Region Group · ASX:RGN
Region — Investor Presentation (February 2019)
42 slides from Region's investor presentation, Feb 5, 2019
Slide 1: First Half FY19 Results Presentation
SCA PROPERTY GROUP First Half FY19 Results Presentation 4 February 2019 Sturt Mall, NSW
Slide 2: Agenda
AGENDA 1 Overview of First Half FY19 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 FY19 Results
1 OVERVIEW OF FIRST HALF FY19 RESULTS Anthony Mellowes Chief Executive Officer
Slide 4: First Half FY19 Highlights
FIRST HALF FY19 HIGHLIGHTS Financial Capital Active Portfolio Performance Management Management $65.9m, up by 17.5% 34.2%, up by 3.0% 98.3% 4.8% Funds from operations1 Gearing3, middle of our 30 – 40% target range Portfolio occupancy6 Specialty vacancy6 8.10 cpu, up by 7.7% $2.27, down by 1.3% 6.43%
Slide 5: Key Achievements – Delivering on Strategy
KEY ACHIEVEMENTS – DELIVERING ON STRATEGY • Existing centres continue to perform well: – Supermarket MAT sales growth of 1.7%, Discount Department Stores 1.9%, Specialties 3.5% – December sales and foot traffic growth remained positive, demonstrating the benefit of convenience-based, non- discretion
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 2018 • Net property income: $m 1HY19 1HY18 % Change – Gross property income increase primarily due to acquisitions and Anchor rental income 59.9 53.5 12.0% the completion of developments (Vicinity portfolio, Sturt Mall, Miami, Bushland, Shell Cove),
Slide 8: Funds From Operations
FUNDS FROM OPERATIONS For the Six Months Ended 31 December 2018 $m 1HY19 1HY18 % Change • Funds From Operations of $65.9m is up by 17.5% on the same period last year Net profit after tax (statutory) 39.3 69.6 (43.5%) – Non-cash and one-off items have been excluded – $0.3m net unrealised profit from
Slide 9: Balance Sheet
BALANCE SHEET As at 31 December 2018 • Value of investment properties increased from $2,453.8m to $m 31 December 2018 30 June 2018 % Change $3,153.1m, primarily due to acquisitions and developments (see Cash 1.9 3.7 (48.6%) slide 34 for further detail) Assets - held for sale - 57.9 nm – Portfolio we
Slide 10: Debt and Capital Management
DEBT AND CAPITAL MANAGEMENT As at 31 December 2018 • Gearing of 34.2% is within target range of 30% to 40%. Our $m 31 Dec 2018 30 June 2018 preference is for gearing to remain below 35% at this point in the Facility limit1 1,303.1 964.8 cycle – Look through gearing (including CQR and SURF investment
Slide 11: Operational Performance
3 OPERATIONAL PERFORMANCE Anthony Mellowes Chief Executive Officer
Slide 12: Portfolio Overview
PORTFOLIO OVERVIEW Weighting towards food, medical and retail services (non-discretionary) As at 31 December 2018 Number of Number of GLA Occupancy Value WALE Weighted average centres specialties (sqm) (% GLA) ($m) (yrs) cap rate (%) Neighbourhood 75 1,271 458,448 98.2% 2,316.6 8.1 6.35 Sub-regional
Slide 13: Portfolio Occupancy
PORTFOLIO OCCUPANCY Stable at 98.3% • Total portfolio occupancy is 98.3% of GLA Portfolio Occupancy (% of GLA) – Specialty vacancy of 4.8% is within the target range of 3-5% 98.4% 98.4% 98.4% 98.3% – Excluding acquisitions, specialty vacancy is 4.7% and occupancy is at 98.4% – Refer to slide 16 for
Slide 14: Sales Growth and Turnover Rent
SALES GROWTH AND TURNOVER RENT Existing centres continue to perform well • The numbers on this slide exclude acquisitions completed during the six months Comparable Store MAT1 Sales Growth by Category (%) to 31 December 2018. Please refer to slide 16 for a breakdown between existing and acquired cen
Slide 15: Specialty Key Metrics
