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

Atlantic Leaf Properties Limited Annual Results: February 2017

Atlantic Leaf at a glance Key Property Portfolio Statistics Listed on SEM & JSE AltX AUM Assets LTV Weighted average March 2014 £304m 51.7% 48 properties asset yield 14 Tenants 7.3% Move to JSE Main board Equity Average cost of debt WAULT November 2016 £155m 11.6 years 3.2% Growth in Property Assets Under Management Portfolio composition Retail Warehouse £304m 2% Office £ 264m 26% £ 195m £ 158m £ 143m £ 131m £ 68m £ 50m £ 27m Industrial 72% Apr-14 Mar-15 Jun-15 Jul-15 Oct-15 Nov-15 Feb-16 Oct-16 Feb-17 2

Full Year Highlights Distributions Distribution profile 4.2 pence interim dividend - August 16 2016 4.2p 4.3p 8.5p 4.3 pence final dividend - February 17 Up 21% over the prior year 2015 3.0p 4.0p 7.0p Interim Final Achievements 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 3

Shares & Liquidity Shares in issue / New shares added / Market cap Shareholder concentration 2,354 160 2,500 100% 2,090 140 77.4% 2,000 80% 120 Market Cap (R’mill) 63 ALP Shares (mill) 100 1,500 60% 80 143 1,000 60 40% 51 532 40 79 500 14.9% 20% 20 28 2.5% 1.5% 1.7% 1.0% 1.0% - - 0% 31-Dec-14 Added in 31-Dec-15 Added in 31-Dec-16 Top 5 6 - 10 11 - 15 16 - 20 21 - 25 26 - 30 Rest 2015 2016 15.4K 325 Closing shares in issue (m) Shares added (m) MCap (R'm) Liquidity & free float 3.1% 1.8% Total Ave. shares number of traded per day shareholders (calendar) (as at) 28.2% 114 33.9% 3.9K 2016 2015 63.0% 70.0% 31-Dec-15 28-Feb-17 2015 2016 Tightly held Free float (not traded) Free float (traded) Move to the Main Board of the JSE has seen an increase in trade 4

Strategic Summary The Team Industrial Assets Yield • Experienced and agile UK based • Target distribution growth of 5% - • Industrial warehousing and team based in central London 7% y/y against the backdrop of the distribution target sector UK’s low inflation (currently at 2% • Majority of opportunities sourced • Best performing UK property sector Y/Y) off-market over past few years • Asset management opportunities to • Team focussed on delivering improve earnings above lease • Some office as part of portfolio escalations earnings growth from core leases balancing • Stable and relatively low cost base • Unlocking further growth through • Sector remains robust despite Brexit • 50% gearing enhances growth in asset management opportunities uncertainty earnings per share • Active financial and risk • Rental growth still an opportunity in • Comfortable with gearing management many instances as we are coming off - WAULT of 11.6 years a low rental base (c. £4.67 / sq. ft.) - High cash flow covenants - Low perceived risk Vs. high benefit of low costs of funding - Hedging in place Focused on investing in quality UK assets with appropriate yields, which also allow for growth in earnings. 5

Key Objectives Summary: Atlantic Leaf has performed well in achieving its stated objectives in FY17 Key Objectives Current Position £150m by Feb 2016 £300m by Feb 2017 Target 20-30% growth in AUM subject to £304m at Feb 2017 AUM - Opportunities that fit Good pipeline in place Grow the company - Appropriate yields - Raising new capital Diversification Shareholder Improvement in trading liquidity Attract more institutional investors Number of shareholders increased from 114 to 325 Increase trading liquidity Deliver performance 2016: 7.0 pence Distribution 2016: 7 pence 2017: 8.5 pence 2017: 8.5 pence 2018: Initial Projection 8.9 pence 2018: Revised Forecast 9.0 pence Notes: 6

