Investec lifts earnings available for distribution 3%
INVESTEC Property Fund lifted earnings available for distribution 3 percent to 146.6 cents a share in the year to March 31, in line with guidance as the company spent R4.3 billion to expand offshore.
There was significant offshore transaction activity in the year to March. The balance sheet was now 35 percent offshore, underpinned by pan-European logistics.
An 11.5 percent increase in net asset value was driven mainly by the revaluation of the strongly performing Pan European Logistics (PEL) portfolio.
Joint chief executive Darryl Mayers said yesterday that the logistics portfolio would benefit from fast growth in e-commerce – for example, five times more warehousing space was required for e-commerce than in the High Street retail store environment – while the portfolio had also benefited in the short term from rising demand for storage.
The South African portfolio, which holds 65 percent of group assets, saw net property income (NPI) growth of 0.9 percent. The PEL platform reported 9 percent like-for-like NPI growth. The UK fund reported a stable 3.1 percent like-for-like NPI growth.
There had been strong cash collection during the international lockdowns, and Mayers said they were well positioned to weather the uncertain environment. The dividend declaration was deferred due to the uncertainty and to preserve cash. The share price was 9.3 percent lower at R7.89 on the JSE yesterday afternoon, before closing at 7.80.
“We have to be brutal about this. It is too soon to tell how 2021 is going to turn out, although there are positive glimmers of hope,” said Mayers. More than 70 percent of collections had been received for April and May, which he described as a “remarkable achievement given the circumstances”.
Joint chief executive Andrew Wooler said IF’s balance sheet was also underpinned with a “robust” tenant base, with 88 percent of tenants graded as investment grade or better, which improved the groups defensiveness in the face of all the uncertainty.
Retail, which had been hardest hit by the pandemic, represented only 25 percent of IPF’s balance sheet.
Locally, 83 percent of the retail tenant base were national retailers. In the UK, where the portfolio is 66 percent weighted towards retail, more than 50 percent was underpinned by large national supermarkets.
Mayers said the expansion of its European platform in the past year was to deliver on a target of at least 20 percent offshore exposure, and to extend the group’s diversification into the logistics sector. Strong offshore performance had supported weak domestic returns in the past year, he said.
“Operationally, the benefits of our diversification strategy are coming to the fore with the economies of Europe, UK and Australia showing signs of opening up,” said Wooler.
IPF’s gearing was at 47.5 percent, a temporary increase from September 2019 due to the PEL and Belgian investments in the second half of the 2020 year.
This was expected to fall to around 34 percent post a “de-gearing flightpath”, which was well under way. Degearing would be through refinancing the offshore business, realisation of some R900 million from local assets already sold, and the release of about another R900m to South Africa through the inclusion of a Belgium asset into the logistics platform.
The IPF had R1.5bn of available cash – including guarantees received on asset sales, pending transfer – at year end.
In the South African portfolio, an increase in business failures contributed to a constrained net property income growth, as did longer void periods and negative rental reversions.
IPF acquired an additional 28 percent interest in the UK Fund during the year, increasing its ownership to 38 percent.