Financial results presentation For six months ended 30 September 2018
Transition Plan – to 31 March 2020 Targets Progress MLI to comprise 65% of total portfolio Currently 27%, with a number of acquisitions under Sales and Purchases Manage timings of acquisitions and disposals during active consideration transition to minimise cash drag and maintain dividend Currently 47.3%, with planned deleverage to reach 45% Overall debt to reduce to no more than 40% LTV by year end Leverage Manage use of revolving credit facility to smooth Further deleverages from the sale of non-MLI assets will financing requirements meet the 40% goal in FY20 Smart Lease launched and 1 st phase of online leasing platform in place. Transition existing business into a scalable MLI focused operating platform Industrials.co.uk relaunched and new tenant marketing Operating Platform strategy actioned Embrace technology solutions to improve operating efficiency Further roll-out of tech platform underway, including tenant portal 2
Financial highlights Diluted adjusted EPRA Interim dividend Diluted EPRA NAV earnings per share per share per share 3.375p £1.42 0.7% 5.28p 8.4% with scrip alternative and 3.40 pence - Property income matching buyback programme 1.88 pence - Management income EPRA cost ratio Full year dividend per share Dividend yield on guidance current share price 2 1 31.9% 13.9% (annualised) 6.75p 6.0% including direct vacancy costs 1 Compared to FY18. 2 Based on a share price of £1.12 3
Portfolio valuations at 30 September 2018 In GBP – vs 31 March 2018 values * Total 2.3% United Kingdom 1.6% 1.6% values 0.7% currency Germany Switzerland 2.6% 11.4% 1.3% values 6.3% values 1.3% currency 5.1% currency Only one property valued in CHF remaining * On a like-for-like basis, excluding the impact of acquisitions and disposals 4
Debt LTV LTV LTV 30 September 2017 31 March 2018 30 September 2018 55.0% 49.2% 47.3% (includes bridging finance (41.8% after free cash) for MLI acquisition) All in cost of debt All in cost of debt Weighted average debt maturity Excluding assets held for sale 3.3 years 2.51% 2.54% Excluding assets held for sale Revolving credit facility Target LTV £50m 31 March 2019 45% to facilitate new MLI acquisition 31 March 2020 40% while selling non-MLI assets. Incurs no non-utilisation fees 5
EPRA earnings per share (pence) Year to 30 September 2018 1.98 1.88 1.89 0.41 1.43 0.12 0.33 7.84 5.28 4.95 Gross rental income Property operating Management fee Admin and other Income from Net finance cost Other Diluted EPRA EPS Other EPRA earnings Diluted Adjusted expenses income operating costs * associates and JV's adjustments EPRA EPS (including EPRA adjustments) * Includes one- off REIT and listing costs, reversed out in ‘Other EPRA earnings adjustments’ 6
NAV movement since 30 September 2018 GBP:EUR 30 Sep 2018 – 1.123 Pence per share GBP:EUR 31 Mar 2018 – 1.137 150 0.01 1.16 0.51 1.11 0.37 3.83 145 0.95 3.67 140 135 130 125 142 141 120 115 110 112 105 100 Diluted EPRA NAV Net income after Portfolio Other gains and Fair value FX Translation Movement in Dividend EPRA and other Diluted EPRA NAV Share price 31 Mar 2018 financing costs revaluation losses movement in JV swaps adjustments 30 Sep 2018 19 Nov 2018 and associates 7
MLI Portfolio as at 30 September 2018 Current Passing Rent £12,424,129 £5.43 psf 2,634,279 861 sq ft Units Contractual Rent 1 £12,712,539 £5.56 psf Estimated Rental Value (ERV) at 100% occupancy £14,892,673 £5.65 psf 36 547 Assets Tenants Current Vacancy 2 169,911 sq ft 7.1% Notes: 1 Contractual rent includes contracted uplifts contained in existing leases over period of lease. 2 This excludes the vacant space at Coningsby Park, Peterborough which was purchased in December 2017 and is currently undergoing refurbishment and hence is not available to let. If this included then total vacancy is 361,680 sq ft, reflecting 13.7%. Geographic Breakdown by Passing Rent Tenant Business Breakdown* South Yorkshire Sole Trader/ Unclassified Other service activities West Midlands 7% 4% 3% South East 4% Administrative & Support services Wales 21% 10% Manufacturing 6% 13% Professional, Scientific & Technical East Midlands 4% 7% Real Estate Activity 4% East 7% Construction Information & Communication 12% 4% North West 20% Transportation & Storage 3% Scotland 16% Wholesale & Retail trade 33% West Yorkshire *As at February 2018 15% 8
