Palace Capital Plc · LSE:PCA
Palace Capital — FY2018 Earnings Presentation
37 slides from Palace Capital's earnings presentation, June 2018
Slide 1: Uniquely positioned Regional Focus
Uniquely positioned Regional Focus Neil Sinclair Full Year Results Presentation Chief Executive 12 months to 31 March 2018 Stephen Silvester Finance Director Richard Starr Executive Director www.palacecapitalplc.com
Slide 2: Contents
CONTENTS Palace Capital is a Introduction property investment Finance Review company that focuses Property Review on commercial real estate outside London Looking to the Future Appendices 1 Investor Presentation June 2018
Slide 3: Introduction
INTRODUCTION NEIL SINCLAIR Chief Executive 2 2 Investor Presentation June 2018
Slide 4: Transformational Year
TRANSFORMATIONAL YEAR Palace Capital is well positioned for growth following a transformational year Key achievements: • £70m new equity to fund RT Warren portfolio acquisition • £67m new debt facilities to support acquisitions • £88m of acquisitions • £9m of disposals recycling capital • Move to th
Slide 5: Our Strategy / Proven Business Model
OUR STRATEGY / PROVEN BUSINESS MODEL We invest in regional commercial property outside London • Opportunistic acquisitions –corporate & direct • Diversified portfolio - deliberately limited exposure to structurally challenged retail sector • Affordable rents - underpin the sustainability of our cash
Slide 6: Highlights for the Year
HIGHLIGHTS FOR THE YEAR Active asset management approach delivering growing income & capital returns • Adjusted profit before tax up 27% to £8.5m • Ordinary dividend per share increased 2.7% to 19.0p; fully covered by adjusted earnings • FY18 Q4 dividend of 4.75p/share, ex-div 5 July 2018, payable 3
Slide 7: Highlights for the Year: equity raise and debt facilities
HIGHLIGHTS FOR THE YEAR Successful equity raise of £70m & new debt facilities of £67m • Completed £70m equity raise in October 2017 at 340 pence per share • Arranged £67m of new debt facilities • LTV reduced to 30% and debt maturity increased to 4.7 years • Move to the Main Market and joining FTSE S
Slide 8: Operating in Regions Outside London
OPERATING IN REGIONS OUTSIDE LONDON Regional commercial property market remains an excellent opportunity supported by economic fundamentals • Regional economy continues to grow • Regional unemployment remains consistently low • Less exposed to financial services than Central London • Limited new bui
Slide 9: Track Record of Outperforming UK Real Estate Sector
TRACK RECORD OF OUTPERFORMING UK REAL ESTATE SECTOR What makes Palace Capital different? 4.5 years NAV Growth to 31 Mar-18 since the Signal acquisition • Investment in the right sectors in the right locations 100% 90% Active Asset Management strategy growing income 80% • streams and NAV 70% 60% Dive
Slide 10: Finance Review
FINANCE REVIEW STEPHEN SILVESTER Finance Director 9 9 Investor Presentation June 2018
Slide 11: Significant Achievements Raising Fresh Capital
SIGNIFICANT ACHIEVEMENTS RAISING FRESH CAPITAL £137m of capital raised during FY18 £70m equity raised £27m 5 year facility with • 12% discount to prevailing share price of 385p Santander Aug 2017 • Provided capital to complete acquisition of RT Warren (Investments) Ltd £67m debt raised • to refinanc
Slide 12: Balance Sheet Positioned for Growth
BALANCE SHEET POSITIONED FOR GROWTH • Property portfolio fair value increased to £276.7m at 31 Mar-18 Mar-17 March 2018 £m £m Property Portfolio 276.7 183.9 • £19.0m cash in the bank and a further £14.2m borrowing facilities undrawn at year-end available for Cash 19.0 11.2 future acquisitions Other
Slide 13: EPRA NAV per Share
