution from the investment portfolio,
Slide 10: Composition of operating result
For personal use only Focusing now on the composition of the operating result. Retail Income was lower, primarily as a result of the divestment of the Casuarina and Woden interests last year and the smaller impact of the divestment of the Homemaker portfolio and Erina Fair this half, with compar
Slide 11: Expense reduction and MER
For personal use only We typically talk about JAWS in respect of our expenses and this remains a key long term target for the group. However today I wanted to focus on the overall expense reduction we have achieved in the past year. Expenses have declined by 30%, with the biggest savings seen in
Slide 12: Buy-back and payout ratio
For personal use only GPT recommenced its security buy-back this half, acquiring 25.2 million securities bringing the total buy-back to 6.1% of issued capital. To date securities have been acquired at an average 14% discount to the June 30 NTA creating $50.4 million of value for securityholders. W
Slide 13: Fortress balance sheet
For personal use only We continue to have a fortress balance sheet. Net tangible assets increased to $3.76 over the period. Gearing as a proportion of total tangible assets is 19.9%. The Office Fund continues to have low gearing of 12.4% and the Shopping Centre Fund gearing has reduced to 22.0
Slide 14: Debt diversification and tenor
For personal use only We have made significant progress on both increasing the diversification and tenor of our debt facilities in the first half. Bank debt is now 49% of our borrowings, down from 66% at December. Bonds now make up 51% of the portfolio on account of the two offshore issues dur
Slide 15: Portfolio overview
For personal use only The first half of 2013 has been a difficult operating environment. To meet these challenges and position the portfolio for long term performance, we have remained focused on executing a disciplined strategy of improving quality and implementing the right asset management stra
Slide 16: Portfolio total return and valuations
For personal use only The 12 month total return for the portfolio was 8%, reflecting a net revaluation uplift of $108m. The revaluation for the June half was $20m of which approximately 60% was driven by cap rate movement. This cap rate tightening was predominantly in premium office assets. The
Slide 17: Office WALE and total return
For personal use only This chart illustrates the relationship between the office sector WALE and total return for the 12 months to June 2013. This reflects the reward for de-risking cash flows which has been a key element of our active management approach. Particular success has been in those
Slide 18: Retail portfolio performance
For personal use only Turning to the retail portfolio. Comparable income growth slowed over the half to 1.5%. This was primarily driven by a continuation of negative leasing spreads across the portfolio reflecting difficult trading conditions. At an asset level, results were mixed with a stron
Slide 19: Retail leasing
For personal use only Our leasing team continues to actively remix the tenancy profile, with the aim of securing the right tenant in the right location and structured rental increases. Over the first half we saw the introduction of 155 new tenants out of 330 leasing deals. Of deals completed a l
Slide 20: Retail spending environment
For personal use only Retail spending has been subdued over the past three years as a result of cyclical and structural factors. It is critical that our strategy continually responds to these challenges in what will be a modest growth outlook. We are seeing retailers embrace these challenges by
Slide 21: Retail strategy: market share and expenses
For personal use only With regards to growing market share, management is focussed on active remixing towards the growth categories such as food catering, retail services, and experienced based retail. Our social media strategy continues to evolve with Highpoint the most liked shopping centre in
Slide 22: Erina Fair sale
For personal use only The sale of GPT's 50 per cent interest in Erina Fair for $397 million in June was a great result. Erina has delivered solid returns since GPT's purchase of the Centre in 1992 and the subsequent expansion to super regional status in 2003. The decision to sell reflects the
Slide 23: Highpoint development
For personal use only The Highpoint development completed earlier this year is a great example of how shopping centres in the right market with the right mix of retailing, experience and theatre continue to be in demand by retailers. Highpoint is the first centre in the country to offer both Zar
Slide 24: Retail sales outlook
For personal use only A modest level of retail sales growth is anticipated over the remainder of 2013 as consumers remain cautious about the outlook for the economy, job security and as structural impacts unwind. Several growth drivers are expected to support retail sales growth over this period
Slide 25: Office portfolio
For personal use only The office portfolio remains in a solid position. Our strategy has been to focus on tenant renewals and address future expiry risk which has resulted in an increased WALE and a reduction in our 2014 expiry profile. Comparable income growth was down slightly for the six mo
Slide 26: Office expiry profile and leasing
For personal use only Over the course of the year we have seen further deterioration in all markets which is reflected in negative net absorption. The office team has continued to focus on de-risking the portfolio in light of these challenging market conditions. The 2014 expiry has been the focu
Slide 27: Australia Square and Melbourne Central Tower
For personal use only Two assets where we have had significant success in driving outperformance are Australia Square and Melbourne Central Tower. At Australia Square we have renewed 3 major tenants in the building in the past six months, increasing the WALE to 5.5 years and reducing the 2014 ex
