Earnings Call: H2 2021

Aug 23, 2021

I would now like to hand the conference over to Mr. Glenn Willis, CEO. Please go ahead. Welcome to the annual results presentation for Eleonore Investors Group for the 2019 ATE, and thank you for your interest in the group. On the call today, I'm joined by the executive leadership team of Eleonore, and I and my colleagues look forward to taking questions at the end of this call. During the presentation, we'll be referring to the solid presentation that was released to the asset this morning. Today, I'm pleased to provide an overview of Eleonore and more quickly an update on the progress we made in executing on our key strategic objectives for the group over the year. Our key strategic objective has been to build Alunort into a major The funds management business is known for delivering superior investment returns and critically, a funds management business, an organization that does business in a sustainable and socially positive manner. We should be calling it Al Anon doing business the right way, that is growing our business, growing the group and being acutely conscious of all whom we interact with and effect in operating our business. I'd like to commence by making an obvious comment, and that is that these times continue to present challenges for a great many across our country and within our economy. And whilst the COVID pandemic has been a burden for some sectors, it has and is causing harm and offered great harm to many sectors. I believe we've confronted challenging market conditions for some sectors of absence over the period of this pandemic. The hotels, tourism related funds and some of our retail funds in particular have affected. Despite some of the significant challenges across the group in these sectors, our funds management business achieved strong growth over the year. Indeed, I'm pleased with the growth that we achieved in FY 20 1 and the broader performance on growth over the year. Before I go into detail here, I'd like to, at this time, provide an overview of the group, particularly those who are new to Alunort. And I'd ask you that you now turn the floor of the presentation. Real Estate Funds Manager, invested in its market leading investment terms. The average return or IRR that we've realized from investors in our funds is just under the 2nd quarter round. We've reduced investment performance of track record, and we are acutely focused on and prioritize investment performance over the growth. This approach and track record is resulting in investment growth in our capital markets and our capital partners in our funds, also our private capital partners and our institutional capital partners. The growth we've achieved in our investor base over the last year is and will be a key contributor to the growth in the future. This slide here highlights our key real estate sectors of property. Our $1,100,000,000 funds management business at 30 June 'twenty one is currently focused on 4 key real estate sectors: office real estate, health care real estate, retail repositioning and business and the hotels tourism related sector. Indeed, all investment additions achieved growth over the year with some achieving significant growth. Importantly, we have a strong pipeline across our sectors. And in some sectors, like Health Care, we have strong and mature pipeline. Furthermore, as we say here, we have a highly scalable investment management platform. The funds management platform we firmly believe will enable us to deliver strong growth and security holder value going forward. I can now turn to Page 6 or Slide 6 of the presentation pack for the results and highlights. As I said, despite some market challenges and significant market challenges over the year, our funds management business achieved strong growth over the period. Funds under management increased by 23% to over $2,070,000,000 over FY 'twenty one. Funds management income increased by over 38%. And most pleasingly, recurring funds management income increased by over 40% over the year. This being the key objective we have for our business. 2021 was the 1st year that the company's ability to generate transactional income, that is gained from sales of investments. As such, as the joint growth in home management income, core earnings were up to $2,150,000 And an important correction here is that EPS was 18% higher at $0.0727 for the year. Pleasingly, core earnings increased by over 200% on a pre transactional income basis over the year. This is one of the key highlights of the year and as I said in Q1, And you may be aware that FY 'twenty two has started off well with the transactional income and gain NDA increased 11% over the period, substantially as a result of the positive revaluations on our co investments. Finally, the group has substantial capital available to grow funds under management. At the end of June, we had approximately 38,000,000 of available growth capital. And for completion of the El Anor Hotel accommodation fund, a further 25,000,000 will be available. And as we stated, we will be slowing down our current investment in our hotel accommodation plan to 15%, which will result in us having approximately $120,000,000 of available capital to facilitate finance management growth. I'd like to now hand over to Paul Sidia to continue his presentation on the operating mix of Alamo and Telstra's fleet. Thank you, Glenn. I just encourage listeners on the conference call to turn to Page 8 of the investor presentation that we released earlier today. This slide shows very clearly what the composition of our core earnings is, and it comprises 3 key components. The first is the EBITDA that we generate from our funds management business the second, the co investment earnings that we enjoy from our co investment in our managed funds And the third is our transactional income, which Glenn has already referred to. You'll