EPRA NAV PER SHARE pence 470.0 450.0 54.0 443.0 430.0 21.3 19.0 16.4 0.8 1.5 410.0 415.7 415.0 415.0 8.0 397.0 399.3 399.3 390.0 389.0 389.0 389.0 370.0 350.0 EPRA NAV £70m equity EPRA NAV Deferred Tax Adjusted Dividends Property Profits on Exceptional EPRA NAV Mar-17 issue dilution Oct-17 excluded
Slide 14: Continued Growth in Recurring Earnings
CONTINUED GROWTH IN RECURRING EARNINGS • Adjusted profit before tax increased 27% to £8.5m FY18 FY17 (FY17: £6.7m) Movement £m £m • Adjusted earnings per share of 21.2p (FY17: 22.2p) Gross property income 16.7 14.3 following issue of 20.8 million shares in Oct-17 Property operating expenses (1.8) (2
Slide 15: Dividend Track Record
DIVIDEND TRACK RECORD INCOME Annual Dividends (pence) 18.5p 19.0p Track Record of delivering 16.0p progressive dividend 13.0p • Quarterly dividends commenced Apr-18 • Proposed final dividend FY18 Q4: 4.75p • Payable 31st July, ex-div date: 5th July • Dividend Yield > 5.3% FY15 FY16 FY17 FY18 • Divid
Slide 16: Property Review
PROPERTY REVIEW RICHARD STARR Executive Director 15 15 Investor Presentation June 2018
Slide 17: Portfolio Overview
PORTFOLIO OVERVIEW Contractual Rental Income £17.9m p.a. Estimated Rental Value £20.8m p.a. WAULT (to break) 5.3 years 16 16 Investor Presentation June 2018
Slide 18: Portfolio Metrics
PORTFOLIO METRICS The portfolio is diversified by both sector and geography and has no exposure to Central London The top 10 tenants contribute 26.5% of all contractual income, providing security of income streams on the basis of strong credit ratings and low risk of default. TOP 10 TENANTS GEOGRAPH
Slide 19: Regional Development Pipeline
REGIONAL DEVELOPMENT PIPELINE York – Hudson House • Planning consent achieved for 127 apartments, 34,000 sq ft offices, 5,000 sq ft of commercial and car parking • Demolition commenced in February 2018, expected to be completed September 2018 • Demand for residential & Grade A office space strong •
Slide 20: Regional Office Sector
REGIONAL OFFICE SECTOR Manchester – Boulton House Leeds – Bank House Newcastle – St James’ Gate • Purchased August 2016 for £10.6m • Purchased April 2014 for £10m • Purchased August 2017 for £20m • 75,000 sq. ft. • 88,000 sq ft • 82,500 sq ft • City centre multi-let offices • City centre multi let o
Slide 21: Regional Industrial Sector
REGIONAL INDUSTRIAL SECTOR Bristol – Point Four Industrial Verwood – Black Moor Road Coventry – Courtauld House Estate • Purchased in RT Warren portfolio • Purchased in Sequel portfolio in 2013 • Purchased in Sequel portfolio in 2013 • 65,700 sq ft, multi-let estate in • 77,500 sq ft single let dist
Slide 22: Regional Leisure Sector
REGIONAL LEISURE SECTOR Halifax – Broad Street Plaza Northampton – Sol Central • Purchased March 2016 for £24.12m • Purchased in May 2015 for £20.7m • City centre multi let scheme generating £1.7m annual • The casual dining sector has been going through challenging income with anchor tenants trading
Slide 23: Regional Retail Sector
REGIONAL RETAIL SECTOR York – Lendal / Museum Street East Grinstead – A&B Bridge Park • Purchased in RT Warren portfolio • Purchased in PIH portfolio • Prime South East location • Centrally located retail & offices • Both tenants recently completed improvements including new • Vacant offices to be r
Slide 24: Active Asset Management
ACTIVE ASSET MANAGEMENT Milton Keynes – Solaris House Milton Keynes – Midsummer Leamington Spa – Imperial • Purchased in Sequel portfolio 2013 Boulevard House & Court • 14,500 sq ft refurbished office building • Purchased in March 2016 for £7.225m • Purchased in Sequel portfolio in 2013 • In April 2
Slide 25: RT Warren Acquisition
