Urban Logistics posts stable results after second-half recovery

Urban Logistics REIT reported an 8.4% improvement in net rental income in its full-year results on Thursday, to £57.4m.

The FTSE 250 company said adjusted earnings per share for the 12 months ended 31 March slightly decreased to 6.89p compared to 6.93p in the prior year, while the total dividend per share remained steady at 7.60p.

Its total property return improved significantly to 4.8%, up from -5.0% in the 2023 financial year.

Additionally, the total accounting return for the period was 3.3%, a substantial recovery from the -9.9% reported in the prior year, with an average annual return of 11.4% since the company's initial public offering.

Urban Logistics said it maintained a strong balance sheet, with IFRS net assets of £758.6m, slightly down from £769.8m year-on-year.

The EPRA net tangible assets (NTA) figure per share decreased to 160.27p from 162.44p.

Its debt stood at £354m, with a weighted average cost of debt at 4.02% and 97% of the debt hedged with a weighted average maturity of 5.4 years.

The first debt refinance was scheduled for August next year, with lender negotiations already advanced.

Urban Logistics said its loan-to-value ratio was conservatively managed at 29.3%, below the target range of 30% to 40%.

The portfolio consisted of 128 mid-box urban logistics assets covering 9.7 million square feet, valued at £1,100m, indicating stable portfolio valuations with a slight like-for-like decrease of 0.3%.

Its EPRA vacancy rate improved to 5.8% from 7.4% in the 2023 period.

Over the year, the company completed 35 lease events with a rental uplift of 19%, generating an additional contracted rental income of £3m.

One further new letting in legal stages was expected to add £1m in rental income.

The gross to net rental income ratio remained high at 96.4%, and the weighted average unexpired lease term was 7.5 years.

“The two halves of the period under review were characterised by markedly different conditions,” said Richard Moffitt, chief executive officer of Urban Logistics REIT’s investment adviser.

“In the first half, uncertainty levels remained high with a lack of clarity on the likely trajectory for both interest rates and inflation.

“Towards the end of the second half of the year, confidence improved thanks to strengthening macro-economic conditions.”

Moffitt said that throughout the period, the strength of Urban Logistics' business model was evident with a stable portfolio valuation, increasing rents and low vacancy levels.

“The robust performance, both operationally and financially, positions the business well, as we expect investment flow levels into logistics to pick up in the coming 12 months.

“The key priority for the company is to drive earnings growth and build dividend cover.”

Moffitt said the firm was focussed on reducing vacancy and capturing upside at rent reviews to drive the significant reversionary potential within the portfolio, with one new letting over a vacant asset in the final stages of legals, which would provide £1.0m of annual rental income, and reduce vacancy to 4.5%.

“As market conditions continue to improve, the investment adviser believes that now is the right time to deploy additional capital, aiming to enhance earnings per share and rebalance the portfolio from core assets to asset management opportunities.”

At 0934 BST, shares in Urban Logistics REIT were up 0.05% at 122.46p.

Reporting by Josh White for Sharecast.com.