Slide 1: 2014 Full Year Results Presentation and Aspen Parks Property Fund Update
For personal use only ASPEN GROUP 2014 FULL YEAR RESULTS PRESENTATION AND ASPEN PARKS PROPERTY FUND UPDATE
Slide 2: Agenda
Agenda For personal use only 1. Overview 2. FY14 progress on business transition 3. APPF recapitalisation 4. APPF investment case 5. Conclusion Appendix A. FY14 financial results and debt update 2
Slide 3: 1. Overview
For personal use only 1. Overview
Slide 4: Summary
Summary For personal use only Accelerating progress of business transition over the last year Commercial asset sales significantly advanced: Spearwood remaining major asset Development assets now substantially sold Business is net cash, with $44.7m cash and $26.8m debt (June 14) Overhead e
Slide 5: Strategic vision for Aspen
Strategic vision for Aspen Transition Aspen to an A-REIT focussed on ‘value for For personal use only money’ accommodation Attractive industry dynamics with significant growth opportunities Strong demographic trends, underpinned by ageing population Fragmented industry provides opportunities f
Slide 6: Key financial metrics
Key financial metrics For personal use only APPF recapitalisation $39.9m entitlement offer; reduces gearing to 31.7% (headroom for future acquisitions) APPF distribution yield of 8.2% on offer price (on current APPF distribution rate) Distribution is after retaining earnings for stay-in-busi
Slide 7: Impact on Aspen
Impact on Aspen Aspen Group asset exposure predominantly in accommodation For personal use only Look through assets1 Asset exposure – look through basis $m % 11% APPF 87.7 35.3% AKV 38.5 15.5% 11% 35% Spearwood 67.5 27.2% Development 2 27.3 11.0% Cash / other 27.2 11.0% 27% Total 248.2 100.0% 16% AP
Slide 8: Distribution guidance
Distribution guidance For personal use only Distribution guidance range 8.0 to 10.7 cents per share for FY15 (FY14:11.5 cps) Lower end of range assumes Spearwood is not leased during 2H15 Based on balance sheet gearing of 4.2% (look through gearing 16.5%) 1 Distribution guidance may vary dep
Slide 9: Aspen Group market position
Aspen Group market position Peer comparison - FY15 distribution yield For personal use only 10.0% 8.0% 6.0% As at 22 August 2014 closing price of $1.24, Aspen is trading on 4.0% 2.0% A distribution yield of 6.5% to 8.6%, based on the FY15 distribution guidance range 0.0% APZ ARF HPI FET GHC NSR
Slide 10: Committed to delivery of value to Aspen Group shareowners
Committed to delivery of value to Aspen Group shareowners For personal use only Board has considered a number of alternative approaches on various assets There have been approaches to acquire Aspen Group’s management rights and co-investment in APPF as well as individual assets of APPF No appr
Slide 11: 2. FY14 progress on business transition
For personal use only 2. FY14 progress on business transition
Slide 12: Rapid progress over FY14
Rapid progress over FY14 Key priorities Progress For personal use only Sale and settlement of 2 out of 4 commercial assets Commercial Noble Park in advanced negotiations for sale properties Spearwood sole key asset remaining Development Development asset exposure reduced from $204.9m (June 1
Slide 13: Commercial portfolio sale
Commercial portfolio sale FY13 Performance - Key Points Substantial progress on commercial portfolio disposal For personal use only Completed sale of the two largest properties in the portfolio Septimus Roe, Perth and ATO Adelaide office buildings – no exposure to the office market Remaining two
Slide 14: Non-core divestments
Non-core divestments FY13 Performance - Key Points Development asset exposure materially reduced For personal use only 200 150 152.0 $m 100 204.9 50 15.6 13.5 37.3 17.2 23.9 0 6.8 14
Slide 15: Aspen Karratha Village
Aspen Karratha Village FY13 Performance - Key Points For personal use only Successfully re-leased most of the property to Woodside in January Re-leased at a lower rental rate, a strong outcome given difficult market conditions Associated capital works of $0.6m completed Strong focus on reduc
Slide 16: Aggressive reduction in overheads
Aggressive reduction in overheads FY13 Performance - Key Points Reduced by 33% relative to the prior year For personal use only Current annualised overhead cost rate of $8m is half the level of FY13 Remains a continued focus in FY15 as the business continues to simplify 9 Overheads expense by
Slide 17: Business is now net cash
Business is now net cash FY13 Performance - Key Points Simplified structure with only one senior facility remaining For personal use only Debt substantially reduced by $202.7m since June 13, to $26.8m Cash holdings of $44.7m Aspen Group's total on balance sheet debt exposure 300 40% 35% 250 30%
Slide 18: NTA per share composition
