Gpt Group · ASX:GPT
Gpt — The GPT Group — H1 2012 Earnings Presentation
45 slides from Gpt's earnings presentation, 2012
Slide 1: The GPT Group
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Slide 2: Agenda
Agenda Strategy Business Performance Outlook Michael Cameron CEO Financial Result Capital Management Michael O’Brien CFO Note: All information included in this presentation includes GPT owned assets and GPT’s interest in the Wholesale Funds (GWSCF and GWOF) unless otherwise stated. All ret
Slide 3: 2012 Interim Result: Solid business model delivering strong results
HIGHLIGHTS 2012 Interim Result Solid business model delivering strong results Long term investment value Active portfolio management Deep capability Effective capital management 3
Slide 4: 2012 Interim Result – key highlights
HIGHLIGHTS 2012 Interim Result – key highlights EPS growth of 6.2% in first half EPS growth of 6.2%(1) DPS growth of 11.8% Comparable income growth of 4.3% 111 Eagle Street and 5 Murray Rose developments complete Sold 50% interest in Casuarina and Woden to GWSCF Sold two thirds interest
Slide 5: 2012 Interim Result – key indicators
STRATEGY 2012 Interim Result – key indicators Long term value proposition For investors, GPT offers a secure, reliable investment targeting superior risk-adjusted returns over time - Quality assets - Strong stable earnings - Growth potential Six months to Targets Outcome 30 Jun 2012 EPS(1) growth
Slide 6: Strategic focus
STRATEGY Strategic focus Platforms to accelerate performance + OPTIMISE GROW To achieve targets To accelerate performance Rental growth Funds growth Expense discipline Development Capital management Other profit sources Portfolio management Asset acquisitions 6
Slide 7: Optimisation: Fit for Growth
STRATEGY Optimisation Fit for Growth Review of cost base and structure Impact of ‘Fit for Growth’ program to reflect Estimated impact - Process and system Effective date completed 10 August improvements Reduction in people 70 - Simpler business model Net reduction in roles 60 - Focus on growth Exp
Slide 8: Growth: Good progress in growth strategies
STRATEGY Growth Good progress in growth strategies Funds Growth of $890 million, or 16% in GPT’s funds since the management start of 2012 + Development Business plan and resources in place to implement new logistics and business parks development strategy + New profit Eight additional potentia
Slide 9: GPT people: Changes to Leadership Team
STRATEGY GPT people Changes to Leadership Team in line with strategy Establishing capability for Effective October 2012 growth focus Michael O’Brien to head up a new Corporate Development function Bringing in additional Judy Barraclough moves to Head of experience Strategy Active career de
Slide 10: 2012 Interim Result summary
FINANCIALRESULT 2012 Interim Result summary Distribution per security up 11.8% GPT Financial Summary Six months to 30 June ($m) 2012 2011 Total Realised Operating Income (ROI) 227.2 221.5 Changes in fair value of assets 122.4 54.1 (Loss)/profit on disposals (2.5) 1.5 Financial instruments marked to
Slide 11: Segment performance
FINANCIALRESULT Segment performance Strong contributions from all business units Six months to 30 June ($m) 2012 2011 Comment Retail 161.0 152.3 Comparable income growth of 3.9% Office 64.4 60.3 Comparable income growth of 5.6% Logistics & Business Parks 31.6 27.8 Comparable income growth of 2.5% GP
Slide 12: 2012 Interim Result – earnings attribution
HIGHLIGHTS 2012 Interim Result – earnings attribution Multiple performance drivers EPS attribution 0.3c 0.1c -0.1c -0.1c 12.0c 0.6c 1.0% -1.2% 2.4% -1.1% 6.2% 11.3c 5.2% EPS 30 Income Interest Buy-back Disposals Lower Tax EPS 30 June 2011 Growth Rates Benefit June 2012 12 Note: EPS defined as ROI pe
Slide 13: Management expenses: Income growth exceeds expense growth
FINANCIALRESULT Management expenses Income growth continues to exceed expense growth Comparable income growth of 4.3% outpacing comparable management expense growth of 1.3% Expenses ‘Jaws’ for six months to Six months to 30 June ($m) 2012 2011 30 June 2012 Corporate Overheads 12.8 10.5 Portfolio E
Slide 14: Management expenses: Fit for growth
FINANCIALRESULT Management expenses Fit for growth Review of cost structure Impact of ‘Fit for Growth’ program Significant restructure resulting in Estimated impact ($m) 2012 2013 removal of roles, creation of new roles, Reduction in (4.6) (17.6) overall reduction in headcount expenses(1) ROI im
Slide 15: Balance sheet
FINANCIALRESULT Balance sheet Well positioned balance sheet GPT Balance Sheet 30 Jun 31 Dec 2012 2011 Total assets ($m) 9,001 9,288 Total borrowings ($m) 1,912 2,144 Net tangible assets per security ($) 3.65 3.59 Gearing (%)(1) 20.2 22.9 Look through gearing (%)(1) 23.1 24.4 Interest cover ratio (x)
Slide 16: Capital management: Active management of capital levers
