Region Group · ASX:RGN
Region — FY2021 Earnings Presentation
41 slides from Region's earnings presentation, Aug 17, 2021
Slide 1: FY21 Results Presentation
Is FY21 RESULTS PRESENTATION 16 August 2021 slide Mount Isa, QLD
Slide 2: Agenda
AGENDA 1. OVERVIEW OF FY21 RESULTS 2. FINANCIAL PERFORMANCE 3. OPERATIONAL PERFORMANCE 4. GROWTH OPPORTUNITIES 5. KEY PRIORITIES AND OUTLOOK 6. QUESTIONS 7. APPENDICES slide
Slide 3: Overview of FY21 Results
1 OVERVIEW OF FY21 RESULTS Anthony Mellowes Chief Executive Officer slide 3
Slide 4: FY21 Highlights
FY21 HIGHLIGHTS FINANCIAL CAPITAL ACTIVE PORTFOLIO PERFORMANCE MANAGEMENT MANAGEMENT Net Profit After Tax 1 Gearing 3 Portfolio occupancy 6 Specialty vacancy 6 $462.9m, up by 441.4% 31.3%, up by 5.7% 97.4% 5.1% FFO per unit 2 NTA per unit 4 Portfolio weighted average cap rate 7 14.76 cpu, up by 0.8%
Slide 5: Key Achievements
KEY ACHIEVEMENTS Strong rebound in second half of FY21 • Our convenience-based centres have benefited from the shift to shopping locally – Anchor tenants have experienced strong sales growth and turnover rent has increased – Specialty sales recovered quickly following the easing of restrictions – St
Slide 6: Financial Performance
2 FINANCIAL PERFORMANCE Mark Fleming Chief Financial Officer slide 6
Slide 7: Impact of COVID-19
IMPACT OF COVID-19 Strong sales growth and a return to pre-COVID-19 cash collection rates 20% Moving annual turnover growth (%) 1 Sales growth trends 15% • Sales growth has been volatile throughout the COVID-19 period – Australia-wide restrictions significantly impacted tenant sales between March an
Slide 8: Impact of COVID-19
IMPACT OF COVID-19 The earnings impact of COVID-19 is starting to reduce COVID-19 impact on AFFO Estimated COVID-19 Impact on FY21 ($m) Other Direct Reduction in ECL FY21 AFFO • The estimated direct impact of COVID-19 on the FY21 AFFO result Waived Rent COVID-19 Impacts Allowance COVID-19 Direct Imp
Slide 9: Profit & Loss
PROFIT & LOSS For the year ended 30 June 2021 30 June 30 June % Change $m 2021 2020 Anchor rental income 134.2 128.7 4.3% • Net property income increase on the prior year is primarily due to acquisitions and reduced COVID-19 related impacts Specialty rental income 125.8 126.1 (0.2%) Recoveries and r
Slide 10: Funds From Operations
FUNDS FROM OPERATIONS 30 June 30 June % Change $m 2021 2020 For the year ended 30 June 2021 Net profit after tax (statutory) 462.9 85.5 441.4% • Funds From Operations (“FFO”) of $159.0m is up by $18.2m or 12.9% compared Adjustment for non cash items to last year, primarily due to: – Net property inc
Slide 11: Balance Sheet
BALANCE SHEET At 30 June 2021 $m 30 June 2021 30 June 2020 % Change • Prior year cash included term deposits of $180.0m being the excess proceeds Cash 11.6 183.8 (93.7%) from the equity raisings in April and May 2020 (this excess cash was used to repay the maturing A$MTN $225.0m in October 2020) Inv
Slide 12: Debt and Capital Management
DEBT AND CAPITAL MANAGEMENT At 30 June 2021 30 June 2021 30 June 2020 • Gearing of 31.3% is within the target range of 30% to 40%. Our preference is Facility limit ($’m) 1,582.1 1,457.1 for gearing to remain below 35% at this point in the cycle. The increase in gearing from June 2020 is due to the a
Slide 13: Operational Performance
3 OPERATIONAL PERFORMANCE Anthony Mellowes Chief Executive Officer slide 13
Slide 14: Portfolio Overview
PORTFOLIO OVERVIEW Weighting towards food, health and retail services (non-discretionary) At 30 June 2021 Number of Number of GLA Site Area Occupancy Value WALE Weighted average centres specialties (sqm) (sqm) (% GLA) ($m) (yrs) cap rate (%) Neighbourhood 80 1,459 508,464 1,730,858 97.5% 2,989.8 7.1
