Texton’s dividend falls by more than 50 percent

TEXTON Property Fund, a diverse South African Reit with assets also in the UK, saw its dividend fall by more than half with its distributable income impacted by rising operating costs, compressed profit margins, and tight cash flows in the six months to December 31.

The dividend per share fell 55.5 percent to 16.09 cents. The board, however, remained committed to distribute 75 percent of annual distributable earnings at year-end.

Distributable earnings per share fell 11.1 percent to 32.17c, versus 36.18c in December 2018.

Despite the headwinds in the property market, chief executive Marius Muller said yesterday that they had made “pleasing” operational advances, including reducing vacancies to 9 percent from 10.5 percent in the prior interim period.

The tenant retention rate increased to 90.5 percent from 86.2 percent, and positive rental reversions of 2 percent were achieved.

Vacancies in the South African portfolio fell to 10.3 percent from 10.8 percent, and of vacant space; properties held for sale accounted for 39 percent.

The remainder was mostly in the Gauteng office portfolio which, with vacancies at 9.3 percent, had nevertheless outperformed the 12.5 percent South African Property Owners Association’s vacancy rate for Gauteng offices.

New leasing deals extended the average unexpired lease term in the South Africa portfolio to 2.6 years from 2.1 years.

The net cost-to-income ratio of the local portfolio fell slightly to 25.7 percent from 26.4 percent.

A review of soft services were achieved partially by rising offset rates, taxes and municipal cost increases.

In the UK, a prolonged Brexit, and low economic growth of 1.4 percent for 2019 with property market returns being low, affected results.

Texton’s refinancing programme was being driven by non-core asset disposals, with R326.8 million of assets held for sale.

Tesco Chobe in Newcastle, UK, was sold and the proceeds used to settle £11.3m (R238.15m) of UK debt, significantly reducing financing risk.

UK asset sales were the main contributor to the 7 percent reduction in total portfolio revenue, partially offset by lower finance costs from lower debt levels, and favourable exchange rates.

Texton’s total portfolio value of R4.24 billion was 3.7 percent lower than in June.

Net asset value at 604.53c per share was down 0.6 percent in the same comparative period.

Loan-to-value ratio at 44.9 percent fell by 2.3 percent. Some R139m of South African debt was paid down.

Muller said Texton remained committed to retaining tenants and improving occupancies at properties, while reducing debt and financing risk, as well as decreasing gearing.

Texton’s wholly-owned UK portfolio was 100 percent let with an average unexpired lease term of 8.4 years.

Its biggest asset in the UK, Broad Street Mall in Reading, in which it has a 50 percent stake, reduced vacancies to 8 percent from 19 percent.

Broad Street Mall was being transformed from a pure retail mall to a mixed-use precinct with a hotel, entertainment, offices, residential and retail.

Footfall at the mall grew 7.9 percent on a 12-month basis to end February. It had increased 27 percent in January alone.

Texton shares closed 1.56 percent higher at R1.95 on the JSE yesterday.