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2016 Half-year results

5 August 2016

Half-year results for the period ended 30 June 2016

Kennedy Wilson Europe Real Estate Plc (LSE: KWE), an LSE listed property company that invests in real estate across the UK, Ireland, Spain and Italy, today announces its unaudited half-year results for the period ended 30 June 2016 (the 'Period').

  

  30 June
2016
30 June
2015
Change
(%)
Net operating income (NOI) (£m) 78.7 58.4 35
Net profit after taxation (£m) 78.7 149.3 -48
Adjusted earnings (£m) 36.2 31.0 17
Adjusted earnings per share (p) 26.8 23.0 17
DPS paid (p) 24.0 15.0 60
Quarterly DPS announced (p) 12.0 10.0 20
  30 June
2016(1)
31 December
2015
Change
(%)
Adjusted NAV (£m) 1,677.2 1,596.5 5
IFRS NAV (£m) 1,679.6 1,629.2 3
Adjusted NAV per share (p) 1,233.8 1,174.5 5
IFRS NAV per share (p) 1,235.6 1,198.5 3
Valuation uplift (£m) 47.3 91.2(2) -48
Net debt (£m) 1,280.8 1,109.6 15
Loan to value (LTV) (%) 41.8 39.7 2.1pp

Footnote: 2. Excludes commercial units.

Operational highlights in the Period:

  • Portfolio value at £3,063.2 million1, annualised NOI of £161.4 million (£165.4 million topped-up3) across 278 properties
  • Solid asset management progress completing 85 commercial lease transactions (420,100 sq ft), and delivering an uplift over previous passing rent of 4.3%, outperforming valuers’ ERVs by 1.8%  
  • Strong portfolio occupancy of 95% and long WAULTs of 7.0 years (9.0 years to expiry)
  • Took direct title of Pioneer Point, now held as direct real estate worth £76.0 million (294 unit PRS4 scheme)
  • Disposal programme delivered a further £165.5 million of completed sales across 30 properties at an average exit yield of 5.8%, a spread of 190bps over entry yield on cost and generating an attractive return on cost of 24.0%

Financial highlights in the Period:

  • 5.1% increase in Adjusted NAV per share to 1,233.8 pence (Dec-15: 1,174.5 pence)
  • 60% increase in dividends paid of 24.0 pence per share (H1-15: 15.0 pence per share) or £32.6 million of dividends paid in the Period
  • Raised a further €150 million to KWE’s 2025 Euro bonds, increasing the issue to a benchmark size of €550 million on an attractive ten-year term; 89% of Euro balance sheet hedged
  • Low weighted average cost of debt of 2.9%, with 88% of debt fixed or hedged 
  • Long debt term of 6.0 years; LTV of 41.8% within target range

Post period end achievements:

  • £300 million non-core disposal programme complete with £315.3 million of disposals across 68 properties, delivered since 2015, at a premium to preceding valuation of 5.3%, generating a return on cost of 25.6% and achieving a spread between entry yield on cost and exit yield of c. 240bps.
  • Practical completion of Baggot Plaza and Block K, Vantage, together expected to add £7.9 million of annualised NOI
  • Strong leasing momentum in the UK continues with nine leases completed, adding £0.7 million of incremental annualised NOI and delivered 6.9% ahead of valuers’ ERVs

Charlotte Valeur, Chair of Kennedy Wilson Europe Real Estate Plc, commented:  “These strong half-year results demonstrate the team’s ongoing ability to deliver robust underlying profits from a secure and diverse £3.1 billion portfolio. As such, the Board is pleased to announce a further 12.0 pence per share dividend to be paid in Q3-16, on track to deliver 48.0 pence per share annualised target for 2016, a 37% increase over 2015, and reflecting an attractive dividend yield of 4.9%. Following the result of the EU referendum, the Board takes comfort in the strong financial position of the business with significant cash liquidity and low levels of capital commitments supported by robust operating metrics.”

Mary Ricks, President and CEO of Kennedy Wilson Europe, added: “We strategically remained neutral between acquisitions and disposals to keep our powder dry, with £609 million of liquidity at the end of June. Our activity continues to transform the portfolio by improving covenants, locations and lot sizes – selling assets of c. £5.5 million on average where we have completed our asset management plans and buying larger assets in core locations where we see asset management upside.

“It is too early to be able to assess the level of market dislocation that will arise as the broader market is well capitalised. Our team remains disciplined in assessing opportunities and we will allocate capital where we believe we can achieve the best risk-adjusted returns.

“I am particularly pleased that we continue to see a good level of activity across our portfolio, including post Period-end. Most notably we completed our £300 million non-core disposal programme where our return requirements have not changed on deals completed after 23 June. We have delivered sales at a premium to book value and maintained a high return on cost. We continue to target a second £200 million tranche of disposals. We also delivered on major projects in the Period, and have a pipeline of value add initiatives to grow NOI.

“With 42% of our portfolio based in Ireland, Spain and Italy, our asset base and income stream is diversified both geographically and by sector to provide additional security. Our UK portfolio remains robust and continues to deliver strong asset management momentum with 12 leases completed after 23 June delivering additional income of £0.9 million and 6.1% ahead of valuers’ ERVs, with more to come.”

Footnotes:

1. Third party valuations (RICS Red Book) have been undertaken by CBRE on direct property assets (other than the Italian office portfolio which has been valued by Colliers); loan portfolios have been fair valued by Duff & Phelps, in each case at 30 June 2016. See page 5 for further details on valuation uncertainty as a result of the UK’s referendum result to exit the EU
2. Valuation uplift for H2-15
3. Topped-up NOI includes expiration of rent-free periods and contracted rent steps over the next two years
4. Private rented sector

Dividend

The directors of the Company have resolved to pay an interim quarterly dividend of 12.0 pence per share.

Dividend event

Declared

Ex-dividend

Record

Payment

Date

5-Aug-16

18-Aug-16

19-Aug-16

31-Aug-16

 

Leavesden Park, Watford, UK (1)

Investor enquiries
Juliana Weiss Dalton, CFA
Investor Relations Director,
Kennedy Wilson Europe
+44 (0) 20 7479 7429
ir@kennedywilson.eu

Press & media enquiries 
Dido Laurimore / Tom Gough
FTI Consulting
+44 (0) 20 3727 1000
kennedywilson@fticonsulting.com