I N T E R I M R E S U L T S 2 0 1 9 6 M O N T H S H I G H L I G - - PowerPoint PPT Presentation

I N T E R I M R E S U L T S 2 0 1 9

• Core direct property portfolio growth of

2.75% before gearing (all properties)

• Escalations on expiry were overall

2.5% positive

• Announced the intention to merge

Arrowhead and Gemgrow

6 M O N T H S H I G H L I G H T S

• Solid property performance in tough

environment

Revised guidance to 56 cents (from 58 cents) for the year ending 30 September 2019 No contribution from Rebosis Lower guidance as a result of Indluplace trading statement and impact of Edcon

R E S U L T S

Interim dividend declined to 27.8 cents

S T R A T E G Y

South African focused Pure property Across the country in all sectors Specialists in sustainable properties

A R R O W H E A D G R O U P S T A F F I N C R E A S E

Supplement JHI services not replacing, additional staff to add to the bottom line

+

Increased from 12 to 26

• ver the last 18 months +

New deals

leasing team

+

Focused debtors

resource

+ +

Dedicated utilities

position filled

A R R O W H E A D S N A P S H O T

As at 31 March 2019

Gearing R3.5 billion. Group LTV of 41% and Company of 35% Diverse portfolio (industrial, office and retail) valued at R5.7 billion 59.6% interest in Indluplace: R1.8 billion 53.3% in Gemgrow: R1.9 billion 8.6% interest in Dipula: R354 million 16.4% interest in Rebosis: R224 million

• Positive election outcome for SA economy
• Market cautious
• Greenshoots of optimism
• AWA well positioned for South African

bounce

S O U T H A F R I C A N E N V I R O N M E N T

• Tough operating environment continues

T O T A L D I V I D E N D

R’000 2019 2018 Revenue (excluding straight line rental income) 1 182 597 1 112 580 Listed securities income 62 402 109 980 Property expenses (471 511) (408 359) Administration and corporate costs (35 525) (28 319) Finance charges (316 941) (273 936) Finance income 40 158 47 336 Pre-effective date dividend - subsidiary 6 090

• Non-controlling interest profits elimination (net of antecedent income)

(142 856) (146 348) Distributable income 324 414 412 934 Antecedent income - subsidiary 1 403

• Accrued dividend on listed securities

16 702 107 749 Listed securities income recognised in previous reporting period (62 402) (109 980) Total dividend 280 117 410 703 Dividend to the Arrowhead Charitable Trust and corporate fees* 11 138 13 793 Total dividend after effects of Arrowhead Charitable Trust 291 255 424 496 *Dividend to the Arrowhead Charitable Trust and corporate fees are added back as it is eliminated on consolidation. Corporate fees are in respect of administration costs recouped from Indluplace and Gemgrow. Property expenses as a percentage of revenue – gross 40% 38% Property expenses as a percentage of revenue – net 18% 16% Total dividend^ 291 255 424 496 Total dividend (cents)^ 27.80 40.43 Net asset value per share (cents) 690.44 823.83 ^ The dividend was declared on 29 May 2019

A R R O W H E A D A S A T 3 1 M A R C H 2 0 1 9

R’000 UNAUDITED FOR THE SIX MONTHS ENDED 31 MARCH 2019 UNAUDITED FOR THE SIX MONTHS ENDED 31 MARCH 2018 Assets Non-current assets 16 577 829 17 698 905 Investment property 15 207 306 15 036 213 Fair value of property portfolio for accounting purposes 15 072 410 14 912 089 Straight line rental income accrual 134 896 124 124 Property, plant and equipment 1 129 1 486 Loans to participants of group share purchase and option schemes 778 261 736 874 Goodwill

• 337 449

Financial assets 585 655 1 584 800 Deferred Taxation

• 2 011

Derivative instruments 5 478 72 Current assets 576 689 377 713 Trade and other receivables 317 464 253 539 Cash and cash equivalents 259 225 124 174 Non current assets held for sale 380 360

• Total assets

17 534 878 18 076 618 Equity and liabilities Shareholders’ interest 7 019 573 8 394 444 Stated capital 6 558 758 6 572 398 Reserves 460 815 1 822 046 Non-controlling interest 3 156 311 3 055 312 Other non-current liabilities 6 289 567 5 602 954 Secured financial liabilities 6 258 674 5 532 120 Derivative instruments 30 893 70 834 Current liabilities 1 069 427 1 023 908 Trade and other payables 370 006 323 235 Secured financial liabilities 697 000 700 673 Derivative instruments 2 421

• Total equity and liabilities

17 534 878 18 076 618

Debt expiry 2019 R381 million 2020 R1 116 million 2021 R205 million 2022 R924 million 2023 and beyond R910 million Total R3 536 million

