Redefine ends year in line with guidance, lowers dividend

Income-focussed real estate investment trust Redefine International reported underlying earnings per share of 2.75p in its final results for the year to 31 August on Thursday, which was in line with guidance.

The FTSE 250 firm said gross rental income increased 3.7% on a like-for-like basis, compared to 1.0% growth in 2016, while its dividend was fully covered with a payout ratio of 94.5%.

Its portfolio valuation increased 3.0% on a like-for-like basis during the year, slightly below the 3.4% improvement seen in 2016, while its cost of debt reduced to 3.1% from 3.4%.

Redefine’s loan-to-value ratio reduced to 50.0%, including post year end transactions, from 53.4% a year ago.

The company’s EPRA net asset value per share increased 3.5% to 41.4p.

Looking at its income statement, EPRA earnings rose to £50.9m from £44.1m, while re-based underlying earnings were ahead to £49.8m from £46.3m in the prior year.

The board declared a dividend per share of 2.6p, down from 3.2p in 2016.

On the balance sheet, Redefine’s portfolio valuation - including its share of joint ventures - was £1.539bn, up from £1.529bn.

“Redefine International has delivered another solid performance for its investors,” said chairman Greg Clarke.

“Following the capital markets day earlier this year, the company outlined clear and measurable medium-term targets and has demonstrated clear conviction in executing these throughout the year.

“The continued focus on improving the portfolio's quality is well on track, following the completion of a number of successful strategic disposals and income enhancing investments, whilst progress in strengthening the capital structure leaves the business well positioned to offer investors security in an uncertain economic climate.”

On the operational front, Redefine said EPRA occupancy remained high at 97.7% - in line with where it was at the end of the 2016 year - while it made disposals of £148.2m during the year at a 12.2% premium to book value.

Leases subject to indexation increased to 38.9% from 34.7%, and the firm reported a weighted average unexpired lease term of 7.4 years to first break and 8.5 years to lease expiry.

It completed 235 lease events during the year, totalling £17.3m - a 3.9% improvement on passing rent and up 0.7% on estimated recovery value.

It highlighted an agreement for lease with TK Maxx at Derby for a new 22,000 square foot unit, adding that its office vacancy reduced to 4.2% following “a number” of successful lettings, from 6.9% at the end of the 2016 financial year.

Since year-end, a scheme of arrangement was approved to increase the group's interest in IHL, Redefine reported.

“At our capital markets day earlier this year, we outlined our strategic priorities to put the company on track to becoming the UK's leading income focused REIT,” commented chief executive Mike Watters.

“I'm pleased to report tangible progress across all areas which enables us to present a higher quality portfolio and stronger balance sheet.”

Watters noted that, in line with guidance, 2017 saw the dividend re-based to align more closely to operational cash flow.

“We firmly believe this was the right thing to do and continue to deliver one of the highest yields on NAV in the industry.

“With a growing global appetite for predictable income returns, we believe our income-led business model, designed to deliver market leading shareholder distributions, remains extremely attractive and we look to the future with confidence.”