Atlantic Leaf Properties Limited Annual Results: February 2017 - - PowerPoint PPT Presentation

Atlantic Leaf Properties Limited

Annual Results: February 2017

Atlantic Leaf at a glance

2 Growth in Property Assets Under Management Portfolio composition Key Property Portfolio Statistics

AUM

£304m

Equity

£155m

£ 27m £ 50m £ 68m £ 131m £ 143m £ 158m £ 195m £ 264m £304m Apr-14 Mar-15 Jun-15 Jul-15 Oct-15 Nov-15 Feb-16 Oct-16 Feb-17

LTV

51.7%

Average cost of debt

3.2%

Assets

48 properties 14 Tenants

WAULT

11.6 years

Listed on SEM & JSE AltX

March 2014

Move to JSE Main board

November 2016

Weighted average asset yield

7.3%

Office 26% Industrial 72% Retail Warehouse 2%

Full Year Highlights

3

Distributions

4.2 pence interim dividend - August 16 4.3 pence final dividend - February 17 Up 21% over the prior year

3.0p 4.2p 4.0p 4.3p 2015 2016 Interim Final

Distribution profile

8.5p 7.0p

Move to Main Board of JSE – November 2016 Healthy growth in distributable earnings £11.6m up from £4.5m AUM growth - £304m from £195m Disposal of Wombourne property resulting in a net IRR of 34% - Profit of £0.9m 100% occupancy rate for portfolio for the full year

Achievements

70.0% 28.2% 1.8% Tightly held Free float (not traded) Free float (traded)

Shares & Liquidity

4

28 79 143 51 63 532 2,090 2,354

• 500

1,000 1,500 2,000 2,500

• 20

40 60 80 100 120 140 160 31-Dec-14 Added in 2015 31-Dec-15 Added in 2016 31-Dec-16 Market Cap (R’mill) ALP Shares (mill) Closing shares in issue (m) Shares added (m) MCap (R'm) 63.0% 33.9% 3.1%

2016 2015

• Ave. shares

traded per day (calendar) Total number of shareholders (as at) Shareholder concentration Shares in issue / New shares added / Market cap Liquidity & free float

77.4% 14.9% 2.5% 1.5% 1.0% 1.0% 1.7% 0% 20% 40% 60% 80% 100% Top 5 6 - 10 11 - 15 16 - 20 21 - 25 26 - 30 Rest 114 325 31-Dec-15 28-Feb-17 3.9K 15.4K 2015 2016

Move to the Main Board of the JSE has seen an increase in trade

Strategic Summary

5

Focused on investing in quality UK assets with appropriate yields, which also allow for growth in earnings.

The Team

• Experienced and agile UK based

team based in central London

• Majority of opportunities sourced
• ff-market
• Team focussed on delivering

earnings growth from core leases

• Unlocking further growth through

asset management opportunities

• Active financial and risk

management

Industrial Assets

• Industrial warehousing and

distribution target sector

• Best performing UK property sector
• ver past few years
• Some office as part of portfolio

balancing

• Sector remains robust despite Brexit

uncertainty

• Rental growth still an opportunity in

many instances as we are coming off a low rental base (c. £4.67 / sq. ft.)

• Target distribution growth of 5% -

7% y/y against the backdrop of the UK’s low inflation (currently at 2% Y/Y)

• Asset management opportunities to

improve earnings above lease escalations

• Stable and relatively low cost base
• 50% gearing enhances growth in

earnings per share

• Comfortable with gearing
• WAULT of 11.6 years
• High cash flow covenants
• Low perceived risk Vs. high

benefit of low costs of funding

• Hedging in place

Yield

£304m at Feb 2017 Good pipeline in place Improvement in trading liquidity Number of shareholders increased from 114 to 325 2016: 7 pence 2017: 8.5 pence 2018: Revised Forecast 9.0 pence £150m by Feb 2016 £300m by Feb 2017 Target 20-30% growth in AUM subject to

• Opportunities that fit
• Appropriate yields
• Raising new capital

Attract more institutional investors Increase trading liquidity 2016: 7.0 pence 2017: 8.5 pence 2018: Initial Projection 8.9 pence

Key Objectives

Summary: Atlantic Leaf has performed well in achieving its stated objectives in FY17

6

Notes:

