BWP Trust

Ladies and gentlemen, thank you for holding and welcome to the BWP Half Year Results Investor Briefing. Your lines will be muted during the briefing. However, you will have an opportunity to ask questions immediately afterwards and instructions will be provided on how to do this at that time. I would now like to hand the call over to the Managing Director of BWP, Mr. Mark Skatina.

Thank you and good morning everyone and thanks for joining us. My name is Mark Scatina, Managing Director of BWP, and I'm joining you from Perth. With me today is Andrew Ross, Head of Property, and David Hawkins, our Chief Financial Officer. Today we're pleased to present BWP Group's results for the half-year ending 31 December 2025. BWP is released to the OSEC this morning. It's half-year results announcement, half-year report incorporating the 4D and investor briefing presentation. I'll now take you through the key aspects of the presentation before we take questions. Turning to slide three. To commence today, we acknowledge the traditional owners of country throughout Australia and their continuing connection to lands and waterways upon which we depend. We pay our respects to their elders past and present. Turning to slide six and portfolio highlights. The half year result reflects continued progress across BWP strategic pillars of portfolio optimisation, profitable growth and portfolio renewal. Portfolio optimisation outcomes were underpinned by the completion of management internalisation and progress on the Bunnings lease reset, resulting in an extension of the portfolio weighted average lease expiry to 7.5 years, an increase of 3.1 years on the prior corresponding period. Like-like rental growth of the 12 months to 31 December 2025 was 2.6%, supported by strong leasing outcomes in the large format retail portfolio, where leasing spreads increased by an average of 7.6%. The portfolio recorded a valuation uplift of $155.9 million, reflecting improved rental income and affirming of the weighted average cap rate of 13 basis points to 5.27%. Developments and repurposing activities, namely at Fountain Gate and Broadmeadows in Victoria and Norlunga in South Australia, were advanced during the period. Supporting profitable growth, the group completed the acquisition of Home Centre Morayfield in Queensland for $48 million at a market capitalisation rate of 5.75%. The fully leased large format retail centre was acquired off market funded from existing debt facilities and was earnings accreted from settlement, further increasing BWP's exposure to large format retail. Reflecting the group's operating performance, an interim distribution of 9.58 cents per security has been declared and will be paid on the 27th of February 2026 to security holders on BWP's register at 5pm Western Standard Time on 31 December 2025. BWP today reaffirms full year distribution guidance subject to no major disruption of the Australian economy or material change in market conditions, expecting total distributions for the year ending 30 June 2026 of 19.41 cents per security, representing a 4.1% increase on the prior year's distribution of 18.65 cents. Portfolio renewal and capital management activity also progressed during the half, including the divestment of a non-core asset at Morley in Western Australia. Post the balance date, the divestment of Port Kennedy in Western Australia was completed and the group also entered into an unconditional contract for the sale of Chadstone in Victoria for $86 million, with settlement expected in June 2026. In October 2025, the group completed a successful debt refinancing, issuing a $300 million five-year Australian medium-term note, which was strongly supported by both domestic and offshore investors, further diversifying our funding base and enhancing balance sheet flexibility. Moody's revision of our credit rating upwards to A3 stable further underscores the strength and resilience of the balance sheet, positioning the group well to support future growth opportunities. Turning to slide 7 and key portfolio metrics. statutory profit after fair value movements and income tax was $221.8 million, compared with $157.1 million in the prior period, an increase of 41.2%. Profit before fair value movements and tax of $66.4 million was largely anon with a prior corresponding period with increased rental income offset by one-off transaction costs associated with the internalisation and lease reset. The underlying net tangible asset backing of BWP securities increased during the period to $4 per security at 31 December 2025, reflecting the unrealised gains on revaluation of investment properties and the increased number of securities on issue post the internalisation. Turning to slide nine and financial performance. While I won't spend time on slides nine and 10, they do provide an overview of financial performance for the half with key metrics focused on income, expenses, portfolio valuation, distributions, investments and cash generation and our capital structure. Turning to slide 11 and funds from operations. Funds from operations increased to $70.4 million, up 6% on the prior corresponding period with a distribution reflecting 98.6% of FFO. Distributions for the half were fully supported by cash generation, despite increased repurposing activity providing a headwind to rental income. BWP continues to target a distribution payout ratio of 90% to 110% of FFO, providing flexibility to accommodate the impacts of activities such as development and repurposing. Turning to slide 13 and portfolio evolution. This slide summarises the evolution of the BWP portfolio and reflects the contribution of site repurposing, Bunnings upgrades and expansions, and increasing participation in the large format retail or LFR sector to the composition of BWP's portfolio. While investment in Bunnings Warehouses remains BWP's primary focus, large format retail has become an increasingly important component of our portfolio. Since 2020, BWP's LFR portfolio has grown to approximately $1.2 billion, driven by rental growth, acquisitions and asset repurposing, placing BWP as Australia's