Slide 15: Portfolio Occupancy
PORTFOLIO OCCUPANCY Specialty vacancy is stable despite COVID-19 challenges Portfolio Occupancy (% of GLA)1 • Continued strategic focus on remixing toward non-discretionary categories and reducing long term vacancies where deals are accretive 98.4% 98.4% 98.2% 98.2% 97.4% • Total portfolio occupancy
Slide 16: Sales Growth and Turnover Rent
SALES GROWTH AND TURNOVER RENT Strong sales growth continuing • Supermarket portfolio MAT1 growth has increased by 3.2% (June 2020: 5.1%) Comparable Store MAT1 Sales Growth by Category (%) – Panic buying in the last quarter of FY20 not repeated in the last quarter of FY21 Year ending Year ending – C
Slide 17: Specialty Key Metrics
SPECIALTY KEY METRICS Rebound in second half • Strong second half leasing performance with positive renewal spreads (2H Specialty Tenant Metrics +1.6% vs 1H -4.6%) and improved new lease spreads (2H +3.0% vs 1H +0.8%) – In addition to the above, we executed 75 COVID lease extensions Total Portfolio
Slide 18: Sustainability
SUSTAINABILITY We are targeting our efforts in six key areas where we can have maximum impact1 slide 1. See our FY21 Sustainability Report for more information. slide 18
Slide 19: Our Pathway to Net Zero by 2030
OUR PATHWAY TO NET ZERO BY 20301 slide 1. Scope 1 and 2 carbon emissions only. See our FY21 Sustainability Report for more information. slide 19
Slide 20: Growth Opportunities
4 GROWTH OPPORTUNITIES Anthony Mellowes Chief Executive Officer slide 20
Slide 21: Track Record of Acquisitions
TRACK RECORD OF ACQUISITIONS On average we have acquired 6 properties for $238m each financial year Acquisitions by financial year ($m) 1 677.92 452.4 274.9 233.1 $238m average annual acquisitions 135.8 145.3 117.8 78.4 26.3 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 7 Properties 6 Properties 8 Pr
Slide 22: FY21 Acquisitions
FY21 ACQUISITIONS Nine contracted, seven completed during the financial year Bakewell SC & Petrol Station (Bakewell, NT) Auburn Central (Auburn, NSW) • Shopping centre acquisition completed in Sep 20 • Acquisition completed in Dec 20 for $129.5m (6.0% for $33.0m (7.2% implied fully let yield) implie
Slide 23: Convenience Based Centres
CONVENIENCE BASED CENTRES Fragmented ownership provides continuing acquisition opportunities Indicative Ownership of Convenience Based Centres CONVENIENCE BASED CENTRE LANDSCAPE (number of centres) • There are approximately 1,200 Coles and Woolworths anchored ISPT VCX CQR neighbourhood and sub regio
Slide 24: Indicative Development Pipeline
INDICATIVE DEVELOPMENT PIPELINE Over $170m of development opportunities identified at more than 30 of our centres over the next 5 years 1 Estimated Capital Investment (A$m) DEVELOPMENT TYPE CENTRE(S) FY21 Actual FY22 FY23 FY24 FY25 FY26 Greenbank, Warner, North Orange, Wyndham Vale, Epping North, Be
Slide 25: Funds Management
FUNDS MANAGEMENT Successful conclusion of SURF 1 (achieved IRR of 11%) and SURF 2 (achieved IRR of 12%) • First fund “SURF 1” was launched in October 2015, and successfully sold the five properties, with the final return made in October 2020 (consistent with 5-year term set out in the PDS) – Achieve
Slide 26: Key Priorities and Outlook
5 KEY PRIORITIES AND OUTLOOK Anthony Mellowes and Mark Fleming Chief Executive Officer and Chief Financial Officer slide 26
Slide 27: 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 28: Online Retail Implications
