Following successful share placements to raise £16.8-million of new capital to support the recent €189-million acquisition of three prime German shopping centres, as well as a further placement to fund the settlement of its debt with UK insurer Aviva, London-listed property group Redefine International has pushed it market capitalisation to £500-million.
The income-focused company, which finalised its secondary listing on the JSE on Monday, reported in its audited results for the year ended August 31, that “positive progress” was made in restructuring the balance sheet post year-end, helping drive full-year distributable earnings up 18% to £30.1-million.
“The reduction in servicing the group’s indebtedness has meant the company has increased its earnings available for distribution from its rationalised and higher quality investment portfolio,” chairperson Greg Clarke commented on Tuesday.
Redefine declared basic earnings a share of 6.66p for the year, returning to profit after posting a loss of 24.16p apiece in 2012.
The company produced an after-tax profit attributable to equity holders of £61.5-million for the year, which showed an encouraging, albeit gradual, improvement in the UK and European property markets.
As a result, earnings available for distribution for the year were 3.11p a share, which Redefine considered a “strong result”, despite this contracting by 28.9% from the 4.4p a share declared the prior year.
“This is largely the result of the weaker Australian dollar, which reduced earnings by about 0.05p,” said Clarke, referencing the group’s 13% shareholding in Australia-listed commercial real estate company Cromwell.
Meanwhile, the “solid” performance of the group’s property portfolio was underpinned by signs of improving investor and occupier sentiment, with overall occupancy increasing from 95.9% in February 2013 to 97.3% on August 31.
Valuations generally stabilised or rose in the second half of the year, reflecting a stronger economic outlook and more positive investment market conditions, with the UK retail portfolio performing in line with national trends.
The holding of government-let offices was successfully reduced to 11.6% over the period.
“The remaining portfolio now provides a combination of high-yielding assets let to tenants with strong covenants and opportunities to recycle capital from redevelopment assets into income-producing investments,” Clarke noted.
The European portfolio provided a “resilient” income contribution of £16.2-million, the largest contributor to the £62.8-million in total yearly income, backed by strong covenants and inflation-linked leases.
The acquisition of the German shopping centres was expected to provide a stronger asset base from which to drive rental growth in this portfolio.
The hotel portfolio performed well during a period that was expected to be weak after last year’s Olympic Games, in London, contributing £11.1-million in rental income for the twelve months.
In the Australian market, Cromwell, which held a £1.1-billion market capitalisation, produced a record operating profit of A$102.4-million and increased its distribution by 3.67% to 7.25c a share. However, this was largely offset by a weaker Australian dollar against the pound.
Meanwhile, advancing its strategy to rationalise its shareholding structure, Redefine reported that the next, and final, step of the process would be the proposed conversion to a UK Real Estate Investment Trust (REIT) and the internalisation of management.
While remaining subject to regulatory and shareholder approval, this was expected to be implemented in December.
As a result of the restructuring efforts, Clarke said the group was now on a substantially firmer footing, which had enabled it to make the recently announced accretive investments.
He added that the business model would continue to be focused around a diversified portfolio allowing capital to be recycled into growth areas.
“The economic outlook for the year ahead is increasingly positive and we firmly believe that, with an internalised management and industry benchmarked REIT structure, the company is well positioned to deliver strong returns to shareholders,” he said