SPECIALTY KEY METRICS Sustainable rents enabling positive rental reversions in existing centres • The numbers on this slide exclude acquisitions completed during the Specialty Tenant Metrics six months to 31 December 2018. Please refer to slide 17 for a Existing breakdown between existing and acquir
Slide 16: FY19 Acquisitions – Key Metrics
FY19 ACQUISITIONS – KEY METRICS Sales growth, turnover rent, portfolio occupancy, WALE • We owned the centres acquired from Vicinity for less than three Sales MAT Growth Existing Centres FY19 Acquisitions Total Group months of the period. Remixing strategies in relation to these Supermarkets 1.7% -1
Slide 17: FY19 Acquisitions – Key Metrics
FY19 ACQUISITIONS – KEY METRICS Specialty key metrics Spec Tenant Metrics Existing Centres FY19 Acquisitions Total Group • Only 30% of specialty tenants are reporting comparative sales Comparable sales MAT growth (%) 3.5% -1.6% 1.9% (vs c.50% for the existing portfolio) Average Spec Occ Cost 9.4% 12
Slide 18: Growth Initiatives
4 GROWTH INITIATIVES Anthony Mellowes Chief Executive Officer
Slide 19: Portfolio Management
PORTFOLIO MANAGEMENT Twelve acquisitions and five divestments in the six months to 31 December 2018 Vicinity Acquisition Vicinity acquisition overview • Ten convenience-based shopping centres located in NSW, QLD, VIC and WA • Acquisition completed in Oct 2018 for $573.0m (7.47% implied fully let yie
Slide 20: Portfolio Management (Cont'd)
PORTFOLIO MANAGEMENT (CONT’D) Twelve acquisitions and five divestments in the six months to 31 December 2018 Other Acquisitions Sturt Mall Miami One (Wagga Wagga, NSW) (Gold Coast, QLD) • Acquisition completed in Aug 2018 for $73.0m • Acquisition completed in Oct 2018 for $31.9m (6.93% implied fully
Slide 21: Convenience Based Centres
CONVENIENCE BASED CENTRES Fragmented ownership provides acquisition opportunities Convenience Based Centre Landscape Ownership of Convenience Based Centres (Number of centres) • There are approximately 1,200 Coles and Woolworths anchored neighbourhood and sub regional centres in Australia Indicative
Slide 22: Indicative Development Pipeline
INDICATIVE DEVELOPMENT PIPELINE Over $120m of development opportunities identified at 26 of our centres over the next 5 years1 Estimated Capital Investment (A$m) 1HY19 Development Type Centre(s) Actual 2HY19 FY20 FY21 FY22 FY23 New centre developments Bushland Beach, Shell Cove 9.7 - - - - - Epping
Slide 23: Funds Management Business
FUNDS MANAGEMENT BUSINESS Potential to deliver additional earnings growth in the future • First fund “SURF 1” performing well – Investment property value increased from $60.9m in October 2015 to $71.0m as at December 2018 with NTA per unit increasing from $0.95 to $1.24 – Distribution yield on initi
Slide 24: Key Priorities and Outlook
5 KEY PRIORITIES AND OUTLOOK Anthony Mellowes Chief Executive Officer Mark Fleming Chief Financial Officer
Slide 25: 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 25
Slide 26: 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 turnover
Slide 27: Key Priorities and Outlook
KEY PRIORITIES AND OUTLOOK Continue to deliver on strategy in FY19 • Integration of acquisitions Optimising the • Focus on managing expenses both at centres and corporate levels while maintaining Core Business appropriate standards within our centres • Continue to explore value-accretive acquisition
Slide 28: Questions
SGA Property Group 6 QUESTIONS
Slide 29: Appendices
SGA Property Group 7 APPENDICES
Slide 30: FY19 FFO Per Unit Guidance
FY19 FFO PER UNIT GUIDANCE We have maintained guidance at 16.20cpu Reduction of distribution income as a Increased interest expense due result of CQR stake sale (5 million units in to Miami One acquisition, early 1HY19 and the remainder in 2HY19 settlement of Currambine and retaining the remaining C
