Kennedy Wilson makes progress with portfolio as net profit falls
Kennedy Wilson Europe Real Estate
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13:16 20/10/17
Kennedy Wilson Europe Real Estate saw its net operating income rise slightly in its first half, it reported on Friday, by 1.3% to £79.7m, although its net profit after tax fell 30.2% to £54.9m.
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The FTSE 250 firm said its adjusted earnings were ahead 7.5% at £38.9m in the six months to 30 June, with adjusted earnings per share improving 14.9% to 30.6p.
Dividends per share paid were precisely in line with last year at 24p, and the board declared a quarterly dividend of 12p, also exactly the same as at the same time in 2016.
Kennedy Wilson’s adjusted net asset value and IFRS net asset value were both up 2.1% at £1.566bn and £1.568bn respectively.
Its adjusted net asset value per share was 1,241.4p, while its IFRS net asset value per share was 1,243p - both up 2.1%.
The company’s valuation movement for the period was a £16.6m uplift, much improved on the £55.9m decrease in the first half of 2016, and it made a small reduction in its net debt to £1.234bn from £1.235bn.
According to the board, Kennedy Wilson’s loan-to-value ratio was 42.4%, down 0.4 percentage points on the same time 12 months ago.
“KWE has delivered another strong set of results over the past six months, having carefully navigated the market with solid leasing progress and capitalised on opportunistic disposals,” said chairman Charlotte Valeur.
“The performance is once again underpinned by smart asset management to generate stable cash flows.
“As such, the board is pleased to announce a further quarterly interim dividend of 12.0 pence per share to be paid in the third quarter."
On the operational front, the company’s portfolio was valued at £2.91bn, generating an annualised topped-up net operating income of £160m across 207 properties.
The board said the company’s “strong asset management momentum” had continued, as it completed 76 commercial lease transactions across 1.1 million square feet, delivering an uplift of 13.1% over previous passing rent and reportedly outperforming the valuers’ ERVs by 5.2%.
It said its secure income was underpinned by long weighted average unexpired lease terms of 7.4 years, or 9.3 years to expiry, with a “solid” portfolio occupancy of 93.6%.
Kennedy Wilson’s non-core disposal programme had gained “further traction”, the board added, delivering £57.6m of sales across 15 properties at a spread of 219 basis points over entry yield on cost.
The company said it achieved a premium to book value of 6.1% and generated a return on cost of 29.5% there.
During the period, the practical completion at Pioneer Point in Ilford saw the launch of the company’s professionally-managed PRS operation in London, with 135 brand new units to let in the south tower.
It also made a 73,000 square foot agreement for lease with online fashion retailer ASOS for a new 10-year lease, which was the largest letting of the year in the South East office market.
“The portfolio has benefitted from big leasing wins in the first half of the year, with the team delivering £4.1m of incremental annualised income, already beating all of 2016,” said president and CEO Mary Ricks.
“We continue to deploy accretive capital expenditure through a combination of value-enhancing refurbishments and more material redevelopment opportunities to provide a pipeline of value-add initiatives to grow NOI.”
Ricks said liquidity levels remained “high across the investment market” for the right product, which had “further enhanced” Kennedy Wilson’s non-core disposal programme.
“Including post period-end sales exchanged, we are firmly on track to meet our £150m disposal target announced in February.
“I am particularly pleased with the team's discipline in assessing disposal opportunities to ensure we meet our target returns - with a notable £636.7m of sales since 2015, generating an average premium to book value of 7.0% and a return on cost of 30%.”