fkp property group - aveo · 2020-02-08 · aveo bayview gardens bayview, nsw . 3 underlying profit...
TRANSCRIPT
FKP Property Group Full Year Results Presentation 28 August 2012
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1. Overview
2. Financials
3. Capital Management
4. Divisional Commentary
5. Strategy and Outlook
6. Entitlement Offer
7. Appendices
Contents
Aveo Bayview Gardens Bayview, NSW
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Underlying profit of $94.7 million, in guidance range of $91.9 - $104.3 million
FY12 distribution of 2.8cps
Earnings in line with revised guidance
Market headwinds have impacted earnings
Progress on Strategic Review
Overview
FKP is continuing to explore a demerger or other separation of its Retirement and Development/Property Trust businesses
Weak property markets and fragile investor sentiment shaped the environment
Conditions improving in isolated pockets
Statutory loss of $350.3 million
Adoption of appropriate valuation assumptions given market conditions
Statutory results impacted by revaluations
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Albion Mill Albion, QLD
Contents 1. Overview
2. Financials
3. Capital Management
4. Divisional Commentary
5. Strategy and Outlook
6. Entitlement Offer
7. Appendices
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Outcome FY12 FY11
Underlying profit after tax $94.7m $121.0m
Statutory (loss)/profit after tax ($350.3m) $82.3m
Underlying EPS 7.9cps 10.3cps
Recurring income percentage1 74% 60%
Distribution 2.8cps 3.0cps
NTA per unit $0.90 $1.25
Gearing 39.1% 28.9%
Key Financial Outcomes
1 Excludes retirement valuation
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FY12 $m
FY11
$m Change
Residential Communities and Apartments 18.9 36.4 (48%)
Retirement operations 33.2 46.3 (28%)
Retirement valuation 79.9 79.6 -
Commercial and Industrial 9.3 29.5 (68%)
Funds and Investments 13.9 15.8 (12%)
Corporate overheads (14.9) (17.3) (14%)
EBITDA 140.3 190.3 (26%)
Depreciation and amortisation (2.9) (3.0) (3%)
EBIT 137.4 187.3 (27%)
Interest and borrowings expense (12.5) (26.5) (53%)
Profit Before Tax 124.9 160.8 (22%)
Income tax (25.0) (34.1) (27%)
Profit After Tax 99.9 126.7 (21%)
Non-controlling interests (5.2) (5.7) (9%)
Net Underlying Profit1 94.7 121.0 (21%)
Divisional Contributions
1 The underlying profit has been calculated as per the AICD Underlying Profit Guidelines
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$113m $71m
HY12 FY12
$68m
$20m
HY12 FY12
Retirement Residential Communities
Currumbin
$1,207m $918m
HY12 FY12
(24%)
Adjustments due to the adoption of appropriate valuation assumptions1 (including consolidated FPG assets) given market conditions
(71)%
(37)%
Market conditions have impacted expected delivery dates
Mulpha FKP Norwest JV
$118m
$69m
HY12 FY12
(42%)
Lower carrying value reflecting adoption of appropriate valuation assumptions given market conditions
RVG Investment
Balance Sheet Portfolio
Market conditions have impacted expected delivery dates
Asset Impairments
Balance sheet has been impaired to reflect the current market environment
1Represents NPV of annuity streams. Key assumptions underpinning valuations include discount rate (12.5%), medium term (years 1 – 5) average property price growth (3.5%), long term (year 6 onwards) property price growth (4.5%) and subsequent resident tenure (10 years for Independent Living Units (ILUs) and 4 years for Serviced Apartments (SAs)).
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Deloitte engaged to assist FKP in a review of the appropriateness of key valuation assumptions
Current resident entry trends were extrapolated into future periods to determine likely future resident entry characteristics and tenure periods
Review saw changes to assumptions underlying the FKP Directors’ valuation
— Subsequent ILU resident turnover period increased from 9 years to 10 years
— Future price growth changed from 5.0% per annum to an average of 3.5% over first five years (range between 3.0% and 4.0%) and 4.5% from year six onwards
Adjustments to unit list prices to maintain sales rates and clear stock levels in the current operating conditions also have a follow on valuation impact
Key Valuation Assumptions FY12 FY11
NPV of annuity streams $918m $1,165m
Discount rate 12.5% 12.5%
Medium term future property price growth1 3.5% 5.0%
Long term future property price growth2 4.5% 5.0%
Existing Resident Tenure3 Life Tables Life Tables
Subsequent resident tenure (years)
Independent living units 10 9
Serviced apartments 4 4
1. Medium term growth averages 3.5% but increases from 3.0% in year one to 4.0% in year five 2. From year six onwards 3. Life tables are adjusted for a 3 year “X factor” to reflect the adjusted expected resident departure date
As with previous reporting periods, the fair value of the retirement assets has been determined by an FKP Directors’ valuation which was supported by an independent external valuation completed by Deloitte
Retirement Investment Property Valuation
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Contents
Aerial Camberwell Junction, VIC
1. Overview
2. Financials
3. Capital Management
4. Divisional Commentary
5. Strategy and Outlook
6. Entitlement Offer
7. Appendices
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Reported gearing, measured as net debt divided by cash adjusted assets (net of resident obligations) is at 39%
This is above the target level of 35%
Interest coverage ratio at 2.7 times against a covenant of > 2.0 times
Weighted average borrowing cost is 8.07% with a weighted average debt maturity of 2.3 years
Currently hedged at 64% of facility limit with a weighted average time to maturity of 2.8 years
All covenants have been satisfied
The $130m Wilbow facility matures in June 2013
465 Victoria Avenue was refinanced into the property trust and the facility was increased to $105m in June 2012
1 Includes margins and line fees 2 Undrawn facilities are dependent upon having sufficient security 3 Includes available cash 4 Excludes Port Bouvard Limited
Metrics FY12 FY11
Reported gearing 39% 29%
Covenant gearing (limit 55%) 51% 40%
ICR (minimum 2.00x) 2.7x 2.9x
Total interest bearing liabilities $975m $803m
Undrawn committed lines2,3,4 $182m $207m
Available facilities3,4 $51m $89m
Weighted average borrowing cost1,4 8.07% 8.48%
Weighted average debt maturity4 2.3 years 2.2 years
Hedged % on drawn debt4 73% 85%
