RDI REIT cuts cost ratio to boost earnings – RDI REIT has announced results for the year ended 31 August 2018. Highlights include:
- EPRA NAV per share increased 3.4% to 42.8 pence
- Underlying earnings per share of 2.84 pence, an increase of 3.3%
- Net rental income increased 2.1% on a like-for-like basis
- EPRA cost ratio (excluding direct vacancy costs) improved to 15.6% (31 August 2017: 17.2%)
- Total dividend of 2.70 pence per share, an increase of 3.8%, fully covered
- Total return (growth in NAV plus dividends paid) of 9.8%
Portfolio quality enhanced through significant recycling activity
- Disposal proceeds totalling GBP255.7 million at an average premium of 8.9% to book value
- Increased stake in GBP104.4 million IHL hotel portfolio to 74.1% (31 August 2017: 17.2%) at an implied net initial yield of 6.9% and yield on equity of over 10%
- Acquisition of an 80% interest in the GBP161.7 million London Serviced Office (“LSO”) portfolio at an implied net initial yield of over 6% and yield on equity of over 9%
- Increased exposure to the distribution and industrial sector post period end with a GBP26.3 million acquisition of Southwood Business Park, Farnborough and a GBP26.0 million forward funding of Link 9 at Bicester
Further progress in strengthening the balance sheet
- Portfolio valuation increased by 0.6% in local currency terms despite challenging market conditions
- LTV reduced by 380bps to 46.2% (31 August 2017 pro-forma: 50.0%)
Active asset management
- EPRA occupancy remains high at 97.1% (31 August 2017: 97.7%)
- Long WAULT of 7.0 years to first break and 8.4 years to lease expiry (excludes hotels managed by RBH and the newly acquired London serviced office portfolio)
- London serviced offices trading in line with expectations; occupancy remains high at 92.2%, EBITDA per sqft increased by 0.3% since acquisition and EBITDA conversion remained at 63.4%
- Primark took occupation of the 7,000 sqm (75,000 sqft) unit in Ingolstadt and commenced trading in August 2018
Gavin Tipper, chairman, commented: “Today’s results are further evidence of the steps the business is taking in its aim to become the UK’s leading income focused REIT. The team continues to deliver against our medium term targets and has made significant progress in all aspects of the business over the last year. This constitutes a particularly strong set of results given the structural changes in the property sector and uncertain economic and political backdrop. We look to the future with confidence.”
Mike Watters, chief executive, commented: “I am very pleased with the progress against our strategic priorities contained in these results. We continue to deliver one of the highest yields on net asset value in the sector, with our performance underpinned by a strong balance sheet and a significantly improved portfolio. The investments we have made over the last three years have improved the quality of our income and the defensive nature of our portfolio, positioning us well for the future. The structural changes in occupier demand that are placing a far higher emphasis on operational platforms and services have been addressed. This is an area we have already made great strides in through our latest major acquisitions of limited service hotels and our expansion into London serviced offices. Security of our operational income is supported by our best in class strategic partnerships with RBH and Office Space in Town. The year ahead will no doubt bring its own set of challenges. With this in mind, we are placing more emphasis on maintaining liquidity and lower leverage in order to enable us to continue delivering long term sustainable and growing income for our shareholders.”
RDI : RDI REIT cuts cost ratio to boost earnings