Burstone Group, formerly Investec Property Fund, has published its interim results for the six months ended September 2023, reporting strong operational performances.
Against the backdrop of continued uncertainty in the global economic and interest rate environment, the company successfully completed the internalisation of the business in July 2023 and consequently rebranded as the Burstone Group in September 2023.
“We have brought the different parts of the business and our people closer together under the new Burstone name. More than a name change, the Burstone rebrand is a culmination of a shared vision and shared purpose as a group of people with common passion and the exciting opportunity to leverage in-depth local knowledge to take advantage of international opportunities. We believe our collaborative approach, speed, agility, and passion for property –coupled with our on-the-ground expertise – are levers for differentiation going forward,” comments CEO, Andrew Wooler.
During the integration of its business across its South African, European, and Australian platforms, Burstone achieved strong operational performances in its SA and European portfolios. Its local portfolio remains stable and achieved 2% growth in like-for-like net property income (NPI) with its European PEL portfolio reporting an increase in like-for-like NPI of 7.9% driven by continued growth in contracted rent. Overall performance was further bolstered by cost containment initiatives.
As anticipated, the group’s results were however, adversely impacting by higher funding costs which occurred during the second half of the prior year but remained in line with its expectations with its distributable income per share declining by 5% to 51.07 cents per share (September 2022: 53.78 cents per share). Its dividend payout ratio was 95% with an interim dividend of 48.52 cents per share (September 2022: 51.09 cents per share).
Burstone maintains its previous guidance and expects to deliver distributable income per share growth of 0% to 2% in FY2024, equating to expected growth of 5% to 9% in 2H2024.
Its balance sheet remains healthy with its loan-to-value (LTV) ratio having increased marginally to 43% (March 2023: pro-forma – 42%). The group has a defined plan to decrease its loan-to-value (LTV) ratio over time to c.41% largely through further asset sales.
Its South African portfolio accounts for 44% of its asset base on a look-through basis, comprising 77 properties. While its portfolio supports a sustainable level of earnings, growth expectations remain low given the electricity crisis, industry challenges, and global macro-economic volatility and uncertainty.
The performance of its European portfolio is underpinned by a strong, defensive asset base that has capitalised on the sector dynamics consistently since acquisition. The portfolio is geographically diverse and concentrated in core Western European jurisdictions, with a strong tenant base and a varied lease expiry profile providing opportunities to drive rental income on a staggered basis, with the income derived from a wide spread of strong, household named companies.
“The Group has maintained stability across its portfolio with vacancy levels in South Africa and Europe remaining at low levels of 3.7% and 0.9%, respectively. In South Africa, 90% of space expiring has been re-let or leases have been extended; in Europe the ratio was 96%. We continue to engage proactively with clients to reduce the cost of occupation,” noted Wooler.
Burstone’s longer-term focus will be on the roll-out of a capital light fund management model, exploring value-add / core-plus opportunities, and implementing a holistic sustainability strategy that creates broader stakeholder value that is impactful. The Group’s immediate focus will be on maintaining the stability of the current portfolio, enhancing the quality of recurring earnings, maximising operational synergies, and effectively managing its capital allocation given the opportunities that are arising from the current market dislocation.
“Burstone has an underlying quality asset base and a robust balance sheet, which provide strong foundations for growth. We believe that our integrated international offering will be a key differentiator as we implement our strategic plan over the next few years.”