see that in respect of the year FY 'twenty one, our funds management EBITDA was $10,700,000 And this EBITDA is after allocation of all corporate costs of the business against our funds management income. As we referred to the growth in our funds management income in FY 'twenty one was 38%. Our funds management EBITDA has grown in excess of 100% from FY 'twenty two, and our margin our fund management margin has increased to 36% from 25% in FY 'twenty. As we continue to grow our funds management business, we can see the jaws of our margin and also, of course, the amount of EBITDA generated from the business increasing. In respect of co investment income, a significant increase in FY 'twenty one from FY 'twenty to $11,100,000 However, this level of co investment income, which I'll just remind everybody reflects the distributions that we actually receive from the funds that we're co investing in. In other words, it's cash or receivables. That level of co investment income still is impacted in some areas, particularly the hotels and the wildlife park by COVID-nineteen. So we can expect as some of those restrictions continue to be relaxed, we look forward to some improved income and it comes to the course of future conditions. Transactional income, Glenn mentioned, was not a component of our FY 'twenty one result. So the 3 components add to $22,000,000 of core earnings. The difference between that $22,000,000 and the $15,000,000 of core earnings that Glenn mentioned is interest expense and tax. So quite simple compelling results for people to understand the contributions that make it up. So I ask you to turn to Page 12 of the pack, where we set out both the growth and also the components of our funds management income. Our funds management income grew from $21,500,000 to $29,700,000 throughout FY 'twenty one. From FY 'nineteen over the last 2 years, we've enjoyed 100% increase in our funds management income. This income is very substantially of a recurring nature. The key components of management fees and leasing and development fees, we expect to both continue and grow. The leasing and development fee income flows from our core strategy, particularly within our retail real estate sector of repositioning real estate and that generates for us leasing and development fees from taking certain real estate and repositioning it to a higher and better use with an alternate tenant mix. Acquisition fees of $6,000,000 reflects simply the fees we generate on the $374,000,000 of increased fund generated during the year. And you will see that there's a very modest contribution in the current year's funds management income from performance fees. I ask you to turn to Page 14, where I'll just make 1 or 2 comments on key events that have occurred since the 30th June. In respect of our office real estate sector, listeners are probably alert to the fact that our listed multi asset commercial office fund, ECF, acquired 50 Cavill Avenue for $113,000,000 In relation to our hotels, tourism and leisure division, the group made an announcement on the 19th August that announced the extension of the Eleanor Hotel Accommodation Fund. This brings together the group of 14 hotels that focus on the luxury and the regional hotel segments. In respect of that fund, which has a starting gross asset value of $346,000,000 the group will enjoy acquisition fees of $3,900,000 And I would just make a note, we don't provide guidance. I would just make a note that our acquisition fees in respect of FY 'twenty one in prior year was $6,100,000 We've also referred a number of times to the fact that FY 'twenty one did not include the results and therefore any transactional income. As announced on the 19th August, the establishment of the Eleanor Hotel Accommodation Fund will mean that the group will book $10,500,000 of transactional gains. And these gains reflect the uplift in values of the Eleonore Luxury Hotel Fund that was sold into the Eleonore Metro and Prime Regional Hotel Fund. Moving then briefly to our preliminary results, and our core earnings is set out on Page 19 of the investor presentation. We've touched on a number of the key points already in the presentation, including the strong growth in our funds management income to $29,700,000 Our distributions, I've already mentioned, from our current investments, it increased significantly to 11 $100,000 As I mentioned, there's still some impact on those distributions from COVID. There's more information for readers of our results on Page 17 of our investor presentation. That provides a breakdown of the co investments received from each individual fund and our co investment level in those funds. And we've mentioned, of course, no transactional income in FY 'twenty one. In respect of our balance sheet, Page 20. The group has net assets of $173,800,000,000 and an NTA per security of $1.44 That's an 11% increase from the prior year, and that reflects growth in the underlying real estate properties within our managed funds that Eleonore is invested in. We have cash and undrawn debt facilities of $37,900,000 at 30th June. That will be further bolstered by the capital release of $25,000,000 from the establishment of the hotel accommodation fund announced in August. The gearing of the group, that 30th June 'twenty one is 21%, a modest level of gearing. After adjusting that level of gearing on a pro form a basis, for that capital release of $25,000,000 that will flow to us from the Eleonore Hotel accommodation front launch results in our gearing being reduced on a pro form a basis to 11%. I'll hand back to Glenn for some closing remarks. Thanks, Paul. I'm just going to ask you to turn to Page 22, thoughts and outlook comments now. Despite the ongoing challenging market conditions in the current sectors, we're very conscious of the conditions in which we operate in. Having said that, we are firmly with the view that