Hedged % on facility limit4 64% 69%
Weighted average hedge maturity4 2.8 years 3.9 years
Capital Management Metrics
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Group Available Capacity
Following the delay of the Aerial project, FKP received a waiver for the net debt / EBITDA covenant as at 30 June 2012
Subsequent to these negotiations the following were agreed to:
— Permanent reduction in the minimum NTA covenant from $1.25bn to $1.00bn
— Permanent reduction in the facility limit of the Multi-Option Facility by $40m by 31 March 2013
— Total liabilities to total tangible asset ratio has decreased to 50% from 1 November 2012
— Based on current security value, available capacity in facility will be reduced by further $35m by 31 March 2014
— Interest coverage Ratio (ICR) has increased to 2.25x from 1 July 2013
In addition to the amendment to the development Multi-Option Facility, the available capacity has been impacted by the following factors
— Further Aerial delays
— Large asset impairments have impacted covenants and reduced headroom
— Continued difficult trading conditions across the retirement and residential markets
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Corporate Costs
Total corporate costs continue to decline as a result of continued focus on identification and delivery of cost control measures throughout the business through initiatives including
— Implementation of internal audit program to assist in identification of process improvement measures
— Specific project team created to implement automation of village employee payroll process and eliminate manual processing
— Restructuring of corporate services with some service lines combined and others discontinued
— Procurement review across selected villages and corporate costs focusing on outsourcing of non-core services
1. Total assets net of resident obligations
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Contents 1. Overview
2. Financials
3. Capital Management
4. Divisional Commentary
5. Strategy and Outlook
6. Entitlement Offer
7. Appendices
Saltwater Coast Point Cook, VIC
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Results impacted by difficult residential and retirement trading environment
Divisional profit contribution of $113.1m
Operating contribution of $33.2m down 28% on FY11, however underpinned by stable DMF/CG contribution
DMF/CG contribution of $49.3m 100% cash covered
Management fees down due to RVG village sales, lower RVG development activity and sales volume
Other income down due to lower contribution from development and refurbishment activity and lower commissions received from residents
Retirement P&L FY12 $m
FY11 $m Change
DMF/CG 49.3 49.7 (1%)
Management fees 10.1 14.2 (29%)
Aged care contribution 1.2 1.1 17%
Other income 6.0 13.3 (55%)
Total income 66.6 78.3 (15%)
Expenses (33.4) (31.9) 5%
Retirement operations profit 33.2 46.3 (28%)
Revaluation contribution 79.9 79.6 0%
Divisional profit contribution 113.1 125.9 (10%)
Retirement: Financial Result
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FY12 volume marginally down on FY11 volume
Strong 2HY12 volume
— 46% up on HY12 volume
— 17% up on pcp volume
— 10% annualised turnover
Buyback stock reduced by 11 units - trend to continue going forward
Sales Volume FY12 FY11 Change
Resales 467 481 (3%)
New sales 37 37 -
Total Sales 504 518 (3%)
Portfolio turnover (based on sales)1 8% 8% -
Net buyback purchases/(sales) (11) 62 118%
Sales Volume 2HY12 HY12 Change
Total Sales 299 205 46%
Portfolio turnover (annualised) 10% 7% 3%
1 Turnover based on FKP direct portfolio of 6,294 units
Sales Volume – HY12 vs 2HY12
Retirement: Sales Volume
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Metrics reflects high quality mature portfolio with strong market share
DMF/CG transaction price point and average DMF/CG increased substantially
Average age lifted to 82.7 years
Exiting Residents during FY12 have on average lived 9.1 years in the village
Substantial development pipeline of 708 units
Development expenditure dependent on selling environment and capital availability
Key Performance Indicators FY12 FY11 Change
Villages (owned and managed)1 76 76 -
Units (owned and managed) 1 9,824 9,786 0%
Avg DMF/CG transaction price point $276k $251k 10%
Avg DMF/CG per transaction $108k $91k 18%
Average DMF rate of existing contracts 30% 30% -
Average capital gain share of existing contracts 50% 50% -
Occupancy 93% 93% (1%)
Average resident age on entry 77.8 78.0 (0%)
Average age of residents 82.7 82.4 -
Average village age 22.6 21.6 5%
Average tenure on exit 9.1 9.3 (2%)
Underlying property value $1.9b $1.9b (3%) 1 Includes FKP direct portfolio (including FPG) and RVG’s Australian portfolio
Development Pipeline (units) Existing Pipeline Total
FKP Balance Sheet2 6,294 708 7,002
Managed for RVG2 3,530 499 4,029
Total 9,824 1,207 11,031 2 Includes 51 units not offered for accommodation purposes, e.g. manager’s units
Retirement: Key Metrics
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Subdued market sentiment impacted sales volumes across all communities projects
However margins have largely been maintained due to the high quality product offering involved
FY12 result impacted by decline in built product sales
— Final Rosebery apartment settlements contributed to FY11 result
— Given lead times in delivering projects, the delay in the Aerial construction completion into FY13 meant no built product was available to replace the Rosebery FY11 contribution
Results achieved without reducing the level of deposits on hand
Deposit levels held increased due to continued increases in pre-sales across the apartment projects currently in pre-sale stage
First lots settled at Mulgoa Rise project
Key Performance Indicators1 FY12 FY11 Change
Divisional profit contribution $18.9m $36.4m (48%)
Sales revenue $100.3m $141.0m (29%)
Land lot sales2 380 504 (25%)
Built product sales 13 69 (81%)
Average margin (incl interest) 27% 31% (4%)
Average margin (excl interest) 40% 40% -
Residential Communities and Apartment Deposit Flow
Residential: Communities and Apartments
1. Excludes Port Bouvard Limited 2. Includes 52 (FY12) and 63 (FY11) relating to englobo sales
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Residential: Portfolio overview
Brisbane
Albion Mill, Albion Gasworks, Newstead The Milton, Milton The Rochedale Estates, Rochedale
Currumbin Valley, Currumbin Alpinia, Sanctuary Cove