D E B T

• Arrowhead loans of R3.5 billion and Group of R7 billion
• Arrowhead LTV of 35%, Group of 41%
• Loans fixed, Arrowhead 73% and Group 76.5%
• Arrowhead weighted average interest rate of 9.69% and Group weighted

average interest rate of 9.78%

N A V B R I D G E P E R S H A R E G R O U P

9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00

7.54

NAV in R’s

September 2018 Investment property Non-current assets held for sale Trade and other receivables Loans to participants of group share purchase and option scheme Derivative instruments Property, plant and equipment Stated capital Cash and equivalents Trade and other payables Non-controlling interest Financial assets Secured financial liabilities March 2019

Balance Sheet Movement

0.78 0.05

• 0.02

0.04

• 0.05
• 0.00
• 0.00

0.22

• 0.00
• 0.22
• 0.59
• 0.84

6.90*

Increase Decrease Total

*Current discount to NAV as at 24 May 2019 was approximately 44%

Average gross rent per sector (retail R141/m2, office R113/m2, industrial R47/m2) 49 commercial (industrial, office and retail) properties Retail 61%, office 31% and industrial 8% (sectoral by value) Overall vacancy 8.6% (office 13.2%, retail 6.6%, industrial 5%)

A S A T 3 1 M A R C H 2 0 1 9

• Average lease profile 3.85 years
• Reversions per sector

(retail 0.3%, office 4.2%, industrial -15.3% (only 352m2)) overall 2.5% positive

• 28 493m2 came up for renewal, 19 849m2 retained (70%) and 2 681m2 of 8 644m2

was re-let

• Overall 79% of expiring GLA was retained and re-let
• New deals per sector

(retail 1%, office -43%, industrial 10%) overall -22%

• Escalation per sector

(retail 7.2%, office 7.7%, industrial 7.9%) overall 7.6%

36 assets Indluplace Gemgrow

C O R E P O R T F O L I O

Debtors under control – business rescue on the rise, well managed Property portfolio performed as expected 1 Sturdee 100% occupied 25 Owl Street (minor revamp), let 13 810m2 of 14 984m2 Business Centre vacant – revamped then sold for R24.5 million Vacancy increased marginally to 8.6% (as expected in forecast)

O P E R A T I O N A L S U C C E S S E S

2 5 O W L S T R E E T

C H A L L E N G E S

lost anchor and 3 397m2 vacant of 6 538m2 S I M U N Y E 1 441m2 vacant of 6 352m2 L Y N D H U R S T lost large single tenant to business rescue, 2 340m2 of 5 034m2 vacant T H E A T R I U M R O S E T T E N V I L L E 3 923m2 vacant of 14 198m2

S I M U N Y E

W A Y F O R W A R D O N C H A L L E N G E S

R36 million, 6 538m2 S I M U N Y E

• Sourcing anchor tenant and general refurb
• Potentially converting to private school
• Reconsider proposal from national tenant

(concept store – large investment required)

• Disposal

L Y N D H U R S T

W A Y F O R W A R D O N C H A L L E N G E S

R54.2 million, 6 351m2 L Y N D H U R S T

• Placed in ‘ICU’
• Additional letting resources allocated to

turnaround project

• Canvassing convenience centre type tenants

– ie gym, pharmacy, party shop, national pizza franchise

T H E A T R I U M

W A Y F O R W A R D O N C H A L L E N G E S

R29 million, 5 036m2 T H E A T R I U M

• Internal minor refurb complete
• Potential for ground floor retail
• Market research indicates demand for

smaller offices

• Conversion into school – node has large

educational presence

• Disposal

R O S E T T E N V I L L E

W A Y F O R W A R D O N C H A L L E N G E S

R O S E T T E N V I L L E

• Identified challenges
• Underwent feasibility and identified opportunities
• Well located, high barriers to entry, low competition
• Revamp (R3 million)
• Hired retail consultants
• Uptick in foot count approximately 15%
• Existing tenants upgrading stores and potentially taking
• n additional space

R81.6 million, 14 198m2

M A R K E T O B S E R V A T I O N S

• Competitive environment, declining pool of tenants
• Increasing cost of placing new tenants
• Do everything to keep existing tenants
• Some convenience centres under pressure – monitoring situation

(Mkuze, Eersterust & Lyndhurst but Terminus, Matsulu & Sibasa performing)

• Large centres defensive
• Renewals under pressure across sectors

A R R O W H E A D O B S E R V A T I O N S

• Impact of utilities – letting and occupation
• Retail renewals – closer attention to trading metrics
• Chasing of market share has declined
• Uptick in demand on larger retail assets
• Pressure on convenience centres
• Ease of doing business
• Lower built in escalations
• Abuse of business rescue – risk to landlords
• Effect of security risks
• Tenants looking for value offering

T O P S I X P R O P E R T I E S

ACCESS PARK Western Cape R895 593 402 20 456m2 Retail

98% let (vacancy is churn) Continues to perform Tenants upgrading their own space (Adidas, Footgear, Guess, Nike, Fruit & Veg) New brands (Tommy Hilfiger, Asics) March on March growth at 7%

