Gpt Group · ASX:GPT
Gpt — The GPT Group — H1 2011 Earnings Presentation
40 slides from Gpt's earnings presentation, Aug 26, 2011
Slide 1: Welcome to GPT's 2011 interim result presentation
For personal use only Good morning. Thank you for joining us today, and welcome to GPT’s 2011 interim result presentation. 1
Slide 2: Presentation overview
For personal use only Today I will provide a brief summary of our strategy Michael O’Brien will talk about our Financial Results and Capital Management, and I will take you through the performance of our business. There will be plenty of time for questions at the end of the presentation. 2
Slide 3: Strong results for first six months of 2011
For personal use only I am pleased to report strong results for the first six months of 2011. Importantly, we are delivering on our promises. Operating profit for the first half was $221.5 million, an 8% increase on last year, while statutory profit was up 67%. We are making good progress on
Slide 4: Balance sheet and capital initiatives
For personal use only Our balance sheet is rock solid and we continue to work hard on capital initiatives. Our forecast average cost of debt has been reduced by a further 20 basis points, and earlier in the year we activated a share buy- back. The funds to complete the buy-back came from the set
Slide 5: Optimising the business: short term initiatives
For personal use only As we continue on our strategic journey towards best performance, our focus over the last six months has been on optimising the business. We have implemented a series of short term initiatives to push up recurring income levels. The result for the six months was helped by
Slide 6: Building blocks for the future
For personal use only In addition to short term initiatives, we have also concentrated on establishing building blocks for the future. One of these is our disciplined approach to capital allocation. An example of this is buying back our securities at low prices. Another example that I can anno
Slide 7: Simple and straightforward strategy
For personal use only These initiatives are all part of our simple and straightforward strategy, one that we aim to execute with excellence, discipline and imagination We are committed to owning and actively managing high quality Australian real estate assets - For investors, that means superior
Slide 8: Earnings components and levers
For personal use only To demonstrate the sustainability of our model, this slide breaks down earnings into financial components and shows the levers that can be used to enhance our core property income. This example shows that if we are able to achieve income growth from our assets of 3% and kee
Slide 9: Total return and capital growth
For personal use only On the capital side of the equation: - with a distribution yield of 5%, - net assets growing at 3%, and - the benefit of retaining some earnings each year, - a minimum of 9% Total Return is achievable. We’ll continue to influence capital growth by: - Focusing on quality - E
Slide 10: Operating performance for the half year
For personal use only I’ll just talk firstly about the operating performance of the Group for the half year. Realised Operating Income, which reflects our underlying operational earnings, was up 8% over the previous corresponding period – a strong result with solid contributions from all of the
Slide 11: Balance sheet and gearing
For personal use only The Balance Sheet is in great shape with gearing at 21% following: - the completion of the US Seniors Housing sale, - the receipt of the first tranche of the Ayers Rock Resort proceeds and - the progression of the wholesale fund sell down. Look through gearing reduced subst
Slide 12: Composition of operating result
For personal use only In terms of the composition of the operating result: Comparable income was up solidly across the core portfolios, particularly in Retail, driven by strong growth at Rouse Hill Town Centre and Penrith Plaza. Office was also up solidly with strong growth, in particular, at
Slide 13: Management expenses
For personal use only Management Expenses, on a comparable basis, were up 2.7% and, pleasingly, below the comparable income growth achieved across the business. We’re focussed on this because retaining this gap results in a positive leverage effect on earnings. This year we’re looking at re-de
Slide 14: Reducing average cost of debt
For personal use only Reducing our average cost of debt has been a key objective for us for a while now because a high cost of debt is a drag on earnings and has contributed to the gap between the share price and NTA. The asset sale proceeds received in the first half have enabled us to cancel o
Slide 15: Debt maturity profile and refinancing
For personal use only We’ve done a lot of work over the last 2 years on extending and flattening our debt maturity profile so that the refinancing risk is low and the undrawn lines carried can be reduced which has reduced cost. I’m delighted to be able to say today that the remaining $485m of th
Slide 16: Security buy-back
For personal use only In February of this year we made the necessary changes to our Constitution to enable us to undertake a buy back, and in May we announced our intention to buy back up to 5% of issued capital, which we’re funding through the asset sales we’ve completed this half. The assets s
Slide 17: Portfolio key measures
For personal use only Thanks Michael. Across the portfolio we achieved comparable income growth of 3.6%. This slide sets out the key measures for each of our three portfolios. Each portfolio is in a strong position and has performed well in the first half. 17 17
Slide 18: Retail portfolio performance
For personal use only Notwithstanding a cautious retail environment, our retail portfolio has performed well. Income growth of 4.1% was stronger than last year, and specialty sales were broadly the same at around $9,000 per square metre. Occupancy costs actually reduced since December 2010 but
Slide 19: Retail sales trends
For personal use only Retail sales over the past six months were variable, as you can see in this chart. Between January and June, specialty sales growth averaged 2.7% compared to the same period last year. We live in uncertain times though, and although our first half specialty numbers look enc
Slide 20: Working with retailers