Multi-let industrial portfolio performance 6 months from 31 st March 2018 to 30 th September 2018 Contractual rent p.a. No of lettings 200,000 12 37 new lettings (£494k p.a. of rent) at an average 17% above previous Contractual Rent p.a. passing rent 180,000 Number of Lettings 10 160,000 16 lease renewals / regears (£231k p.a. of rent) at an average 12% ahead of 140,000 8 previous passing rent 120,000 100,000 6 80,000 The average letting / renewal is 3.2 years contractual term certain, with an 4 average rent free period granted of 1.3 months 60,000 40,000 2 20,000 As at 21st November 2018 there were 42 units under offer to let (£877k p.a. of rent) at an average rent of £6.13 psf ,0 0 No units let at or below ERV over the period The contractual rent on the 25 MLI estates purchased on 30 June 2017 increased by 4.5% in the 12-month period ending 30 September 2018 9
Update on MLI Platform Completion of 1 st phase of online leasing portal, 2 nd phase underway Technology Further rollout of VTS (leasing), Coyote (investment), Realla (marketing) and instruction of Engage (tenant portal) Removing friction from the leasing process. Leasing strategy New marketing materials, Smart Lease rollout, preparation of additional services Re-launch of industrials.co.uk Marketing Tenant survey Tenant referral scheme. 10
The MLI Market and Acquisition Criteria Multi-let Industrial Deal Flow Acquisition criteria Deal Volume (£M) No of deals Purpose-built industrial accommodation 1400 140 1200 120 Multi tenanted income profile 1000 100 800 80 Located within or close to areas of high population density 600 60 400 40 Accessible locations 200 20 Areas of strong economic activity 0 0 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 2015 2016 2017 2018 Acquisition below replacement cost value Deal volume No. of deals Acquisition target of c. £100m p.a. enables disciplined investment 11
Non-MLI Portfolio UK portfolio: £344m (52.6%) £177m MLI – 36 estates across the UK £154m offices – primarily Euston House in London and Trafalgar Court in Guernsey £13m in various retail and single let industrial buildings Dana Trading Estate, United Kingdom German portfolio: £292m (44.7%) £134m Bleichenhof – Core Hamburg city centre building comprising offices, retail and parking £67m comprised of three daily needs, food-anchored centres in central Berlin £56m various retail warehouses / supermarkets £35m in four care homes Bleichenhof, Hamburg Swiss portfolio: £17m (2.7%) £17m in one leisure centre in Lugano Lugano, Switzerland All of these non-MLI assets are performing to business plan and will be sold over the next few years as Stenprop transitions to 100% MLI 12
Outlook Stenprop has adopted distribution per share as its key performance measure In considering the payment of the current dividend of 3.375 pence the Board has chosen to retain the earnings associated with the non-recurring management fees earned in the period (which equate to 1.88 pence per share) so that the dividend is fully covered out of property related earnings. Distributions of non-property related earnings will continue to be evaluated by the Board from time to time. Assuming current trade conditions continue to prevail (and based on average exchange rates of €1.12:£1.00 and CHF1.28:£1.00) Stenprop continues to target a final dividend of 3.375 pence for the year ending 31 March 2019 giving a total dividend of 6.75 pence for the financial year. Stenprop is on track to achieve its two year transition plan to become a focused UK MLI business targeting 40% overall leverage and over 65% of its assets in MLI by 31 March 2020. Stenprop anticipates that property related earnings will grow steadily from 1 April 2019 onwards, due to rental growth from the enlarging MLI portfolio. 13
Management fee income With focus on MLI, no intention Contribution of Reducing to 1.88p insignificant levels to pursue further management fee by FY20 in FY19 opportunities 15
Income Statement and Earnings 6 months ended 6 months ended 30 September 30 September 2018 2017 £m £m Net rental income* 16.7 18.5 Management fee income 5.4 3.2 Operating costs* (5.4) (2.8) Net operating income 16.7 18.9 Income from Investment in associates/joint ventures 1.2 1.4 (excl. fair value gains) Net finance costs* (4.1) (5.3) EPRA adjustments and other items* 1.3 (1.3) Adjusted EPRA earnings 15.1 13.7 Diluted Adjusted EPRA EPS 5.28 cents 4.87 cents Annualised Earnings Yield Dividend Yield 9.4% 6.0% Current share price (£1.12) 7.4% 4.8% EPRA NAV (£1.42) * Includes assets held for sale 16
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