Raven Russia battens down the hatches

Raven Russia has announced results for the year that ended on 31 December 2014. Over the period the company’s fully diluted, adjusted net asset per share fell to 106cents from 126cents. The proposed final distribution, equivalent to 3.5 pence per share, makes a total of 6 pence per share for 2014, a 20% increase on 2013. They intend to distribute this by way of a tender offer buyback of 1 in every 14 ordinary shares at 48 pence per share.

Valuations of investment property and property under construction valuations have decreased by $145m and the US Dollar equivalent value of the assets they hold denominated in Roubles fell by $45m. However, the investment property portfolio was virtually fully let throughout the year and this helped boost underlying earnings from $60m to $67m.

The statement points out that the company’s weighted average term to debt maturity is now 4.8 years, the weighted average lease term is 4.2 years and, as of 9 March, they have $247m of free cash, the majority of which is held in their Guernsey holding companies. They were also able to refinance $275m of debt during the year, reducing the overall cost of debt from 7.2% to 7.0%.  Since the year end, they have drawn a further $66m on existing facilities.

They say the portfolio of 1.5m sqm is 94% let and securely financed. The problem is that some of their tenants are suffering given the state of the Russian economy. Raven Russia say they may allow some of them to switch to paying Rouble rather than US dollar rents but only if Raven is protected by contractual terms, including lease term, indexation and covenants.

All speculative development has ceased (they are sitting on 267ha of development land), acquisition plans have been put on hold and The Board say that the dividend will most likely be maintained at its current level rather than being gradually increased over time as they had hoped. They say the good news is that the market for warehousing and distribution is still undersupplied even in the current environment. 140,000 sqm of space, currently generating $17m of revenue (9% of the total) will experience lease expiry in 2015. All eyes will be on how they manage this situation – a further 23% comes up for renewal in 2016. ERVs have fell by $10-$15 per sqm over the second half of 2014. In Moscow they have 80,000 sqm of vacant space that has just been completed. Raven say, within their tenant base, the economic situation has probably hit third party distribution businesses hardest but many of these are large multi-nationals such as DHL and Kuhne & Nagel.

RUS : Raven Russia battens down the hatches