FEBRUARY 2015 2 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS - PowerPoint PPT Presentation

Development Securities PLC PRELIMINARY RESULTS FOR YEAR ENDED 28 FEBRUARY 2015

2 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES CONTENTS Overview and highlights Slide 3-5 Financial results Slides 6-11 Operating review Slides 12-27 – Overview – Investment portfolio – Development and trading portfolio Case studies Slides 28 - 38 Outlook Slides 39-40 Appendices Slides 41-63

3 2015 PRELIMINARY RESULTS OVERV VERVIEW EW AN AND D HIGHLIGHTS TS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES • Featured property: • Property name • D e s c r i p t i o n OVERVIEW AND HIGHLIGHTS

4 2015 PRELIMINARY RESULTS OVERV VERVIEW EW AN AND D HIGHLIGHTS TS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES A STEP CHANGE IN PERFORMANCE – Record-level headline profit before tax - £45.4m* (2014: £19.5m) – Record level development and trading gains – 69% increase to £45.7m (2014: £27.0m) – Good visibility on future gains – Continued NAV growth - 8.4% increase** in adjusted EPRA NAV per share ‒ £10.0m special dividend – paid out of strong cash flows – Cathedral acquisition already adding value – Management succession and shareholder alignment – strong leadership for the future *Before exceptional items of £10.6m including termination costs of cross currency swap (£7.9m) and acquisition costs of Cathedral Group (£2.7m) **7.7% growth before payment of special dividend and after restructure of Euro loan notes, cancelling previous mark to market swap deficit

5 2015 PRELIMINARY RESULTS OVERV VERVIEW EW AN AND D HIGHLIGHTS TS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPENDICES A STEP CHANGE IN PROFITABILITY Exp Expectations ions of gains ins to be reali lised sed across ss current portfoli lio 70.0 61.1 60.0 54.2 53.4 £53.0m £50.4m 50.0 45.7 £42.8m 40.0 £’m 28.1 30.0 27.0 £26.3m 20.0 17.4 10.0 10.0 6.8 5.9 7.4 0.0 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Realised gains Expected gains* Dividend Special dividend Previous guidance *Existing projects only

6 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES • Featured property: • Property name • D e s c r i p t i o n FINANCIAL RESULTS

7 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES STRONG PERFORMANCE 28 th Feb 2015 28 th Feb 2014 Change in year Headline profit before tax £45.4m* £19.5m 133% EPRA Net Asset Value (NAV) pre- £355.6m £320.7m** 10.9% special dividend EPRA NAV per share pre-special 284p 262p** 8.4% dividend EPRA Earnings per share 23.9p 7.8p 206.4% Development and trading profits £45.7m £27.0m 69.3% Final dividend 3.5p 3.2p 9.4% Special dividend 8.0p - - Balance sheet gearing 36.3% 48.0% *Before exceptional items of £10.6m including termination costs of cross currency swap (£7.9m) and acquisition costs of Cathedral Group (£2.7m) **Restated after restructure of Euro loan notes, cancelling previous mark to market swap deficit

8 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES MOVEMENT IN EPRA NAV PER SHARE THROUGH THE PERIOD 320 14 310 37 9 300 3 290 6 8 2 1 280 9 pence 270 11 260 250 276 262 240 230 220

9 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES DEBT FINANCING 28 Feb 2015 28 Feb 2014 £’m £’m Gross debt 205.0 221.1 Cash (79.3) (67.3) Net debt 125.7 153.8 Gearing 36.3% 48.0% Share of net debt in joint ventures 46.8 28.1 Net debt including joint ventures 172.5 181.9 Gearing including joint ventures 49.8% 56.8% Analysis of gross debt (excluding JVs) Fixed rate 44.6% 43.5% Capped / SWAP 31.0% 42.2% Floating rate 24.4% 14.3% Weighted average interest rate 5.4% 5.8% Weighted average maturity 5.4 years 6.8 years

10 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES HOW OUR CASH FLOW WORKS DEVELOPMENT AND TRADING GAINS NET FINANCE OVERHEAD COST SHORTFALL CASH PROFIT ORDINARY CORPORATION DIVIDENDS TAX NET FREE CASH FLOW CAPITAL REINVESTMENT RETURN IN PROJECTS