CAPITALMANAGEMENT Capital management Active management of capital levers Effective debt manage- ment Active Capital portfolio Security manage- management buy-back ment levers Leverage via funds 16
Slide 17: Capital management: Continued reduction in cost of debt
CAPITALMANAGEMENT Capital management Continued reduction in cost of debt Forecast cost of debt reduced Average cost of debt by 50bps from previous 2012 7.4% forecast to 5.7% 6.6% 6.2% - Renegotiation of existing 5.7% loans Fees - Termination of Margin expensive hedges as asset sale proceeds Floati
Slide 18: Capital management: Flat maturity profile with long tenor
CAPITALMANAGEMENT Capital management Flat maturity profile with long tenor Weighted average term to maturity of 5 years versus target of 4 years $100m bond issue in July 2012 – increased tenor and diversification Sources of debt Debt maturity profile Facility CPI A$ million 375 Bonds 325 287 4%
Slide 19: Improving returns
FINANCIALRESULT Improving returns Focus on increasing return on equity Reducing cost base Reduced average cost of debt Increased return on capital invested in the wholesale funds Sale of low income producing assets Earnings per security(1) Total return(2) 24.0c 9.3% 22.4c 9.2% 20.7c Minimum
Slide 20: Portfolio weighting
PORTFOLIO Portfolio weighting Moving towards target portfolio weighting Portfolio weighting Portfolio weighting Target portfolio weighting As at 31 December 2011 As at 30 June 2012 9% 11% 15% 61% 30% 57% 32% 50% 35% Retail Office Logistics & Business Parks Structural changes in retail landscape an
Slide 21: Investment Management: Strong portfolio performance
PORTFOLIO Investment Management Strong portfolio performance Portfolio Comparable WALE Occupancy WACR Size(1) Income Growth(2) Retail $4.8bn 3.9% 4.4 years 99.1% 6.10% Office $2.7bn 5.6% 4.8 years 93.6% 7.01% Logistics & $0.9bn 2.5% 6.1 years 99.0% 8.36% Business Parks Total $8.4bn 4.3% 4.7 years 97
Slide 22: Retail: Continues to deliver solid operating performance
PORTFOLIO Retail Continues to deliver solid operating performance Key operating metrics Six months to 30 June 2012 2011 Comparable income growth 3.9% 4.1% Comparable total centre sales growth(1) 0.4% 1.2% Comparable specialty sales growth(1) 0.4% 2.1% Specialty sales psm(1) $8,981 $8,904 Specialty o
Slide 23: Retail: Resilient despite headwinds
PORTFOLIO Retail Resilient despite headwinds Comparable income growth of Six months to 30 June 2012 2011 3.9% underpinned by high proportion of structured rental Vacancies(1,2) 40 30 increases Arrears: % annual billings 0.7% 0.5% Customer traffic and average $3.9m $2.9m $ value spend remain stea
Slide 24: Retail: Sales impacted by cyclical factors
PORTFOLIO Retail Sales impacted by cyclical factors Retail sales growth at cyclical low due to economic uncertainty and subdued consumer sentiment Retailer margins have increased over past decade despite volatile sales GPT monthly specialty sales growth Retailer margins vs retail sales Jan – Jun
Slide 25: Retail: Actively addressing structural changes
PORTFOLIO Retail Actively addressing structural changes Retail structural changes Opportunities for GPT Online retail growth Continued enhancement of quality, regional centres Price harmonisation Digital strategy focused on driving Changing physical traffic consumption patterns Evolution
Slide 26: Retail Development: Highpoint update
PORTFOLIO Retail Development Highpoint update Development is progressing well with 70% of specialty shops leased to high quality domestic and international brands Stage one Stage Two Stores Woolworths David Jones and 35 and 65 specialties specialties Leasing Fully leased 35 stores Update leased Co
Slide 27: Office: Income growth of 5.6% achieved
PORTFOLIO Office Income growth of 5.6% achieved in first half Key operating metrics Six months to 30 June 2012 2011 Comparable income growth 5.6% 3.4% Occupancy 90.6% 96.9% Occupancy (including terms agreed)(1) 93.6% 97.5% Weighted average lease expiry 4.8 years 4.9 years Leases signed 35,026 sqm 46
Slide 28: Office: Portfolio quality underpins performance
PORTFOLIO Office Portfolio quality underpins performance Strong income growth driven by high average occupancy and rental growth Reduced occupancy due to a number of lease expiries at 30 June and inclusion of 111 Eagle Street Managing risk of key upcoming expiries with Citigroup lease renewed
Slide 29: Office: Mixed outlook across primary CBD markets
PORTFOLIO Office Mixed outlook across primary CBD markets Actively targeting to expand portfolio from 30% to 35% - Focus on prime assets with preference for GPT to have control - Long term investment timeframe Proactively managing capital expenditure Market Outlook(1) (arrows represent outlook)
Slide 30: Office Development: One One One Eagle Street
