INTERIM RESULTS PRESENTATION for the six months ended 30 November 2014 1
PRESENTATION OUTLINE 1. Financial Highlights 2. Operational Highlights 3. Tower Strategy 4. Tower At A Glance 5. Tower Asset Managers 6. Management Team 7. Financial Results 8. Borrowings 9. Operational Performance 10. Portfolio Growth 11. Corporate Social Responsibility 12. Shoprite Brits 13. Shoprite Ennerdale 14. Shoprite Modimolle (Nylstroom) 15. Sunclare 16. Cape Quarter Residential Initiative 17. Shareholders 18. Prospects
FINANCIAL HIGHLIGHTS • Interim distribution of 42 cents per share • Headline earnings up 73% to R61 million • Distributable earnings up 59% to R63 million • Annualised historical total return of 19% • Portfolio expanded to 32 properties • Portfolio value increased to R2.2 billion • Market capitalisation increased to R1.35 billion 1
OPERATIONAL HIGHLIGHTS • Expense ratio reduced to 13.7% (net of recoveries) • Lighting retrofit completed at Cape Quarter and rolled out to De Ville Shopping Centre • Solar project, at a 17% IRR, completed at Cape Quarter • Cape Quarter residential bulk to be developed in the short term • Greening programme showing returns 2
TOWER STRATEGY Tower aims to generate competitive investment performance by adding value through property asset management and the cost effective greening of its property portfolio resulting in lower operational expenditure and increased tenant retention. Tower aims to expand its portfolio through management’s network of contacts throughout South Africa. 3
TOWER AT A GLANCE Sectoral profjle by value (Nov 2014) Geographic profjle by value (Nov 2014) Property portfolio value: R2.2bn 1% Rentable area (GLA): 139 000m 2 33% Gauteng Retail 45% Occupancy rate (GLA) (31 Jan 2015): 90% 49% Offjce Western Cape 66% Existing portfolio escalations: 8.4% Industrial KwaZulu-Natal Average gross rental: R129/m 2 6% Gearing (LTV): 34% Projected sectoral profjle by value Projected geographic profjle by value (Apr 2015) (Apr 2015) 1% 39% Retail Gauteng 45% 50% Offjce Western Cape 60% Industrial KwaZulu-Natal 5% 4
TOWER ASSET MANAGERS • Experienced team: TAM comprises Spire and ex Mettle executives • Successful track record of managing and assembling Paramount Property Fund. • Good mix of property and financial skills • Demonstrated ability to add value and improve underperforming properties • Spire contracted to undertake national property management • Spire highly regarded as a niche, hands on property manager by listed and private clients 5
MANAGEMENT TEAM Marc Edwards Bruce Kerswill Chief Executive Officer Executive Director Strategy, acquisitions, debt and Strategy, Marketing and Greening capital raising Joanne Mabin* Johan Malherbe Chief Financial Officer Asset Manager Financial controls and management Western Cape Keith Craddock Bruce Rogerson Executive Director Asset Manager Financial, administration, property Gauteng and KwaZulu-Natal management *Joanne Mabin replaced Fred Jenkings as CFO from 1 January 2015 6
FINANCIAL RESULTS Condensed consolidated statement of comprehensive income Unaudited as at 30 November 2014 R’000 Revenue 117 896 Net property operating expenses (14 167) Net property rental and related income 103 729 Administration expenses (7 236) Net operating profit 96 493 Fair value adjustments 36 577 Profit from operations 133 070 Net finance costs (34 052) Capital raising expenses (80) Profit before taxation 98 938 Taxation - Total comprehensive income for the period 98 383 Basic and diluted earnings per share - weighted 69.0 average shares in issue (cents) Basic and diluted headline earnings per share - 42.7 weighted average shares in issue (cents) 7
FINANCIAL RESULTS (continued) Condensed consolidated statement of financial position Assets Non-current assets 2 216 781 Current assets 103 424 Total assets 2 320 205 Equity and liabilities Equity 1 456 475 Stated capital 1 367 905 Retained income 88 570 Liabilities Non-current liabilities Secured financial liabilities 811 314 Current liabilities 52 416 Total equity and liabilities 2 320 205 8
BORROWINGS • Targeted loan to value - 40% Debt providers (Feb 2015) • Current LTV - 34% R12m Standard Bank • Total borrowings - R811m Nedbank • Fixed debt - 74% R799m • Weighted average rate - 8.3% Debt providers (Nov 2014) • Investec debt to be refinanced through Standard Bank. Saving of 87 basis points translates to approximate savings R12m Standard Bank of R4.1m per annum (excluding opportunity cost) Investec R325m • LTV to increase to 40.9% prior to dropping below the 40% mark Nedbank R474m due to the acquisition of Sun Clare. 9