Slide 31: Sustainability
SUSTAINABILITY We continue to focus on long-term sustainable performance SCP has continued to implement it’s sustainability strategy Our Sustainability Objectives (environment, social and governance), focusing on improving energy efficiency, supporting its communities and reducing risk. SCP has: Str
Slide 32: Long Term Leases to Woolworths, Coles and Wesfarmers
LONG TERM LEASES TO WOOLWORTHS, COLES AND WESFARMERS • 49% of gross rent is generated by anchor tenants Overall Lease Expiry (% of gross rent) (Woolworths 33%, Coles 11% and Wesfarmers 4% on 35.9% a fully leased basis), with an Anchor WALE of 10.7 years • Overall, a 8.2 year portfolio WALE combined
Slide 33: Anchor Tenants
ANCHOR TENANTS 30 June 2015 30 June 2016 30 June 2017 30 June 2018 31 December 2018 Woolworths Limited • All of our centres are currently Woolworths 53 53 54 54 58 anchored by either Woolworths Big W 9 8 7 7 9 Limited, Coles Group Limited or Dan Murphy's 5 3 2 2 4 Wesfarmers Limited retailers Master
Slide 34: Investment Properties Value
INVESTMENT PROPERTIES VALUE • Acquisitions include the VCX portfolio for $573.0m, Sturt Mall ($73.0m), Miami One ($31.9m) and $36.9m of stamp duty and other transaction costs. • A partial disposal of Highett was made during the period for $2.4m (SURF 3 was held for sale as at 30 June 2018) • Develop
Slide 35: 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 6 Acquisition facility 246.0 246.0 - Oct 2020 Bank bilateral 225.0 82.0 143.0 FY 2023 (refer below & note 1) Bank bilateral 25.0 - 25.0 FY 2024 496.0 328.0 168.0
Slide 36: Acquisition Facility Refinancing
ACQUISITION FACILITY REFINANCING We intend to complete the refinancing of the Citi facility by 31 December 2019 Acquisition Facility (expiry October 2020) Comments Initial Long-term Funding 1 Acquisition facility of $365.0 million, Funding initially drawn to $356.0 million including $356.0m $110.0m
Slide 37: Acquisitions During the Period
ACQUISITIONS DURING THE PERIOD Six months to 31 December 2018 Anchor Specialty Total Total Purchase Implied Acquisition % GLA Centre Type GLA GLA GLA Price Fully Let Date Committed (sqm) (sqm) (sqm) ($m) Yield Acquired Properties Sturt Mall, NSW Sub Regional Aug 2018 9,857 5,469 15,326 97.1% 73.0 6.
Slide 38: Divestments During the Period
DIVESTMENTS DURING THE PERIOD Six months to 31 December 2018 Anchor Specialty Total Total Sale Divestment % GLA Divestment Centre Type GLA GLA GLA Price Date Committed Cap Rate (sqm) (sqm) (sqm) ($m) Divested properties (“SURF 3”) Moama Marketplace, NSW Neighbourhood 10 July 2018 3,623 891 4,514 99.
Slide 39: Portfolio List (I)
PORTFOLIO LIST (I) Occupancy Number of WALE Valuation Valuation Dec-18 Property State Property Type Anchor Tenant(s) Completion Date Total GLA (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Lavington Square NSW Sub-Regional WOW; Big W 2005 20,467 97% 58 4.8 7.75% 52.0 Sturt Mall NSW Sub-
Slide 40: Portfolio List (II)
PORTFOLIO LIST (II) Occupancy Number of WALE Valuation Valuation Dec-18 Property State Property Type Anchor Tenant(s) Completion Date Total GLA (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Annandale Central QLD Neighbourhood Coles 2007 6,655 93% 22 6.3 7.25% 30.5 Ayr QLD Neighbourhood
Slide 41: Portfolio List (III)
PORTFOLIO LIST (III) Completion Total GLA Occupancy Number of WALE Valuation Valuation Dec-18 Property State Property Type Anchor Tenant(s) Date (sqm) (% by GLA) Specialties (Years by GLA) Cap Rate (A$m) Properties Under Management - SURF 1 Burwood DM NSW Freestanding Dan Murphy's 2009 1,400 100% 0
Slide 42: 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