Aspen Group Limited · ASX:APZ

Aspen — H1 2014 Earnings Presentation

41 slides from Aspen's earnings presentation, Feb 24, 2014

  1. Slide 1: Aspen Group December 2013 Half Year Results Presentation

    Welcome to the Aspen Group December 2013 half year results presentation. This is Clem Salwin, chief executive of Aspen. I am joined on this call by our CFO, Adam Marrs Ekamper. The speaking notes will be released at the conclusion of this presentation. 1

  2. Slide 2: Four topics to be covered

    Today, I will cover off 4 topics: ‐ Progress on the business transition and the objectives that we set back in August ‐ The financial results over the half year ‐ An update of our accommodation business ‐ I will conclude with our management priorities 2

  3. Slide 3: Big picture view of the business transition

    To commence with a “big picture” view as to where the business is today. Aspen is part way through a major business transition. Back in August we launched an acceleration of change. The objective is to have the business much more simple, with lower debt, much more focussed, in the accommodation sect

  4. Slide 4: Progress against August management priorities

    Revisiting our check list from August, of our management priorities: ‐ We have commenced the disposal process of the commercial property portfolio and this is continuing ‐ We have progressed the non‐core development asset sale programme, which is now substantially complete, with only $26 million rem

  5. Slide 5: Components of announced impairments

    The impairments we announced last week can be characterised in a number of components. Firstly, there are impairments related to actual sale prices of assets that have been sold. Then we have impairments on expected sales prices for assets which have been conditionally sold or where we are in advanc

  6. Slide 6: Major adjustments to carrying values

    Just to outline the major individual elements of these adjustments to carrying values. The largest single element is that related to the Adelaide CBD land development site, where we are in negotiations for sale. CBD development sites generally tend to have a volatile value ‐ and the significant nega

  7. Slide 7: Commercial property portfolio sale process

    The sale process for the commercial property portfolio has been conducted in two parts. Our prime asset, the 50% interest in the ATO Adelaide, is new and has a long WALE. However, it is held in a jointly owned entity. As a result, the optimal approach, and that required under the joint ownership agr

  8. Slide 8: Income yield from commercial property portfolio

    generated by this portfolio. This income yield gives us optionality on being able to be patient in securing appropriate value for these assets, and not be constrained by an arbitrary deadline. 7

  9. Slide 9: Non-core development asset sales

    Turning now to our non‐core development assets. We have made good progress in this sale programme. It is now substantially complete. As at June we had just over $200 million in non‐core assets. In the half $105 million has settled and since the December balance date, a further $49 million have been

  10. Slide 10: Re-leasing Aspen Karratha Village

    Re‐leasing Aspen Karratha Village has been a major achievement. In December, we announced that Woodside had re‐leased 83% of the rooms at the Aspen Karratha Village. We are pleased that since that time, they have agreed to take a further 24 rooms at the same room rate, taking occupancy of the proper

  11. Slide 11: Overhead cost reductions

    In August last year, we set a goal to aggressively reduce overheads. This is well underway, across both employment and other expenses. Total overheads are down 21% from the comparable half. Put another way, as compared to the comparable half, annualised overhead cost savings are running at nearly $4

  12. Slide 12: Financial results in more detail

    Turning now to the financial results in more detail. 11

  13. Slide 13: Operating results over the half

    Operating results were solid over the half. Gross profits in commercial and industrial were up, largely on the back of the full period inclusion of the ATO that was completed in November 2012. Gross profit from Aspen Parks Property fund reflects lower distributions received over the half, and lower

  14. Slide 14: Statutory profit and operating profit

    Turning to the overall statutory profit. Operating profit in accommodation and commercial property totalled $13.1 million. This is equivalent to 10.9 cents per share, as compared to the distribution per share of 7.5 cents in the 1H. However, the statutory loss reflects below the line carrying value

  15. Slide 15: Total assets, liabilities and gearing

    Total assets have fallen, largely reflecting the degree of asset realisations that have been effected so far, though of course, also the carrying value impairments. Liabilities have reduced as we effected asset sales. The change in treatment of the commercial property portfolio has also meant that m

  16. Slide 16: NTA per share build

    Our usual NTA build slide shows the key components of the NTA per share. Most noteworthy in this build is that the largest single component of NTA is the commercial property portfolio held for sale, which exceeds the total level of debt. 15

  17. Slide 17: Senior debt facility

    The senior debt facility is broadly unchanged over the half. We remain on track to meet the mandated debt reduction programme with our principal financier, with a further $32 million due to be repaid by June 14, being the final mandated amount. This is due to be largely met from existing contracted

  18. Slide 18: Group debt facilities

    In terms of the overall group, facilities over the half declined slightly, with debt repayments as assets have been sold. The Fern Bay and Dunsborough facilities are due to be repaid with the contracted asset sales in hand for these two funds. The main other change over the half was the repayment of

  19. Slide 19: Capital management and buy-back

    Late last year, we received approval from the shareowners to undertake an on market buy‐back of up to 25% of shares. This programme has not yet been activated. We will look to commence the programme as soon as practical. Substantive amounts will be reliant on the timing of the commercial property sa

  20. Slide 20: Update on accommodation business

    Turning now to an update on our accommodation business. 19

  21. Slide 21: Accommodation business is simple

    Our accommodation business is simple. It has a simple business purpose: to provide affordable, “value for money” accommodation. Our customers range from major companies to smaller businesses, individual tourists and permanent residents. For all these customers we offer a “value for money” propositio