Peregian Springs, Sunshine Coast Ridges at Peregian Springs, Sunshine Coast
Luxe, Woolloomooloo
Beaumont Rise, Beaumont Hills Bella Vista Waters, Bella Vista Central Park at The Lakes Norwest, Baulkham Hills Mulgoa Rise, Mulgoa The Greens at The Lakes Norwest, Baulkham Hills
Aerial, Camberwell Junction Saltwater Coast, Point Cook
Shearwater on the Island, Phillip Island
Sydney
Melbourne
Residential Apartments
Residential Land
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Continuing to roll out stages across the established portfolio of communities as market conditions allow
Continuing to build on the momentum generated by the delivery of key community infrastructure
— 48 home builders display village opened at The Rochedale Estates in May 2012
— Saltwater Coast lifestyle centre opened to residents in February 2012 and construction of the community centre at The Rochedale Estates is underway and is expected to open in October 2012
Note: Excludes lots controlled by Port Bouvard Limited
Residential: Communities - Outlook
Land projects State Remaining lots approx. Current target annual lot sales
Saltwater Coast, Point Cook VIC 1,450 125-150
Peregian Springs & Ridges, Peregian Springs QLD 975 80-100
The Rochedale Estates, Rochedale QLD 900 100-125
Other 650 25
Total FKP 3,975 330-400
Mulpha FKP Joint Venture NSW 750 80 -100
Total 4,725 410-500
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Apartment projects Location Status Total
Residential Units
Available for Sale Percentage Sold
Current Projects
Aerial, Camberwell Junction VIC Under Construction 144 20 86%
Luxe, Woolloomooloo NSW Under Construction 77 23 70%
The Milton, Milton QLD Currently Selling 298 139 53%
The Hudson at Albion Mill, Albion QLD Currently Selling 134 107 20%
Subtotal 653 289 56%
Future Projects
Albion Mill, Albion QLD Future stages 275
Gasworks Residential, Newstead QLD Future stages 927
The Greens at The Lakes Norwest, Baulkham Hills1 NSW Future stages 149
Subtotal 1,351
Total 2,004
Residential: Apartments - Outlook
Delivery and initial settlements from Aerial expected in second quarter FY13
Construction commenced at Luxe with a focus on selling remaining available apartments
The Milton pre-sales have now passed 50%
The Hudson at Albion Mill pre-sales continue to progress although sales rates have been impacted by market conditions
1 Mulpha FKP Joint Venture
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Key Performance Indicators FY12 FY11 Change
Divisional profit contribution $9.3m $29.5m (68%)
Comprised of: Trading $0.4m $11.8m (97%)
Recurring $8.9m $17.7m (50%)
Trading sales revenue $14.2m $62.0m (77%)
Properties held 4 7 (43%)
Industroplex Mackay Update
Industroplex is a masterplanned industrial precinct in one of the largest industrial developments in Mackay
Zoned Industry (high impact), which permits twenty four hour, seven days a week operation
Hastings Deering, Force Equipment, National Tyres, and ARB have already established premises
Stages one and two are sold out and lot sizes ranging from 2,500sqm to 1.41 hectares are available in stages three and four
Entered into a contract to sell a 14 hectare site for over $25m in July, bringing the total sales contracts written at Industroplex over the past four months to almost $50m
Trading
Lower construction profit and less contribution from legacy projects led to a reduced profit level
Negotiations with several parties regarding a sale and fund through transaction at Gasometer 1 continue
Heads of Agreement with BOQ regarding lease at Gasometer 2 proceeding towards lease final documentation
Recurring
Capital recycling program continues
Sales of Peregian Springs Shopping Centre for over $20m and Browns Plains Bulky Goods Centre for $24m achieved during second half
Refurbishment and releasing work at 465 Victoria Avenue, Chatswood now nearing completion
Property has now been taken to the market with expressions of interest due in mid September
In discussions with several potential buyers regarding sale of Lonsdale St office asset
Commercial and Industrial
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465 Victoria Avenue Chatswood, NSW
Contents 1. Overview
2. Financials
3. Capital Management
4. Divisional Commentary
5. Strategy and Outlook
6. Entitlement Offer
7. Appendices
23
Strategic Review Findings Comments and Next Steps
Ownership structure should be streamlined over time
FKP will aim to streamline ownership of retirement villages currently held through FKP, FPG and RVG structures
FKP is continuing to explore a demerger or other separation of its Retirement and Development/ Property Trust businesses
RVG NZ holdings consolidated through merger of Metlifecare, PLC and Vision – RVG now holds a 43% stake in NZ listed Metlifecare which has delivered strong returns since completion of the merger
Platform will benefit from stronger focus on annual cash flow
As turnover is an important cash flow driver, there will be strong focus on achieving higher turnover with secondary focus on sale prices
Initiatives implemented to improve turnover in second half of FY12 delivered strong results with sales volume up 46% on HY12 and 17% up over pcp
Average tenure for current residents is 7.6 years - if all residents would turn over today, FKP would realise $506m of cash flow
Profit margin can be improved through achieving operating efficiencies
Operational efficiency program being implemented during FY13
Target overhead savings of 5%-10% on like for like basis
Opportunity to reduce working capital requirement
Currently, circa $78 million of capital invested in buyback stock and deferred purchase agreements
Capital invested in buyback stock held to be reduced over time – FY12 already saw a strong sell down of stock held
Buyback purchases to be limited with a focus on undertaking refurbishments on units still owned by outgoing residents (reducing need to buy back stock)
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2
3
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Retirement: Strategic Review
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Strategic Review Findings Comments and Next Steps
Opportunity to increase refurbishment program
• Target increase in number of refurbishments to be undertaken across portfolio each year
• Strong focus on undertaking refurbishments on units still owned by outgoing residents (reducing need to buy back stock, in line with reducing working capital target)
