CAPE TOWN – LONDON Stock Exchange-listed UK Reit, RDI, which has a secondary JSE listing, has reintroduced a dividend and declared a 5 pence (R1.04) payout for the year to August 31, in spite of the impact of the pandemic on earnings and valuations, and new Covid-19 restrictions.
The company made good progress on its strategy to cut exposure to retail and debt, deputy chief executive Stephen Oakenfull said yesterday. The share price leapt 8.34 percent to R19.36 on the JSE by yesterday afternoon. It later closed at R19.25.
Explaining the resumption of the dividend, he said “the company is now in a far stronger position than it was at the same time last year”. Retail exposure was down to 10.1 percent of the portfolio from 28.1 percent at the same time last year, and leverage had reduced to 32.6 percent from 42 percent.
Following a period of consolidation, the strength of the repositioned portfolio, the recovery of the operating assets and £240 million of liquidity provided strong drivers to rebuild income on a sustainable basis, he said.
Separately, chief executive Mike Watters announced that he would retire in December and Oakenfull would take over as chief executive. Oakenfull said the current environment was uncertain with new lockdown restrictions coming into force in the UK yesterday, affecting mainly stores selling non-essential goods and entertainment.
He said RDI’s serviced offices and hotel assets were severely impacted through the first lockdown in March and April, and only started recovering in July and August. “The new restrictions might set us back a month or two as far as our serviced officers and hotels are concerned,” he said.
Net operating income fell 28.1 percent to £42.2m during the year. The portfolio was valued at £1.17 billion.
Some £371.4m of largely retail disposals exchanged or completed at an average 3.5 percent discount to the last reported value.The remaining retail assets would be exited. The distribution, industrial and office portfolios now comprise 56.5 percent of the portfolio on a pro forma basis.
Cash and available facilities increased to about £240m post year end. Occupancy increased to 98.8 percent from 95.9 percent.
Like-for-like net rental income declined 23.5 percent, reflecting a reduction in income from operational assets, continued CVA (a CVA is a UK-specific statutory insolvency procedure) activity in the retail sector and a deterioration in collection rates. All properties including hotels and London serviced offices had reopened.
The London serviced office portfolio delivered a resilient performance despite the Covid-19 restrictions.
There had been signs of recovery in hotel portfolio occupancy and room rates, prior to new lockdown measures.
There had been a like-for-like valuation decline of 9.8 percent, weighted toward the second half of the financial year. The average rent collection rate was 91.9 percent of rents demanded between March and September.
“The substantial efforts that have been successfully undertaken over the past 18 months, against an extremely challenging background, have delivered a streamlined, higher quality portfolio together with a strong balance sheet. While there is work to be done in shaping the future trajectory of the portfolio, the company is well positioned for growth,” said Watters.
Strategic options were being considered for the hotel portfolio in medium-term, but a near-term exit was not expected to best benefit shareholders.