Key Objectives Current Position Shareholder Diversification Distribution AUM Grow the company Deliver performance

2016/17 Results

Financial Highlights

8

28-Feb-17 28-Feb-16 Revenue £20.0m £8.5m Distributable earnings £11.6m £4.5m Adjusted Earnings per share 9.0 pence 7.2 pence Dividend per share 8.5 pence 7.0 pence Adjusted NAV per share 1.12 1.10 Revenue

+135%

Distributable Earnings

+157%

Dividends

+21.4% A solid year of growth

Key Financial Metrics

9

Loan to Value Ratio (%) Interest Cover Ratio Cost of Debt (%) Debt Maturity (Years) Debt Hedged (%)

39% 52% 0% 10% 20% 30% 40% 50% 60% 28-Feb-16 28-Feb-17

3.20% 3.20%

0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 28-Feb-16 28-Feb-17 63% 74% 0% 10% 20% 30% 40% 50% 60% 70% 80% 28-Feb-16 28-Feb-17 3.4 2.9 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 28-Feb-16 28-Feb-17 2.6 4.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 28-Feb-16 28-Feb-17

Statement of Comprehensive Income

10

28-Feb-2017 28-Feb-2016 £’m £’m Net rental income 20.0 8.5 Property Operating expenses (0.9) (0.5) Net operating expenses (1.5) (0.5) Finance costs (4.5) (2.5) Tax Expense (1.5) (0.5) Adjusted Earnings/Distributable earnings 11.6 4.5 Fair Value movement on investment property (3.1) 2.2 Net Profit on disposal of investment property 0.9

• Once-off transaction costs

(0.4) (1.0) Foreign exchange loss on equity raised

• (0.3)

Reported Profit 9.1 5.4 Adjusted Earnings per share increased from 7.2 pence to 9 pence.

Valuations of Investment Property In terms of IFRS investment properties are held at their fair value

11

Costs are capitalised on acquisition as per IFRS Consistent with our existing accounting policy, our peers and IFRS, Atlantic Leaf has capitalised costs of £6,5m Properties cannot be acquired without incurring transaction costs In particular UK stamp duty At year end properties are required to be held at fair value per IFRS Fair value is defined as the price one could sell the assets and excludes acquisition costs Given the short period we have held the properties and that the market has not shown significant appreciation, values have not increased sufficiently to absorb all acquisition costs Accounting for investment properties at fair value at year end effectively results in a downward valuation in our properties by a net £3m.

Statement of Financial Position

12

28-Feb-2017 28-Feb-2016 £’m £’m Investment Properties 303.1 195.3 Cash 12.7* 6.2 Interest bearing debt 156.6 75.3 Fair value of derivatives 2.0 1.8 Other net assets/(liabilities) (2.4) 11.6 Net assets 154.8 136.0 Adjustments 5.3m

• Adjusted net assets

160.1 136.0 Adjusted NAV per share £1.12 £1.10

*£5m used to repay debt in March 2017

Our Portfolio

UK property market

14

¹ CBRE ² IPF.org

Post-Brexit uncertainty and supportive investment fundamentals create opportunities

25 20 15 10 5

• Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014 2015 2016 Other Industrial Retail Rest of UK office Central London office

Investment volumes (£’billions) 2 Rolling annual transaction yields and gilts (%) 3

9 8 7 6 5 4 3 2

• 2016

10yr gilts Retail Office Industrial 2015 2014 2013 2012 2011 2010 2009 2008 2007

(1.0) (1.2) 4.0 3.2 4.2 3.5 6.2 5.8 1.4 1.6 5.3 4.5 (1.3) 0.7 5.0 3.6 (0.9) 1.9 6.0 4.4 0.6 1.3 5.1 4.2

(2)

• 2

4 6 8 2016 2017 2018 2016 - 2018 Office Industrial Standard retail Shopping centre Retail warehouse All

Property total return forecast (%) 1 UK industrial sector continues to be the standout performer and is expected to remain resilient Challenging 2016 for UK property with both an unexpected increase in stamp duty to 5.0% (from 4.0%) and the impact of Brexit Annual return on UK commercial property in 2016 was c. 2.7% which included capital growth of -2.4% 1 (skewed by underperforming office) Despite low returns, Q4 recorded positive income and capital growth as well as higher investment inflows signalling a possible recovery The Investment Property Forum (IPF) UK Consensus (institutional investors and property advisers) forecasts total return of c. 5.8% between 2016 and 2018 for industrial property