ONLINE RETAIL IMPLICATIONS Convenience based centres are becoming last mile logistics hubs • Our centres are located within local communities, well suited for last mile logistics • We believe the store-based fulfilment model will remain the predominant model for online grocery fulfilment in Australi
Slide 29: Impact of COVID-19 on FY22
IMPACT OF COVID-19 ON FY22 The impact of current lockdowns on FY22 earnings is unknown at this time • All specialty tenant categories finished the Category % of Gross Rental Income Sales Growth (%) financial year with positive sales growth May 2021 June 2021 June Total (month- (month- 2021 Impact •
Slide 30: Longer Term AFFO Growth Target
LONGER TERM AFFO GROWTH TARGET Indicative target growth rate for AFFO in the medium-longer term is 2% to 4% pa Indicative Contribution to AFFO Growth Rate (% pa) Description and Assumptions – medium to longer term – Anchor Rents • Anchors represent 48% of rental income. 34% of anchors in turnover re
Slide 31: Key Priorities and Outlook
KEY PRIORITIES AND OUTLOOK “Love local, Shop local, Act local” • Our focus continues to be: – Serving our local communities for their everyday needs – Partnering with our supermarket anchors to improve their online offer OPTIMISING THE – Actively managing our centres to ensure that we have successfu
Slide 32: Questions
6 QUESTIONS slide 32
Slide 33: Appendices
7 APPENDICES slide 33
Slide 34: Portfolio Detail
PORTFOLIO DETAIL Portfolio construction provides high degree of income predictability Overall Lease Expiry (% of Gross Rent) • Overall, a 7.2 year portfolio WALE combined with investment grade tenants and non-discretionary retail categories provides a higher degree of income predictability 27.8% • 3
Slide 35: Anchor Tenants
ANCHOR TENANTS 48% of gross rent generated by anchor tenants 30 June 30 June 30 June 30 June 30 June 2017 2018 2019 2020 2021 • All centres are anchored by either Woolworths Limited or Woolworths Limited Coles Group Limited retailers Woolworths 54 54 58 58 63 Big W 7 7 9 9 11 • 48% of gross rent is
Slide 36: 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 and Syndicated Facilities Bank bilateral 200.0 145.0 55.0 FY23: $200m Nov 2022 Bank bilateral 75.0 75.0 - FY24: $25m Dec 2023 and $50m Jun 2024 Bank bilateral 100.0 100.0 -
Slide 37: Acquisitions During the Year
ACQUISITIONS DURING THE YEAR 30 JUNE 2021 Specialty Total Total Purchase Implied Acquisition Anchor GLA Occupancy Centre Type GLA GLA Price Fully Let Date (sqm) (% GLA) (sqm) (sqm) ($m) Yield Acquired Properties Bakewell Shopping Centre Neighbourhood Sep 2020 4,854 1,553 6,407 96% 33.0 7.22% Bakewel
Slide 38: Portfolio List (I)
PORTFOLIO LIST (I) Completion Total GLA Occupancy Number of WALE Valuation Valuation Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate June 2021 ($m) Lavington Square NSW Sub-Regional WOW; Big W 2005 20,222 96.2% 58 3.2 6.25% 73.0 Marketown East
Slide 39: Portfolio List (II)
PORTFOLIO LIST (II) Completion Total GLA Occupancy Number of WALE Valuation Valuation Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate June 2021 ($m) Annandale Central QLD Neighbourhood Coles 2007 6,655 96.5% 20 5.6 6.75% 26.6 Ayr QLD Neighbourh
Slide 40: Portfolio List (III)
PORTFOLIO LIST (III) Occupancy Number of WALE Valuation Valuation June Property State Property Type Anchor Tenant(s) Completion Date Total GLA (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate 2021 ($m) Properties Under Management - SURF 1 All assets have been sold and this fund was wound up in O
Slide 41: Contact Details and Disclaimer
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.au E: mark.fleming@scaproperty.com.au Disclaimer This presentation has been p