PRELIMINARY RESULTS FOR THE YEAR ENDED 29.02.16 FOR THE YEAR ENDED 29.02.16 1
OVERVIEW AND HIGHLIGHTS 2
OUR VISION IS TO CREATE LONG-LASTING SOCIAL AND ECONOMIC CHANGE FOR THE COMMUNITIES IN WHICH WE BUILD AND SUSTAINABLE VALUE FOR OUR SHAREHOLDERS 3
OUR YEAR HAS DELIVERED A NEW COMPANY, RECORD GAINS AND CONTINUED NAV GROWTH 4
FY2016 HIGHLIGHTS 5
FY2016 HIGHLIGHTS RECORD GAINS AND CONTINUED NAV GROWTH 51m of development and trading gains realised 11.8% increase + 5.4% increase in EPRA NAV per share to 291p SUPPLEMENTAL DIVIDEND DECLARED 8.0 pence per share to be paid from strong cash flow + Interim and final dividend of 5.9 pence per share paid during the year + New dividend policy to provide greater visibility on shareholder returns DELIVERING STRATEGIC INITIATIVES To position business for long-term growth + Focus on larger regeneration projects + Repositioning investment portfolio to drive better value + Building specialist platforms 6
RECORD GAINS AND GOOD VISIBILITY ON FUTURE YEARS Aggregate expectations for development and trading gains unchanged for next 2 years 80 114m 3-5 year target + 50m plus pa + 12% post-tax total return* 72 60 61 63 40 46 51 54 42 53 20 27 0 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Realised gains ( 'm) Expected gains ( 'm) Previous guidance ( m) *Total returns: the growth in our basic net asset value including dividends. 7
FINANCIAL RESULTS 8
FY2016 PERFORMANCE FY 2016 FY 2015 Development and trading gains 51.1m 45.7m EPRA Net Asset Value (NAV) 363.5m* 345.6m EPRA NAV per share 291p* 276p Total declared dividends per share 13.9p 13.9p EPRA Earnings per share 17.1p 23.9p Profit before tax 25.8m 34.8m Total return 7.2% 10.0% Balance sheet gearing 44.4% 36.3% *Before payment of 10.0m (8.0 pence per share) of supplemental dividend to be paid on 17th June 2016 9
MOVEMENT IN EPRA NAV THROUGH THE PERIOD NOTE: Development and trading assets not revalued, held at lower of book cost or net realisable value. 330 320 17 310 41 12 300 290 2 6 1 291 280 276 10 270 EPRA NAV Feb 2015 Contribution from invesment property Contribution from development and trading Operating costs Net interest costs Taxation Ordinary dividend Other EPRA NAV Feb 2016 10
DEBT FINANCE FY2016 m FY2015 m Gross debt 213.3 205.0 Cash (51.8) (79.3) Net debt 161.5 125.7 Gearing 44.4% 36.3% Share of net debt in joint ventures 43.6 46.8 Net debt including joint ventures 205.1 172.5 Gearing including joint ventures 56.4% 49.8% Analysis of gross debt (excluding JVs) Fixed rate 35.1% 44.6% Capped / SWAP 30.1% 31.0% Floating rate 34.8% 24.4% Weighted average interest rate 4.9% 5.4% Weighted average maturity 4.5 years 5.4 years 11
DEBT MATURITY PROFILE 80 70 70 60 60 50 50 40 30 32.6 33.9 70.6 40 30 20 10 0 36.6 28.3 11.4 2.6 Feb-17 Feb-18 Feb-19 Feb-20 Feb-21 Feb-22 Feb-23 Feb-24 Feb-25 Feb-26 Corporate ( 'm) Drawn - Investment ( 'm) Drawn - Development ( 'm) NB: 7.6m of debt has been extended to 04/2017. 27.2m has been repaid following sales at Deptford. 20 10 0 12
NEW DIVIDEND POLICY TO CREATE GREATER VISIBILITY ON SHAREHOLDER RETURNS DEVELOPMENT + TRADING GAINS NET FINANCE COST OVERHEAD SHORTFALL CASH PROFIT ORDINARY DIVIDENDS CORPORATION TAX Ordinary dividend: Fixed + recurring NET FREE CASH FLOW Supplemental dividend: REINVEST REDUCE DEBT RETURN CAPITAL Paid from net free cash flow proportion intended to be broadly similar to the proportion paid in April 2015 (48%)/June 2016 (46%) Announced alongside FY results 13