PORTFOLIO Office Development One One One Eagle Street Leasing Completed in June 2012 Total NLA 64,000 sqm 82% of floor space committed Signed and/or committed 52,500 sqm GPT development profit of $44m Average lease $820/sqm Stabilised project development yield Average incentives 25% of 6.9%
Slide 31: Logistics & Business Parks: High occupancy and long WALE
PORTFOLIO Logistics & Business Parks High occupancy and long WALE maintained Renamed to better describe our portfolio Low vacancy and limited downtime underpins solid income performance Weighted average capitalisation rate firmed 11 basis points Key operating metrics Six months to 30 June 2012
Slide 32: Logistics & Business Parks: Moving towards target weighting of 15%
PORTFOLIO Logistics & Business Parks Moving towards target weighting of 15% Addition of $178 million to Logistics & Business Parks portfolio in 2012 demonstrates progress in growth strategy - Completion of 5 Murray Rose Avenue valued at $64 million - $115 million in acquisitions: Citiport Business
Slide 33: Logistics & Business Parks: Underlying fundamentals remain positive
PORTFOLIO Logistics & Business Parks Underlying fundamentals remain positive Limited supply and speculative development Low vacancy in Sydney and Melbourne Strong tenant demand for existing stock evidenced by low downtime in vacancies Increased import levels support demand for warehouse and
Slide 34: Logistics & Business Park Development: 5 Murray Rose
PORTFOLIO Logistics & Business Park Development 5 Murray Rose Completed in April 2012 100% leased to Lion Group for 12 years Stabilised development yield of 8.5% Development profit of $5 million Achieved 6 Star Green Star design rating 34
Slide 35: Growth strategies: Four growth platforms
STRATEGY Growth strategies Four growth platforms, consistent with risk profile Funds management + Development + New profit sources + Asset acquisitions Potential to generate meaningful profit from growth platforms Aligned with strategy and risk appetite Relatively low impact on balance sheet 3
Slide 36: Growth platform 1: Funds management
STRATEGY Growth platform 1: Funds management Strategy to grow via two pathways Focus on growing existing funds in the short term First Pathway: Grow the Acquisitions and developments existing funds Logistics wholesale fund – after target weighting is Second achieved on balance sheet Pathway: N
Slide 37: Growth platform 1: Increasing size and quality of existing funds
STRATEGY Growth platform 1: Funds management Increasing size and quality of existing funds Acquired $586m assets in 1H 2012 Continues to improve quality of funds GPT Funds Growth in FUM ($ million) GWOF: Acquired 150 Collins Street 586 6,407 593 7,000 5,517 304 Completed 111 Eagle Street dev
Slide 38: Growth platform 2: Development
STRATEGY Growth platform 2: Development A dual approach Focus on value enhancement of existing assets Portfolio enhancement Mainly retail and major office projects Building further capability in logistics and business park Logistics and development business park projects Will help target wei
Slide 39: Growth platform 3: New profit sources
STRATEGY Growth platform 3: New profit sources Opportunities across assets and customers GPT Extracting value from intangible real estate expertise Examples: assets Exploiting information value Digital strategy, including tailored Source digital advertising Monetising the of value consumer presenc
Slide 40: GPT people: Focus on culture and capability
STRATEGY GPT people Focus on culture and capability aligned with strategy Renewal program underway Culture of achievement and accountability Adopted seven cultural values – being embedded throughout the business 40
Slide 41: Outlook for second half of 2012
OUTLOOK Outlook for second half of 2012 Earnings and value drivers Portfolio Steady income growth based on structured rental income increases and high occupancy Improved outcome from leasing success at One One One Eagle Street, and sale of Newcastle CBD Growth Increased fees from growth in who
Slide 42: Outlook for full year 2012
OUTLOOK Outlook for full year 2012 Targeting EPS(1) growth of at least 7% for 2012 Payout ratio of no less than 80% of ROI (1) EPS defined as Realised Operating Income (ROI) per ordinary security 42
Slide 43: GPT Interim Result: Solid business model delivering strong results
HIGHLIGHTS GPT Interim Result Solid business model delivering strong results Long term investment value Active portfolio management Deep capability Effective capital management 43
Slide 44: Contact Information
Contact Information Michael Cameron Michael O’Brien Judy Barraclough Chief Executive Officer and Chief Financial Officer Head of Strategy and Managing Director Corporate Affairs Tel: +61 2 8239 3565 Tel: +61 2 8239 3544 Tel: +61 2 8239 3752 Mob: +61 410 437 597 Mob: +61 417 691 028 Mob: +61 418 962
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