Management Discussion & Analysis FORWARD TOGETHER 10 BUSINESS REVIEW In 1H2023, ESR delivered resilient financial and operational results against a challenging macroeconomic backdrop. The Group continues to grow its Total AUM1, 2 which increased 9% year-on-year (“YOY”) to US$147 billion, propelled by 13% growth in New Economy AUM1,2 to US$69 billion. Notably, the Group’s Fund Management EBITDA grew by 14% to US$328.7 million with a record-high Fund Management EBITDA margin of 82% (up from 78% in 1H2022) supported by higher fee revenue, disciplined cost management and broader economies of scale. Excluding the impact of promotes, Fund Management EBITDA was up by 19% year-on-year. Most importantly, the Group continues to successfully execute on its asset-light transformation as evidenced in the growth of its fund management EBITDA, which was up 14% YOY and now represents approximately 55% of its total segment EBITDA (compared to less than 25% at the time of the IPO). Given that the Group reports in US dollars, FX translation continues to experience headwinds with sustained weakness in the Japanese Yen, Chinese Renminbi and other key Asian currencies. Total EBITDA and PATMI were down YOY mainly driven by lower fair value gains in the New Economy Investment and Development segments and the absence of one-off income and gains in 1H2022 as several of the contracted capital recycling events are expected to close in the second half of the year. Additionally, PATMI was impacted by higher interest expense as a result of increase in base rates. Focussed on delivering sustainable value to shareholders In line with ESR’s goal of a sustainable dividend policy established in 1H2022, the Board recommended the declaration of the third interim dividend of HK$12.5 cents per share (approximately US$1.6 cents per share) (which implies a 2.2%3 yield) for the financial year ending 31 December 2023, amounting to approximately US$70 million which will be paid to Shareholders on 29 September 2023. In addition, share repurchases totalled US$71.3 million (or 1% of market capitalisation), translating to a Net Asset Value uplift of US$0.02 per share. Notes: 1. Based on FX rates as at 30 June 2023 2. Includes the reported AUM of the Associates and assumed the value of the uncalled capital commitments in the private funds on a levered basis 3. Based on closing share price of HK$11.50 on 22 August 2023; on an annualised basis 4. Fee-related AUM excludes AUM from Associates and levered uncalled capital Double-digit growth in fund management earnings and higher margins ESR’s Fund Management segment continued to record strong performance given the deep support from its capital partners. Fee-related AUM1,4 grew 10% YOY to US$78 billion. Fund Management EBITDA increased by 14% to US$328.7 million, reflecting higher recurring fee revenue from growth in fee generating AUM, development starts, promotes and disciplined cost management. The Group continues to see strong capital flows from global institutional investors who are seeking to strategically rebalance their portfolios into New Economy sectors. The Group raised US$2.0 billion (approximately 80% is New Economy-focussed) through 15 new or upsized funds and mandates in the year-to-date. The Group remains well-positioned to achieve an acceleration in fundraising over the next six months as rates start to stabilise. Key capital raising commitments in 1H2023 included a further upsize of US$300 million for the ESR Data Centre Fund (ESR DC Fund 1), seeded by eight projects comprising 560MW of development projects and a sizeable pipeline of additional projects. ESR also entered into a strategic partnership with Indonesia Investment Authority and MC Urban Development Indonesia for development projects in Indonesia. The Group has US$19.3 billion of dry powder capital to deploy into new investments of which two thirds is in New Economy.
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