FINANCIAL HIGHLIGHTS Record gains delivered and clear visibility on 2-year pipeline Target 12% post-tax return and over 50m of development and trading gains pa within 3 5 years Strong balance sheet and focus on capital efficiency 14
OPERATING REVIEW 15
OUR FOCUS MIXED-USE REGENERATION Creating places where people can thrive IN THREE CORE MARKETS London City Region, Manchester and Dublin TO DRIVE SUSTAINABLE RETURNS Our business model is designed to deliver a 12% post-tax total return on a consistent basis 16
U+I: AN INTEGRATED PORTFOLIO DEVELOPMENT AND TRADING PORTFOLIO 63% Of gross assets* 359m Capital Value Objectives Generate profit from regeneration activities. Key value drivers Quality of place Arbitrage/mispricing Planning gain CREATING PLACES INVESTMENT PORTFOLIO 37% Of gross assets* 212m Capital Value Objectives Drive recurring income streams. Add value and contribute to NAV growth. Warehouse longer-term development opportunities. Capture the value uplift of our completed regeneration projects ( Greenhouse ). Key value drivers Improve tenant mix and rental tone. Asset management including development. *Group share where appropriate 17
FY2016 HIGHLIGHTS: ON TRACK WITH STRATEGIC INITIATIVES FEWER, LARGER PROJECTS To drive focus and better returns + 2 new PPP projects won with a GDV of over 450m + 335m of sales during the year over 20 projects + Increasing profit per project over 3 year period REPOSITIONING INVESTMENT PORTFOLIO To drive better returns + 10.7m of assets rationalised during the year plus a further c. 70m in the short to medium-term + c. 130m of assets to be optimised + Early progress to build Greenhouse and Warehouse portfolios SPECIALIST PLATFORMS To improve returns, efficiency and delivery options for our projects + Heads of terms signed with a major UK-based capital partner to create initial off-balance sheet Build to Rent platform 18
DEVELOPMENT AND TRADING PORTFOLIO 19
A BALANCED APPROACH TO DEVELOPMENT AND TRADING MIXED-USE REGENERATION GAINS TRADING SHORT-TERM PROFIT FLOWS (1-3 YEARS) PLANNING GAIN IS OFTEN KEY ARBITRAGE/MISPRICING OPPORTUNITIES IRR OF >30% EQUITY MULTIPLE 1.5X PPP PROJECTS AND LARGER MIXED- USE PROJECTS (2-5 YEARS) MAX 15m EQUITY IN ANY ONE PROJECT BUT HIGH UPSIDE POTENTIAL IN ALL PLANNING GAIN IS KEY VALUE DRIVER PROJECTS DE-RISKED VIA FORWARD FUNDING OR PRE-SALES EQUITY MULTIPLE 2.0X 5.0X PROJECT DELIVERY TIME 20
FY2016 DEVELOPMENT AND TRADING GAINS Anticipated FY16 gains Gains realised in FY16 399 Edgware Road 7m 8m The Old Vinyl Factory 6m 6m Variance Dublin projects: Percy Place Charlemont Clinic Robswall, Malahide Cross Quarter, Abbey Wood Wick Lane Wharf The Deptford Project Brentwood Becket House Hale Barns Norwich Other (15 projects) 10m 5m Profit from Percy Place deferred to FY17 due to delay to commercial sale 4m 5m 4m 4m 4m 4m 4m 4m - 3m Disposal accelerated by off-market approach from Freeholder 2m 2m 2m - Profit realisation deferred to FY17 12m 10m Total 55m 51m 21
OUTLOOK FOR FY17: DEVELOPMENT AND TRADING GAINS Project name Anticipated FY17 gains H1 H2 Profit trigger 12 Hammersmith Grove 10m 10m Letting 90% of office space Dublin: a) Percy Place b) Robswall c) Pembroke Road Maidstone Ashford 7m 5m 2m a) Sale of residential units and sale of commercial component b) Sale of remaining residential units c) Sale of consented site 4m 4m Sale of first consented residential phase. Secure planning and sell second phase of development (BTR). 3m 3m Secure planning and sell consented site The Old Vinyl Factory Birmingham International Park Norwich Woking Other (8 projects) 3m 3m Secure planning and sell consented site. Funding of record store. 2m 2m Secure planning and sell consented site 2m 2m Sale of consented site 2m 2m Secure planning and sell consented site (BTR) 9m 3m 6m Total 42m 8m 34m 22
