Full Year Results to March 2013 31 st May 2013
Agenda Financial highlights Strategy Operational highlights Investments Asset management activity Financial results Outlook Q&A 2
Financial highlights
Financial highlights Pro-forma Enlarged group figures (1) indicative of operational performance PBT (2) £45.6m (2012: £32.7m) +39% Underlying profit £25.9m (2012: £31.0m) -16.4% Valuation £20.3m (2012: £11.1m) +83% EPRA EPS 4.1p (2012: 4.9p) -16.4%; DPS flat at 7p EPRA NAV 109p (2012: 119p) -8.4% Adjusted NAV (adding back exceptionals) 116p (2012: 119p) -2.5% (1) 12 months of London & Stamford and 12 months of Metric Property (2) Includes revaluation surplus, derivatives movement and profit on sales, 2013: £18.6m, 2012: -£4.8m, excludes exceptional items and tax 4
Strategy
Strategic priorities Continued focus on income, asset management & developments: • Out of town retail • Retailer distribution Divestment of low yielding assets: • Wholly-owned residential investments • City offices Continue to leverage strong joint venture relationships Emphasis on growing income & underlying profits to cover the dividend Exploit enlarged group synergies, both value creation & costs 6
Synergies Value Costs creation People Occupier reach Corporate Firepower Operations Execution capabilities -£2.5m 7
Operational highlights
Operational highlights Portfolio valuation £1.2bn, up £20.3m Total property return 8.0% vs IPD All Property 3.0% Topped up initial yield 6.4% – post period end 6.6% (1) (2012: 5.6%) Occupancy (2) 95% – post period end 99% (1) (2012: 94%) Like-for-like rental growth +3.5% (2012: -6.1%) WAULT 11.9 years (2) (2012: 9.4 years ) (1) Post distribution portfolio sales announced 4 June 2013 for £247.56m (2) Investment portfolio as at 31 March 2013, excluding developments and residential (3) Post distribution portfolio sale 11.1 years to first break; 31 March 2013: 11.6 years to expiry, 10.8 years to first break 9
Operational highlights since merger Acquired Saturn portfolio of 6 retail parks for £92.4m, yield 7.8% Acquired Primark Distribution Centre, Thrapston for £60.5m, yield 6.4% £59.6m of sales agreed across 116 residential units One Carter Lane: 67,400 sq ft in solicitors’ hands (58% of target income) Tamworth letting: 336,500 sq ft (57% of area) for £1.6m p.a. Disposal of 11 distribution centers for £247.6m (£138.4m net share) 10 JV assets with Green Park + 1 wholly-owned former Focus DC in Tamworth 10
Investments
Investment Strategy Asset Short-cycle management development Income Retailer Retail led Bishop Auckland Leicester Coventry In solicitor’s Strong Distribution cashflow hands Primark, Thrapston Tesco, Harlow Opportunity London driven Unilever, Leatherhead Clerkenwell Quarter, London Carter Lane, London 12
Investment activity in the period £397m (1) of acquisitions – average yield 7.4% • 19 properties • WAULT 12.9 years £489m (1) of disposals – average yield 5.9% • 18 properties • WAULT 6.8 years Distribution Retail Saturn – 6 retail parks Primark, Thrapston Purchase price £92.4m, yoc 7.8% Purchase price £60.5m, yoc 6.4% 393,200 sq ft, WAULT 10.2 years c. 20 year lease with 1.5% indexation (1) LondonMetric net share 13
Transactions summary since merger Post period end JV distrib’n portfolio sale £109.1m (1) 25 January 27 March 18 February 20 February Sold Tamworth disposal £100m Acquired Acquired Distributi £400m Merger £29.3m on tender Saturn Primark complete + offer £92.4m £60.5m Portfolio ‘Piccolo’ Residential sales £59.5m (2) Acquisitions in solicitors’ (1) Gross disposal proceeds £218.2m hands (2) Across 116 units: Clerkenwell Quarter 57 units for £32.1m, residential investment portfolio 59 units for £27.5m £70m includes Highbury, Battersea and Stockwell 14
Investment pipeline Distribution portfolio disposal income hurdle £5.1m (1) Acquisition 1 Acquisition 2 Acquisition 3 £13m £22m £35m 15 (1) Reflects net income of distribution portfolio sale. Recent Tamworth letting is not including as rent does not start flowing until after the disposal completes.
