SENS: Redefine International – interim results for the six months ended 28 February 2018

Mike Watters, CEO of Redefine International.
Mike Watters, CEO of RDI REIT.

Strong growth in underlying earnings per share:

  • Underlying earnings per share of 1.46 pence, an increase of 8.2%, well ahead of medium term growth targets.
  • Gross rental income increased 2.1% on a like-for-like basis (HY2017: increased by 3.3% like-for-like) with strong performance across the majority of the portfolio.
  • EPRA cost ratio (excluding direct vacancy costs) improved to 15.7% (HY2017: 20.7%).
  • Cost of debt increased 20bps to 3.3% following transactional activity, however remains within target range.
  • Interim dividend of 1.35 pence per share, an increase of 3.9%, fully covered by a pay-out ratio of 92.5%.

Further progress in strengthening the balance sheet:

  • EPRA NAV per share increased 2.2% to 42.3 pence.
  • Portfolio valuation up 0.3% like-for-like in local currency terms.
  • LTV continues to trend downwards, now reduced to 48.0%.
  • Total annualised accounting return (growth in NAV plus dividend paid) of 10.7% for the period.

Portfolio quality enhanced:

  • Disposal proceeds totalling £211.8 million at an average premium of 8.7% to August 2017 market values.
  • Increased stake in £104.4 million IHL hotel portfolio to 74.1% (31 August 2017: 17.2%) at an implied net initial yield of 6.9% and yield on equity of over 10%.
  • Acquisition of an 80% interest in the £161.7 million London serviced office portfolio at an implied net initial yield in excess of 6% and yield on equity of over 9%.
  • Continued reduction in overall retail exposure to 45.3% (31 August 2017: 60.0%) with UK Shopping Centres now down to 18.8% by market value.

Income-led active asset management reflected in solid operational metrics:

  • EPRA occupancy remains high at 97.3% (31 August 2017: 97.7%)
  • Long WAULT of 6.8 years to first break (8.2 years to lease expiry); this metric excludes hotels managed by RBH and the newly acquired London serviced office portfolio.
  • London serviced offices trading ahead of expectation; occupancy stable at 92.9% with average desk rates increasing marginally since acquisition.
  • RBH managed hotel portfolio trading in-line with expectations; occupancy averaging over 80% in the period and revenue per available room 2.6% above the same period last year.

Greg Clarke, Chairman, commented:

“RDI has once again demonstrated its commitment to becoming the UK’s leading income focused REIT with another strong set of results. The strategy of improving the quality of the portfolio is well on track, following the completion of a number of successful disposals and well-timed income enhancing acquisitions.”

Mike Watters, Chief Executive, commented:

“We continue to make good progress against our strategic priorities, with underlying earnings per share growth of 8.2%, which is well ahead of target. The income producing qualities of our portfolio have improved through further recycling of capital out of low growth assets into assets and sectors aligned with our strategy of delivering long term sustainable and growing income. We are also seeing an increasing opportunity for real estate owners to become high quality service providers. We are well positioned to take advantage of this trend, given our operational platforms and experience with our hotel portfolio and the more recent expansion into London serviced offices”.

“We are confident that our income-led business model, designed to deliver market leading shareholder distributions, remains attractive in a world starved of predictable and recurring income.”