All

Our Portfolio

15 Tenant Composition Regional Split

By income (£) By income (£)

36% 10% 9% 8% 6% 6% 5% 4% 4% 3% 3% 2% 2% 2% 18% 15% 15% 14% 12% 9% 6% 5% 3% 3% Booker Inspirepac Santander Gestamp Halfords EE DHL Palmer & Harvey Epwin Bauer Thomas Cook Robert McBride

• E. ON

Homebase North East Scotland North West

• York. & the humber

West Midlands South East East Midlands East Anglia South West Wales

Comfortable with the credit risk on existing tenants - Booker is performing well

Acquisitions and Disposals – 2016/7

16

Key acquisitions provided diversification and growth for Atlantic Leaf

DHL Runcorn Westpoint, Peterborough

Purchase Price £29.3m NIY 6.25% WAULT 8.3 years Area 635,656 sq ft Rent £2.87/sq ft Purchase Price £22.9m NIY 7.57% WAULT 11.9 years Area 177,621 sq ft Rent £11.68/sq ft Recently refurbished building with additional income opportunities and lease re-gears Excellent growth prospects with minimum 12.12% increase in 2019 or ERV estimated to be c. £3.50 – 3.75 Wombourne The sale of the Wombourne property at an attractive price of £11,3m demonstrates management’s ability to realise value and adds support to the valuations of Atlantic Leaf’s remaining portfolio Represents an attractive exit IRR of 34% Atlantic Leaf bought in at a NIY of c. 7.2% and secured an exit at c. 6.25%

Disposals

Tenants

• Thomas Cook
• Bauer Consumer Media

Tenant

• DHL Supply Chain

Asset Management Plan for 2017/18

17

Realise Value through strategic M&A activity

Recent market evidence suggests underlying value in the Atlantic Leaf portfolio Opportunities to realise value and offload smaller assets

Enhanced cash on cash returns by exploiting Capital Allowance benefits

Management exploring capital allowances across the portfolio This could result in a lower tax charge

Lease Re-gearing and Redevelopment Opportunities

Focus on shorter income re-gears (McBrides, St Helens; DHL, Runcorn; Eon, Coventry) Inspirepac, Chesterfied: Discussions underway for possible extension on un- utilised land Booker, Hull: Opportunity to surrender the lease and extract value through re- letting/re-development

  

Any of these should add to revenue

Outlook

18

UK focused and primarily industrial / distribution warehouse assets Seek to add assets through individual purchases or strategic alliances / partnerships as our balance sheet continues to grow Strategic alliances will allow us to participate in larger ticket transactions Strict discipline of delivering on distribution target

1 2 3 4

The target dividend per share for 2017/18 of 9 pence, an increase of 6% on 2016/17

Atlantic Leaf Proposition

19

Strong underlying property fundamentals Low risk in our portfolio Benefitting from low UK interest environment

• Debt cost still well below income yield
• Long leases give comfort on 50% LTV level
• The forecast is for rates to remain fairly low for a longer period
• 74% of debt hedged against interest rate risk
• 100% occupancy
• No vacancies foreseen
• No requirements for tenant improvements or rent-free periods
• Secure and regular income flows
• Long leases in place
• Good prospects for rental growth in the next few years:
• Contractual upward only rent reviews
• RPI linked leases will escalate with higher UK inflation, currently at

2.3% Distribution targets are being met

• First year 7 pence
• Second year 8.5 pence
• Third year 9 pence target

Solid growth in distributions is being achieved

Contacts Paul Leaf-Wright T: +44 203 355 3092 E: paul@atlanticleaf.mu Shaun Fourie T: +44 7470 110 955 E: shaun@atlanticleaf.mu General enquiries E: info@atlanticleaf.mu Website www.atlanticleaf.mu

Appendices

• 1. Top Assets
• 2. Our Tenants

3.Summary of Debt Facilities

• 4. Share Price Statistics

5.History

• 6. Management Team

• 1. Top Assets by Value

22

Sector Location Tenant GLA (sq ft) Annual Income (£) GMR (£/sq ft) WAULT (years) Value (£m)

