Region Group · ASX:RGN
Region — SCA Property Group — H1 FY2018 Earnings Presentation
36 slides from Region's earnings presentation, Feb 5, 2018
Slide 1: First Half FY18 Results Presentation
SCA PROPERTY GROUP First Half FY18 Results Presentation 5 February 2018 Kwinana Marketplace, WA
Slide 2: Agenda
AGENDA 1 Overview of First Half FY18 Results 2 Financial Performance 3 Operational Performance 4 Growth Initiatives 5 Key Priorities and Outlook 6 Questions 7 Appendices 2
Slide 3: Overview of First Half FY18 Results
1 OVERVIEW OF FIRST HALF FY18 RESULTS Anthony Mellowes Chief Executive Officer
Slide 4: First Half FY18 Highlights
FIRST HALF FY18 HIGHLIGHTS Financial Capital Active Portfolio Performance Management Management $56.1m, up by 4.9% 32.5% 98.4% 4.7% Funds from operations 1 Gearing 3, lower end of 30 – 40% target range Portfolio occupancy 6 Specialty vacancy 6 $51.6m, up by 5.3% $2.23, up by 1.4% 6.47% Adjusted fund
Slide 5: Key Achievements – Delivering on Strategy
KEY ACHIEVEMENTS – DELIVERING ON STRATEGY • Supermarket sales showing improving trends – Moving annual turnover growth of 2.7% with both Woolworths and Coles trading well Optimising the • Specialty tenants continue to perform well Core Business – Sales growth of 3.2% and occupancy cost of 9.9% – 6.7
Slide 6: Financial Performance
2 FINANCIAL PERFORMANCE Mark Fleming Chief Financial Officer
Slide 7: Profit & Loss
PROFIT & LOSS For the Six Months Ended 31 December 2017 • Net property income: $m 1HY18 1HY17 % Change – Anchor rental income down due to sale of New Zealand assets Anchor rental income 53.5 53.9 (0.7%) partially offset by Australian acquisitions and rental increases Specialty rental income 47.2 41.
Slide 8: Funds From Operations
FUNDS FROM OPERATIONS For the Six Months Ended 31 December 2017 $m 1HY18 1HY17 % Change • Funds From Operations of $56.1m is up by 4.9% on the same Net profit after tax (statutory) 69.6 204.7 (66.0%) period last year – Non-cash and one-off items have been excluded Adjustment for non cash items – Inc
Slide 9: Balance Sheet
BALANCE SHEET As at 31 December 2017 • Value of Australian investment properties increased from $m 31 December 2017 30 June 2017 % Change $2,364.6m to $2,437.7m, primarily due to acquisitions and Cash 3.0 3.6 (16.7%) positive revaluations (see slide 29 for further detail) Investment properties 2,437
Slide 10: Debt and Capital Management
DEBT AND CAPITAL MANAGEMENT As at 31 December 2017 • Gearing of 32.5% is within target range of 30% to 40%. Our $m 31 Dec 2017 30 June 2017 preference is for gearing to remain below 35% at this point in the cycle Facility limit1 989.8 1,054.8 Drawn debt (net of cash)2 834.8 780.2 • Look through gear
Slide 11: Operational Performance
3 OPERATIONAL PERFORMANCE Anthony Mellowes Chief Executive Officer
Slide 12: Portfolio Overview
PORTFOLIO OVERVIEW Assets Number of Number of GLA Occupancy Value WALE Weighted average As at 31 December 2017 centres specialties (sqm) (% GLA) (A$m) (yrs) cap rate (%) Neighbourhood 69 1,045 401,114 98.2% 1,863.9 9.0 6.47 Sub-regional 6 309 136,150 98.8% 552.5 10.8 6.46 Development 2 n/a n/a n/a 2
Slide 13: Portfolio Occupancy
PORTFOLIO OCCUPANCY Australian portfolio occupancy is 98.4% • Total Australian portfolio occupancy is 98.4% of GLA Portfolio Occupancy (% of GLA) – Specialty vacancy of 4.7% is within the normalised 98.6% 98.4% 98.4% 98.4% target range of 3-5% • Acquisitions during the 6 months to December 2017 had
Slide 14: Sales Growth & Turnover Rent
SALES GROWTH & TURNOVER RENT • Supermarket MAT1 sales growth has improved due to our relative weighting to Woolworths and its improved trading performance Comparable Store MAT1 Sales Growth by Category (%) – Coles sales growth is also positive As at As at • Discount Department Store sales growth has
Slide 15: Specialty Key Metrics
SPECIALTY KEY METRICS Positive rent reversions are expected to continue • Specialty sales and renewal spreads continue to perform strongly relative Australian Specialty Tenant Metrics to peers 31 Dec 2017 30 June 2017 • Occupancy cost has increased slightly due to rental increases exceeding sales gr
Slide 16: Growth Initiatives
4 GROWTH INITIATIVES Anthony Mellowes Chief Executive Officer
Slide 17: Active Portfolio Management
ACTIVE PORTFOLIO MANAGEMENT Four acquisitions in the six months to 31 December 2017 Acquisitions Sugarworld Shopping Centre Belmont Bowling Club Site (Cairns, QLD) (Belmont, NSW) • Acquisition completed in Oct 2017 for $24.8m (7.01% • Acquisition completed in Dec 2017 for $4.8m implied cap rate) (n/
Slide 18: Neighbourhood Centres in Australia
NEIGHBOURHOOD CENTRES IN AUSTRALIA Fragmented ownership provides acquisition opportunities Neighbourhood Centre Landscape in Australia Ownership of Neighbourhood Centres in Australia (Number of centres) • There are over 900 Coles and Woolworths anchored Indicative neighbourhood centres in Australia