• These refurbishments are very capital efficient and have been a steady profit contributor for FKP
• Regular refurbishment will improve the quality and enhance the value of the offering
Substantial untapped value in existing portfolio
• Majority of portfolio located in premium locations with available land substantially under utilised in a number of villages
• Opportunity to redevelop a number of villages and substantially increase site density over medium to long term – potential to deliver a net increase of more than 800 units
• In addition to medium term potential outlined above, FKP will continue to deliver its existing development pipeline of 708 units, subject to selling environment and capital availability
Opportunity to evolve business model with resident needs
• Continuum of care model, with increased higher care complementing ILUs and SAs, will benefit existing and new residents, especially as the average entry age continues to increase
• FKP has investigated the NZ retirement market in detail – continuum of care model has been implemented successfully by a number of operators
• In pursuing new development or redevelopment activity, FKP will consider incorporating continuum of care principles
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5
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Retirement: Strategic Review
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Target stronger FY13 performance in a tough trading environment
Build on sales momentum of 2HY12 to improve sales volume in FY13
Target lower stock levels and reduction in working capital invested
Seek to reduce buyback activity and focus on undertaking refurbishments on units still owned by outgoing residents
Development activity dependent on selling environment and availability of capital
Target like for like overhead savings of 5-10%
Retirement: Outlook
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Adjust business plan to reflect challenging market, selectively roll out established projects, where it makes economic sense
Build on momentum of current pipeline particularly at The Rochedale Estates, Saltwater Coast and Gasworks
Extract value from embedded development pipeline
Seek to improve annual cash flow through increased turnover and achieving operating efficiencies
Streamline ownership structure currently held through FKP, FPG and RVG
Explore higher care services to complement current offerings, in line with continuum of care principles
Focus on improving retirement cash flow
Repay debt and improve liquidity and headroom under debt facilities using proceeds from Entitlement Offer and asset capital recycling program
Continually adapt capital management policy to maintain prudent gearing levels
Remain focused on proactively managing working capital levels
Seek improvement in retirement cash flow and maximise value from selective roll out of existing development pipeline
Deliver on a stringent capital management policy
Strategy and Outlook
Continue to explore a demerger or other separation of the Retirement and Development / Property Trust businesses
Continue exploring demerger or separation of FKP
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Contents
Gasometer 1, Gasworks Newstead, QLD
1. Overview
2. Financials
3. Capital Management
4. Divisional Commentary
5. Strategy and Outlook
6. Entitlement Offer
7. Appendices
Aveo Minkara Resort Bayview, NSW
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Overview of the Entitlement Offer
Accelerated pro-rata non-renounceable entitlement offer Underwritten accelerated pro-rata non-renounceable Entitlement Offer to raise $208m
6 for 7 offer of New Stapled Securities at an offer price of $0.20 each
― 33% discount to theoretical ex-rights price (TERP)¹
― 66% discount to pro-forma net tangible assets (Pro-forma NTA) per Stapled Security²
Entitlement Offer being undertaken in order to allow FKP to repay debt and provide liquidity and headroom under its debt facilities
Mulpha, FKP’s largest securityholder with ~26% is fully supportive of the Entitlement Offer
― Mulpha has committed to take up its full entitlement under the Institutional Entitlement Offer (approximately $54m)
FKP will continue to explore a demerger or other separation of its Retirement and Development / Property Trust businesses
1The TERP is a theoretical price at which Stapled Securities should trade immediately after the ex-date of the Entitlement Offer. The TERP is a theoretical calculation only and the actual price at which Stapled Securities trade immediately after the ex-date for the Entitlement Offer will depend on many factors and may not be equal to TERP. 2Pro-forma NTA calculated by adjusting FKP’s 30 June 2012 net tangible assets (NTA) by giving effect to the Entitlement Offer and the application of the proceeds described in this presentation as though it occurred on that date, see slide 11 for details. As at 30 June 2012, FKP had NTA per Stapled Security of $0.90, prior to effects of the Entitlement Offer. As at 31 December 2011, NTA was $1.22 per Stapled Security.
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Rationale for the Entitlement Offer
FKP is seeking to delever given property market conditions and the current economic environment
― Leverage pre-equity raise at unsustainable levels and close to covenant limits – covenant gearing at 51% versus a limit of 55%
― Impact of delay in receiving the proceeds from Aerial residential apartment project and a continued slowdown in the residential market
― FKP has materially written down the carrying value of several assets, reducing headroom
Steps taken to assist deleverage through bank negotiations
― FKP received a waiver for the Net Debt /EBITDA covenant as at 30 June 2012 from Multi-Option Facility lender
― Headroom re-established through a permanent reduction in the minimum NTA covenant from $1.25bn to $1.00bn
An equity raising helps to solve the issues facing FKP and allows FKP to delever and create borrowing headroom. The Entitlement Offer is expected to:
― materially reduce leverage levels and improve liquidity
― assist FKP to deal with upcoming refinancing
Current strategy to seek to sell non-core assets will continue, however from a stronger position
FKP will proceed with the final distribution of 1.4c per Stapled Security announced on 20 June 20121
1The New Stapled Securities will not be eligible for the distribution announced by FKP on 20 June 2012.
