Region Group · ASX:RGN
Region — Investor Presentation (February 2020)
38 slides from Region's investor presentation, Feb 4, 2020
Slide 1: First Half FY20 Results Presentation
FIRST HALF FY20 RESULTS PRESENTATION 3 February 2020 slide Shell Cove, NSW
Slide 2: Agenda
AGENDA 1. OVERVIEW OF FIRST HALF FY20 RESULTS 2. FINANCIAL PERFORMANCE 3. OPERATIONAL PERFORMANCE 4. GROWTH INITIATIVES 5. KEY PRIORITIES AND OUTLOOK 6. QUESTIONS 7. APPENDICES slide
Slide 3: Overview of First Half FY20 Results
1 OVERVIEW OF FIRST HALF FY20 RESULTS Anthony Mellowes Chief Executive Officer slide 3
Slide 4: First Half FY20 Highlights
FIRST HALF FY20 HIGHLIGHTS FINANCIAL CAPITAL ACTIVE PORTFOLIO PERFORMANCE MANAGEMENT MANAGEMENT FFO per unit 1 Gearing 3 Portfolio occupancy 5 Specialty vacancy 5 8.44 cpu, up by 4.2% 34.2%, up by 1.4% 98.3% 4.8% Distribution per unit 1,2 NTA per unit 4 Portfolio weighted average cap rate 6 7.50 cpu
Slide 5: Key Achievements
KEY ACHIEVEMENTS Supermarket anchored convenience centres continue to be resilient • Our tenants are performing well – Supermarket and discount department store MAT sales growth has continued to improve over the last six months and turnover rental growth is increasing – Specialty MAT sales growth ha
Slide 6: Financial Performance
2 FINANCIAL PERFORMANCE Mark Fleming Chief Financial Officer slide 6
Slide 7: Profit & Loss
PROFIT & LOSS For the six months ended 31 December 2019 31 Dec 31 Dec • Net property income: $m 2019 2018 % Change 3 – Gross property income increase primarily due to acquisitions Anchor rental income 63.5 56.0 13.4% – Property expenses slightly increased as a percentage of gross property income 3 S
Slide 8: Funds From Operations
FUNDS FROM OPERATIONS For the six months ended 31 December 2019 $m 31 Dec 31 Dec 2019 2018 % Change • Funds From Operations (“FFO”) of $78.5m is up by 19.1% on the same period Net profit after tax (statutory) 90.2 39.3 129.5% last year, primarily due to acquisitions completed during 1HFY19 – Non-cas
Slide 9: Balance Sheet
BALANCE SHEET As at 31 December 2019 $m 31 Dec 2019 30 June 2019 % Change • Value of investment properties increased from $3,147.0m to $3,232.8m, primarily Cash 3.8 4.2 (9.5)% due to: – Acquisition of Warner Marketplace for $78.4m, completion of Shell Cove Assets - held for sale 21.5 - nm Stage 3 de
Slide 10: Debt and Capital Management
DEBT AND CAPITAL MANAGEMENT As at 31 December 2019 31 Dec 2019 30 June 2019 • Gearing of 34.2% is within target range of 30% to 40%. Our preference is for gearing to Facility limit ($’m) 1 1,307.1 1,257.1 remain below 35% at this point in the cycle – Look through gearing (including CQR and SURF inve
Slide 11: Operational Performance
3 OPERATIONAL PERFORMANCE Anthony Mellowes Chief Executive Officer slide 11
Slide 12: Portfolio Overview
PORTFOLIO OVERVIEW Weighting towards food, health and retail services (non-discretionary) As at 31 Dec 2019 Number of Number of GLA Site Area Occupancy Value WALE Weighted average centres specialties (sqm) (sqm) (% GLA) ($m) (yrs) cap rate (%) Neighbourhood 75 1,292 465,521 1,495,916 98.3% 2,384.7 7
Slide 13: Portfolio Occupancy
PORTFOLIO OCCUPANCY Specialty vacancy has reduced Portfolio Occupancy (% of GLA) • Strategic focus on remixing toward non-discretionary categories, reducing long term vacancies and maintaining the retention rate on existing tenant renewals 98.6% 98.4% 98.4% 98.2% 98.3% • Total portfolio occupancy ha
Slide 14: Sales Growth and Turnover Rent
