Tritax EuroBox continues strategic revival in challenging market

Tritax EuroBox reported a fall in EPRA net tangible assets (NTA) in half year results, as the impact of sector-wide outward yield shift continues.

The company’s portfolio valuation fell 2.9% on a like-for-like basis to €1,464.8m, contributing to a 5.9% drop in EPRA NTA to €0.96.

Adjusted earnings per share was down 3.0% to 2.62 euro cents, primarily due to disposals of two assets in the period. Crucially, earnings still covered its dividend for the period of 2.50 euro cents.

Highlights

• IFRS rental income was €35.9m, up 10.1%, reflecting rent indexations, asset management activity and conversion of rental guarantees into income partly offset by the disposals.
• Annualised rental income of €74.3m, down 2.6%, primarily due to the sales programme. Like-for-like rental decline of 0.3% over six months, with income growth offset by lease and rental guarantee expiries.
• Portfolio rental reversion of 21.3% or €15.9m, reflecting a like-for-like increase in portfolio estimated rental value (ERV) of 4.0%.
• 97% of leases subject to annual rental increases, with a WAULT to expiry of 9.5 years and 82% linked to inflation.
• Decrease in EPRA vacancy rate to 3.9% (from 5.5%) reflecting new lettings in Italy, Sweden and Poland (totalling €1.6m of annual rent). Post period end short-term letting in Poland reduces this to 3.1%.
• Adjusted EPRA cost ratio of 24.1% (H1 23: 25.6%), in line with the target range of 20-25%.
• Asset sales in Bochum and Malmö for €46.8m and €28.3m respectively, and post period end in Gothenburg for €33.5m. The disposal programme has now reached €173m, with overall sales in line with book value.

Balance sheet

• 100% of drawn debt with fixed rates, with an average cost of debt of 1.43%. €250.0m of undrawn debt facilities as at period end.
• Three-year weighted maturity, with earliest refinancing of drawn debt not required until Q2 2026.
• Fitch investment grade rating re-affirmed and outlook upgraded to Stable.
• Loan to value (LTV) ratio of 44.5% – taking into account the post period end disposal at Gothenburg, the pro-forma LTV decreases to 43.3%.
• Covenant headroom with LTV of 44.5%, interest cover of 4.8x and gearing of 86.1%, versus covenants of 65%, 1.5x and 150.0% respectively.

Robert Orr, chairman, commented:

“Over the past six months, we have continued to build on the good progress made on delivering the strategic priorities we outlined 18 months ago. A solid operational performance is reflected in the cost ratio within our target range, the dividend remaining fully covered, and the further advancement of our planned disposal programme that continues to lower balance sheet leverage.

“Asset sales have now reached €173 million, and we expect to complete the disposal programme and move our debt metrics towards target levels by the end of 2024.  In total, these transactions have been completed broadly in line with book values, demonstrating the attractiveness of our portfolio in what has been a challenging period in investment markets. Reflecting this uncertain market backdrop, investment yields have continued to soften leading to our portfolio valuation declining marginally over the period.

“We remain confident our high-quality portfolio and customer base continues to place the Company in a strong position to benefit from the supportive structural drivers and market dynamics in the European logistics sector. However, despite the progress with our strategic priorities and well-positioned portfolio, the Board remains acutely aware of the significant share price discount to NAV. The Board is in regular dialogue with the Manager and the Board’s advisers about how to address this issue, and there is a clear alignment and focus to deliver value for all shareholders in an effective and efficient manner.”