NTA per share composition Much greater clarity of value as business simplification has continued For personal use only Of the 23 cents per share in assets held for sale, 17 cents has been contracted 2.00 1.80 0.01 0.03 1.60 0.37 0.22 1.40 0.23 1.20 $/share 1.00 0.41 0.80 1.50 0.60 0.40 0.73 0.20
Slide 19: NTA per share movement
NTA per share movement Major decline in NTA over the half year to June 14 was due to the revaluation of For personal use only Spearwood, about 12 cents per share There was also a smaller negative impact (approximately 3 cents per share) reflecting provisions on exit of remaining assets and reduc
Slide 20: Change in underlying performance between FY13 and FY14
$m For personal use only 2.00 4.00 6.00 8.00 - 10.00 12.00 14.00 16.00 FY13 Underlying 11.1 Earnings Net commercial property 3.4 Net accommodation 5.5 Other revenue 1.7 FY13 Performance - Key Points Operating expenses 4.3 Financial expenses 1.7 Development operating loss 1.3 Change in underlying per
Slide 21: 3. APPF recapitalisation
For personal use only 3. APPF recapitalisation
Slide 22: Recapitalisation of APPF
Recapitalisation of APPF Immediate requirement to reduce leverage in APPF For personal use only APPF has experienced reduced operating income primarily driven by the downturn in resource sector capital expenditure Fall in operating income has flowed through to a reduction in the value of the APP
Slide 23: APPF entitlement offer summary
APPF entitlement offer summary For personal use only Offer details APPF application of funds Offer price - $0.49, a discount of $m 7.5% to the NAV per security of APPF Debt repayment 33.5 Entitlement – 1 new security for Withdrawal offer 6.0 every 2 existing APPF securities Offer costs 0.4 Amo
Slide 24: APPF key financial metrics
APPF key financial metrics For personal use only LVR – pre recapitalisation 54.8% LVR – post capitalisation 35.4% Annualised distribution rate1 4 cents per security Offer price $0.49 per security Distribution yield on offer price 8.2% New APPF debt facility2 Limit $125.0m Term 3 years to August 2017
Slide 25: Underwriting arrangements
Underwriting arrangements Aspen Group intends to participate to its full entitlement and has For personal use only agreed to underwrite the APPF entitlement offer Underwritten price of $0.51 per security Underwriting APPF reserved the right to cancel the Entitlement Offer if a compelling and arr
Slide 26: APPF management arrangements
APPF management arrangements For personal use only Aspen Funds Management (AFM), a wholly owned subsidiary of Aspen Group, is the responsible entity of the Aspen Parks Property Trust (APPT) Separately, AFM is also the Fund Manager of APPF, under a contract to April 2019 Asset management fee of
Slide 27: Approaches in relation to APPF
Approaches in relation to APPF For personal use only On 20 June 2014 Aspen Group was approached by Ingenia Communities Group (ASX:INA) with a non-binding indicative proposal to acquire both Aspen Group’s 12.5% co-investment in APPF, at NAV; and Aspen Group’s management rights in APPF, at $5m
Slide 28: 4. APPF investment case
For personal use only 4. APPF investment case
Slide 29: Aspen Parks overview
Aspen Parks overview Established presence in the For personal use only Aspen Parks portfolio – as at 30 June 2014 accommodation market A leading player in the accommodation No Value $m % park industry Mixed use 15 141.6 70% Portfolio of 21 properties Resource 4 33.2 16% Management track reco
Slide 30: APPF investment proposition
APPF investment proposition For personal use only 1. Positive industry dynamics 2. Focus on operating margins 3. Development opportunities 4. Expansion opportunity as an industry consolidator 30
Slide 31: 1. Positive industry dynamics
1. Positive industry dynamics For personal use only Strong demographic trends, underpinned by ageing population Fragmented industry facilitates growth through acquisition Accommodation is a necessity; residential affordability remains a key issue Long term supply/demand dynamics are positive
Slide 32: 2. Focus on operating margins
2. Focus on operating margins For personal use only Unlike commercial real estate, there is significant margin sensitivity Labour is the bulk of costs at ~72% Operating margin in FY14 was 36.5% Changes in margin have magnified impact after overhead costs and gearing Revenue opportunities
Slide 33: 3. Development opportunity
3. Development opportunity For personal use only In-house development management capability Over the past 2 years, APPF has delivered an additional 83 cabins Capital constraints associated with APPF’s LVR have prevented APF realising several development opportunities Currently investigating
Slide 34: 4. Expansion potential
4. Expansion potential For personal use only Industry is characterised by highly fragmented ownership Large number of individual owners Generational change is a driver of transactions Forces for industry consolidation are evident – including increased capital requirements and marketing/techn
