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Schroder Real Estate results reflect Berxit

Schroder Real Estate says its NAV fell from 62.2p to 61.1p over the six months ended 30 September 2016. They are also reporting a 10% increase in underlying EPRA earnings per share to 1.3p. Based on the two 0.62p dividends they declared for the period, dividend cover is 106%. The NAV total return for the period was 0.2%.

The underlying portfolio value, including the joint venture properties in Manchester and Bloomsbury, barely changed.  After adjusting for GBP5.5 million of capital expenditure, which includes GBP0.4 million for the joint venture properties, the like for like portfolio movement contributed -1.2 pps to the NAV. Post tax net revenue over the period was 1.3 pps.

They say that the impact of the EU referendum decision resulted in a 3.5% decline for average UK real estate over the period.  Rental value growth also slowed, with a 0.6% increase over the quarter to June falling to 0.2% over the quarter to September.

The industrial sector outperformed with a total return of 0.8% compared with offices and retail at -2.7% and -1.6% respectively.  This was due to healthy occupational demand, particularly as a result of online retail, driving rental growth of 1.6%.  The Company’s industrial estates in Milton Keynes and Leeds continue to perform strongly and contributed 0.4% to the 3.0% relative outperformance over the period.

In contrast with recent years the office sector underperformed. This was caused by lower levels of rental growth and weakening sentiment following the EU referendum result, resulting in an average capital value decline of -4.0%.  The City of London was the worst performing sub-sector over the period, with values falling -4.8%.  We therefore expect the relative performance of the underlying portfolio to benefit from having no exposure to the City of London, Canary Wharf or European financial institutions as tenants.

The retail sector was the worst performing due to online competition and high vacancy rates.  This resulted in the weakest rental growth of 0.4% and capital values falling -4.2%.

SREI : Schroder Real Estate results reflect Berxit

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