SALES GROWTH AND TURNOVER RENT Sales growth in our centres is increasing • Supermarket portfolio MAT1 sales growth has improved to 2.6% (June 2019: 2.0%) Comparable Store MAT1 Sales Growth by Category (%) – Both Coles and Woolworths showing an increased rate of growth As at As at • Discount Departme
Slide 15: Specialty Key Metrics
SPECIALTY KEY METRICS Executing our strategy in a challenging retail market • Strong metrics for specialty tenants: – Sales growth increasing to 2.3% (June 2019: 1.8%) Specialty Tenant Metrics – Sales productivity increased to $8,134 psm (June 2019: $8,010 psm) – Our rents remain the lowest in the s
Slide 16: Growth Initiatives
4 GROWTH INITIATIVES Anthony Mellowes Chief Executive Officer slide 16
Slide 17: Portfolio Management
PORTFOLIO MANAGEMENT One acquisition, one completed development and one disposal in the six months to 31 December 2019 ACQUISITION DEVELOPMENT Warner Marketplace (Warner, QLD) Shell Cove – Stage 3 (Shellharbour, NSW) • Acquisition completed in Dec 2019 for $78.4m (5.92% implied fully let • Stage 3 r
Slide 18: Convenience Based Centres
CONVENIENCE BASED CENTRES Fragmented ownership provides acquisition opportunities CONVENIENCE BASED CENTRE LANDSCAPE Ownership of Convenience Based Centres • There are approximately 1,200 Coles and Woolworths anchored (number of centres) neighbourhood and sub regional centres in Australia Indicative
Slide 19: Indicative Development Pipeline
INDICATIVE DEVELOPMENT PIPELINE Over $115m of development opportunities identified at 31 of our centres over the next 5 years1 Estimated Capital Investment (A$m) 1HY20 DEVELOPMENT TYPE CENTRE(S) Actuals 2HY20 FY212 FY22 FY23 FY24 Shell Cove, Epping North, Belmont, North Orange, Warner Centre expansi
Slide 20: Funds Management Business
FUNDS MANAGEMENT BUSINESS – AUM$156.5M Potential to deliver additional earnings growth in the future • First fund “SURF 1” was launched in October 2015, and has successfully sold the five assets, consistent with 5-year term set out in the original PDS – Achieved sales price for the five assets of $6
Slide 21: Key Priorities and Outlook
5 KEY PRIORITIES AND OUTLOOK Anthony Mellowes and Mark Fleming Chief Executive Officer & Chief Financial Officer slide 21
Slide 22: Core Strategy Unchanged
CORE STRATEGY UNCHANGED Defensive, resilient cashflows to support secure and growing long term distributions to our unitholders WEIGHTED TO FOCUS ON CONVENIENCE- LONG LEASES TO NON-DISCRETIONARY BASED RETAIL CENTRES QUALITY ANCHOR TENANTS RETAIL SEGMENTS APPROPRIATE GROWTH CAPITAL STRUCTURE OPPORTUN
Slide 23: Sustainability
SUSTAINABILITY We continue to focus on long-term sustainable performance SCP remains on track to deliver our sustainability targets with dedicated resourcing and focus on the 3 pillars of our strategy Our Sustainability Objectives SCP achievements during this period: Strengthen the relationships bet
Slide 24: Potential Earnings Growth Trends
POTENTIAL EARNINGS GROWTH TRENDS Continued solid earnings growth expected over time Indicative Contribution to FFO Growth Rate (% pa) Description and Assumptions – medium to longer term – Anchor • Anchor rental income represents about 50% of overall gross property income 0 - 1% Rental • Once turnove
Slide 25: Key Priorities and Outlook
KEY PRIORITIES AND OUTLOOK Continue to deliver on strategy in FY20 • Completion of remixing project for centres acquired in FY19 • Leasing focused on sustainable tenants at sustainable rents - maintain high retention rates on renewals and continue to OPTIMISING THE reduce specialty vacancy CORE BUSI
Slide 26: Questions
6 QUESTIONS slide 26
Slide 27: Appendices
7 APPENDICES slide 27
Slide 28: FY20 FFO per Unit Guidance