11 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINAN ANCI CIAL AL RESU RESULTS TS / OPERATING REVIEW / SUMMARY / APPENDICES FINANCIAL HIGHLIGHTS ‒ Step change in level of performance ‒ Significant increase in dividends from strong cash flow ‒ Strong financial position: ‒ Efficiency of balance sheet improved ‒ £0.8m p.a. of finance cost savings from restructure of Euro loan notes ‒ Focus on capital discipline ‒ Capacity for recurring capital distributions from strong cash flow ‒ £185.4m of new debt facilities secured in the year - Strong capital partner relationships ‒ Balance Sheet gearing modest at 36.3% (excluding JVs)

12 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES • Featured property: • 399 Edgware Road • Project forward funded and under construction OPERATING REVIEW

13 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES A BALANCED APPROACH IN INVES VESTMENT DEVE DEVELOPMENT AN AND D PORTFOLIO PO TFOLIO TRAD TRADING ING PO PORTFOLIO TFOLIO Objectives Objective – Recurring income stream – Generate short to medium- – Contributes to NAV growth term profit realisation Key value drivers Key value drivers DEVELOPMENT INVESTMENT – Lease re-structures – Land improvement profit AND TRADING PORTFOLIO – Improve tenant mix and – Development profit PORTFOLIO – Arbitrage/mispricing rental tone 42% of – Asset management including 58% of Book Value development Book Value £211m £291m capital value capital value FY’15 KPIs* FY’15 KPIs* – £45.7m of realised – £13.8m rental income – 12.2% valuation gain (inc JVs) gains – 8 projects on site – £60.8m of disposals – 6 new projects acquired – £65.7m of acquisitions *All since 1st March 2014 to date

14 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES INVESTMENT Featured property: Chippenham Shopping Centre PORTFOLIO Acquired in September 2014 as part of ongoing capital recycling within portfolio

15 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPERATING REVIEW / SUMMARY / APPE APPENDI DICES CES INVESTMENT PORTFOLIO AT A GLANCE NUMBER OF ASSETS NUMBER OF ASSETS VALUATION INCREASE (inc JVs) SIZE OF PORTFOLIO 21 21 £203.3m £11.2m Feb 2014: 24 Feb 2014: 24 Feb 2014: £4.8m Feb 2014: £202.1m INITIAL YIELD CONTRACTED RENTAL INCOME 6.87% £13.77m Feb 2014: 7.21% Feb 2014: £14.1m ESTIMATED RENTAL VALUE VOID RATE EQUIVALENT YIELD £15.0m 4.97% 7.42% Feb 2014: £14.9m Feb 2014: 6.27% Feb 2014: 7.48%

16 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES INVESTMENT PORTFOLIO STRATEGY ‒ Focus on assets with: ‒ Core defensive income ‒ High yields ‒ Value enhancement potential ‒ Majority of assets are convenience retail destinations (73%) with a food store anchor to drive footfall or leisure assets (11%) ‒ Size of portfolio is appropriate to contribute to wider returns target for the company and support business overheads ‒ 3-5 year business plan for each asset maintains investment discipline and allows capital recycling Annual rent % of Top 5 occupiers as at 28th Feb 2015 £m contracted rent 1 Waitrose 1.5 11.1% 2 Matalan 0.7 5.2% 3 J Sainsbury 0.5 3.6% 4 Sports Direct 0.3 2.5% 5 Wilkinson 0.3 2.1%

17 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES DISPOSAL COLSTON TOWER ‒ Iconic office tower in central Bristol ‒ Held for 3.5 years ‒ 54,900 sq. ft. of lettings completed in period ‒ Rental tone increased from £9psf to £14psf ‒ 34% valuation growth during ownership (net of capex) ‒ 18.5% IRR Key stats Purchase price £7.6m Date acquired 2011 Purchase yield 10.08% Sale price £11.3m Exit yield 8.25%

18 2015 PRELIMINARY RESULTS OVERVIEW AND HIGHLIGHTS / FINANCIAL RESULTS / OPE PERA RATI TING REVI REVIEW EW / SUMMARY / APPENDICES ACQUISITION KILLINGWORTH SHOPPING CENTRE ‒ Principal retail provision in Killingworth, a commuter suburb of Newcastle ‒ Morrisons anchor foodstore (outside of ownership) ‒ Key tenants: Matalan, Wilkinson, Poundworld ‒ Asset management plans underway to drive value: ‒ Lease re-structures ‒ Deliver additional retail space to broaden offer ‒ Increase dwell time Key stats Purchase price £19.2m Dev Secs ’ share 100% NIY 8.27% Occupancy rate 100% WAULT (to tenant 5.1 years break) Projected 1 yr cash 9.43% on equity return