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$0.44
$0.28
$0.29
$0.19
$0.08
$0.05
$0.06
$0.04
$0.04
$0.03
$0.33
$1.22
$0.48$0.39
NTA as at 31-Dec-11 NTA as at 30-Jun-12 Entitlement Offer Pro-forma NTA as at 30-Jun-12
Sensitivity for a further 10% decrease in asset
value
Sensitivity for a further 20% decrease in asset
value
Retirement NTA Residential Communities and Apartments NTA Commercial & Industrial (Development) NTA Property Trust Other NTA
$0.90
$0.58
Offer Price: $0.20
30 June 2012 Pro-forma NTA per Stapled Security is A$0.58
The Offer Price of $0.20 represents a 66% discount Pro-forma NTA
Net Tangible Assets
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Contents
Gasometer 1, Gasworks Newstead, QLD
1. Overview
2. Financials
3. Capital Management
4. Divisional Commentary
5. Strategy and Outlook
6. Entitlement Offer
7. Appendices
32
Appendix 1 Detailed Financial Information
Appendix 2 Retirement Annuity Stream Valuation
Appendix 3 Capital Management
Appendices
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FY12 FY11 Gross
$m Tax $m
Net $m
Gross $m
Tax $m
Net $m
Statutory (Loss)/Profit After Tax (350.3) 82.3
Change in fair value of derivatives 41.3 (12.4) 28.9 (10.2) 3.0 (7.2)
Change in fair value of retirement investment property portfolio 324.8 (99.9) 224.9 1.5 (0.5) 1.1
Change in fair value of investment in RVG 79.2 (23.7) 55.5 20.1 (6.0) 14.1
Change in fair value of investment in MFKP 36.1 - 36.1 - - -
Change in fair value of other equity accounted investments 3.1 - 3.1 9.5 (1.0) 8.5
Business combination related impairments 21.5 - 21.5 - - -
Change in fair value of property trust portfolio 27.8 - 27.8 12.6 - 12.6
Development Impairment - Currumbin 50.0 (15.0) 35.0 - - -
Other development impairments 7.8 (3.0) 4.8 1.3 (0.4) 0.9
Provision for development losses 3.6 (1.1) 2.5 - - -
Other 6.8 (1.9) 4.9 9.4 (0.7) 8.7
Underlying Profit After Tax 94.7 121.0
Reconciliation of Statutory Profit to Underlying Profit
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Reconciliation of Underlying Profit to Segment Notes
Underlying Profit
Share of Equity
Accounted Investments
Change in fair value of derivatives
Change in fair value of retirement investment
property portfolio
Business Combination
related impairments
Property Trust Fair
Value
Development impairments
Provision for development
losses Other
Statutory Segment
Note
Retirement Operations 33.2 - - - - - - - (2.1) 31.1
Retirement Valuation 79.9 - - (337.4) - - - - - (257.5)
Residential Communities and Apartments 18.9 (4.3) - - - - (56.3) - (3.6) (45.3)
Commercial and Industrial 9.3 - - - - (27.8) (1.0) - - (19.5)
Funds Management and Investments 13.9 (12.9) - - (10.2) - - - (0.7) (9.9)
Equity Investments - (99.4) - - (11.3) - (2.5) - - (113.2)
Corporate (14.9) (1.8) (41.3) - - - - (3.6) (3.6) (65.2)
EBITDA 140.3 (118.4) (41.3) (337.4) (21.5) (27.8) (59.8) (3.6) (10.0) (479.5)
Depreciation and Amortisation (2.9) (0.1) - - - - - - 3.0 -
Interest Expense (12.5) - - - - - - - (0.4) (12.9)
Income Tax (25.0) 23.7 12.4 99.9 - - 18.0 1.1 2.4 132.5
Minority Interest (5.2) - - - - - - - 5.2 -
NPAT 94.7 (94.8) (28.9) (237.5) (21.5) (27.8) (41.8) (2.5) 0.2 (359.9)
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FY12 $m
FY11 $m Change
Assets
Cash / receivables / other 259.9 154.5 68%
Investment properties (refer slide 37) 2,427.5 2,857.5 (15%)
Inventories (refer slide 39) 871.5 712.8 22%
Investments (refer slide 39) 159.7 297.9 (46%)
Property, Plant and Equipment 23.8 30.7 (22%)
Intangibles 2.8 2.8 -
Total Assets 3,745.2 4,056.2 (8%)
Liabilities
Payables / provisions / deferred revenue / other 211.8 198.4 7%
Resident loans 1,275.5 1,314.2 (3%)
Bank debt (refer slide 47) 844.0 669.9 26%
Other borrowings (refer slide 47) 131.6 132.9 (1%)
Deferred tax 70.4 199.6 (65%)
Hedge liability 40.7 9.8 315%
Total Liabilities 2,574.0 2,524.8 2%
Net Assets 1,171.2 1,531.4 (24%)
NTA per unit $0.90 $1.25 (28%)
Summary Balance Sheet
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Management Balance Sheet
FY12 ($m)
FY11 ($m) Change
Assets
Real Estate Assets:
Property Trust Assets 155.0 236.6 (35%)
Commercial & Industrial Developments 198.6 197.5 1%
Residential Communities and Apartments 762.0 685.4 11%
Retirement (refer slide 38)1 1,153.8 1,465.6 (21%)
Other Assets (including cash and trade receivables) 105.3 77.2 36%
Total Assets 2,374.8 2,662.3 (11%)
Interest – Bearing Liabilities (refer slide 47) 975.6 802.8 22%
Derivative Liabilities 62.8 24.1 161%
Deferred Tax Liabilities 70.4 199.6 (65%)
Other Liabilities (including trade payables, provisions, deferred revenue) 94.8 104.4 (9%)
Total Liabilities 1,203.6 1,130.9 6%
Net Assets 1,171.2 1,531.4 (24%)
1 Net of resident obligations and deferred income
37
FY12 $m
FY11 $m Change
Retirement
NPV of annuity streams (See Appendix 2) 918.3 1,165.5 (21%)
Resident obligations 1,275.5 1,314.2 (3%)
Deferred Income net of Accrued DMF 94.9 79.6 19%