RT WARREN ACQUISITION Southampton – Kings Park Winchester – Regency House Winchester - Hyde Abbey House • City centre, listed office building House • City centre multi let offices fully • Consent to convert upper parts to • Agreement of outstanding dilapidations refurbished in September 2017 residen
Slide 26: Looking to the Future
LOOKING TO THE FUTURE • Significant opportunity currently exists in regional commercial real estate market • Palace Capital is uniquely positioned to deliver sector-leading income & capital returns as a result of its focus outside London • Continue to source and execute off-market corporate transact
Slide 27: Appendices
APPENDICES 26 26 Investor Presentation June 2018
Slide 28: Biographies
BIOGRAPHIES Neil Sinclair Stephen Silvester Richard Starr Chief Executive Finance Director Executive Director Chartered Surveyor RICS Chartered Accountant ACA Chartered Surveyor RICS Neil co-founded Palace Capital and has Stephen joined Palace Capital in 2015 and Richard joined Palace Capital in 201
Slide 29: Our Story So Far
OUR STORY SO FAR • July 2010 – Management taking Board control of the Company valued at £0.1m with a vision to invest in the regional property market. • October 2013 – Sequel portfolio consisting of 24 properties across office, industrial and retail sectors acquired for £39.25m. • August 2014 – Prop
Slide 30: Financial Track Record
FINANCIAL TRACK RECORD BALANCE SHEET FY15 FY16 FY17 FY18 Property Portfolio £102.8m £173.4m £183.2m £276.7m Net Assets £80.0m £106.8m £109.6m £183.3m EPRA* NAV per Share*** 393p 414p 443p 415p Loan to Value 23% 37% 37% 30% INCOME STATEMENT IFRS Profit Before Tax £13.9m £11.8m £12.6m £13.3m Adjusted
Slide 31: Debt Summary
DEBT SUMMARY Debt Facility Debt Drawn Debt Lender (£m) (£m) Maturity Barclays 40.0 35.8 Jan-2023 £35.7m fixed NatWest 30.4 20.4 Mar-2021 Includes £20m RCF Santander 26.7 26.7 Aug-2022 £20.0m fixed Lloyds 3.8 3.8 Apr-2019 100% floating Scottish Widows 14.6 14.6 Jul-2026 100% fixed 115.5 101.4 4.7 yea
Slide 32: Debt Charts
DEBT CHARTS Debt maturity Fixed/Floating 80 45 70 40 Floating 35 60 Fixed 30 50 25 40 20 30 15 10 20 5 10 0 0 Barclays NatWest Santander Lloyds Scottish 0–1 1–2 2–3 3–4 4–5 >5 Widow The average debt maturity is 4.7 years, providing 70% of the debt drawn at year end was fixed, support to the business
Slide 33: Selection from the Portfolio
SELECTION FROM THE PORTFOLIO WINCHESTER STREET, SALISBURY SANDRINGHAM HOUSE, HARLOW OVEST HOUSE, BRIGHTON HARNHAM BUSINESS PARK, SALISBURY FRASER HOUSE, STAINES 32 32 Investor Presentation June 2018
Slide 34: RT Warren Portfolio
RT WARREN PORTFOLIO WARREN HOUSE, THAME MILLBARN MEDICAL, BEACONSFIELD ALDI, GOSPORT WESTMINSTER HOUSE, GERRARDS CROSS HIGH STREET, UXBRIDGE LONDON COURT, SOUTHAMPTON HARBOUR COURT, PORTSMOUTH PELHAM SQUARE, BRIGHTON 33 33 Investor Presentation June 2018
Slide 35: Top 10 Assets by Value
TOP 10 ASSETS BY VALUE % of Portfolio by Market Value Net Intial Reversionary WAULT to Property Name Area (sq ft) Gross rental income (£) Market Value 31 March 2018 (£) Yield Yield Break (yrs) Broad Street Plaza, Halifax 8.4% 23,195,000 117,768 1,710,070 6.15% 7.11% 13.2 2&3 St James Gate, Newcastle
Slide 36: Sector Splits
SECTOR SPLITS Market Value 30 March % of Portfolio by Current passing Total ERV of No. Properties No. Leases Area (sq ft) ERV (£) WAULT (yrs) 2018 (£) market value rental income (£) Void (£) Offices 134,233,600 48.5% 32 111 722,977 8,034,789 10,541,820 2.73 1,447,740 Leisure 42,070,000 15.2% 2 22 24
Slide 37: Disclaimer
DISCLAIMER The information in this presentation may include forward-looking statements, which are based on current expectations and projections about future events. These forward looking statements reflect the Directors’ beliefs and expectations and are subject to risks, uncertainties and assumption