Elanor Investors Group (ENN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Elanor Investors Group ENN Investor Briefing. I would now like to hand the conference over to Mr. Ian Mackie, Chairman. Please go ahead.

Good morning, and thank you for joining today's market update. My name is Ian Mackie, and I'm the Chairman of Elanor Investors Group. With me today is Tony Fehon, our recently appointed Interim Managing Director. I'd like to start by acknowledging that this has indeed been a challenging time. And I thank you for your patience as we have navigated through some significant changes. This market update has been scheduled to provide further color on what we announced yesterday and the actions we are taking to strengthen the ENN balance sheet and simplify the business. Our 4E has not been launched with the ASX as yet. We are unable to take questions today. You will have an opportunity to do so at our investor update currently scheduled for 30 September 2024. Yesterday, we announced significant changes that will see ENN become a capital-light and simplified business. We have done this to ensure we are able to navigate the prevailing property market conditions, in an orderly and planned way. The Board believes that these measures will ensure the group is optimally placed to deliver strong fund and security performance over the long term. A number of key management changes up were also announced to ensure an orderly leadership transition to support the strategy execution. The company and the broader operating environment has changed. And as we enter this new and pivotal chapter, Glenn has made the decision that the timing is right for him to retire. Tony Fehon, who has been on the Board of Elanor for the past 5 years, and involved in the development of the refocused strategy has been appointed interim Managing Director. Tony has the Board's full confidence to lead the company through this transition phase. He has extensive experience in operational and leadership roles in the real estate and funds management sector, including as an Executive Director at Macquarie Bank. He has the right leadership skills, operational experience and understanding of our business to steer the company through this phase while providing the necessary leadership continuity, so the team can stay focused on managing assets and delivering investment returns. The Board will commence a search for a new CEO once the group is further advanced in the execution of it's stabilization strategy. Additionally, after 10 years with the business, Paul Siviour has also announced his retirement from his role as the group's Chief Operating Officer, effective immediately. Appropriate succession arrangements will be made for this role. These leadership changes are affected immediately. It will ensure strong leadership of the group through this transition period and will support the execution of the group's long-term vision. While our 4E has not been lodged with the ASX as yet, you will have seen some key metrics from yesterday's announcements. Such as assets under management of approximately $6 billion as at 30 June 2024 versus $3 billion at 30 June 2023. Preliminary FY '24 recurring funds management income of approximately $49 million, representing a 44% increase on FY '23. Base recurring management fees increased by 73% to approximately $40 million for the year. Preliminary FY '24 funds management EBITDA of approximately $12.5 million and FY '23 was $1.7 million. We are continuing to assess a range of capital management initiatives. In parallel, we are progressing with the audit and finalization of our FY '24 financials in conjunction with PwC. We are engaging with the ASX in respect of the reinstatement of the quotation of our securities, which will follow the release of our Appendix 4E. Our audited FY '24 financial results are expected to be available by 30 September 2024. Finally, I want to assure you that the Board is actively involved in the strategy execution, and we remain very focused on delivering value for our security holders. We believe these changes are the right ones for the business and are confident that will -- it will set us up for future success. Thank you, and I will now hand over to Tony Fehon to provide further details with regards to our strategy going forward.

Thank you, Ian. Thank you, Chairman. And thank you to the Board for giving me the opportunity to lead ENN through this transition phase. As the chair as outlined, yesterday, we announced some comprehensive changes to our business. Let me start by taking you through what we are doing to strengthen the balance sheet. With more than $140 million in net tangible assets, the reorganization of the balance sheet will bring stability to the day-to-day operations of the business. Immediate action has been taken to reduce balance sheet gearing through the sale of Elanor's stake in the Elanor Commercial Property Fund to Lederer Group. The Lederer Group were a small investor in ECF and with a similar outlook on the office market and a belief in the capability of our team, it was a strategic opportunity to sell our stake to them and continue to build on a shared vision for the fund. Furthermore, an orderly sale program of Elanor hotel assets is well underway. And given the level of interest expressed in the portfolio or on individual asset sales, we remain confident that this sale is in the best interest of our fund investors. Other asset sales are well progressed in relation to certain Elanor managed funds. After the sale of these assets, Elanor will still have more than $5 billion in funds under management. Let me take you through the ECF deal announced yesterday. The sale to Lederer was a deal struck at the right time and with the right party for the fund. Elanor sold its -- 12.6% interest in ECF via an off-market sale to Lederer Group draw approximately $23.9 million. This represented a sale price of $0.60 per ECF security. Proceeds from this sale will be used to reduce the Group's senior secured fully revolving debt facility by $15 million and for working capital requirements. Settlement of the sale of ECF Securities is due on the 13 of September 2024. Importantly, we will remain as the Responsible Entity and the Manager of ECF. We have additional plans to execute on our previously announced capital light funds management strategy, and part of this is to pay down our debt to retain flexibility in our future. We have agreed with our senior secured financier to undertake other capital management initiatives to raise funds of at least $15 million by the 31 of October, in 2024 and to reduce the senior revolving debt by a further $10 million prior to the 15 of November 2024. Getting this facility below [ $50 million ] will open up further flexibility in the future. Citigroup Global Markets has been appointed to assist in exploring appropriate capital management initiatives. And in parallel, Moelis has been appointed to explore debt financing options. Elanor will continue to assess financing options to strengthen the group's balance sheet and provide the most flexible financing terms to support the group's strategic initiatives. In May 2024, investors in the Elanor Property Income Fund, which we call EPIF approved the orderly realization of assets and return of capital. EPIF divestment strategy is well advanced with Glenorchy plaza sold and 2 of the 3 remaining assets in exclusive due diligence. All assets are expected to be divested this year. Furthermore, we have commenced the strategic divestment of the hotel assets within the Elanor Hotel accommodation Fund, or EHAF, with the proceeds to reduce the fund's debt and return capital to EHAF investors. Asset realization programs are also in progress for several single-asset retail managed funds, including Bluewater Square and Belconnen markets. All these planned asset realizations are expected to release well in excess of $100 million of Elanor's balance sheet capital over the next 18 months. Net gearing for the Group will be substantially reduced following execution of these initiatives. With the divestment of fund assets in the hotel tourism and leisure sector, we are simplifying our funds management platform to focus on the core real estate sectors of retail office, health care and industrial. This divestment program has already commenced and is planned to be substantially completed by 30 June 2025. And I would like to stress that any asset sales will be assessed on their own merit and what is in the best interest of investors in our funds and for our broader stakeholder partners. As I've said earlier, this orderly divestment of assets will strengthen our balance sheet and provide the foundation for a capital-light and simplified business. Now following the integration of the Challenger and ADIC real estate funds management mandates, the group is continuing a range of cost management initiatives to further grow the profitability of the funds management platform. In addition to these actions being taken, we will continue to assess any approaches that are being made by third parties and any decision to progress discussions will be made on a basis that is in the best interest of our security holders. While we remain in discussion with a number of parties, there is currently no assurance that a particular outcome will eventuate. We have appointed Citigroup Global Markets and King Wood Mallesons to advise us on these issues. We will continue to keep the market informed in accordance with our ongoing continuous disclosure obligations. No action is currently required by Elanor securityholders. In conclusion, and as the Chair mentioned, we are seeking to come out of trading suspension at the appropriate time following the lodgment of Appendix 4E. My focus right now is to execute this strategy to ensure the group is well positioned to deliver strong fund and securityholder performance over the long term. Thank you for joining today's call, and we look forward to holding a detailed briefing on our audited results when they are released. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.