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2016 Full-Year Results

24 February 2017

Full-Year results for the year ended 31 December 2016

KWE delivers 23% income growth.

Kennedy Wilson Europe Real Estate Plc (LSE: KWE), an LSE listed property company that invests in direct real estate and real estate loans in Europe, today announces its audited full-year results for the year ended 31 December 2016.

  

  31 December
2016
31 December
2015
Change
(%)
Net operating income (NOI) (£m) 160.3 130.1 23.2
Net profit after taxation (£m) 66.0 259.0 -74.5
Adjusted earnings (£m) 74.1 65.0 14.0
Adjusted earnings per share (p) 55.2 47.9 15.2
DPS paid (p) 48.0 35.0 37.1
Quarterly DPS announced (p) 12.0 12.0 -
  31 December
20161
31 December
2015
Change
(%)
Adjusted NAV (£m) 1,533.7 1,596.5 -3.9
IFRS NAV (£m) 1,535.9 1,629.2 -5.8
Adjusted NAV per share (p) 1,215.9 1,174.5 3.5
IFRS NAV per share (p) 1,217.6 1,198.5 1.6
Valuation uplift (£m) -8.6 211.8 Na
Net debt (£m) 1,234.8 1,109.6 11.3
Loan to value (LTV) (%) 42.8 39.7 3.1pp

Operational highlights

  • Portfolio value at £2,882.2 million1 generating annualised topped-up NOI2 of £163.7 million across 223 properties
  • Solid asset management progress having completed 140 commercial lease transactions (1.1 million sq ft), delivering an uplift over previous passing rent of 11.4% and outperforming valuers' preceding ERVs by 3.1%
  • Secure and sustainable income underpinned by strong portfolio occupancy of 95% and long WAULTs of 7.1 years (8.9 years to expiry)
  • £413.1 million of sales across 89 properties3, at an average exit yield of 5.8%, a spread of 180bps over entry yield on cost; delivering a premium to book value of 4.8% and generating an attractive return on cost of 31.8%; £200 million non-core disposal programme completed ahead of June 2017 target
  • Practical completion of Baggot Plaza and Block K, Vantage, our two largest developments in Dublin, together expected to add £8.1 million of annualised NOI

Financial highlights:

  • 3.5% increase in Adjusted NAV per share to 1,215.9 pence (Dec-15: 1,174.5 pence)
  • 37% increase in dividends paid of 48.0 pence per share (FY-15: 35.0 pence per share) or £64.4 million of dividends paid in 2016
  • Raised a further £318.6 million of unsecured financing by tapping the 2025 Euro bond by a further €150 million to a benchmark size of €550 million and the 2022 Sterling bond by a further £200 million to £500 million
  • Low weighted average cost of debt of 3.0%, with 92% of debt fixed or hedged
  • Long debt term of 6.1 years; LTV of 42.8% and well within target range
  • Completed £100 million share buyback of 9.8 million shares at an average price of 1,020 pence per share, representing a 17.7% discount to Q3-16 adjusted NAV per share

Post year-end achievements:

  • Strong leasing momentum continues with 17 lease transactions completed, adding a further £0.7 million of incremental annualised income; delivering a rental uplift of 18.1% ahead of previous passing and outperforming valuers’ preceding ERVs by 11.4%
  • Agreement for lease signed with Tesco at Stillorgan Shopping Centre, Co. Dublin, for a new 25-year lease (term certain 15 years) and planning permission received for new extension unit unlocking asset management opportunities

Charlotte Valeur, Chair of Kennedy Wilson Europe Real Estate Plc, commented:  “The strong top-line performance throughout the year highlights the positive level of operational and asset management activities, coupled with ongoing financial discipline. In a year marked by significant political and capital market turbulence, the Group reported a solid financial performance, with strong earnings growth and delivery of the annual dividend target to 48.0 pence per share, a 37% increase on 2015. As part of our strategy to continuously assess the best use of our capital to ensure efficient balance sheet management, we undertook a share buyback programme which was accretive to returns.

“Looking forward, the Board is alert to the fact that the potential for increased volatility remains high. In this context, KWE’s diversified portfolio, both geographically and by sector, together with low capital commitments and ample liquidity to capitalise on any fallout, places the business on a solid foundation to deliver attractive investor returns.”

Mary Ricks, President and CEO of Kennedy Wilson Europe, added: “Our success in delivering substantial earnings growth is a strong endorsement of our active asset management initiatives as they are realised across our portfolio adding both incremental income from a material level of lease transactions, as well as gains on sales from our successful disposal programme. Our positive leasing, underpinned by good occupancy and long leases, contributed to our secure and sustainable cash flows.

“Going forward, the triggering of Article 50 is likely to prolong market uncertainty. We will remain disciplined in deploying capital, always allocating it to its best use, and 2017 will continue to see a balance between disposal proceeds and selective capital deployment.

“We saw huge success with our development and refurbishment programme during 2016 and we will continue to deliver risk-mitigated repositioning opportunities. To this end, we are progressing our plans at Moraleja Green and Puerta del Sol in Madrid, Pioneer Point in London and Stillorgan Shopping Centre in Co. Dublin. All these value-enhancing initiatives will drive income to the bottom line.

“High demand for our non-core assets in 2016 resulted in a very active level of disposals, delivering c. £400 million of sales across 89 properties. Our most recent £200 million tranche of non-core disposals formed part of these sales, completing well ahead of our Q2-17 target and delivering strong returns ahead of previous book values.”

Footnotes:
1. Costs associated with these items are typically expensed through the income statement in the period in which the expense is incurred.
2. Costs associated with equity fundraisings are typically applied against the Stated Capital balance in the consolidated balance sheet. For further information, refer to Note 28.
3. Costs associated with debt transactions are typically capitalised into borrowing costs and amortised over the period of the associated debt. For further information, refer to Note 25.
4. Costs associated with these items may, depending on the nature of the transaction for which services are being provided, either be expensed during the period that a cost is incurred, or capitalised into the underlying cost base of the associated asset.

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

24-Feb-17

9-Mar-17

10-Mar-17

31-Mar-17 

Leavesden Park, Watford, UK (1)

Investor enquiries
Juliana Weiss Dalton, CFA
Investor Relations Director,
Kennedy Wilson Europe
+44 (0) 20 7123 5577
ir@kennedywilson.eu

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