  22. Slide 22: Aspen Karratha Village returns

    Re‐leasing Aspen Karratha Village has been a key management focus over the last six months. However, it is important to see this product type in a longer perspective, in which it has produced very strong returns. The FIFO (fly in – fly out) workforce model is entrenched and workforce facilities prov

  23. Slide 23: Aspen Parks Property Fund

    Aspen Parks Property Fund is the second largest owner of holiday parks in Australia. The fund commenced in 2004, meaning we have a 10 year management track record in this sector. Our management platform has nearly 500 staff, including various in‐house specialists. The fund has a diverse holiday park

  24. Slide 24: Impact of resources capex downturn

    I have mentioned a few times, the impact of the downturn in the resources capex cycle. We have seen this impact in the net income of Aspen Karratha Village. We have seen this impact flow through to weakness in the Perth office market. And we have seen the impact very markedly on Aspen Parks. The fun

  25. Slide 25: Pilbara Holiday Park occupancy and rates

    To get a sense of scale of the impact of the resources sector downturn, one of the major resources parks in the fund is Pilbara Holiday Park, located immediately adjacent to the Aspen Karratha Village. These charts illustrate the falls in the key operating metrics for the property – occupancy and th

  26. Slide 26: Response for Aspen Parks

    There are a number of elements in our response to this significant change in operating environment for Aspen Parks. Firstly, the operating management platform is a key focus. As I mentioned we have reduced overheads. However we are also looking to invest in the platform. We are currently restructuri

  27. Slide 27: Positive view on value-for-money accommodation

    Notwithstanding the severe impact of the resources related parks, we remain very positive on the opportunity in “value‐for‐money” accommodation. The structural supply‐demand dynamic remains positive with positive demographic trends. And within this favourable industry positioning, Aspen is relativel

  28. Slide 28: Key priority action points

    Turning now to our key priority action points. 27

  29. Slide 29: Management priorities ahead

    Aspen is in a period of transition to a very much more simple, and transparent, and focussed business model. We are making progress in the transition of the business. However, there has been negative financial impact, particularly from the resources capex downturn and in the values of assets for sal

  30. Slide 30: Questions

    aspen ASPEN GROUP 2014 HALF YEAR RESULTS PRESENTATION Questions 29

  31. Slide 31: Appendix: Affordable accommodation industry overview

    Appendix Affordable accommodation industry overview 30

  32. Slide 32: Accommodation supply

    Accommodation supply Supply has been falling markedly Holiday Park sites ‐ number ™ From 1991 to 2009, the 300,000 number of holiday park sites has fallen by over 33% 200,000 ™ Local authority leaseholds / special zoning are important ™ Importance of expertise in 100,000 mixed visitor and permanents

  33. Slide 33: Accommodation demand

    Accommodation demand Relatively stable market share ™ Holiday park market share of domestic visitor nights is relatively stable at 22-23% ™ Average visitor stay is much longer than other forms of accommodation Holiday parks ‐ domestic visitor nights ‐ Average visitor stay market share 6 24% 23% 5 22

  34. Slide 34: Accommodation occupancy rate

    Accommodation occupancy rate Structurally higher and less seasonal Occupancy rate ‐ short term stays 60% ™ Occupancy rates have 50% moved up significantly, largely on back of falling 40% supply 2009 30% 1997 ™ Better utilisation of capital 1989 ™ Seasonality of summer 20% 1979 holidays now reduced 1

  35. Slide 35: Structural change: Caravan Park to Holiday Park

    Structural change From “Caravan Park” to “Holiday Park” Cabins ‐ number ™ Despite fall in overall sites, 40,000 cabin numbers at parks have grown rapidly ™ Creates scope for business 30,000 customers at parks ™ Unpowered sites in relative decline. Focus on: 20,000 • ensuite sites • technology and po

  36. Slide 36: Structural change: strong community need

    Structural change Strong community need – change of delivery method ™ Public sector is no longer a Dwelling approvals ‐ public sector: total substantial direct supplier of 12% affordable housing 10% ™ Indirect public sector support to individuals for 8% provision by private sector 6% 4% 2% 0% Source

  37. Slide 37: Structural change: permanent residential demand

    Structural change Permanent residential demand – an affordable residential option ™ Robust, simple, easy to Net growth in population aged 65+ understand financial model, with 160,000 residents: 140,000 • owning the cabin 120,000 • renting the land ™ Key demographic trend – at start 100,000 of this b

  38. Slide 38: Importance of broad product expertise

    Importance of broad product expertise Perth metropolitan cluster: mixed accommodation • Freehold • 120 Tourist Sites • 89 Permanent Sites • Leasehold • 78 Tourist Sites • 118 Permanent Sites • Leasehold • 146 Tourist Sites • 109 Permanent Sites 37

  39. Slide 39: Structural change: technology

    Structural change Technology is more important ™ Technology is increasingly Online Revenue % (of Tourist Revenue) 30% important to the holiday parks business 25% ™ Bookings on-line / mobile have increased markedly 20% • Now comprise 25% of tourism bookings at Aspen 15% Parks • This trend continues 1

  40. Slide 40: Consistent value-for-money customer proposition

    Accommodation business Consistent “value‐for‐money” customer proposition ASPEN GROUP LIMITED own manager / 11% co‐investor KARRATHA ASPEN PARKS PROPERTY FUND Business Workforce accommodation Holiday Parks lines Customers Corporate Corporate Tourists Residents 39

  41. Slide 41: Disclaimer

    Disclaimer This presentation has been prepared by Aspen Group (“Aspen”) and should not be considered in any way to be an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, and neither this document nor anything in it shall form t

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