Investment properties under construction – Retirement 43.1 44.1 (2%)
New units available for first occupancy 35.6 38.5 (8%)
Buyback units available for occupancy 60.1 57.2 5%
Subtotal 2,427.5 2,699.1 (10%)
Property Trust
Investment properties – FKP Property Trust 155.0 234.4 (34%)
Investment properties under construction/redevelopment – FKP Property Trust - 2.2 (100%)
Total Investment Properties 155.0 236.6 34%
Assets Reclassified as available for sale (155.0) (73.5) (111%)
Operating lease receivables and incentives - (4.7) (100%)
Subtotal - 158.4 (100%)
Total Investment Properties per Balance Sheet 2,427.5 2,857.5 (15%)
Investment Property Summary
38
Retirement Assets FY12 $m
FY11 $m Change
New units available for first occupancy (Investment Properties) 35.6 38.5 (8%)
Buyback units available for occupancy (Investment Properties) 60.1 57.2 5%
Retirement properties under construction (Investment Properties) 43.1 44.1 (2%)
Residential aged care facilities and other plant and equipment 15.4 14.9 3%
Bed licences and other intangible assets 2.4 1.9 26%
Subtotal 156.6 156.6 -
NPV of annuity streams (See Appendix 2) 918.3 1,165.5 (21%)
Retirement Assets1 1,074.9 1,322.1 (19%)
Equity accounted investments in RVG and US Senior Living 78.9 143.5 (45%)
Retirement assets including investments in RVG and US Senior Living 1,153.8 1,465.6 (21%)
Retirement Division Assets
1 Includes FPG but excludes RVG
39
Inventories and Investment Summary
FY12 $m
FY11 $m Change
Inventories
Residential Communities 480.3 441.5 9%
Residential Apartments 230.4 133.7 72%
Commercial and Industrial 160.8 137.6 17%
Total Inventories 871.5 712.8 22%
Investments
RVG 68.7 135.1 (49%)
FKP Core Plus Funds 6.4 14.1 (55%)
Mulpha FKP 71.2 107.9 (34%)
Port Bouvard1 - 24.8 (100%)
US Senior Living 10.2 8.4 21%
Brookvale 3.2 7.6 (58%)
Total Investments 159.7 297.9 (46%)
1 Previously Port Bouvard Limited has been treated as an investment in an associate and accounted for under the equity method. Effective 31 May 2012, the accounts of Port Bouvard Limited were consolidated into the consolidated Group.
40
Underlying Profit Contribution FY12 $m
FY11 $m Change
Retirement Villages Group 10.4 13.0 (20%)
Retirement Villages Group Management 1.5 0.4 275%
Subtotal RVG 11.9 13.4 (11%)
Funds Management (1.1) (1.4) 21%
FKP Core Plus Funds 1.8 0.8 125%
US Senior Living Group 1.3 0.1 1,200%
Port Bouvard 0.2 3.3 (94%)
Other JV’s (0.1) (0.4) 75%
Subtotal Other Funds and Investments 2.1 2.8 (25%)
Total 13.9 15.8 (12%)
Core Plus Funds Divestment strategy continues in line with medium term
goal of winding funds up
Only Metrolink and Big Hepher (Joint Venture) assets remaining in Core Plus fund and Festival and Rocklea assets remaining in Core Plus Two fund
RVG Full FKP ownership of RVG fund manager effective from
January 2012 with all fund manager arrangements now transitioned from Macquarie
Underlying RVG result impacted by similar market conditions as experienced within the FKP owned retirement portfolio
Post merger of Metlifecare, PLC and Vision Senior Living, Metlifecare has become one of New Zealand’s largest retirement village operators
Funds Management and Investments
Port Bouvard Following the resignation of the Port Bouvard Chairman in late May 2012, the two FKP appointed directors were part of a three
director Board. This Board situation remained the case at 30 June 2012
Although this is not expected to remain the case long term, given the Board composition post the Chairman’s resignation, Port Bouvard has been consolidated from 1 June onward for accounting purposes
41
Interest Expense Reconciliation
FY12 $m
FY11 $m
Interest expense paid 80.5 80.8
Less Capitalised interest
Residential Communities (34.4) (34.4)
Residential Apartments (14.8) (8.5)
Commercial and Industrial – Trading (11.9) (9.7)
Commercial and Industrial – Recurring (6.0) -
Other (0.9) (1.7)
Total (68.0) (54.3)
Net finance costs 12.5 26.5
Add Capitalised interest expenses in COGS
Residential Communities 13.0 10.1
Residential Apartments 0.3 3.0
Commercial and Industrial – Trading 1.2 6.1
Commercial and Industrial – Recurring - -
Other - -
Total 14.5 19.2
Finance costs including capitalised interest expensed in COGS 27.0 45.7
42
Commercial and Industrial
Residential Communities and Apartments
Historical Divisional Contributions Retirement
Corporate overheads
$21m $25m
$17m $15m
0m
10m
20m
30m
FY09 FY10 FY11 FY12
$23m
$37m
$30m
$9m
0m
15m
30m
45m
FY09 FY10 FY11 FY12
$8m
$34m $36m
$19m
0m
15m
30m
45m
FY09 FY10 FY11 FY12
$119m $117m $126m
$113m
0m
50m
100m
150m
FY09 FY10 FY11 FY12
43
Appendix 1 Detailed Financial Information
Appendix 2 Retirement Annuity Stream Valuation
Appendix 3 Capital Management
Appendices
44
Retirement Investment Property Annuity Stream Sensitivity ($m)
Medium Term Property Price Growth 4.5% 4.0% 3.5% 3.0% 2.5%
Net Present Value of Annuity Streams 961 939 918 896 876
