TR Property (TRY) has published its annual results for the year ended 31 March 2023, which its chairman, David Watson (pictured), has described as “a very difficult year for the property market, for property shares and for the Company”. During the period, TRY’s NAV total return was -35.5%, which is modestly worse than its benchmark’s total return of -34.0%. The share price total return was -36.2% as TYRY’s discount to NAV widened slightly, reflecting weaker investor sentiment. Watson says that, although the change in the trust’s NAV in the second half of the year was modest (first half NAV total return of -33.6% March to September 2022), the trust “experienced some very dramatic price action in the intervening six months”.
Watson also comments that the dramatic price falls and bear market rallies that have been seen during the year were largely undiscriminating between the good and the bad. Forced sellers were interested in volume not price in his view, while small caps struggled in these conditions. However, he hopes that this macro-driven environment is finally abating as investors appear increasingly interested in differentiating between individual companies’ prospects following the significant correction.
Revenue results and final dividend
TRY’s investment universe has seen a number of companies cut or suspend their dividends. Watson comments that these were, in the main, the likely suspects and it would be a surprise if many others now emerge given the economic cycle. However, he thinks that one of the core attractions of real estate investing is the potential of indexed income and he says that this is showing through and remains TRY’s focus.
Earnings per share increased by 26% from 13.69p per share to 17.22p during the year, which is an all-time high. Although company earnings did in general recover to pre-Covid-19 levels, TRY’s headline earnings were further flattered by changes in the timing of some dividend payments.
TRY has announced a final dividend of 9.85p taking the full year dividend to 15.50p, representing a 6.9% increase. In determining the dividend, the board says that it has been very sensitive to investor appetite for income but has also been conscious of the underlying income growth and the potential impact of interest and exchange rates on future earnings.
Revenue outlook
Following a record level of earnings in 2022/23, TRY’s board says that it expects to report a reduction in net income for the year to 2023/24. This is not only as a result of the non-recurrence of certain items which enhanced the current year earnings, but also because of the number of companies that have announced dividend cuts or suspensions. It notes that all companies have had to adjust to the change in the price of debt and that, for some, the impact has been immediate, while for others it will be somewhat delayed as they continue to benefit from historic fixed rates. However, it notes that index-linked rents will benefit. The medium to longer-term outlook for interest rates is difficult to predict though so it thinks it could be a while before companies feel confident about the longer-term outlook.
Net debt and currencies
Gearing at 12.3% is an almost identical figure to that at the half year, although the level of gearing has varied in response to the market volatility and as investment opportunities have occurred. Sterling weakened over the year by just over 4%, which was marginally enhancing for TRY’s income account.
Discount and share repurchases
The discount to NAV widened slightly over the year from -7.3% to -8.6%. However, the spread over the year has been much wider, swinging between close to -1% and over -10%. The average over the year under review was -5.8%, close to the 10-year average of -4.9% and an improvement on the -6.6% average since the invasion of Ukraine. No share buy-backs or issues were made during the year.