BORROWINGS (continued) Tower Loan Facilities Name of Bank Start Date End Date Months Loan Amount Access Facility Interest Rate Investec Bank 22-Jul-13 22-Jul-16 36 347 921 600 Not Applicable 7.79% Investec Bank 15-Aug-13 15-Aug-16 36 126 068 750 Not Applicable 9.91% Standard Bank 27-Aug-13 31-Aug-16 36 200 000 000 40 000 000 8.61% Standard Bank 17-Apr-14 17-Apr-17 36 157 300 000 31 460 000 7.58% Nedbank 6-Dec-13 6-Dec-18 60 11 900 000 500 000 min 8.30% Tower Swap Facilities Name of Bank Start Date End Date Months Swap Amount Interest Rate Investec Bank 19-Jul-13 19-Jul-15 24 344 000 000 7.79% Investec Bank 3-Apr-14 3-Apr-17 36 126 000 000 9.91% Standard Bank 8-Apr-14 8-Apr-17 36 130 000 000 9.08% 10
OPERATIONAL PERFORMANCE Lease Expiry By GLA (30 Nov 2014) • Vacancies increased to 10% (Jan 2015) 17,8% 17,2% • Positive letting in Constantia View, 13,2% 11,7% 11,4% 9,5% De Ville Shopping Centre, Cape Quarter 8,7% 6,7% and 31 Beacon Road 3,8% 5 6 7 8 9 0 y l 1 1 1 1 1 2 t 4 h n 1 t y y y y y y a n a a a a a a • Refurbishment of 31 Beacon Road has v c o M M M M M M a o M V N < < < < < > resulted in a fully let property Lease Expiry by Gross Rental (30 Nov 14) 28% • Refurbishment of 382 Jan Smuts under way 23% 17% 14% 10% 6% 2% 0% y 5 6 7 8 9 0 1 1 1 1 1 2 l 4 h 1 t y y y y y y n a a a a a a v o M M M M M M o M N < < < < < > 11
OPERATIONAL PERFORMANCE (continued) • Over 6 000m 2 of space let • 1 940m 2 of new space let • 4 430m 2 of renewable space let • Active letting strategies should further reduce vacancies in the short term • Vacancies post new acquisitions of 7.6% 12
PORTFOLIO GROWTH Property deals concluded during and post interim period Property Sector Purchase price Location Medscheme Office R110m Florida North Section 3, Constantia View Office R12m Quellerina *Sunclare Office R192m Claremont *Brits Shoprite Retail R85m Brits *Ennerdale Shoprite Retail R71m Ennerdale *Nylstroom Shoprite Retail R82m Modemolle *4 Properties purchased / announced post Nov 2014 13
CORPORATE SOCIAL RESPONSIBILITY • Funding a bursary in the BSc Property Studies Degree at UCT • Funding a book prize at UCT for the property studies course • Partnering with UCT in a community based initiative aimed at assisting in the creation of educational facilities from creche-going age. Looking to raise R8.5m for the project which will cover full costs of the school. Government then contributes R18 per child per day 14
SHOPRITE BRITS • The Centre is located on the fringe of the CBD close to densely populated residential areas • Shoprite trades extremely well and the centre attracts the medium to lower LSM groups • Close to taxi ranks and public transport • Nationals occupy 77% of the Centre 15
SHOPRITE ENNERDALE • Nationals occupy 92% of the Centre • KFC drive-thru and Cashbuild recently completed • Scope for upward reversions as rentals are low • Ample bulk for future expansion 16
SHOPRITE MODIMOLLE (NYLSTROOM) • Relatively new centre located on the main arterial route at the entrance to Modimolle • Attractive tenant mix with 78% occupied by national tenants • Cashbuild, OK Furnishers, Pep, Spur and Wimpy are some of the nationals • The centre attracts a broad spectrum of consumers 17
SUNCLARE • Desirable location close to public transport • Close to retail amenities including Cavendish Square • Strong demand for office space in the area • Claremont vacancies below 1% • Flexible use of space with natural light through atria and balconies 18
CAPE QUARTER RESIDENTIAL INITIATIVE • Utilising current bulk on the Piazza • Opportunity to build 50-80 residential apartments • Developed out of subsidiary company with assessed loss • Material profits will support and enhance earnings in the medium term • Completion 2nd quarter 2017 19
SHAREHOLDERS Major fund managers Rank Fund manager % holding 1 STANLIB Asset Management 20,10 2 Allan Gray Asset Management 18,03 3 Coronation Fund Managers 16,24 4 Grindrod Asset Management 8,00 5 Prescient Investment Management 5,48 6 Personal Trust International 3,23 7 3 PM Investments 2,37 8 Sanlam Investment Management 2,05 9 Plexus Wealth 1,31 10 Ampersand Asset Management 0,93 77,74 20
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