Slide 28: Office vacancies and expiries
For personal use only The main contributors to our existing vacancies are Melbourne Central Tower and One One One Eagle Street. For both of these assets, we remain confident in the product and price offering. In addition we have bolstered our leasing initiatives, introducing flexible work spaces
Slide 29: Office leasing and asset management
For personal use only The office team is working hard to ensure we are driving the best possible leasing and asset management outcomes. GPT’s significant exposure to the east coast prime asset market provides market intelligence and exposure to all market enquiries enabling us to respond quickly
Slide 30: MLC Centre repositioning
For personal use only The MLC Centre is a good example of the work we are doing to maximise asset performance. There are four areas of focus to reinvigorate the precinct including the office tower refurbishment and leasing, façade remediation, precinct activation and branding and retail redevelo
Slide 31: Office employment growth
For personal use only White collar employment growth remains weak across most office markets. Despite this weakness, forecasters are expecting an improvement in growth in financial year 2014 although below historical averages. Each market has a different employment base and as such are expecte
Slide 32: Office net absorption
For personal use only An analysis of historical net absorption and the correlation between equity markets provides further supporting data suggesting the worst of the declines in base office demand may be behind us. Over the past 40 years there have only been two periods where negative net absor
Slide 33: Logistics portfolio
For personal use only • The logistics portfolio continues to deliver with steady asset growth, a 9% total return, robust income growth and high occupancy levels. • The portfolio WALE is strong at 5.4 years and will increase significantly on completion of the Toll NQX development in February 2014 and
Slide 34: Logistics and business parks capability
For personal use only Our logistics and business parks business has significant capability, reflecting the importance of this business to the Group. The investment management portfolio, led by David Burgess, has responsibility for delivering on the overall performance of the portfolio. The log
Slide 35: Up-weighting the industrial portfolio
For personal use only We are very pleased with the progress of up-weighting our industrial portfolio. Since we announced our strategy in 2012 the value of product acquired, developed or in a preferred position represents a 60% increase in total portfolio value. Since the beginning of 2012 we hav
Slide 36: Logistics sector fundamentals
For personal use only Fundamentals in the logistics sector remain balanced. This chart is showing the growth in enquiry levels in the western Sydney industrial market Notably there has been a material improvement in tenant demand in the pre lease market in western Sydney, however conversion re
Slide 37: Growth platforms
For personal use only • Thanks Carmel. • One of our priorities for 2013 has been to build on our growth platforms. We have outlined the individual initiatives on previous occasions and the next few slides provide an update on each one. 37
Slide 38: Funds management
For personal use only • Profitability has continued to improve for our funds management business. • GWOF and GWSCF were the top two performing funds in the core wholesale sector over one year. This is a tremendous achievement. It reflects the high quality of our funds and the capabilities of Nick Ha
Slide 39: Retail & Major Projects and logistics development
For personal use only The Retail & Major Projects business has delivered on two key developments. − The $300 million expansion of Highpoint has resulted in a value uplift of $140 million divided between GPT and the co-owners. − The $780 million development of 161 Castlereagh Street has delivered a
Slide 40: New profit sources: Innogen and LiquidSpace
For personal use only We continue to develop our new profit sources. Innogen is now fully operational and working successfully at Charlestown Square: − Four new projects are underway at Highpoint, Melbourne Central, Parkmore and Chirnside. − The Innogen business is expected to deliver income of
Slide 41: Transactions and portfolio weightings
For personal use only GPT has completed $1.7 billion of transactions over the past 18 months. We have made tangible progress towards achieving our target portfolio weightings. With incremental debt costs below 5%, and property yields well above that, every acquisition opportunity we see is obvio
Slide 42: Outlook
For personal use only Whilst we remain cautiously optimistic about 2013, market fundamentals have softened. GPT is meeting these challenges by actively managing our portfolio. This together with fixed rental increases provides a strong base for income growth. Additional value is being pursued
Slide 43: Guidance: EPS growth and payout
For personal use only I am pleased to advise that we are comfortably on track to deliver our target of at least 5% EPS growth in 2013 despite asset sales in the first half. We will continue to have a payout ratio of 80% which is 100% of AFFO. While we are targeting to deliver CPI+1% EPS growth
Slide 44: Closing remarks
For personal use only I will conclude by again reminding you that the most important thing the team at GPT can do is allocate capital to deliver the best returns to securityholders. We seek to be a hyper-efficient organisation that is flexible and opportunistic. Thank you for your time today.
Slide 45: Contact information
CONTACT INFORMATION Michael Cameron Chief Executive Officer and Managing Director Tel: +61 2.8239 3565 Mob; +61 410 437 597 Email: michael.camerongpt.com.eu <7 Mark Fookes Chief Financial Officer Tel: +61 28239 3518 Mob: +61 412 279 833, Email: mark.fookes/@gpt.com.au Wendy Jenkins Group Invest Mana
Slide 46: 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