12 HAMMERSMITH GROVE + 170,000 sq. ft. Grade A office building + Forward-funded by Aberdeen Asset Management + Lettings campaign underway - 10HG let within 12 months + Average Hammersmith rents - 56psf + Profit guidance of 10m based on rents of 52.50 and 5.5% yield 23
MAIDSTONE AND ASHFORD Maidstone + Consented site acquired in December 2015 192 residential units + 180,000 sq. ft. of commercial space + Phase 1 Under offer to sell existing residential consent on part of the site Ashford + 9-acre site acquired in October 2015 + Planning process underway for c.660 homes committee in Summer 2016 + Phase 2 Progressing new planning applications for c. 240 residential units 24
NEW PROJECT: 8 ALBERT EMBANKMENT + 380m PPP project with London Fire Brigade + Competitive bid process + 5m initial equity investment plus 5m post planning + Plans for major mixed-use regeneration 25
NEW PROJECT: COCKPIT YARD + 100m PPP project with Camden Council + Competitive bid process + 2m initial equity investment rising to 4m + Plans for major mixed-use regeneration planning submission targeted Q1 2017 26
SPECIALIST PLATFORMS: BUILD TO RENT FUNDING PARTNER PROMOTE PROFIT AND RUNNING INCOME TARGET RETURN c.7.5% CAPITAL BUILD TO RENT PLATFORM PLANNING DEVELOPMENT BUILD TO RENT UNITS LAND + MINORITY EQUITY INVESTMENT + PLANNING AND DEVELOPMENT EXPERTISE U+I (LAND, PLANNING AND DEVELOPMENT EXPERTISE) LAND IMPROVEMENT PROFIT DEVELOPMENT MANAGEMENT FEE PROFIT VIA PROMOTE STRUCTURE (BASED ON OPERATING PERFORMANCE OVER THE MEDIUM TERM) 27
INVESTMENT PORTFOLIO 28
INVESTMENT PORTFOLIO OVERVIEW NUMBER OF ASSETS VALUATION INCREASE (inc JVs) SIZE OF PORTFOLIO 20 Feb 2015: 21 1.7m Feb 2015: 11.2m 203.3m Feb 2015: 203.3m INITIAL YIELD* CONTRACTED RENTAL INCOME 6.8% Feb 2015: 6.8% 14.3m Feb 2015: 13.8m ESTIMATED RENTAL VALUE* VOID RATE EQUIVALENT YIELD* 14.4m Feb 2015: 14.5m 4.5% Feb 2015: 5.0% 7.20% Feb 2015: 7.4% *on a like-for like basis and core portfolio only 29
INVESTMENT PORTFOLIO: STRATEGY TO DRIVE VALUE OPTIMISE Driving value through asset enhancement, planning gain or redevelopment RATIONALISE Disposing of non-core assets where we see no further potential to add value REINVEST Building a portfolio that better contributes to our overall returns target as a business 30
TARGET BREAKDOWN OF INVESTMENT PORTFOLIO GREENHOUSE c. 35m (17.5%) Target size + Retail, commercial or leisure elements of our completed developments + Emerging locations where destination factor is key + High income and capital growth potential DYNAMIC PORTFOLIO + HIGHER RETURNS CORE c. 120m (60%) Target size + Assets with strong covenants and stable income streams (suited to Aviva debt facility) + Income and capital growth potential through asset management and enhancement WAREHOUSE c. 45m (22.5%) Target size + Income producing, longer-term development opportunities + Feeds regeneration pipeline Current portfolio breakdown* Type Value % of portfolio Greenhouse 3.6m 1.8% Warehouse 16.9m 8.4% Other (including core assets) 181.0m 89.8% 201.5m 100.0% *analysis of core portfolio and assets considered within investment portfolio repositioning process 31
OPTIMISE: SWANLEY + Planning application to be submitted in Q2 2016 + Surface car park - 343 residential units, retail and restaurant space, new public realm + c. 3m value add through planning. Further value if we develop out. 32
