Value and Indexed Property Income Trust PLC · LSE:VIP
Value and Indexed Property Income Trust — Value & Income Trust — Shareholder Meeting (August 2020)
46 slides from Value and Indexed Property Income Trust's shareholder meeting presentation, August 2020
Slide 1: Value & Income Trust Plc AGM Presentation
Value & Income Trust Plc AGM Presentation Investment Managers
Slide 2: Agenda
Agenda • Performance Overview • Property Portfolio • UK Equity Portfolio • Outlook Investment Managers
Slide 3: Overview: Year to 31st March 2020
Overview Year to 31st March 2020 • Annual dividend increased by 2.5% to 12.1p, 33rd year of consecutive increases • NAV total return -21.8% due to weak equity markets • Share price total return -30.7% as the discount widens • Property portfolio outperforms benchmark • Equity portfolio underperforms
Slide 4: Overview
Overview Source: BNP Paribas. Data to 31/3/2020, rebased to 100 Investment Managers
Slide 5: Overview
Overview Source: BNP Paribas. Data to 31/3/2020 Investment Managers
Slide 6: Year End Asset Split & Capital Structure
Overview Year End Asset Split & Capital Structure Source: BNP Paribas. Data to 31/3/2020 Investment Managers
Slide 7: UK Property Portfolio
UK Property Portfolio Contents ➢Overview ➢Portfolio Data ➢Portfolio Update ➢Outlook Investment Managers
Slide 8: VIT Property Portfolio
VIT Property Portfolio • Invests in UK Commercial Property • Index-related long let, strong income streams • Single let properties on full repairing and insuring leases • Delivers long-term above average real returns from a well spread diversified portfolio • Strategic insight into changing property
Slide 9: OLIM Property manage over £1 billion in UK commercial property
OLIM Property manage over £1 billion in UK discretionary commercial property portfolios with individual mandates for pension funds, investment trusts and Oxford colleges • Matthew Oakeshott - Chairman Joint founder of OLIM where he managed UK commercial property and equity portfolios from 1986 to 20
Slide 10: OLIM Property Investment Team
OLIM Property Investment Team Matthew Oakeshott Louise Cleary Chairman Director Jo Seth-Smith Sarah Martin Jo West Investment Manager Investment Manager Investment Analyst Investment Managers
Slide 11: VIT Property Portfolio as at March 2020
VIT Property Portfolio as at 31 March 2020 Industrials Pubs Leisure Roadside • 6 Properties • 11 Properties • 4 Properties • 2 properties • £1,479,569 Rent • £1,305,504 Rent • £669,199 Rent • £323,848 Rent • WAULT* 12 Years • WAULT* 19 Years • WAULT* 21 Years • WAULT* 7 years Other Supermarket Summa
Slide 12: VIT Property Portfolio Sector Weighting
VIT Property Portfolio Sector Weighting % Capital Value Industrials - 32% Pubs - 32% 5% 2% 6% Other (Caravan Park & Library) - 16% 7% 32% Leisure Bowling - 7% Roadside - 6% Leisure Bingo - 5% 16% Supermarkets - 2% Shops & Retail Warehouses - 0% 32% Source: BNP Paribas. Data to 31/3/2020 Investment M
Slide 13: VIT Property Portfolio by Region
VIT Property Portfolio by Region % Capital Value South East - 47% (8 Properties) 5% 3% North - 18% (8 Properties) 6% East Anglia - 7% (2 Properties) 6% London - 8% (2 Properties) 8% 47% South West - 6% (2 Properties) Midlands - 6% (2 Properties) 7% Scotland - 5% (1 Property) 18% Wales - 3% (1 Proper
Slide 14: Contracted Income by Tenant
VIT Property Portfolio Contracted Income by Tenant % Stonegate 16% Park Resorts 11% Tenpin 9% Kier Group 9% Adelie Foods * 8% Co-operative Food 8% H.M Government 7% Shepherd Neame 7% Hampshire C.C. 7% Buzz Group** 5% Brake Brothers 3% Greene King 3% Mitchells & Butlers 3% Caerphilly Borough Council
Slide 15: Indexed Related Rent Reviews
VIT Property Portfolio Indexed Related Rent Reviews as at 31 March 2020 Retail Price Index (36% Annual Reviews, 14% 34% Five Yearly Reviews) Fixed Increases (6% Annual Reviews, 16% 10% Five Yearly Reviews) 70% Open Market (7% Three Yearly, 7% Five Yearly) Investment Managers
Slide 16: Sector Change 2009 to 2020
VIT Property Portfolio Sector Change 2009 to 2020 % Capital Value Sector March 2009 March 2014 March 2020 Shops 56% 39% 0% Out of Town Retail 1% 0% 0% Supermarkets - 5% 2% Sub total - All Retail 57% 44% 2% Pubs / Restaurants 11% 17% 32% Leisure - - 12% Industrial 6% 8% 32% Automotive & Roadside 17%
Slide 17: Total Annualised Returns
