Texton Property Fund has reported a total dividend of 36.18 cents per share for its half-year ended on the 31st of December 2018.
Whilst the company’s distributions were down 24.6% from December 2017, Texton has made significant strategic progress in clearing the way for improved performance. Its net tangible asset value increased by 25.7% during the half-year to 829.08 cents per share.
During a challenging half-year for Texton, factors which contributed towards its decreased distribution includes lower net property income because of slower than budgeted take-up of vacant space, increased net finance costs and lower realised foreign exchange gains as well as an increased tax liability stemming from a change in tax regulations in the UK.
However, the group made pleasing advances with several strategic initiatives which place it on a much better footing for the future. It has new leadership in place which retains institutional capital at both an executive and non-executive level. It has dealt with its legacy issue of the PIC put option, with shareholders voting against the repurchase of the shares.
After some one hundred days serving as Texton’s new CEO, Marius Muller comments:
“We have dealt with numerous major issues that had been holding Texton back and have made good progress in laying the groundwork for a return to positive performance. We hold ourselves accountable to Texton’s shareholders and have already taken steps to improve our communication, disclosure and engagement with all stakeholders.”
“We have assessed our portfolio of assets and, while it is generally well positioned and defensive, we believe there is an opportunity to rebalance it to optimise performance and support sustainable property income streams. We have identified tenant retention and leasing as an immediate priority. Another key focus for Texton is reducing gearing levels. There are now strategies in place for all three of these priorities.”
Muller considers Texton’s refinancing program as one of its biggest challenges and priorities and, having resolved the PIC put option, the focus is now on decreasing gearing levels. The company’s loan-to-value ration reduced from 42.7% to 40.3% during the half-year. It aims to bring this below the long-term threshold of 40%.
To boost its leasing, Texton has introduced more aggressive incentives and proactive engagement with brokers. Its property manager has also strengthened its leasing team in line with Texton’s priorities. In a weak economy, Texton’s vacancy levels shifted higher to 10.5% with a 12.6% vacancy in its South African portfolio and 3.7% in the UK portfolio.
The company’s international diversification through its UK property holdings is a core strategy: “The UK is a robust market irrespective of its short-term challenges. We intend to maximise the value of our UK property assets” says Muller.
Muller confirms that, with much of the groundwork for achieving Texton’s immediate priorities now in place, its longer-term strategy is being reviewed.
“Turning Texton around in a difficult and unsupportive macroeconomic environment is proving to be a more gradual process than we would have liked. We are, however, confident we can make the necessary changes. We have the full confidence of our board and a great team supporting us. Should all shareholders be willing to work with Texton to restore value, I have no doubt we can achieve this,” says Muller.
“Texton has set a course towards positive performance even in conditions that look likely to remain very challenging. We are committed to adding shareholder value and increasing total returns to support a re-rating of Texton’s share price.”