REINVEST: CORE ASSETS + c. 120m of portfolio held within Aviva facility + Focus on strong covenants and stable income streams + Location, catchment, experience and tenant demand are key + e.g. Killingworth (pictured) dominant retail scheme in affluent town 33
REINVEST: WAREHOUSE ASSETS EXAMPLE: CHARLTON RIVERSIDE ACQUISITION OF ASSETS GROWTH INCOME DEVELOP MASTERPLAN REGENERATION OF PROPERTY Target undervalued, income-producing land or assets with a strategic planning case, within our three core geographies. Manage assets to drive short to mediumterm income streams. Start process of community engagement early in the process. Create development proposals for new mixed-use place and secure planning consent. Deliver new place. 34
REINVEST: GREENHOUSE ASSETS EXAMPLE: THE DEPTFORD PROJECT RETAIN GROW HARVEST Ground floor retail, leisure or commercial space of completed mixed-use regeneration project transferred to investment portfolio. Use detailed knowledge and experience of the location to attract the best tenants, to mature the development, drive footfall and add value. Mature the investment asset, capturing rental and value uplift ahead of ultimate sale. 35
SUMMARY 36
SUMMARY U+I POSITIONED FOR GROWTH Business getting into its stride and integrated into new home GOOD VISIBILITY ON GAINS 50m+ of gains pa within 3-5 years WELL-POSITIONED TO DELIVER SUSTAINABLE SHAREHOLDER RETURNS Target post-tax returns of 12% plus new dividend policy 37
APPENDICES 38
APPENDIX 1: BUSINESS MODEL 39
REINVEST U+I CREATING PLACES DEVELOPMENT AND TRADING INVESTMENT MIXED-USE REGENERATION TRADING OPTIMISING THE VALUE OF OUR RETAINED ASSETS SIGNIFICANT LONGER TERM PROFIT STREAMS FROM LARGER REGENERATION PROJECTS SHORTER-TERM PROFIT REALISATIONS TO BALANCE LUMPIER PROFITS FROM DEVELOPMENT ACTIVITY GREENHOUSE WAREHOUSE OTHER OFF BALANCE SHEET ON BALANCE SHEET PLANNING SECURED PLANNING SECURED ASSET MANAGEMENT OR PLANNING OPTIMISE LAND IMPROVEMENT PROFIT DISPOSAL (TO A FUND OR SPECIALIST PLATFORM) DEVELOPMENT FINANCE SECURED PROJECT DELIVERY PROJECT DELIVERY AND PRE-SALES DISPOSAL COMPLETED DEVELOPMENT COMPLETED DEVELOPMENT CAPITAL GROWTH AND INCOME DEVELOPMENT PROFIT DEVELOPMENT PROFIT TRADING PROFIT RATIONALISE EXAMPLE OF ROUTE: 399 EDGWARE ROAD EXAMPLE OF ROUTE: DEPTFORD PROJECT EXAMPLE OF ROUTE: ROBSWALL, BRENTWOOD 40
PRINCIPAL RISKS 41
APPENDIX 2: FINANCIALS 42
NET DEBT, NET ASSETS AND GEARING 400 70 350 59.2 363.3 60 335.5 346.4 342.9 300 48.3 47.9 304.5 306.7 312.6 45.7 320.3 48 44.4 50 40 40 m 250 36.3 % 30 200 203.3 20 150 147.1 146.8 143.0 153.8 150.7 161.4 10 100 Aug 12 Feb 13 Aug 13 Feb 14 Aug 14 Feb-15 Aug-15 Feb-16 125.7 Net assets (LHS) Net debt (LHS) Gearing excl JVs (RHS) 0 43
CONTRIBUTION TO NAV GROWTH m Net assets attributable to shareholders at 28 Feb 2015 345.7 Cash-related in the year m Non cash-related in the year m Contribution from investment property 12.1 12.1 Property revaluations 0.2 0.2 Contribution from development and trading portfolio 51.1 51.1 Operating costs (21.8) (21.8) Net interest costs (11.8) (11.8) Swap revaluations 0.3 0.3 Foreign currency movements (0.7) (0.7) Other (1.2) (1.2) Taxation (2.5) (2.5) Dividends (7.4) (7.4) Non controlling interest (0.7) (0.7) Sub-total 17.6 17.1 0.5 Net assets attributable to shareholders at 29 Feb 2016 363.3 44