VIT Property Portfolio Total Returns (% p.a.) Data to 31/3/2020 14% 12% 12% 10% 10% 10% 9% 9% 9% Total Annualised Returns 8% 8% 8% 8% 7% 7% 6% 6% 6% 6% 6% 5% 4% 3% 3% 3% 3% 3% 3% 3% 2% 0% 1 year 3 years 5 years 10 years 20 years 33 years -1% -2% VIT Property MSCI RPI Real Return Total Returns on VIT
Slide 18: VIT Property Portfolio Year to March 2020
VIT Property Portfolio Year to March 2020 • Outperformance: Outperformance of the main Benchmark for commercial property continued • Annual Total Return: 6.3% (-0.6% MSCI Benchmark) • Contracted Income Yield: 6.4% • Growth on held properties: Income growth 1.4% & Capital growth 2.7% • Index-Related
Slide 19: VIT Property Portfolio March 2020 to Date
VIT Property Portfolio March 2020 to Date as at 26 August • Capital Value: £75,700,000 (£70,200,000 as at 31 March plus 3 new purchases) • Purchases Completed: 3 freehold supermarket properties let to Co-op for £5,500,000 excluding costs (Net initial Purchase Yield 6.2%, WAULT 13 years, all Index-Re
Slide 20: Effects of COVID-19 on VIT Property Rental Payments
Effects of COVID-19 on VIT Property Rental Payments Q2 MARCH Quarter to 24 June 2020 • 82% Rent for the quarter received • 5% On Agreed Payment Plans • 7% Milton Keynes Adelie Foods went into Administration May 2020 • 6% Bradford & Manchester Buzz Bingo rent free for March quarter agreed Q3 JUNE Qua
Slide 21: Property Market - Outlook
Property Market - Outlook • UK commercial property market is seeing profound Covid changes • Falling property rents, rising valuation yields and downwards capital values. The commercial property valuers material uncertainty clause has now been lifted on industrials, offices, student housing & superm
Slide 22: Property Market – Outlook
Property Market – Outlook • Hotels & Pubs & leisure hit hard but fittest will survive now the hospitality sector can reopen • Lease lengths will shorten, upwards only rent reviews under pressure, break options will be exercised along with increasing number of CVA’s • The Government under tenant pres
Slide 23: Covid-19 effect on Property sub sectors
Property Market Covid-19 effect on Property sub sectors • Offices – Long term effect of the pandemic will be a reduction in demand due to flexible and remote working • Retail – Many bricks and mortar retailers were struggling before COVID and will not re-open. • Supermarket and convenience stores pl
Slide 24: Conclusion
Conclusion • Most sectors of UK Commercial property market face a difficult 2020 • Many tenants will struggle into 2021 • Offices and non-food retail property will suffer most • Well-let warehouses, supermarkets and some alternative sectors likely long term winners • Safe long term income should be
Slide 25: Comparative Yields % – End December
Comparative Yields % – End December (Except 2020 End June) 9 7 5 3 1 -1 -3 Property (Equivalent Yield) Long Conventional Gilts Long Index Linked Gilts Investment Managers
Slide 26: Yield Gaps: Property Less Gilt Yields %
Yield Gaps: Property Less Gilt Yields % Investment Managers
Slide 27: Comparative Yields % – End December
Comparative Yields % – End December (Except 2020 End June) 2020* 2019 2018 2017 2016 2014 2011 2008 2006 Property (Equivalent Yield) 6.0 5.6 5.4 5.5 5.7 5.9 6.8 8.1 5.4 Long Gilts Conventional 0.2 1.0 1.5 1.4 1.5 2.0 2.5 3.7 4.6 Index Linked -2.6 -2.0 -1.8 -1.8 -1.8 -0.8 -0.2 0.8 1.1 UK Equities 4.7
Slide 28: UK Equity Portfolio
UK Equity Portfolio ➢Markets Background ➢Performance ➢Portfolio Changes ➢Outlook Investment Managers
Slide 29: UK Equities – Markets Background
UK Equities – Markets Background Equities (Capital Returns) 3 Mths 6 Mths 12 Mths FTSE All Share -26.0% -23.5% -21.9% ➢2019 gains wiped out in Q1 2020 FTSE 100 FTSE 250 -24.8% -31.0% -23.4% -24.3% -22.1% -21.0% • Rapid sell-off as C-19 implications MSCI World ex UK ($) -21.4% -15.0% -12.1% become cl
Slide 30: UK Equities – FTSE All Share Index
UK Equities – FTSE All Share Index Source: Bloomberg Data to 31/3/2020 Investment Managers
Slide 31: UK Equities – Background
UK Equities – Background ➢ Until Feb 2020 markets had been making steady progress and economic optimism was growing. ➢ The economic and investment background changed profoundly in Q1 2020 as the impact of the coronavirus became clearer. ➢ Scale of economic impact uncertain but large contraction like
Slide 32: UK Equities – Background
UK Equities – Background ➢ UK GDP grew by 1.1% in 2019. Expectations for growth were rising. ➢ Coronavirus lockdown brought the economy to a halt. ➢ UK GDP fell by over 20% in Q2 2020 as lockdown measures restricted economic activity ➢ Interest rates cut to 0.1%, £300bn of QE, massive fiscal support
