Gpt Group · ASX:GPT
Gpt — The GPT Group — FY2011 Earnings Presentation
43 slides from Gpt's earnings presentation, Feb 20, 2012
Slide 1: Speaker's notes from 2011 Annual Result presentation
For personal use only THE GPT GROUP Speaker’s notes from 2011 Annual Result presentation 20 February 2012 Michael Cameron, CEO and Managing Director 1
Slide 2: Welcome and overview of presentation
For personal use only Good morning and welcome to the GPT 2011 Results Presentation. Today I will talk about our strategy and the performance of the business. Michael O’Brien will provide an overview of the financial results and capital management, and there will be time for questions at the e
Slide 3: 2011 delivered on our promises
For personal use only In 2011, the team at GPT has again delivered on our promises. The operating performance for the year was strong. We were very active in managing capital, and GPT is now well positioned for growth in 2012 and beyond 3
Slide 4: 2011 result highlights
For personal use only The result for 2011 highlights both the stability in our earnings and the embedded growth in our portfolio of assets. Operating profit of $438.8m is up 7% on 2010 with a statutory result of $246.2m. EPS growth was 8.1% and DPS growth was 9.2%. Although economic conditio
Slide 5: Delivering secure, reliable returns
For personal use only Our focus has been on delivering secure, reliable returns for investors. EPS growth of 8.1% exceeded our target of CPI + 1% and the guidance we provided in August. Total returns were mainly impacted by mark to market derivative movements. The graph on the right shows a
Slide 6: Active capital initiatives
For personal use only We were again very active with capital initiatives. The average cost of debt reduced by 80bps in 2011 and we remain conservatively geared at 22.9%, with an average debt term of 5.3 years. We activated a security buy back with $140 million of securities bought back to date
Slide 7: Quality of the portfolio
For personal use only A major factor that has contributed to generating stable returns has been the quality of the portfolio. With 95% of the retail assets being regional centres and the office portfolio being 100% prime, it’s no surprise our average occupancy across the total portfolio over the
Slide 8: Optimising the business and Citiport acquisition
For personal use only We continue to optimise the business to achieve our targets through: - Structured rent increases - Tight expense disciplines, and - Active capital and portfolio management In addition, to accelerate our performance we are now well positioned to: - Deliver stronger returns f
Slide 9: Operating performance for 2011
For personal use only I’ll start with the operating performance of the Group for 2011. Realised Operating Income per security, which reflects our underlying operational earnings, was up 8.1% over 2010 – a strong result, ahead of the guidance we gave at the half year result, and reflecting solid
Slide 10: Composition of the operating result
For personal use only Turning now to the composition of the Operating Result. Retail income was up strongly, benefitting from the completion in March of the expansion of Charlestown Square. Comparable income (on a like for like basis) was up a solid 3.6% as a result of strong growth at Melbourne
Slide 11: Income and expense growth
For personal use only We’ve continued to focus on keeping as big a gap as we can between our operating income and our expense growth (the ‘jaws’) – which gives us a positive leverage effect on our earnings. In 2011 we focussed on making two of our key business processes more efficient – our proc
Slide 12: Balance sheet gearing and NTA
For personal use only The Balance Sheet remains in great shape, with gearing as a proportion of total tangible assets at 22.9%, down 2% on 2010 as a result of the completion of the sale of the US Seniors Housing portfolio, the sell-down of GPT’s interests in our wholesale funds and the receipt of
Slide 13: Capital management: cost of debt
For personal use only In terms of Capital Management, we’ve had three key areas of focus through the course of 2011 – getting our cost of debt down, continuing to further extend our debt maturity profile and buying back securities where we saw good value. And I’m pleased to say we’ve made good p
Slide 14: Debt maturity profile
For personal use only The other key area of focus for us, in terms of capital management, has been flattening and extending our maturity profile which helps us achieve attractive borrowing margins and means we can keep our liquidity levels low, reducing cost. The 7-year bond issue we completed i
Slide 15: Security buy-back
For personal use only We’ve completed to date $140m of our security buyback at an average price of $3.04, a 15% discount to NTA, providing a $25.8m uplift to NTA. The buyback has been funded with the proceeds of assets that were sold at an average 15% premium to book value. We continue to beli
Slide 16: Discount to NTA and yield on NTA
For personal use only We’ve talked before about why we’re trading at a discount to NTA. It was clear that there were certain impediments that were holding back our earnings and we’ve been very focussed on removing those earnings drags. The graph on this page shows the Group’s yield on NTA (tha
Slide 17: Comparable income growth
For personal use only Of all of the information reported, the most important measure is the delivery of strong income growth each year. Comparable income growth of 3.6% during a challenging year demonstrates our ability to work our portfolio hard, and highlights the lack of volatility in the bus
Slide 18: Retail portfolio performance
For personal use only Despite subdued retail conditions in 2011, the retail portfolio delivered comparable income growth of 3.6% for the year. There was an improvement in specialty sales growth but this fell short of our expectations. Sales per square metre improved to $8,958 and occupancy cos
Slide 19: Retail outlook and sensitivities
For personal use only We think 2012 will be a year of flat retail sales growth, with re- leasing spreads flat or slightly negative in some cases. We are confident occupancy will remain high. GPT’s retail income will be relatively resilient, as 86% of the specialties are subject to an average 4.5
Slide 20: Retail leasing and re-mixing
For personal use only In 2011, we achieved a 2% positive leasing spread despite the Red Group and Colorado store closures. The leasing team actively monitor retailer performance, which enables them to anticipate and pre-empt problems and opportunities. A good example of the value of an active
Slide 21: Office portfolio performance
For personal use only In relation to our Office portfolio, we said last year the increase in average occupancy would result in stronger income growth in 2011. We were pleased to deliver 4% growth. Our NABERS energy rating (including green power) of 5 stars remains the highest in the sector. 21