Industrial Runcorn DHL Supply Chain 635,656 1,827,000 2.87 7.81 29.3 Office Newcastle Santander Cards 102,650 2,112,257 20.58 11.01 28.4 Industrial Redditch Halfords 361,407 1,889,441 5.23 12.09 28.3 Office Peterborough Thomas Cook, Bauer Consumer Media 177,621 1,762,804 9.92 11.68 23.0 Office Coventry E.On 46,515 1,039,869 22.36 6.13 14.3 Industrial St Helens Palmer & Harvey McLane 145,966 688,085 4.71 15.12 11.2 Industrial Wetherby Inspirepac 155,095 612,750 3.95 9.93 10.6 Office Greenock EE 61,740 725,000 11.74 12.31 10.3 Industrial Nuneaton Booker 90,669 676,128 7.46 10.34 10.2 Industrial Cannock Gestamp Tallent 165,095 796,956 4.83 8.63 10.0

• 2. Tenants

23

100% occupancy across the portfolio Strong tenant covenants WAULT of 11.6 years to expiry and 9.62 years to the break First expiry in 6 years

Tenant classification

88% 12% 0%

A B C

Grade A: Large, multinational or national companies with significant local and/or international operating facilities, strong financial strength and risk credit ratings Grade B: Sizable, national companies with multiple operating facilities, average to good financial strength and risk credit ratings Grade C: Other to be specified on case by case basis

13% 4% 4% 5% 18% 48% 0% 6% 3%

2 4 6 8 10 12

Less 8 Yr 9 Yr 10 Yr 11 Yr 12 Yr 13 Yr 14 Yr 15 Yr 15 + Net rental income (£'m)

Lease expiry profile

• 3. Summary of Debt Facilities

24

Funder Interest Rate Facility End Date Amount Variable Rate Loans Santander Bank 2.25% + LIBOR 17-Jul-18 2,635,101 2.25% + LIBOR 17-Jan-19 2,211,298 2.45% + LIBOR 29-Apr-19 1,067,000 2.45% + LIBOR 29-Apr-19 2,454,000 2.45% + LIBOR 29-Apr-19 2,359,000 2.45% + LIBOR 29-Apr-19 372,000 2.45% + LIBOR 29-Apr-19 550,500 2.25% + LIBOR 22-Oct-20 4,831,924 2.25% + LIBOR 22-Oct-20 1,948,998 HSBC Bank 1.90% + LIBOR 16-Oct-18 9,832,758 1.65% + LIBOR 16-Mar-19 14,591,404 1.60% + LIBOR 16-Mar-19 8,268,858 1.65% + LIBOR 16-Mar-19 12,771,010 1.80% + LIBOR 16-Mar-20 23,834,033 1.90% + LIBOR 29-Jul-20 12,936,443 1.95% + LIBOR 16-Oct-20 33,966,084 Fixed Rate Loans Aviva Commercial Finance Limited 2.15% 25-Nov-21 16,264,217 Total Interest Bearing Loans 156,613,745

• 3. Summary of Swap Agreements

25

Counterparty Fixed Basis Swap end Date Nominal HSBC 1.27% 16/10/2018 10,000,000 HSBC 0.88% 16/03/2019 10,987,500 HSBC 0.88% 16/03/2019 15,877,500 HSBC 0.95% 16/03/2020 14,261,250 HSBC 0.71% 29/07/2020 9,918,750 HSBC 1.60% 16/10/2020 20,000,000 Santander 1.53% 17/07/2018 2,656,056 Santander 1.79% 17/01/2019 2,232,072 Santander 2.29% 12/05/2019 1,067,000 Santander 2.29% 12/05/2019 2,454,000 Santander 1.54% 22/10/2020 1,478,250 Santander 1.54% 22/10/2020 3,663,750 Santander 1.03% 27/11/2020 5,937,500 100,533,628

• 4. Atlantic Leaf Share Price

26

ALP share price (JSE) Vs. ALP share price (SEM) Vs. GBPZAR exchange rate

Sources: 1) Factset share price performance and GBPZAR exchange rate from 8 Feb 2016 to 7 Feb 2017