FY20 FFO PER UNIT GUIDANCE We have increased guidance to 16.90 cpu Warner Marketplace acquisition, Increased volume of Shell Cove Stage 3 development, Increase in corporate costs debt offset by lower Weighted average units on Cowes divestment, SURF 1 due to D&O insurance and cost of debt due to issu
Slide 29: Long Term Leases to Woolworths, Coles and Wesfarmers
LONG TERM LEASES TO WOOLWORTHS, COLES AND WESFARMERS Overall Lease Expiry (% of Gross Rent) • 48% of gross rent is generated by anchor tenants (Woolworths 33%, Coles 11%, Wesfarmers 3% and Other majors 1% on a fully leased basis), with an Anchor WALE 29.3% of 9.9 years • Overall, a 7.6 year portfoli
Slide 30: Anchor Tenants
ANCHOR TENANTS • All of our centres are currently anchored by either Woolworths 30 June 2016 30 June 2017 30 June 2018 30 June 2019 31 Dec 2019 Limited, Coles Group Limited or Wesfarmers Limited retailers Woolworths Limited Woolworths 53 54 54 58 59 Big W 8 7 7 9 9 • We are gradually increasing our
Slide 31: FY19 Acquisitions – Key Metrics
FY19 ACQUISITIONS – KEY METRICS Sales growth, turnover rent, portfolio occupancy, WALE Sales MAT Growth Existing Centres FY19 Acquisitions Total Portfolio Existing Centres: Supermarkets 3.5% (1.1)% 2.6% • Continue to perform strongly DDS 4.1% 2.2% 3.4% • MAT Sales growth of 3.3% (June 2019: 2.6%), i
Slide 32: FY19 Acquisitions – Key Metrics
FY19 ACQUISITIONS – KEY METRICS Specialty key metrics Existing Centres: Spec Tenant Metrics Existing Centres FY19 Acquisitions Total Portfolio Comparable sales MAT growth (%) 1 2.7% 1.3% 2.3% • Tenant metrics improving vs June 2019 with improvements in sales MAT, occupancy cost and sales productivit
Slide 33: Debt Facilities & Interest Rate Hedging
DEBT FACILITIES & INTEREST RATE HEDGING Facility Limit Drawn Debt Financing capacity Maturity / Notes $m (A$m) (A$m) (A$m) Bank Facilities Bank bilateral 275.0 122.0 153.0 FY 2023 (refer below & note 1) Bank bilateral 25.0 25.0 0.0 FY 2024 Bank bilateral non-rev olv ing 50.0 50.0 - FY 2024 Sy ndicat
Slide 34: Acquisitions and Pending Divestments During the Period
ACQUISITIONS AND PENDING DIVESTMENTS DURING THE PERIOD Six months to 31 December 2019 Total Anchor Specialty Total Implied Acquisition % GLA Purchase Centre Type GLA GLA GLA Fully Let Date Committed Price (sqm) (sqm) (sqm) Yield ($m) Acquired Properties Warner Marketplace Neighbourhood Dec 2019 6,16
Slide 35: Portfolio List (I)
PORTFOLIO LIST (I) Valuation Completion Total GLA Occupancy Number of WALE Valuation Dec 2019 Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Lavington Square NSW Sub Regional WOW; Big W 2005 20,233 96% 57 4.5 7.50% 58.0 Sturt Mall NSW Su
Slide 36: Portfolio List (II)
PORTFOLIO LIST (II) Valuation Completion Total GLA Occupancy Number of WALE Valuation Dec 2019 Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Annandale Central QLD Neighbourhood Coles 2007 6,655 100% 20 5.3 7.50% 27.0 Ayr QLD Neighbourho
Slide 37: Portfolio List (III)
PORTFOLIO LIST (III) WALE Valuation Total GLA Occupancy Number of (Years by Valuation Dec 2019 Property State Property Type Anchor Tenant(s) Completion Date (sqm) (% by GLA) Specialties GLA) Cap Rate (A$m) Properties Under Management - SURF 2 Katoomba Marketplace NSW Freestanding WOW; Big W 2014 9,7
Slide 38: Contact Details and Disclaimer
This document has been authorised to be given to the ASX by the Board of SCP. CONTACT DETAILS AND DISCLAIMER For further information please contact: Anthony Mellowes Mark Fleming Chief Executive Officer Chief Financial Officer T: +61 2 8243 4900 T: +61 2 8243 4900 E: anthony.mellowes@scaproperty.com