Slide 22: Office portfolio quality
For personal use only 57% of our office portfolio is premium grade - the highest proportion in the sector. This has helped us maintain a higher occupancy level than the industry, and allowed us to have fixed structural rent increases of 4% across 83% of the portfolio. Leasing activity during t
Slide 23: Office market demand
For personal use only In 2011 there was positive net absorption in major CBD office markets and prime assets are continuing to perform well. With extensive reporting of potential financial services job cuts, there has been some concern about future office demand and we have looked closely at the
Slide 24: Industrial portfolio performance
For personal use only All of the key operating metrics for our industrial portfolio remain steady. 78% of the portfolio is subject to fixed structured rent increases of 3.3% and only 9% of the leases expire during 2012. In 2011, we saw flat re-leasing spreads across the industrial portfolio. 2
Slide 25: Container throughput and industrial rents
For personal use only One of the lead indicators we use in our industrial business is container throughput. With the exception of 2009, growth has been positive in the major capital cities each year. With limited supply and little speculative development, average rents are likely to increase o
Slide 26: Capital allocation framework
For personal use only Across GPT, we use a sophisticated capital allocation framework to actively manage the portfolio. Our portfolio strategy is straightforward, investing in high quality Australian Retail, Office and Industrial assets. In terms of sector weightings, one of the actions we hav
Slide 27: Funds management performance
For personal use only Our Funds Management business continues to perform well. Gearing of 12.9% and 11.3% remains very low, providing significant capacity. Three year returns were above the sector average by 170bps in the Shopping Centre Fund and 300bps in the Office Fund. In preparation for
Slide 28: Fund sell-down and capital raised
For personal use only During 2011 we sold $301m of GPT’s interests in the funds taking the total sold to $517m. Since June 2010, the total capital raised in the funds was $1.1bn. Importantly, the new issue and the GPT sell-down were all done at NTA, demonstrating the demand and liquidity of th
Slide 29: Benefit of reducing interest in funds
For personal use only You will recall we have previously explained the financial benefits of reducing GPT’s interest in the funds. These two charts of the actual before and after position show the up lift of 80 basis points achieved. GPT is now at its target holding level and the funds are in
Slide 30: Development pipeline
For personal use only Development is a core function for GPT: In 2011, GPT commenced two new developments at Highpoint and Wollongong Central, in addition to projects already underway. I am pleased to announce that we have entered into a Heads of Agreement to lease 100% of 5 Murray Rose to the
Slide 31: Developments underway
For personal use only We currently have $1.3bn of developments underway. Completion dates and target yields are shown in this table. New developments are subject to a strict criteria including the need to be accretive and meet minimum return targets. 31
Slide 32: 111 Eagle Street development
For personal use only 111 Eagle Street is on schedule for completion over the next couple of months. 53% of the floor space is committed with leases averaging $809pm2 and 25% incentives. The negative impact on earnings in 2012 is expected to be around $7m being the cost of the interest on our
Slide 33: Highpoint redevelopment
For personal use only Construction is well underway with the re-development of Highpoint. Mark Pheely and the team have made great progress. For GPT, the target yield on this project is 10%. The specialty leasing program commenced in September last year, with completion of the expansion expect
Slide 34: Sustainability and social investment
For personal use only Our sustainability initiatives contribute to the bottom line by reducing costs, and allowing us to attract and retain good tenants. Our Social Investment into our assets keeps them connected and attractive to the communities where they exist. Our activities in these areas
Slide 35: Priorities for 2012
For personal use only Our priorities for this year build on our success in 2011. We have four main priorities: - We will continue to optimise every part of our core business - and actively manage the portfolio. - Our team is focused on high performance and we are investing in building an even st
Slide 36: Four key growth platforms
For personal use only We have four key growth platforms. In our development team, as well as preserving and enhancing our existing portfolio, we are looking to expand the model with a more commercial approach that leverages our partnerships. Anthony McNulty has hired John Thomas to help accele
Slide 37: Leadership team
For personal use only Following a significant realignment of the structure of our business with our strategy, GPT’s Leadership Team is well equipped to deliver on our promise of superior performance. One recent addition to the Leadership Team is Matt Faddy who now leads the Property and Asset Ma
Slide 38: Outlook: headwinds and tailwinds
For personal use only The outlook for the year ahead includes a combination of Headwinds and Tailwinds. In the short term, it’s difficult to see a significant improvement in global economic conditions, domestic confidence, and spending levels. At some point there is the potential for a fast do
Slide 39: 2012 earnings drivers
For personal use only Our portfolio income will be helped by structured rental increases and high occupancy, however the leasing up impact of 111 Eagle Street will occur in 2012. Our focus on growth to deliver a step change to earnings will continue as we adapt to changing trends. We will be d
Slide 40: 2012 EPS and payout targets
For personal use only As we have demonstrated, our business is defensive in nature and does not experience the earnings volatility of more risky business models. We are again targeting EPS growth of at least CPI + 1% for 2012 with a payout ratio of no less than 80% of ROI. 40
Slide 41: Delivered on our promises; questions
For personal use only In 2011 we have delivered on our promises: A strong operating performance Active capital management, and We are well positioned to deliver growth in 2012 and beyond. Thank you, I now invite your questions. 41
Slide 42: Contact Information
42 Contact Information Michael Camoron Chief Executive Officer and Managing Director Tol: +81 2 8230 3565 5 Mob: +81 410 437 597 Ry £22" mieraet cameron ont com au Michael O'Brien Chief Financial Officer Tol 4612 8230 3544 Mob: +51 417 691 028 Emait michael otbren@agpt com au atk Judy Barraclough He
Slide 43: Disclaimer
43 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 prese