Slide 19: Indicative Development Pipeline
INDICATIVE DEVELOPMENT PIPELINE We have identified over $125m of development opportunities at 22 of our centres over the next 5 years1 Estimated Capital Investment (A$m) 1HY18 Development Type Centre(s) Actual 2HY18 FY19 FY20 FY21 FY22 Burnie, Clemton Park, Ocean Grove, The Markets, Centre Improveme
Slide 20: Funds Management Business
FUNDS MANAGEMENT BUSINESS Potential to deliver additional earnings growth in the future • First fund “SURF 1” progressing well Woolworths & Big W, Katoomba – Investment property valuation increased from $60.9m in October 2015 to $69.0m as at 31 December 2017 with NTA per unit increasing from $0.95 t
Slide 21: Key Priorities and Outlook
5 KEY PRIORITIES AND OUTLOOK Anthony Mellowes Chief Executive Officer Mark Fleming Chief Financial Officer
Slide 22: Core Strategy Unchanged
CORE STRATEGY UNCHANGED Defensive, resilient cashflows to support secure 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 opportunities 22
Slide 23: 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 53% of overall gross property income 0 - 1% Rental • Once turnover
Slide 24: Key Priorities and Outlook
KEY PRIORITIES AND OUTLOOK Continue to deliver on strategy in FY18 • Increase specialty rent per sqm by optimising tenancy mix and achieving rental uplifts Optimising the Core on renewals Business • Focus on managing expenses both at centres and corporate while maintaining appropriate standards • Co
Slide 25: Questions
SGA Property Group 6 QUESTIONS
Slide 26: Appendices
SGA Property Group 7 APPENDICES
Slide 27: Long Term Leases to Woolworths and Wesfarmers Group
LONG TERM LEASES TO WOOLWORTHS AND WESFARMERS GROUP • 53% of gross rent generated by Woolworths (39%) Overall Lease Expiry (% of gross rent) and Wesfarmers Group (14%) (on a fully leased 44.7% basis), with an Anchor WALE of 12.5 years • Opportunity to realise positive rent reversions from specialty
Slide 28: Anchor Tenants
ANCHOR TENANTS • All of our centres are currently 30 June 2014 30 June 2015 30 June 2016 30 June 2017 31 December 2017 anchored by either Woolworths Woolworths Limited Limited or Wesfarmers Limited Woolworths 51 53 53 54 54 retailers Big W 9 9 8 7 7 Dan Murphy's 5 5 3 2 2 • We are gradually increasi
Slide 29: Investment Properties Value
INVESTMENT PROPERTIES VALUE • Acquisitions of $38.3m being Sugarworld Shopping Centre ($24.8m), Shell Cove Town Centre land acquisition ($1.5m), Belmont Bowling Club ($4.8m) and Coorparoo Child Care ($7.2m), and $2.5m of stamp duty and other transaction costs • Developments comprises Kwinana ($5.0m)
Slide 30: 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 25.0 25.0 - Feb 2019 Bank bilateral 230.0 158.0 72.0 Dec 2019 (refer below & note 1) Bank bilateral 125.0 45.0 80.0 Nov - Dec 2022 380.0 228.0 152
Slide 31: Acquisitions During the Period
ACQUISITIONS DURING THE PERIOD Six months to 31 December 2017 Centre Type Acquisition Anchor Specialty Total % GLA Total Purchase Implied Date GLA GLA GLA Committed Price Acquisition (sqm) (sqm) (sqm) ($m) Cap Rate (Fully-Let) Acquired Properties Sugarworld Shopping Centre, QLD Neighbourhood Oct 201
Slide 32: Portfolio List (I)
PORTFOLIO LIST (I) Property State Property Type Anchor Tenant(s) Completion Total GLA Occupancy Number of WALE Valuation Valuation Dec-17 Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Lilydale VIC Sub-Regional WOW; Big W, Aldi Jul-13 22,066 99% 60 11.9 6.00% 110.0 Pakenham VIC Sub-
Slide 33: Portfolio List (II)
PORTFOLIO LIST (II) Property State Property Type Anchor Tenant(s) Completion Total GLA Occupancy Number of WALE Valuation Valuation Dec-17 Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Annandale Central QLD Neighbourhood Coles Oct-07 6,685 94% 21 7.1 7.25% 33.5 Ayr QLD Neighbourhoo
Slide 34: Portfolio List (III)
PORTFOLIO LIST (III) Property State Property Type Anchor Tenant(s) Completion Total GLA Occupancy Number of WALE Valuation Valuation Dec-17 Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Properties Under Management – “SURF 1” Burwood DM NSW Freestanding Dan Murphy's Nov-09 1,400 100
Slide 35: Management Team
MANAGEMENT TEAM Anthony Mellowes, Chief Executive Officer Mark Fleming, Chief Financial Officer • Mr Mellowes is an experienced property executive. Prior to joining SCA • Mr Fleming worked for 8 years at Woolworths Limited from 2003 to 2011, Property Group as an Executive Director, Mr Mellowes was e
Slide 36: SCA Property Group
SCA Property Group Level 5, 50 Pitt Street Sydney NSW 2000 Tel: (02) 8243 4900 Fax: (02) 8243 4999 www.scaproperty.com.au Disclaimer This presentation has been prepared by Shopping Centres Australasia Property Group RE Limited (ABN 47 158 809 851) (SCPRE) as responsible entity of Shopping Centres Au