we're well positioned to further strong growth in funds under management and therefore to deliver growth in security holder value. Our strong market position in the sectors in which we focus on combined with the pipeline of funds management opportunities that we have across the business, we believe position us well for both this half and for the year. As you mentioned, we've achieved significant growth in our capital partner base throughout the year in both our private wholesale capital partners and institutional capital partners, substantially due to the market leading investment plans that we delivered for our current investors for a long period of time now. This growing base, this growing investment base, we believe will be a key contributor to the growth of our plant management business. In summary, we're looking forward to delivering further strong growth in tonnes on Amantra, which we call a capital light manner. Manner. And the group and leaders, we begin growth capital to facilitate growth in funds under management and have us to grow value for Indian security holders. Well, thank you for listening in on this presentation, and we look forward to receiving questions now. Thank Your first question comes from Ed Day of MA Financial. Please go ahead. Good morning, Glenn and Paul. Just a couple of quick ones. Firstly, just wondering if you could talk to the potential opportunities for performance fees in 2022 or even 2023 that you have visibility over? Ed, I'll take my question. As I've said before, we don't manage the performance fees. I mean, performance fees are a function realizing our assets when they're in the and we believe that time is optimal to invest those assets and realize returns for our investors. Suffice to say that if we grow our business and grow our funds under management and grow our funds, our performance fees will continue to occur as a matter of course. But we don't manage the performance of those. We manage the core performance until we leave it at that. Sure. And then just on the combined hotel vehicle, could you perhaps dive into how the assets are performing at this point? I mean, clearly, there will be some impact from COVID, but just sort of your expectations there are around recovery as well? Yes. And I might get around to add to my comments here. But the a number of the hotels have been impacted by the government closures and the government restrictions that are in place at the moment. And I think assets across the country, put in assets across the country that are being impacted by nearing degrees. We as occurred when teams opened up last time, we put 4 hotels strongly to very strongly. But in terms of the hotels across the country, they're being impacted by varying degrees. And Mary Anne, maybe just to get some color on the varying degrees of impact across the country in your mind. Yes, absolutely. With the New South Wales, we've got tons of hotels that we're consolidated there. We're generally open. New South Wales and the ACT have been the most heavily anticipated in current period. South Australia is open. And all of those hotels are trading at the moment and open to other states. And we've got some we've got Tasmania that's open at the moment, and Queensland also. And also, Cadillat and Molina, is continuing to trade. So, unfortunately, we do have 5 hotels in the portfolio, which is quite a large percentage of the overall portfolio, almost 6%. So, look at those factors on that end, we're able to tap into the markets that are particular. We are seeing and hearing that there is a positive demand for the industry more generally and certainly preparing ourselves for that when borders continue to open. Thanks, Maria. Thanks, again. Thanks for your time. Your time. Thank you. The next question comes from Aidan Bradley of Shaw and Partners. Please go ahead. Hi, guys. Congrats on the results. Hopefully, you can hear me okay. I just had a question on the hotels as well, obviously, early doors. But in terms of your expectations around how these hotels can perform towards that sort of 10% distribution yield, obviously, there's no change. It's early. But what sort of point does FY 'twenty two and the 8% yield there potentially become an issue, but something that I know you've underpinned that number with the group broadly, but at what sort of stage in FY '22 does that become something to think about? Thanks, Aidan. We're thinking about it all the time, Aidan. Yes, I was struggling with the phrasing of that one, so yes. Look, these conditions are obviously out of our control. What do we know? We know that our actions perform well or very well when conditions open. And we believe that we'll benefit significantly in our assets upon the reopening of quarters when the 2020 event closes. We can't predict when that will be. We'd expect the second half to be strong. We expect the second half to be strong at the back of the reopening. But that's obviously something we can't predict. So we do know that they will perform very well and there will be a significant focus on reopening and we trust to go substantially a substantial way towards compensating for the lost business that is appearing at the moment with Broadband closed. Yes, thanks. Thank you. There are no further questions at this time. I'll now hand back to Nicholas for closing remarks. Thank you all for attending today's presentation. We sincerely appreciate your interest in the group and I'd like to take this opportunity to thank all of my colleagues across the group for our investment and corporate team and all the team members across the Emirates assets across the country. We are particularly thankful for all their efforts and particularly in some sectors where there's been challenging operating conditions. Thank you again and have a good day. That does conclude our conference for today. Thank you for participating. You may now disconnect.