2016/17 Results

Financial Highlights 28-Feb-17 28-Feb-16 Revenue Revenue £20.0m £8.5m +135% Distributable earnings £11.6m £4.5m Distributable Earnings Adjusted Earnings per share 9.0 pence 7.2 pence +157% Dividend per share 8.5 pence 7.0 pence Dividends +21.4% Adjusted NAV per share 1.12 1.10 A solid year of growth 8

Key Financial Metrics Loan to Value Interest Cover Cost of Debt Debt Maturity Debt Hedged Ratio Ratio (%) (Years) (%) (%) 3.4 60% 4.5 3.50% 3.5 80% 74% 3.20% 3.20% 4.0 52% 4.0 2.9 70% 3.00% 3.0 50% 63% 3.5 60% 2.50% 2.5 39% 40% 3.0 2.6 50% 2.00% 2.0 2.5 30% 40% 2.0 1.50% 1.5 30% 20% 1.5 1.00% 1.0 20% 1.0 10% 0.50% 0.5 10% 0.5 0% 0.0 0.00% 0.0 0% 28-Feb-16 28-Feb-17 28-Feb-16 28-Feb-17 28-Feb-16 28-Feb-17 28-Feb-16 28-Feb-17 28-Feb-16 28-Feb-17 9

Statement of Comprehensive Income 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. 10

Valuations of Investment Property In terms of IFRS investment properties are held at their fair value 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. 11

Statement of Financial Position 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 12

Our Portfolio

UK property market Post-Brexit uncertainty and supportive investment fundamentals create opportunities UK industrial sector continues to be the standout performer and is Investment volumes (£’billions) 2 expected to remain resilient Other Retail Central London office Industrial Rest of UK office Challenging 2016 for UK property with both an unexpected increase in 25 stamp duty to 5.0% (from 4.0%) and the impact of Brexit 20 Annual return on UK commercial property in 2016 was c. 2.7% which included capital growth of -2.4% 1 (skewed by underperforming office) 15 Despite low returns, Q4 recorded positive income and capital growth 10 as well as higher investment inflows signalling a possible recovery 5 The Investment Property Forum (IPF) UK Consensus (institutional investors and property advisers) forecasts total return of c. 5.8% - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 between 2016 and 2018 for industrial property 2013 2014 2015 2016 Property total return forecast (%) 1 Rolling annual transaction yields and gilts (%) 3 Office Industrial Standard retail Shopping centre Retail warehouse All 10yr gilts Retail Office Industrial All 8 9 6.2 8 6.0 5.8 6 5.3 5.1 5.0 7 4.5 4.4 4.2 4.2 4.0 3.6 3.5 6 4 3.2 5 1.9 1.6 1.4 1.3 2 4 0.7 0.6 3 - 2 (0.9) (1.0) - (2) (1.2) (1.3) 2016 2017 2018 2016 - 2018 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ¹ CBRE 14 ² IPF.org

Our Portfolio Tenant Composition Regional Split By income (£) By income (£) 3% 3% 2% 2% 2% 3% 5% 18% 3% 6% 4% 36% 4% 9% 5% 15% 6% 12% 6% 15% 8% 10% 14% 9% Booker Inspirepac North East Scotland Santander Gestamp North West York. & the humber Halfords EE West Midlands South East DHL Palmer & Harvey Epwin Bauer East Midlands East Anglia Thomas Cook Robert McBride South West Wales E. ON Homebase Comfortable with the credit risk on existing tenants - Booker is performing well 15

Acquisitions and Disposals – 2016/7 Key acquisitions provided diversification and growth for Atlantic Leaf DHL Runcorn Excellent growth prospects with minimum 12.12% increase in 2019 or ERV estimated to be c. £3.50 – 3.75 Purchase Price £29.3m Tenant NIY 6.25% • DHL Supply Chain WAULT 8.3 years Area 635,656 sq ft Rent £2.87/sq ft Westpoint, Recently refurbished building with additional income opportunities and Peterborough lease re-gears Purchase Price £22.9m Tenants NIY 7.57% • Thomas Cook WAULT 11.9 years • Bauer Consumer Media Area 177,621 sq ft Rent £11.68/sq ft Disposals 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% 16