For personal use only We work closely with our retailers and we understand their challenges. Between the RED Group and Colorado, there will be a total of 20 store closures. We have already leased 13 of those, and with all Borders stores now re-leased, we are using the opportunity in some cases t
Slide 21: Current retail environment
For personal use only To summarise the current retail environment, we are seeing: - Consumer confidence at 89.6, the lowest since May 2009; and - The household savings rate at 11.5%, against a 10 year average of 3.5%. - Uncertainty continues in relation to the global economy, domestic interest rat
Slide 22: Office portfolio performance
For personal use only The Office portfolio is also in good shape with strong comparable income growth of 3.4%. Cap rates have firmed slightly with 48% of the portfolio valued externally during the six months to June. In this period we achieved a large increase in occupancy compared to the same
Slide 23: Office portfolio quality and occupancy
For personal use only We have an office portfolio that has the highest proportion of premium grade properties in the sector, at 56%. Recent asset sales confirm more tightening in cap rates will occur over the next year. Occupancy across the GPT portfolio increased to 97.5%, well ahead of the i
Slide 24: Office outlook
For personal use only The outlook for Office is strong. Constrained supply in all markets continues to drive positive net absorption. Prime vacancies are generally reducing, and effective rents are tracking upwards. Importantly, incentives are also forecast to move in the right direction, wi
Slide 25: Industrial portfolio
For personal use only Our Industrial portfolio has also maintained a long WALE and has increased occupancy from 97% to 98.8%. Income growth of 2.8% is stronger than the first half of last year. The business is solid with good returns and low volatility, providing a strong platform for expansio
Slide 26: Industrial outlook
For personal use only In Industrial, supply remains limited in historical terms, underpinning rental growth of 2-3%. Only 4.4% of the portfolio is impacted by lease renewals before 2012, with almost 90% of the total portfolio subject to structured increases of 3.3%. 26
Slide 27: Wholesale funds enhance returns
For personal use only One of the many benefits of having wholesale funds is our ability to turbo-charge the normal level of returns available from an asset. In the case of Highpoint, we are able to receive a base yield of 7.6% and when a property management fee and a funds management fee are add
Slide 28: Wholesale funds and sell-down
For personal use only Both of the wholesale funds have very low gearing of around 10- 11%, providing significant capacity to grow. One year returns are strong, reflecting the high quality of the portfolios. There is a significant level of activity within the funds management business, with dev
Slide 29: Sell-down income returns
For personal use only As a result of the sell-down exercise, we have achieved a 60 basis point increase in total income returns to GPT since June 2010. This slide sets out the components that drive the increase. The impact of the sell-down, and reducing debt with the proceeds, will be accretiv
Slide 30: Development activity
For personal use only Development activity for GPT is currently our most effective way of growing the portfolio. Around 36% of our total assets were created by development rather than through acquisition. Using historical development margins in excess of 15%, every $1 billion we spend adds mat
Slide 31: Development pipeline
For personal use only Our immediate challenge is to increase our pipeline of work, and to ensure we can execute in a low risk way to ensure recurring profits and strong IRRs. With a large amount of the activity being carried out within the funds, GPT’s capital requirements and risks are reduced.
Slide 32: 111 Eagle Street update
For personal use only The outlook for 111 Eagle St continues to improve. Against a leasing target of 40% by practical completion, we have already achieved 49% signed Heads of Agreement or leases, so we are well ahead of target. With an average of $805 per square metre and incentives of 25% for
Slide 33: Highpoint redevelopment
For personal use only Construction is well underway with the re-development of Highpoint. It will include 100 new specialty stores, David Jones, a new Woolworths supermarket, and an additional 1,000 car spaces. The specialty leasing program is about to commence, with completion of the expansion
Slide 34: Sustainability leadership
For personal use only We continue to receive awards for our leadership role in sustainability. Our efforts have led to significant operational savings each year, and the ability to attract and retain great tenants. Relative to our base year of 2005, our costs are around $13 million less each y
Slide 35: Priorities
For personal use only Our priorities have not changed. We remain very focused on: - Closing the gap to NTA - Optimising our capital allocation processes - Enhancing our growth potential across the Group; and - Equipping our employees for high performance. 35
Slide 36: What is next for GPT
For personal use only So what is next for GPT? To achieve our targets we will continue to work on optimising the business: - Delivering rental growth - Being disciplined about expenses - Managing our capital; and - Remaining focused on our portfolio returns. But, to accelerate our performance,
Slide 37: Outlook
For personal use only Over the remainder of 2011, the way the global and domestic economic situation plays out will have a major role in determining the outlook for retail. It appears that market conditions will remain subdued, but GPT’s portfolio is well positioned and we expect retail sales acro
Slide 38: In conclusion
For personal use only In conclusion: - GPT’s Operating profit was $221.5m for the half, up 8% - We also delivered EPS growth of 8%, and DPS growth of 12% - Annualised Total Return was 7.4%, and - TSR was 10.6%. Our focus on capital management has led to reduced debt costs and a successful buy-ba
Slide 39: Contact Information
Contact Information Michael Camoron Chief Executive Officer and Managing Director Tet: 4612 8290 3565 Mob: +51 410.437 597 Email michael cameron@gpt.com 2u Michael O'Brien Chief Financial Officer Tol 4612 8290 3544 Mob: +51 417 691 028 Email michael.ofbren@agpt com au rN Judy Barractough Head of Str
Slide 40: For personal use only
For personal use only 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 th