Slide 33: UK Equities – Performance
UK Equities – Performance Total Return 9 Months 31/3/19 3 Months 31/12/19 12 Months to to 31/12/19 to 31/10320 31/3/20 VIT Equity Portfolio +10.3% -30.8% -23.7% FTSE All Share Index +8.9% -25.2% -18.5% FTSE Higher Yield Index +4.6% -27.2% -23.8% Source: BNP Paribas, Bloomberg Data to 31/3/2020 Inves
Slide 34: UK Equities Performance
UK Equities Performance ➢Portfolio outperformed in the 9 months to 31/12/19 ➢Sharply underperformed in the virus inspired sell-off ➢High yielding shares underperformed ➢High weightings in Travel & Leisure and Life Assurance sectors, underweighting in Pharmaceuticals hurt performance ➢Travel & Leisur
Slide 35: UK Equities – Year End Sector Split
UK Equities – Year End Sector Split Source: BNP Paribas. Data to 31/3/2020 Investment Managers
Slide 36: UK Equities – Year End Portfolio Top 20
UK Equities – Year End Portfolio Top 20 Value £m Portfolio % Value £m Portfolio % Unilever £6.5m 7.2% Legal & General £3.3m 3.7% GlaxoSmithKline £5.9m 6.0% Beazley £3.3m 3.7% Pennon £4.5m 4.9% DS Smith £3.2m 3.5% BP £4.3m 4.7% Phoenix Group £2.9m 3.2% Vodafone £4.1m 4.5% BHP £2.8m 3.1% Croda Interna
Slide 37: UK Equities – Portfolio Changes to 31/3/20
UK Equities – Portfolio Changes to 31/3/20 ➢Complete Sales: Centrica, BT Group, Eddie Stobart Logistics, Johnson Matthey, Cineworld, Restaurant Group, Crest Nicholson ➢Reductions: Beazley, Unilever, Spectris, Croda, Hansard Global ➢New Holdings: FDM Group, M&G ➢Additions: Lloyds Banking Group, Vodaf
Slide 38: UK Equities – Portfolio Changes to 31/3/20
UK Equities – Portfolio Changes to 31/3/20 ➢Two distinct phases – pre and post virus ➢Pre-virus trades aimed at increasing portfolio quality and dividend growth potential e.g. BT, Centrica sales, FDM purchase ➢Post-virus trades: sold those holdings with weaker balance sheets and worst affected by lo
Slide 39: UK Equities – Portfolio Changes since 31/3/20
UK Equities – Portfolio Changes since 31/3/20 ➢3 new holdings since year-end - Wm Morrison Supermarkets, Telecom Plus, National Grid ➢All have strong balance sheets, secure & growing dividends, largely unaffected by lockdown measures ➢Disposed Lloyds Banking Group, Marston’s ➢Dividend paying capacit
Slide 40: UK Equities – Current Sector Split
UK Equities – Current Sector Split Source: BNP Paribas. Data to 31/7/2020 Investment Managers
Slide 41: UK Equities – Current Portfolio Top 20
UK Equities – Current Portfolio Top 20 Value £m Portfolio % Value £m Portfolio % Unilever £6.4m 7.4% Royal Dutch Shell £3.2m 3.8% GlaxoSmithKline £6m 6.9% Rotork £3.2m 3.8% Vodafone £3.9m 4.6% Rio Tinto £3m 3.6% Spectris £3.7m 4.3% Phoenix Group £3m 3.5% Legal & General £3.7m 4.3% Beazley £2.9m 3.4%
Slide 42: UK Equities – Portfolio Changes
UK Equities – Portfolio Changes ➢Portfolio more resilient to difficult economic conditions ➢Top 20 holdings have all continued to pay dividends / resumed payments bar DS Smith, Beazley & Britvic which are all expected to return to the dividend list ➢Increase weightings in defensive sectors e.g Utili
Slide 43: UK Equities - Outlook
UK Equities - Outlook ➢Coronavirus has changed the economic and investment background profoundly ▪ Global economic contraction at least twice as severe as in the financial crisis ▪ Government and central bank responses have been unprecedented outside times of war ➢Shape of recovery dependent on succ
Slide 44: UK Equities - Outlook
UK Equities - Outlook ➢Unprecedented dividend cuts, deferments, suspensions and even cancellations of previously declared payments ➢Royal Dutch Shell cut its dividend for the first time since the Second World War ➢UK dividend future suggesting 35% fall in FTSE 100 dividends in 2020. Some improvement
Slide 45: UK Equities - Outlook
UK Equities - Outlook ➢Market Valuation ▪ UK equities relatively if not absolutely undervalued: 20.1x 2020 (high degree of error expected), falling to 14.0x 2021, ▪ Circa 3.5% dividend yield after cuts with dividend and earnings rebound in 2021 ▪ Bond yields at lows well below prevailing inflation i
Slide 46: Disclaimer
46 46 Disclaimer This document is issued jointly by OLIM Limited and OLIM Property Limited. Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and an investor may not get back the original amount invested. OLIM and OLIM Property are join
Value & Income Trust — Shareholder Meeting (August 2020) on 6ix