Slide 35: FY14 APPF management changes
FY14 APPF management changes For personal use only Operating management platform strengthened Appointment of new Chief Operating Officer – external appointment (April 2014) Appointment of new Human Resources Manager – external appointment (Nov 2013) Business review – focus on operational eff
Slide 36: APPF central function costs down
APPF central function costs down FY13 Performance - Key Points Management strengthened within overall cost discipline For personal use only APPF central function cost reduced by 9% over FY14, with improved efficiencies Central function costs included COO/Regional Operational Management, IT, mark
Slide 37: Significant re-basing of APPF
Significant re-basing of APPF For personal use only Excessive leverage amplified the impact of resources slowdown Portfolio value down ~29% over 12 months to June 2014 Equity value down ~46% over 12 months to June 2014 Distributions rebased Strongly cash generative at this level Earnings
Slide 38: Valuation update June 2014
Valuation update June 2014 Valuation update For personal use only Five independent valuations undertaken as part of FY14 full year accounts Decline in carrying value of $2.3m or 1% of the total portfolio value Follows full independent portfolio revaluation for December 2013 Mixed outcome o
Slide 39: Financial update - performance
Financial update - performance For personal use only 2013 2014 Change Change $m $m $m % Resource park earnings 15.7 6.5 (9.2) (59%) Resort park earnings 3.7 3.0 (0.7) (19%) Mixed use park earnings 12.9 15.1 2.2 17% Other earnings 1.2 0.5 (0.7) (58%) Total revenue 33.5 25.1 (8.4) (25%) Operating expe
Slide 40: APPF balance sheet – pro-forma
APPF balance sheet – pro-forma Impact of the recapitalisation For personal use only Post-Offer Post Withdrawal 30-Jun-14 Recapitalisation Pro-Forma Pro-forma $m $m $m $m Total assets 210.2 0.0 210.2 210.2 Total liabilities 124.0 (39.5) 84.5 90.5 Net assets 86.2 39.5 125.7 119.7 Securities on Issue (
Slide 41: 5. Conclusion
For personal use only 5. Conclusion
Slide 42: Conclusion
Conclusion For personal use only Aspen Group has made significant progress on its strategic business transition in FY14 Business has been simplified, is more focused, with less debt and lower overhead APPF’s recapitalisation is part of this strategic transition to restore value in Aspen Group
Slide 43: Appendix A: FY14 financial results and debt update
For personal use only Appendix A FY14 financial results and debt update
Slide 44: Operating earnings
Operating earnings FY13 Performance - Key Points For personal use only 2014 2013 $m CPS $m Revenue from operations Net commercial property 15.2 12.6 14.0 Net accommodation - Aspen Karratha Village 10.7 8.9 13.5 - Aspen Parks Property Fund 5.0 4.2 7.8 Other revenue 4.5 3.7 2.6 Total revenue 35.3 29.4
Slide 45: Group Financial Result
Group Financial Result 2014 2013 For personal use only $m CPS $m Accommodation operating profit 15.2 12.6 11.1 Commercial / industrial operating profit 7.7 6.4 14.5 Development operating loss (8.1) (6.8) (14.3) Total operating profit 14.7 12.3 11.3 Loss - subsidiary assets held for sale (27.1) (22.6
Slide 46: Balance sheet
Balance sheet For personal use only 30 June 14 30 June 13 30 June 12 $m $m $m Cash 44.7 37.6 2.1 Subsidiary assets held for sale 24.5 178.8 285.5 Investment properties 38.5 261.0 296.4 Equity Investments 10.7 39.0 52.3 Inventories / assets held for sale 90.6 26.1 23.3 Other 12.7 26.9 41.8 Total Asse
Slide 47: Balance sheet - pro-forma, for different levels of APPF take-up
Balance sheet - pro-forma, for different levels of APPF take-up For personal use only No need for Aspen Group to raise equity in underwriting the APPF entitlement offer PF PF for offer with no PF for offer with full underwriting underwriting $m $m $m Cash 44.7 27.9 14.5 Subsidiary assets held for
Slide 48: Debt management
Debt management For personal use only Senior debt facility substantially reduced post commercial property sales Aspen Group has entered into a new senior debt facility as part of its funding of the APPF offer, which replaces the current senior facility $50.0m facility, for 2 years to August 20
Slide 49: Debt management
Debt management Simplified debt-structure, only the senior facility remains in place For personal use only All other debt facilities now repaid June 2014 June 2013 Weighted average Group facilities Maturity drawn debt ($m) drawn debt ($m) cost of debt Accommodation 7.5 10.5 Aug-15 6.9% Commercia
Slide 50: Disclaimer
Disclaimer This presentation has been prepared by Aspen Group (“Aspen”) and should not be considered For personal use only in any way to be an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, and neither this document nor anyth