fourth largest owner of LFR assets. Importantly, leveraging the post-internalisation reduction in the cost of capital provides BWP with increased capacity to continue growing all aspects of the portfolio, including LFR, and supported by tenant-led expansion and site repurposing pipeline of approximately $100 million. Turning to slide 14 and large format retail dynamics. Continued tenant strength, together with an undersupply of lettable area, is driving an attractive rental growth outlook for large format retail. and population growth, rising residential property values and low unemployment have underpinned strong retailer performance, with listed large format retailers continuing to demonstrate resilient sales growth. Given this context, with cumulative lease expiries within the LFR portfolio to the end of financial year 2029, representing some 10% of annual portfolio income, opportunities exist to drive positive leasing spreads through effective portfolio optimisation and tenant curation. turning to slide 15 and portfolio composition. The large format retail market is material in size with an estimated value of $25 billion and importantly exhibits strong ongoing transaction activity or asset churn that supports portfolio growth through asset recycling and acquisitions accretive to BWP's cost of capital. And whilst BWP's market share of the LFR market is significantly less than its share in Bunnings Warehouse ownership, the addressable market size and the high rates of churn present an opportunity for BWP to grow its portfolio over time, leveraging the group's asset management and development capability, supported by its balance sheet strength and post-internalisation cost of capital reduction. Turning to slide 16 and an update on the transition to an internalised model. Upon completion of the internalisation transaction on 1 August 2025, BWP has prioritised systems enablement, team employment arrangements, and resourcing to support growth and improve the delivery of investor relations and sustainability initiatives. Collaboration with West Farmers to support the transition to an internalised model has been effective, with expansion, planning and upgrade principle development advanced with Bunnings during the half. The internalised model remains a key neighbour of BWP's strategy, supporting a lower cost of capital, improved alignment with security holder interests and greater operational flexibility to pursue value accretive growth opportunities. Turning to slide 18. Activity across the portfolio continued to be underpinned by strong tenant covenant quality, extended lease duration and disciplined asset management. The reset and extension of 62 Bunnings leases materially increased portfolio whale to 7.5 years as of 31 December 2025, while leasing activity within the large format retail portfolio continued to support income growth. Occupancy of 96.7% reflects the impact of stores vacated for repurposing, at sites including Fountain Gate in Victoria and no longer in South Australia. And BWP's rental income continues to be supported by a high quality covenant mix with approximately 97% of income derived from West Farmers Group and other national retailers. And turning to slide 19. Rental income growth for the portfolio reflects the benefits of a balanced lease structure and the increasing contribution from large format retail assets. In the 12 months to 31 December 2025, like-for-like rental growth was 2.6%. Growth was driven by fixed and CPI-linked rent reviews across the portfolio and strong leasing spreads in large-format retail lease renewals, partially offset by market rent reviews on two Bunnings leases, being Chadston and Hawthorne in Victoria. Turning to slide 20. Leasing activity within a large-format retail portfolio delivered positive outcomes, with leasing spreads across eight large-format retail tenancies averaging 7.6%, reflecting strong rental reversion. Also, incentives remain low during the half, reflecting both tenant demand and the quality of BWP's portfolio. These outcomes continue to support income growth despite increased repurposing activity during the half. Moving to slide 21 and cap rates and valuations. The entire portfolio was revalued during the period, resulting in a weighted average capitalisation rate of 5.27%, representing compression of 13 basis points over the half. Net fair value gains for the period totaled $155.9 million with this valuation uplift driven by both improved rental income and cap rate compression. Market transaction activity increased during the period, reflecting improved alignment of buyer and seller expectations and continued investor appetite for assets underpinned by strong covenant quality. Turning to slide 22 and repurposing. During the half, BWP's repurposing activity gained momentum. with construction commenced at both Fountain Gate in Victoria and Noarlunga in South Australia, and progress also made on the Broadmeadows Homemaker Centre expansion in Victoria. These projects reflect BWP's capability to execute across feasibility, planning, construction and leasing, with a strong focus on pre-leasing outcomes and disciplined capital deployment. Repurposing activity remains a driver of future income growth and portfolio renewal, enabling the group to reposition assets to higher and better use while maintaining balance sheet flexibility. Moving to slide 24 and tenant expansion activity. As a key driver of profitable growth, BWP continued to progress agreed tenant-led expansion projects comprising total commitments of $81 million across a number of sites. Key projects include the $14 million expansion at Bunnings Pakenham in Victoria and the $11 million car showroom redevelopment and expansion at Midland in Western Australia, both expected to commence prior to 30 June 2026. These projects are characterised by long lease terms, attractive rentalisation rates and strong tenant alignment and reflect BWP's strategy of deploying capital into lower risk income accretive opportunities within the existing portfolio. Pleasingly, planning has advanced regarding the five Bunnings store expansion