Asset management activity
Delivering the strategy Today (1) At merger (1) Including post period end acquisitions, disposals and deals in solicitors’ hands 17
Valuation surplus: £20.3m 18
Outperforming IPD 19
Occupier contentment 14 new lettings, 4.8% ahead of anticipated rental levels • WAULT 12 years (1) • Including lettings across the legacy portfolio 12 re-gears/renewals at 7.5% ahead of previous passing rents 3.5% like-for-like rental growth 19% of rental income subject to fixed uplifts 288 residential occupier transactions 2.6% ahead of previous passing rent (1) Weighted average lease term for new lettings, 10.0 years to first break 20
Status of developments (1) Includes recently completed Bishop Auckland Phase I (92% let, 5% in solicitors’ hands, 3% to let) and Cannock (84% let, 16% i n s olicitors’ hands) 21 (2) Anticipated rental income at Carter Lane, London of £6.2m, of which £2.6m or 42% is to let
Development activity Costs (£m) Rent roll YOC on PC Description Location Sector Sq ft (£m) CTC Total (%) Existing developments Berkhamsted Retail 22,500 Food store development 0.6 4.4 7.6 7.9 Bristol Retail 61,400 External alternations 0.6 0.5 8.6 7.3 Committed Developments Carter Lane Office 133,000 Refurbishment 6.2 29.5 106.5 5.9 Conditional Developments BA Ph II Retail 27,000 New Open A1 development 0.4 3.8 4.5 9.3 Leeds Retail 105,000 New Open A1 development 2.8 21.7 35.5 8.0 St Austell Retail 171,000 New Open A1 development 2.3 29.6 29.6 7.9 Total 519,900 12.9 89.5 192.3 6.8 22
Financial results
Income statement Pro-forma Enlarged group (1) Statutory format (2) FY to 31 March (£m) 2013 2012 2013 2012 Profit before tax & exceptional items 45.6 32.7 39.9 19.5 Net rental income 39.4 48.1 29.2 35.5 Share of JV net income 5.3 5.5 4.5 5.3 Management fees & other income 10.6 6.4 10.4 6.4 General corporate costs (15.6) (14.2) (11.0) (9.5) Net finance costs (13.7) (14.7) (11.8) (13.4) Underlying profit 25.9 31.0 21.3 24.3 Valuation movements (3) 19.7 1.7 18.6 (4.8) (1) 12 months of London & Stamford and 12 months of Metric Property (2) 12 months of London & Stamford and two months of Metric Property for 2013, London & Stamford only for 2012 (3) Includes revaluation, derivative movements and profit/(loss) on sales 24
Growing income – post distribution sale (2) (4) (3) (1) (1) P&L rental income based on 12 months of London & Stamford and 12 months of Metric Property (2) Contracted annualised rent roll (3) Includes £0.7m of contracted development income and £0.4m of contracted letting income (4) Includes £0.7m for Ipswich acquisitions and £5.7m of deals in solicitors’ hands 25
Dividend cover – post distribution sale (2) (1) (1) Based on 12 months of London & Stamford and 12 months of Metric Property 26 (2) Full year Metric Property and post merger contracted income from acquisitions
Balance sheet At 31 March (£m) 2013 2012 Property portfolio (incl trading properties) 990.6 663.9 Joint ventures 120.9 161.6 Cash 37.6 136.9 Bank debt (464.5) (322.8) Other net assets (7.9) (8.7) Net assets 676.7 630.9 EPRA adjustments 10.6 12.7 EPRA net assets 687.3 643.6 EPRA NAV per share 109p 119p Exceptional items 38.9 1.8 Adjusted net assets 726.2 645.4 Adjusted NAV per share 116p 119p LTV 43% 34% 27
Movement in net assets (3) (2) (1) (1) Merger with Metric: £11.9m, internalisation of management contract £14.4m, impairment of Meadowhall mark to market £23.2m 28 (2) Metric merger: £190.3m, tender offer: -£100.7m (3) Add back exceptional items of £49.5 less EPRA adjustments of £10.6m
Debt financing – post distribution sale Debt £573m, now £514m (2012: £499m) • £76m through merger Net gearing 43%, now 38% (2012: 34%) Cost of debt 3.6% in the year (2012: 4.1%) Term to maturity 3.0 years (2012: 3.0 years (1) ) Joint venture equity commitments: £296m (1) Excludes net share of joint ventures 29
Outlook
Retail market UK has too many shops – consumers continue to polarise Rents remain under pressure, especially on ‘formerly’ prime assets Capital expenditure is becoming a necessity, not an option! Lease expiries, not administrations are now the chief risk • 51% of high street and shopping centre leases to expire by 2015 31
Retail market Growing Rightsizing Competitively Threatened 32
Distribution market Distribution warehouses will be driven increasingly by the needs of e-tailing Retailers are being forced to reconfigure their supply chains to cater for multi-channel retailing Warehouse take-up by retailers forecast at 50.0m sq ft over next five years, up 20% over last five years (1) Supply of new distribution space (8.3m sq ft) at a historic low There are supply shortages of Grade A space (1) Source: Savills 33
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