RECONCILIATION OF PROFIT BEFORE TAX m FY2015 profit before tax 34.7 Increase in development and trading gains 5.4 Increase in net rental income 1.9 Increase in operating costs: One off - 2.4m Recurring - 1.4m (3.8) Decrease in valuation gain on investment portfolio and investments held in JV (11.1) Decrease in profit on sale of investment portfolio (4.1) Change in FX movements in P&L* (7.8) Exceptional items in 2015 Cathedral acquisition costs Euro loan note refinance** (2.7) (7.9) FY2016 profit before tax 25.8 *FX gains taken to reserves increased by 4.7 million **Corresponding deficit of 6.0 million taken to reserve in 2015 45
OVERHEADS FY2016 m FY2015 m Staff costs LTIP 12.8 0.7 12.0 (0.1) 13.5 11.9 Establishment and other Legal and professional Depreciation 4.8 3.2 0.3 3.2 2.5 0.3 21.8 17.9 Non-recurring costs included above: Rebrand and launch costs Integration Rationalisation of office space HDD (unwinding of previous joint venture) Audit fee 0.9 0.6 0.4 0.4 0.1 NB: Overheads include administration and professional fees relating to corporate structures for investing into projects in a capital efficient manner totalling 0.4m 2.4 46
INVESTMENT PROPERTY PORTFOLIO CONTRIBUTION (INCLUDES SHARE OF JVs) FY2016 m FY2015 m Revenue 14.4 12.9 Direct costs (2.4) (2.7) 12.0 10.2 (Loss)/Gains on disposals (0.2) 3.8 Asset management fees and joint venture net income 0.3 (0.1) Contribution prior to revaluation 12.1 13.9 Revaluation gain - Direct - Share of JV 0.2 0.1 7.6 3.4 Contribution 12.4 24.9 47
APPENDIX 3: PORTFOLIO STATS 48
LEVEL OF PROFITS PER PROJECT Aggregate expectations for development and trading gains unchanged for next 2 years 72 9 70 63 8 60 7 50 40 46 51 42 6 5 30 20 10 9 7 28 27 24 11 28 27 18 21 14 4 3 2 1 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 'm Profit (LHS) Number of projects (LHS) 'm profit per project (RHS) 0 49
INVESTMENT PROPERTY ANALYSIS Gross rental income - tenant profile Gross rental income - lease term profile 6.0% 1.7 PLC/nationals/FTSE 100 7.9% 10.8% 25.2% Local traders Regional multiples 44.1% 0 - <5 years 5 - <10 years 10 - <20 years 67.1 Government 37.2% 20 years + Capital value - location profile Capital value - asset type 9.0% 1.8% 8.4% 26.4% 40.1% London and South East South West Greenhouse North and Midlands Warehouse Other 24.5% Wales and Northern Ireland 89.8%
DEVELOPMENT AND TRADING PORTFOLIO: GEOGRAPHIC BREAKDOWN 16.1% 1.0% 22.9% 60.0% London City Region Rest of UK Dublin Manchester 51
DEVELOPMENT AND TRADING PORTFOLIO: GDV PER SECTOR (% of portfolio) 2.2 2.0 2.7 8.3 18.8 66.0 GDV by sector Residential Office Retail Leisure Student Science 52
1 hour 30 mins DEVELOPMENT PROJECTS IN LONDON CITY REGION Cambridge Oxford Reading Slough Woking Sittingbourne Maidstone Brighton Tunbridge Wells Ashford Key Route of Crossrail 1 Route of Crossrail 2 M25 Zone One (London Underground) 53
APPENDIX 3: ECONOMIC CHARTS 54
Capital Growth % CAPITAL GROWTH SEPTEMBER 2015 MARCH 2016 BY SECTOR 5.0 4.0 3.8 3.9 3.0 2.0 1.0 0.8 1 1.5 1.8 2.3 2.9 0.0-1.0-0.6-0.3-2.0 Source: IPD monthly 55
AFFORDABILITY OF HOUSING IN LONDON 90 House Price-to-Earnings Ratio and Mortgage Affordability in London 14 80 13 12 70 11 10 60 9 50 8 7 40 6 Mortgage Affordability London (LHS 30 2000 2005 2010 2015 HPE London (RHS ) 5 4 Source: Capital Economics 56
EMPLOYMENT CHANGE AND UNEMPLOYMENT RATE 9.0 400 300 8.0 200 7.0 100 0 6.0-100 -200 5.0-300 Unemployment Rate (LHS, %) LFS Employment (3m change, 000s) 4.0-400 2000 2002 2004 2006 2008 2010 2012 2014 2016 57
INVESTMENT YIELDS: PRIME TO NON-PRIME SPREAD (bps) 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 2001 2003 2005 2007 2009 2011 2013 2015 Source: Capital Economics 0 58