projects agreed as part of the internalisation and Bunnings lease reset and capital investment transactions. Turning to slide 25, an acquisition activity. During the half, the group acquired Home Centre Morayfield in Queensland for $48 million at a 5.75% market cap rate from an unrelated third party. The fully leased retail centre offers approximately 12,100 square metres of leadable area with tenants such as A-Mart Furniture, Nick Scarley, Super Cheap Auto and Sydney Tools. The off-market acquisition was funded from existing debt facilities and was earnings accreted from settlement, further increasing BWP's exposure to the large format retail sector, which continues to benefit from favourable supply and demand dynamics. Turning to slide 27 and portfolio renewal. Portfolio renewal activity during the half focused on actively recycling capital through the divestment of non-core assets and redeploying capital into opportunities and projects that enhance portfolio quality and growth. The sale of the ex-Bunnings Morley property in Western Australia for $19.5 million and the ex-Bunnings Port Kennedy property also in Western Australia for $14.3 million were both completed at premiums to book value. Subsequent to period end, the group also executed an unconditional contract for the sale of the Chadston Home Plus Homemaker Centre in Victoria for $86.0 million with settlement expected in June 2026. The investment followed the negotiation of a lease extension with Bunnings to July 2030 and an extensive public sales campaign. achieving a realised internal rate of return of 15.2% since its introduction to the BWP portfolio via the NPR transaction. The proceeds of the Chaston sale will initially be applied to reduce drawn debt. These transactions demonstrate BWP's disciplined approach to capital recycling and the ability to capture value through active asset management. Moving to slide 28. BWP's capital position remains strong, supported by diversified funding sources, extended debt maturity, and investment-grade credit ratings from both S&P and Moody's. During the half, the group further diversified its funding sources and extended debt maturities, supporting increased balance sheet flexibility. Gearing at 31 December 2025 was 24.7%, which remains well within the board's preferred range of 20% to 30%, while the weighted average cost of debt remains stable at 4.4%. And on to slide 29. The group completed a new $300 million five-year bond issuance further diversifying funding sources and extending the weighted average maturity of debt. The group has sufficient available liquidity to address upcoming debt maturities, including the $150 million bond maturing in April 2026. BWP's diversified mix of domestic and international bank facilities and capital market funding positions the group well to support ongoing repurposing and tenant-led expansion activity and future portfolio growth opportunities. Turn to slide 31, End Governance. As disclosed in November 2025, our Chair, Tony Howarth AO, has retired from our Board, with the current Chair of the Audit and Risk Committee, Ms Fiona Harris AM, to succeed Tony as Chair. Fiona's appointment as Chair reflects strong Board support and alignment and will provide valuable continuity as BWP transitions to its new role as an internally managed business. On behalf of the management team and investors, I'd like to acknowledge and thank Tony for his significant contribution, strong stewardship wise and commercial counsel and effective leadership of the board. Tony is leaving BWP well positioned following the recent internalisation and lease reset and extension transaction. Turning to slides 33 and 34 and our outlook. For the balance of the 2026 financial year, BWP will continue to deliver on a strategic agenda of portfolio optimisation, profitable growth and portfolio renewal. The group will remain focused on embedding the internalised model with initiatives centred on systems enablement, remuneration alignment with security holder interests and also additional resourcing, particularly in areas supporting growth, being investor relations and sustainability. The second half of the 2026 financial year will see the progression of material capital expenditure commitments, reflecting significant site repurposing activity and tenant-led expansion projects, with capital expenditure of between $60 million and $70 million expected for the 2026 financial year. subject to construction progress and project timing. BWP will continue to assess and pursue accreted growth opportunities, leveraging the reduction in the cost of capital achieved post-internalisation and the group's diversified funding position. Large-format retail remains a key focus area, with favourable market conditions, including low rates of new supply and strong tenant performance, expected to support portfolio optimisation through tenant mix curation and leasing spread opportunities. BWP's largest tenant fundings remains well-positioned supported by its external operating environment and its continued focus on expanding and innovating its addressable market. Rent reviews are expected to contribute incrementally to property income in the second half, with 93 leases scheduled for CPR-linked or fixed percentage increases, incrementals of 73 completed in the first half. In addition, three market rent reviews of Bunnings Warehouses are in the process of being finalised and are expected to be completed during the second half. Finally, and subject to no major disruption, of the Australian economy or material change in market conditions, BWP affirms total distribution per security guidance for the 2026 financial year of 19.41 cents, or 4.1% above last year. And that concludes our prepared remarks, and I now hand back to the moderator to facilitate any questions where myself, Andrew Ross, BWP's Head of Property and David Hawkins, BWP's Chief Financial Officer, are available. Thank you.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you would like to cancel your request, please press Star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Cody Shield from UBS. Please go ahead.