1.00 1.04 1.08 1.12 1.16 1.20 15 16 17 18 19 20 01 Dec '16 08 Dec '16 15 Dec '16 22 Dec '16 29 Dec '16 05 Jan '17 12 Jan '17 19 Jan '17 26 Jan '17 02 Feb '17 09 Feb '17 16 Feb '17 23 Feb '17 02 Mar '17 09 Mar '17 16 Mar '17 23 Mar '17 30 Mar '17 ALP (SEM) GBP ALP (JSE) / GBP:ZAR (Rands) ALP (JSE) GBP:ZAR ALP (SEM)

• 5. History

27

Timeline of Key Events

Listed on SEM & JSE Vukile Strategic investment

£17.5m

Moved to the JSE Main Board Primary Listing

• n JSE

Maiden dividend announced Mar 2014 Oct 2014 YE Feb 2015 Aug 2015 YE Feb 2016 Jun 2016 Aug 2016 Nov 2016 YE Feb 2017 Interim dividend 3p/s Final dividend 4p/s AUM - £195m Interim dividend 4.2p/s AUM - £50m Final dividend 4.3p/s AUM - £304m

• 6. Management

28

Experienced and agile team with strong networks

Key employees

• Paul Leaf-Wright, CA(SA)

CEO

• Shaun Fourie

CIO

• Warren Morton, CA(SA)

Financial Director

• Mark Pryce, CA(SA)

Head of finance and operations

• Jaideep Khandpur, RICS

Asset Manager

• Robert Ferguson, RICS

Asset Manager

• Sana Dawood, CA(MU)

Financial manager

• Tim Leaf-Wright, CA(NZ)

Risk and compliance manager

Management structured to fully comply with the requirements of the various jurisdiction in which Atlantic Leaf operates

• Primary listing in Mauritius requires full board and

accounting presence

• All properties wholly owned out of Mauritius
• Property assets located in the UK requires full

property administration and property accounting functions located in the UK Annual objectives set by the Board for management

• Assets
• Distribution targets
• Growth in assets
• Risk and compliance framework

• 6. Management

29

Key Support Service Provider

Orbit Property Management Orbit is a leading niche commercial property firm with extensive professional expertise across all market sectors, acting for major institutional funds and private clients in both the UK and Europe. Orbit manages Atlantic Leaf’s portfolio on a day to day basis.

This document is not, nor is it intended to be, any financial, investment, trading, tax, legal, accounting, actuarial or other professional advice (“advice”). Atlantic Leaf Properties Limited (“Atlantic Leaf”), their agents and affiliates, are dealing with you exclusively on the basis that you have sufficient knowledge, experience and/or professional financial, tax, legal and other advice to undertake your own assessment of the information. The views in this document are those of Atlantic Leaf and are subject to change, and Atlantic Leaf has no obligation to update its views or the information in this document. This document does not aim to notify you of any possible risks, direct or indirect, in undertaking a transaction and counterparties should ensure that they fully understand and obtain professional advice in respect of the terms of the transaction, including the relevant risk factors and any legal, tax and accounting consideration applicable to them, prior to transacting. The information contained in this publication has been obtained from sources that Atlantic Leaf believes are reliable but we do not represent or warrant that it is accurate or complete. The information may be based on assumptions or market conditions and my change without notice. Market fluctuations and changes in exchange rates may have an effect on the value or price of investments. Past performance is not a guide to future investment performance. This document is confidential and the recipient may not distribute it to other persons without prior written consent of Atlantic Leaf. Distribution of this information may be restricted by law and persons who come into possession of this document should seek advice on and observe any restrictions. Neither Atlantic Leaf nor any of its affiliates or agents accepts any liability whatsoever for any direct, indirect or consequential damages or loss arising from any use of or reliance on this documentation

• r its contents.

No proposal put forward in this document is intended to be binding upon Atlantic Leaf or any of its affiliates or agents whether by way of agreement, representation or otherwise. Atlantic Leaf will not be obliged to carry out any proposals or fulfill any terms mentioned herein. All terms hereby proposed are subject to, among other things, obtaining the necessary mandate appointment for Atlantic Leaf, completion of due diligence as required and execution of the documentation.

Level 3, Alexander House 35, Cybercity, Ebene 72201 Republic of Mauritius T: +230 403 0800 E: info@atlanticleaf.mu W: www.atlanticleaf.mu