TIDMEPIC
RNS Number : 3042F
Ediston Property Inv Comp PLC
12 July 2019
Ediston Property Investment Company plc
(LEI: 213800JRL87EGX9TUI28)
Net Asset Value ("NAV") as at 30 June 2019
Ediston Property Investment Company plc (LSE: EPIC) (the
"Company") announces its unaudited NAV as at 30 June 2019.
Quarter Summary
-- Annualised dividend yield of 6.1% based on an annual dividend
per share of 5.75 pence and share price of 93.8 pence (at 30 June
2019).
-- NAV total return (including dividends) for the quarter of
0.2%, resulting in a NAV total return for the year to 30 June 2019
of 2.3%.
-- Fair Value independent valuation of the property portfolio as
at 30 June 2019 of GBP326.8 million, a decrease of 0.6% compared to
the valuation at 31 March 2019.
-- NAV per share at 30 June 2019 of 111.03 pence (31 March 2019:
112.21 pence), a decrease of 1.05%.
-- Completed lease extension with B&Q plc (B&Q) at Rhyl,
securing GBP508,644 of income per annum until June 2029.
-- EPRA vacancy rate of 3.4%.
-- Fully covered dividend, with cover of 117% for the quarter to 30 June 2019.
The small decline in the portfolio valuation and the impact on
the NAV resulted from continuing negative sentiment towards the
retail market as a whole, from which the retail warehouse
sub-sector is not immune. The Arcadia Company Voluntary Arrangement
(CVA), which is commented on in more detail below, also influenced
the NAV movement.
The negative impact on the NAV was reduced as a result of
successful asset management by the Investment Manager. Further
details can be found in the asset management activity section
below.
The dividend remains well-covered at 117% for the quarter to 30
June 2019. It is worth noting that despite the turbulence and
volatility in the retail sector the portfolio's contracted income
is GBP21.6m per annum, as it was in December 2017 when the current
portfolio was largely assembled. Over the same period, the annual
contracted rent in the retail warehouse portfolio has been
maintained at GBP16.3m. This is indicative of the resilient nature
of the Company's income.
Net Asset Value
The unaudited NAV of the Company at 30 June 2019 was GBP234.63
million, or 111.03 pence per share, a decrease of 1.05% on the
Company's NAV per share as at 31 March 2019.
Pence Per Share GBP million
NAV at 31 March 2019 112.21 237.13
---------------- ------------
Valuation of property portfolio (0.99) (2.09)
---------------- ------------
Capital expenditure (0.44) (0.93)
---------------- ------------
Income earned 2.48 5.23
---------------- ------------
Expenses & finance costs (0.79) (1.67)
---------------- ------------
Dividends paid (1.44) (3.04)
---------------- ------------
NAV at 30 June 2019 111.03 234.63
---------------- ------------
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards ("IFRS"); the
EPRA NAV is not reported separately in this update as it is the
same as the IFRS NAV.
The NAV incorporates the independent portfolio valuation as at
30 June 2019 and undistributed income for the quarter but does not
include a provision for any accrued dividend.
Dividends Paid
The Company paid a dividend of 0.4792 pence per share in each of
April, May and June 2019, resulting in a cumulative dividend
payment in the quarter of 1.4376 pence per share. The monthly
dividend rate of 0.4792 pence per share equates to an annualised
dividend of 5.75 pence per share.
The Board remains committed to paying a monthly dividend which
is covered and sustainable. It looks to grow dividends over the
longer term. The annual dividend is expected to be fully covered,
in the absence of unforeseen circumstances, with cover for the
quarter to 30 June 2019 of 117%.
Arcadia CVA
As was widely reported by the media, Arcadia completed a CVA
during the period. The Company has two units let to Arcadia group
companies, one in Hull and one in Widnes.
The Company initially voted against the CVA proposal. After
further consideration and following some improved terms, it elected
to vote in favour. As a result, the Company has had to accept a
rent reduction of GBP135,548 per annum across the two properties.
This represents 0.6% of the annual rent roll of the Company. Under
the terms of the CVA the landlord is entitled to break Arcadia's
leases and secure vacant possession of each unit, should it wish to
do so. The Investment Manager believes there are good prospects of
reletting the units to new tenants.
The CVA process continues to present difficulties to landlords
with some concern that it is one sided and is being unfairly
exploited by retailers. However, with the aforementioned break
clauses in place the Company is in a stronger position than dealing
with an administration, giving it flexibility to aggressively
manage its portfolio in the best interest of its shareholders.
Asset Management Activity
During the quarter, the Investment Manager completed a lease
extension with B&Q at Clwyd Retail Park in Rhyl. B&Q is the
anchor tenant on the park and has underscored its commitment to the
location by signing a lease extension which will expire in June
2029. B&Q will continue to pay GBP508,644 per annum and
received a 13-month rent free period to facilitate the deal.