T O P S I X P R O P E R T I E S

CLEARY PARK Eastern Cape R563 562 995 36 294m2 Retail Minor revamp complete Retail 100% let Only 806m2 of office available

T O P S I X P R O P E R T I E S

WESTGATE MALL Western Cape R367 519 123 28 951m2 Retail 100% let Minor revamp complete

T O P S I X P R O P E R T I E S

158 JAN SMUTS Gauteng R255 901 751 19 510m2 Office 88% let

T O P S I X P R O P E R T I E S

MIDTOWN MALL North West R239 168 524 17 456m2 Retail 95% let

T O P S I X P R O P E R T I E S

1 STURDEE Gauteng R208 050 337 13 350m2 Office 100% let

E D C O N E X P O S U R E

• Our exposure
• GLA (m2) 2.65%
• Revenue – 2.1% to reduce to approximately 1.2%
• Our Edcon exposure is broken down as follows:
• Edgars 55% (2 tenants)
• Jet 45% (6 tenants)

T R A D I N G D E N S I T I E S

T R A D I N G D E N S I T I E S

March 2018 vs March 2019

R E N T T O S A L E S R A T I O

March 2018 vs March 2019

KWT KWT

4500 4000 3500 3000 2500 2000 1500 1000 500

Access Park Westgate Montclair Midtown Mall Cleary Park 2019 2018

10% 1% 0%... 8% 1% 13% 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%

Access Park Westgate Montclair Midtown Mall Cleary Park 2019 2018

2% 7% 5% 1% 12% 10%

C O M B I N E D L E A S E E X P I R Y P R O F I L E

B Y R E V E N U E

RETAIL INDUSTRIAL OFFICE

9 000 000 8 000 000 7 000 000 6 000 000 5 000 000 4 000 000 3 000 000 2 000 000 1 000 000 2% 10% 23% 19% 23% 23% Monthly 2019 2020 2021 2022 > 2022 Vacancy Monthly 2019 2020 2021 2022 > 2022

B Y G L A

RETAIL INDUSTRIAL OFFICE

90 000 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 9% 3% 7% 19% 15% 19% 28%

Year ended 1 October 2018 to 31 March 2019 1 October 2017 to 31 March 2018 Growth R’000 R’000 %

Revenue 431 737 409 319 5.48 Property expenses (171 321) (155 873) 9.91 Net Operating Income 260 416 253 446 2.75

C O R E P O R T F O L I O

I N D L U P L A C E I N S I G H T S

Tenants remain under pressure Expecting improved second half of the year Maintain strong balance sheet, LTV of 33% Handful of buildings underperforming Continue rental specials and deposit free incentives Highveld letting monthly (outside chance of head lease) Additional staff to sweat portfolio

G E M G R O W I N S I G H T S

In discussion for an additional R500 million sales Ahead of guidance Portfolio performed marginally better than expectations Sales of R425 million before year end Current LTV of 32% Further reducing to 28%

13 assets Rebosis Dipula

N O N - C O R E P O R T F O L I O

S A L E S

Over R100 million sales in discussions

Sold Business Centre for R24.5 million (vacant and book value of R26 million) Sold SARS for the fifth time for R230 million (12.4% yield and book value of R231.7 million) R45.5 million close to transfer R230 million under offer None of the sales below transferred during the six months Sold North End in Port Elizabeth for R21 million (4.4% yield and book value of R25 million)

D I P U L A

Minimal impact on AWA dividend, every 1 cent reduction in Dipula’s earnings, reduces Arrowhead’s dividend by 0.04 cents Currently not selling, held as security Holding DIB over the medium term

R E B O S I S

Currently not selling Work towards unlocking of NAV Rebosis shares unencumbered Already been excluded from forecast

A R R O W H E A D A N D G E M G R O W M E R G E R

• Simplified structure
• Lower dependence on listed property investments
• Rebosis already excluded and reliance on Dipula & Indluplace further reduces
• Retain A & B share structure (unlikely to issue further A shares in this environment)
• R11 billion in physical property portfolio
• Positive step towards focus on pure property
• Great benefits for Gemgrow and Arrowhead
• Possible SAPI inclusion
• Expect to implement before year end
• Increased scale

6 M O N T H S T O S E P T E M B E R 2 0 1 9

• Reduce gearing
• Target group LTV to below 35%
• Manage large lease expiries in 2020
• Tenant retention
• Continue aggressive letting of vacant space
• Focus on sales

• Conservative balance sheet management
• Focus on implementing the merger
• South African hedge in an investor portfolio
• Simple to understand and clean sustainable earnings
• On track to reduce LTV to below 40%, working towards 38% in the short term

6 M O N T H S T O S E P T E M B E R 2 0 1 9

Q U E S T I O N S

T H A N K Y O U