Long Term Property Price Growth 5.5% 5% 4.5% 4% 3.5%
Net Present Value of Annuity Streams 1,034 976 918 871 824
Subsequent Turnover – ILUs/SAs (years) 8/3 9/4 10/4 11/4 12/5
Net Present Value of Annuity Streams 1,038 964 918 877 825
Discount Rate 11.5% 12.0% 12.5% 13.0% 13.5%
Net Present Value of Annuity Streams 1,055 981 918 861 811
Average Age of Current Residents (years) 86.7 84.7 82.7 80.7 78.7
Net Present Value of Annuity Streams 1,027 977 918 853 787
Contract Accrual Period If the standard FKP ILU contract accrual period of 5 years shifted out to 10 years this would reduce the valuation by $80m
Retirement: Investment property sensitivities
Assumption adopted for accounting purposes
Assumptions regarding discount rates, property price growth and future turnover rate metrics are often quoted when comparing across different portfolios
A number of other portfolio characteristics are also just as important when comparing the value of different portfolios
Average age of the residents in the portfolio determine how far on average the next DMF event occurs with corresponding present value impacts
Also important is the time period over which the DMF accrues to maximum levels in the contracts
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Appendix 1 Detailed Financial Information
Appendix 2 Retirement Annuity Stream Valuation
Appendix 3 Capital Management
Appendices
46
Distributions
Distribution for FY12 impacted by delayed completion of Aerial apartments and difficult trading conditions
FY12 distribution is 2.8cps cents per security. Management is committed to maximising shareholder returns whilst balancing the Group’s capital requirements
Excludes non-cash component of the retirement investment property revaluation
DRP is active for 30 June 2012 distribution, with a 2.5% discount granted (consistent with pcp)
FY12 $m
Net underlying profit 94.7
Retirement revaluation (excluding minority interest) (74.4)
Tax impact of retirement revaluation 22.3
Realised underlying profit 42.7
Adjustments:
Profit from equity accounted investments (17.9)
Dividends from equity accounted investments 5.7
Capitalised interest (68.0)
Capitalised interest included in COGS 14.5
Leasing commissions, tenant incentives and maintenance capital expenditure (1.0)
Amortisation of leasing incentives 1.3
Tax effect of above adjustments 14.3
Application of prior period tax losses (11.6)
Actual Funds From Operations (AFFO) (20.0)
Distribution declared 33.7
DRP 13.5
Net distribution 20.3
Distribution as a % of RUP 79%
Distribution as a % of AFFO (169%)
Net distribution as a % of AFFO (101%)
47
Summary of Debt Facilities
FY12 $m
FY11 $m
Interest bearing liabilities1 975 803
Add: Convertible bond adjustments 9 11
Less: Vendor finance and leases (4) (4)
Total debt facilities drawn 980 810
Less: Bank Overdraft - -
Less: Mulpha FKP (12) (15)
Less: Port Bouvard (44) 0
Less: Convertible bond (125) (125)
Gross Bank Debt Drawn 799 670
Available Cash (16) (12)
Net Bank Debt Drawn 783 658
Limit $m
Drawn $m
Undrawn
$m
Major Facilities 875 794 81 Project Finance 145 94 51 Minor Facilities 146 92 54 Total 1,166 980 1865
Facility Limit $m Maturity
Major Facilities:
Property Trust4 105 30/06/2015
Development MOF3 240 31/07/2015
Wilbow 130 30/06/2013
Retirement Syndicate 275 31/03/2014
Convertible Bond 125 5/01/2016
Total Major Facilities 875
Drawn 794
% Drawn 91%
Project Finance: Aerial Project Finance 95 31/12/2012
Luxe Project Finance 50 28/02/2015
Total Project Finance 145
Amount Drawn 94
% Drawn 65%
Minor Facilities (< $25m):
Currumbin 8 12/02/2013
Mulpha FKP 12 1/7/2013
Forest Place Group 80 30/03/2017
Port Bouvard 47 31/12/2012
Total Minor Facilities 146
Amount Drawn 92
% Drawn 63%
Net Bank Debt Drawn
Summary of Undrawn Debt Facilities
Summary of Debt Facilities1
1 Excludes Bank Guarantees 2 Undrawn facilities are dependent upon having sufficient security 3 Facility limit amortisation of $20m in November 2012 and March 2013 4 Facility limit amortisation of $5m in January 2013 $7.9m in July 2013 5 Includes Port Bouvard Limited
48
Covenant FY12 Required
Development MOF / Retirement
(Total Liabilities - Resident Obligations - Deferred Tax Liability) / (Total Tangible Assets - Resident Obligations - Deferred Tax Liability) Gearing 51% 55%
(Underlying EBITDA - Net non-cash component of retirement revaluation + Capitalised Interest in COGS-Inventory Impairment) / (Net Finance Costs - Loan Establishment Fees + Capitalised Interest in COGS)
Interest Cover 2.7x 2.0x
The amount by which total tangible assets exceeds total liabilities NTA 1,168.4m >1,000m
(Interest bearing loans and borrowings – Cash and cash equivalents)/(Underlying EBITDA - Net non-cash component of retirement revaluation + Capitalised Interest in COGS-Inventory Impairment)
Net Debt / Underlying EBITDA Waived 7.5x
Retirement Syndicate
Cash receipts (as defined) / Net Finance Costs - Loan Establishment Fees Interest Cover 2.0x 1.75x
