Fortress grows turnover on simplified capital structure
Property investment company Fortress reported a strong performance for the period to endDecember 2023, marked by robust growth in its direct retail portfolio and an “outstanding” contribution from its associate Nepi Rockcastle.
The company said in a statement on Monday that the strong performance was due to its asset management decisions, including targeted expansions, refurbishments and the strategic sale of noncore assets that have collectively enhanced the overall quality and resilience of the portfolio.
Despite the challenging local consumer market and economic climate, the company said the direct SA retail portfolio achieved a robust 6.9% like-forlike retail turnover growth.
Distributable earnings increased 19% compared with the previous interim period. Its net asset value (NAV) grew 9.1% to R36.4bn The overall portfolio vacancy stood at 3.7% based on rental, reflecting robust tenant demand.
Fortress specialises in the logistics and retail property sectors in SA and owns premium logistics assets in Central and Eastern Europe.
It also holds a stake in JSElisted Nepi Rockcastle.
Despite marginal increases in vacancies from 0.5% to 1.2%, the company’s logistics portfolio, valued at R13.8bn, maintained its strong performance with a 9.2% like-for-like net operating income growth.
The company’s retail portfolio, valued at R10.4bn, reported a robust performance amid a higher interest rate environment, driven by increased demand from essential goods retailers, including from the groceries, supermarkets, pharmaceuticals, and liquor categories, despite challenging trading conditions and load-shedding.
“Fortress looks ahead to continue to power growth for our tenants and communities that we operate in marked by enhanced operational agility, logistics and retail demand, and the ongoing need for more sustainable real estate solutions,” said CEO Steven Brown in a statement.
After the collapse of the dual share structure into a single share structure in February, Fortress has resumed paying dividends to shareholders, declaring an interim dividend of 81.44c a share.
The company intends to declare semi-annual dividends, in line with the current policy of paying out 100% of distributable earnings. Full-year revised distributable earnings are expected to fall with a guidance of R1.66bn-R1.72bn from R1.93bn, a 10.9%-14% reduction from over the previously forecast distributable earnings.
“Fortress has showcased financial resilience with a significant upturn in distributable earnings and a robust dividend declaration,” said IG senior market analyst Shaun Murison.
“Despite a strategic downsizing in the company’s stake in Nepi Rockcastle, financial indicators remain strong, reinforcing the organisation’s solid operational footing,” Murison said.
“Fortress management has exhibited adaptability and strategic foresight in navigating market challenges, including the restructuring of the shareholding in Nepi Rockcastle.”
Murison said the firm was positioned to continue its trajectory of growth, “underpinned by a solid strategy of portfolio optimisation, market-aligned developments, and a commitment to shareholder value”.
“The conservative yet optimistic forecasting for [financial year 2024] reflects a well-balanced view of potential market conditions, operationalising a forward-looking approach to sustain growth and resilience in evolving market landscapes,” Murison said.
The company’s share price gained 0.79% to R16.26, giving it a market cap of R19bn.