EPRA Vacancy Rate
The EPRA vacancy rate at the period end remained low at 3.4%.
This was split between 1.75% in the retail warehouse sector and
1.65% (in one vacant floor) in the office portfolio. If vacant
units covered by rental guarantees are deducted, the portfolio
vacancy rate is 2.9%.
The Investment Manager is working on a number of initiatives to
secure and grow the Company's income and to reduce the vacancy rate
further. In the office portfolio, at St Philips Point in
Birmingham, the Company has completed the refurbishment and
commenced formal marketing of the first floor which extends to
14,208 sq. ft.
In a city which has a restricted supply of accommodation, the
high specification hybrid finish, which includes exposed services,
helps to differentiate the product from much of the competing stock
available to let in Birmingham.
Resilient Income
Despite the structural changes occurring in the retail market as
a whole, which are having an impact on the retail warehouse
sub-sector, the Company's contracted income has remained
resilient.
The Company has not been immune to tenant CVAs, with 10 units
being affected. However, only one unit has become vacant,
representing just 0.4% of the Company's annual contracted rent.
Where rent reductions have been imposed or opportunities for the
Company to break the lease have been inserted into leases via the
CVA process, the Investment Manager has been proactive in securing
the best outcome for the Company. It has either renegotiated lease
terms with occupiers or has secured vacant possession of the unit
to re-let them to better quality tenants.
The Investment Manager has been able to do this as the Company
has assets in locations where tenants trade well and rents are
affordable; the average rent for the Company's retail warehouse
units is GBP15.50 per sq. ft., which provides a good base for lease
negotiations.
Market Outlook
As reported last quarter, political uncertainty continues to act
as a brake on investment activity, as investors seek clarity on the
key issues before making investment decisions. Investment volumes
for the year to date are down on the same period of last year.
This period of inertia could result in further valuation
declines, but the extent of these will vary not just by sector, but
also by the fundamentals of each asset. Intensive asset management
will help to moderate any valuation downside, will minimise vacancy
and will secure income for the Company.
Portfolio Composition
Sector
Sector Exposure
(%)
Retail warehouse 63.9
---------
Supermarket 8.1
---------
Office 24.2
---------
Other commercial 3.0
---------
Development 0.8
---------
Geography
The portfolio is diversified across the regional markets and has
no exposure to Central London assets.
Sector Exposure
(%)
Wales 30.1
---------
North East 15.6
---------
North West 14.5
---------
West Midlands 12.4
---------
Yorkshire 11.5
---------
Scotland 9.7
---------
East Midlands 4.1
---------
South West 2.1
---------
Post Quarter End Activity - Sale
Post quarter end, the Company has completed the sale of Knotty
Ash, Liverpool, a leisure unit let to Mecca Bingo Limited until
September 2022. The sale price was GBP2,915,000, which is in line
with the 30 June 2019 valuation. Due to confidentiality the Company
is unable to disclose who the purchaser is.
The lot size was well below the average for the Company and the
Investment Manager believes it can reinvest the sale proceeds in a
way which is value accretive for investors, either by carrying out
asset management on existing properties or acquiring a new building
in line with the preferred lot size of the Company.
The sale completed after the quarter end and it is included in
the 30 June 2019 valuation used to calculate the NAV.
Broker Novation
The Company has novated its brokership agreement with Canaccord
Genuity Limited to Investec Bank plc, following the Canaccord
Investment Companies team move to Investec on a fully agreed basis.
Investec will act as the Company's sole broker. The Company is
pleased to continue its successful association with the same
broking team that brought EPIC to the market nearly five years
ago.
William Hill, Chairman, commented:
"The second quarter results have shown once again the resilience
of the Company's portfolio to the headwinds in the wider retail
sector. An attractive dividend yield of just over 6%, that is
covered and secured on well let assets at market rents, is a strong
foundation on which to build."
Forthcoming Events
The next scheduled independent quarterly valuation of the
property portfolio will be conducted by Knight Frank LLP as at 30
September 2019 with the unaudited NAV per share at that date
expected to be announced in October 2019.
The Company has shareholder approval for 'tap issuance' for up
to approximately 21 million shares, if issuance is appropriate.
The Company intends to publish shortly a factsheet which will be
made available on the Company's website at
www.ediston-reit.com.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via Regulatory Information
Service, this inside information is now considered to be in the
public domain.
Enquiries
Will Barnett - Investec Bank plc 0207 597 5873
Calum Bruce - Ediston Properties Limited 0131 225 5599
Colin Murphy - Maitland Administration Services (Scotland)
Limited 0131 550 3766
Ben Robinson - Kaso Legg Communications 0203 137 7821
Stephanie Ross - Kaso Legg Communications 0203 137 7784
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END
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