Loan amount outstanding / Mortgaged Property Valuation1 LVR 43% 50%
Property Trust
Net Rent / Interest Expense Interest Cover 1.8x 1.5x
Loan amount outstanding / Mortgaged Property Valuation LVR 68% 68%
All Key Covenants Met
49
Drawn Debt Type $m % Avg Base Rate Weighted Avg Maturity
Floating Rate Debt 219.5 23% 3.63%2 NA
Fixed Rate Debt 718.4 77% 5.46% 2.8
Total / Weighted Av. 937.9 100% 5.03% NA
Fixed Rate Debt Profile
Base Funding Cost Summary
Jun12 Jun13 Jun14 Jun15 Jun16
Face Value of Fixed Rate Debt ($m) 718.4 640.0 590.0 550.0 300.0
Weighted Average Interest Rate on Fixed Rate Debt 5.46% 5.48% 5.52% 5.61% 5.87%
Weighted Average Time to Maturity (Years) 2.8 2.4 1.6 0.7 0.2
Interest Rates1
1 Excludes Port Bouvard Limited 2 Based on BBSY 29 June 2012.
50
Current Debt Maturity1
1. Excludes Port Bouvard Limited. Convertible bond investors have the right to put the bonds to FKP in January 2014.
51
Current Interest Rate Hedging Profile1
1. Excludes Port Bouvard Limited
52
IMPORTANT DISCLAIMER This presentation is issued by FKP Property Group ("FKP"), which consists of FKP Limited ACN 010 729 950 and FKP Property Trust ARSN 099 648 754, of which FKP Funds Management Limited ACN 089 800 082 is the responsible entity. You should be aware that certain financial data included in this presentation may be “non-IFRS financial information” under Regulatory Guide 230 Disclosing non-IFRS financial information published by ASIC. The non-IFRS financial information included in this presentation includes underlying profit after tax. FKP believes this non-IFRS financial information provides useful information to users in measuring the financial performance and conditions of FKP. The non-IFRS financial information measures do not have standardized meanings prescribed by International Financial Reporting Standards and, therefore, may not be comparable to similarly titled measures presented by other entities, nor should they be considered as an alternative to other financial measures determined in accordance with International Financial Reporting Standards. You are cautioned, therefore, not to place undue reliance on any non-IFRS financial information. Disclosures regarding forward-looking statements This presentation contains certain 'forward-looking statements'. Forward-looking statements include those containing words such as: 'anticipate', 'believe', 'expect', 'project', 'forecast', 'estimate', 'likely', 'intend', 'should', 'could', 'may', 'target', 'plan', 'consider', 'foresee', 'aim', 'will' and other similar expressions. Any forward-looking statements, opinions and estimates provided in this presentation are based on assumptions and contingencies which are subject to change without notice and involve known and unknown risks and uncertainties and other factors which are beyond the control of FKP. This includes any statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements may include indications, projections, forecasts and guidance on sales, earnings, dividends, distributions and other estimates. Forward-looking statements are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Actual results, performance or achievements may differ materially from those expressed or implied in such statements and any projections and assumptions on which those statements are based. These statements may assume the success of FKP's business strategies. The success of any of these strategies is subject to uncertainties and contingencies beyond FKP's control, and no assurance can be given that any of the strategies will be effective or that the anticipated benefits from the strategies will be realized in the period for which the forward-looking statement may have been prepared or otherwise. You are cautioned not to place undue reliance on forward-looking statements and except as required by law or regulation, FKP assumes no obligation to update these forward-looking statements. To the maximum extent permitted by law, FKP, its directors, the underwriter of the Entitlement Offer (as defined below) ("underwriter") and any of its related bodies corporate and affiliates, and their officers, partners, employees, agents, associates and advisers disclaim any obligations or undertaking to release any updates or revisions to the information in this presentation to reflect any change in expectations or assumptions, do not make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of such information, or likelihood of fulfillment of any forward-looking statement or any event or results expressed or implied in any forward-looking statement, and disclaim all responsibility and liability for these forward-looking statements (including, without limitation, liability for negligence). Not an offer This presentation is not and should not be considered as an offer or an invitation to acquire stapled securities in FKP or any other financial product and does not and will not form any part of any contract for the acquisition of stapled securities. The pro-rata accelerated non-renounceable entitlement offer ("Entitlement Offer") referred to in this presentation does not constitute an offer in any jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer. No action has been taken to register or qualify the Entitlement Offer, the entitlements or the new stapled securities being offered under the Entitlement Offer ("New Stapled Securities"), or otherwise permit a public offering of the New Stapled Securities, in any jurisdiction outside of Australia, New Zealand and certain other jurisdictions. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. Neither entitlements nor the New Stapled Securities have not been, nor will they be, registered under the U.S. Securities Act of 1933 ("Securities Act") or the securities laws of any state or other jurisdiction of the United States. The entitlements may not be taken up by persons in the United States and the New Stapled Securities may not be offered or sold to persons in the United States, except in transactions exempt from, or not subject to the registration requirements of the Securities Act of and the applicable securities laws of any state or other jurisdiction of the United States.
53
FKP Offices Level 5, 99 Macquarie Street Sydney NSW 2000
Level 5, 120 Edward Street Brisbane QLD 4000
Level 17, 31 Queen Street Melbourne VIC 3000
Cnr Peregian Springs Drive and Longwood Drive Peregian Springs QLD 4573
www.fkp.com.au
Albion Mill, Albion, QLD Artist Impression