FACTORS THAT ARE MAJOR CONSTRAINTS ON PRODUCTION (% balance, Difference from average, Q4 2015) 20 20 10 10 0 0-10 -10-20 -20-30 -30-40 Labour avail. Labour costs Materials avail. Material costs Land avail. Land prices Planning delays Source: Capital Economics Dev. Finance -40 59
% of Total DUBLIN: BREAKDOWN OF FIRMS IN BUSINESS ECONOMY IN IRELAND 100 90 2 23 58 80 70 60 50 98 40 77 30 20 42 10 0 Number of enterprises Number of employees GVA Irish Multinational Source: CSO 60
DISCLAIMER This presentation has been prepared by U and I Group PLC (the Company ). No representation or warranty (express or implied) of any nature is given nor is any responsibility or liability of any kind accepted by the Company or any of its directors, officers, employees, advisers, representatives or other agents, with respect to the truthfulness, completeness or accuracy of any information, projection, representation or warranty (expressed or implied), omissions, errors or misstatements in this presentation, or any other written or oral statement provided. In particular, no responsibility or liability is or will be accepted and no representation or warranty is or is authorised to be given as to the accuracy, reliability or reasonableness of any forward-looking statement, including any future projections, management targets, estimates or assessments of future prospects contained in this presentation, or of any assumption or estimate on the basis of which they have been given (which may be subject to significant business, economic or competitive uncertainties and contingencies beyond the control of the management of the Company). Any such forward-looking statements have not been independently audited, examined or otherwise reviewed or verified. All views expressed in this presentation are based on financial, economic, market and other conditions prevailing as of the date of this presentation. The Company does not undertake to provide access to any additional information or to update any future projections, management targets, estimates or assessment of future prospects or any other forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation, or to correct any inaccuracies in this presentation which may become apparent. Past performance is not indicative of future results and forward-looking statements are not guarantees of future performance. This presentation is for information purposes only and does not constitute an offering document or an offer of transferable securities to the public in the UK. This presentation is not intended to provide the basis for any credit or other evaluation of any securities of the Company and should not be considered as a recommendation that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction with the Company or any other person. The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities. This presentation is being communicated or distributed within the UK only to persons to whom it may lawfully be communicated, and has not been approved for the purposes of section 21 of the Financial Services and Markets Act 2000. It may not be reproduced (in whole or in part), distributed or transmitted to any other person without the prior written consent of the Company. In particular this presentation is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients of this presentation outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction, and are treated as having represented that they are able to receive this presentation without contravention of any law or regulation in the jurisdiction in which they reside or conduct business. 61