Custodian REIT plc (CREI)
Custodian REIT plc: Final Results
06-Jun-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to
REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
6 June 2019
Custodian REIT plc
("Custodian REIT" or "the Company")
Final Results
Custodian REIT (LSE: CREI), the UK commercial real estate investment company, today reports
its final results for the year ended 31 March 2019.
Financial highlights and performance summary
· NAV per share total return[1],* of 5.9% (2018: 9.6%) comprising 6.1% income (2018:
6.2%) and a 0.2% capital decrease (2018: 3.4% capital increase)
· EPRA[2] earnings per share[3],* of 7.3p (2018: 6.9p)
· Basic and diluted earnings per share[4] of 6.0p (2018: 8.9p)
· Portfolio value of GBP572.7m (2018: GBP528.9m)
· Profit before tax down 27% to GBP23.6m (2018: GBP32.4m) primarily due to a GBP8.9m aggregate
property valuation decrease[5]
· GBP13.4m[6] of new equity raised at average premium of 11% to dividend adjusted NAV*
· 2020 target dividend per share* increased 1.5% to 6.65p (2019: 6.55p)
· GBP55.5m[7] invested in 11 property acquisitions, GBP2.5m capital expenditure incurred
primarily on one pre-let development and two significant refurbishments
· GBP6.4m property valuation uplift from successful asset management initiatives
· GBP5.3m property valuation decrease due to company voluntary arrangements
· GBP4.3m profit on disposal of three properties for an aggregate consideration of GBP15.4m
2019 2018 change
Return
NAV per share total return* 5.9% 9.6% -3.7%
Share price total return[8],* 4.2% 6.7% -2.5%
Dividend cover[9],* 110.4% 105.5% 4.9%
Dividends per share[10] (p) 6.55 6.45 1.5%
Capital values
NAV (GBPm) 426.6 415.2 2.7%
NAV per share* (p) 107.1 107.3 -0.2%
Share price* (p) 111.2 113.0 -1.6%
Portfolio value (GBPm) 572.7 528.9 8.3%
Market capitalisation* (GBPm) 442.8 437.1 1.3%
Premium of share price to NAV 3.8% 5.3% -1.5%
per share*
Net gearing[11],* 24.1% 21.0% 3.1%
Costs
Ongoing charges ratio[12],* 1.53% 1.37% 0.16%
("OCR")
OCR excluding direct property 1.12% 1.15% -0.03%
expenses[13],*
EPRA performance measures*
EPRA EPS (p) 7.3 6.9 5.8%
EPRA NAV per share (p) 107.1 107.3 -0.2%
EPRA net initial yield ("NIY") 6.2% 6.1% 0.1%
EPRA 'topped up' NIY 6.4% 6.5% -0.1%
EPRA vacancy rate 4.1% 3.5% 0.6%
EPRA cost ratio (including 16.1% 15.3% 0.8%
direct vacancy costs)
EPRA cost ratio (excluding 14.5% 14.6% -0.1%
direct vacancy costs)
EPRA capital expenditure (GBPm) 2.53 2.50 1.2%
EPRA like-for-like rental growth 39.1 34.1 14.7%
(GBPm)
*Alternative performance measures
The Company presents NAV per share total return, new equity raised, target dividend per
share, share price total return, dividend cover, NAV per share, share price, market
capitalisation, premium to NAV per share, net gearing, ongoing charges ratios and EPRA Best
Practice Recommendations as alternative performance measures ("APMs") to assist
stakeholders in assessing performance alongside the Company's results on a statutory basis.
APMs are among the key performance indicators used by the Board to assess the Company's
performance and are used by research analysts covering the Company. EPRA Best Practice
Recommendations have been disclosed to facilitate comparison with the Company's peers
through consistent reporting of key real estate specific performance measures. Certain
other APMs may not be directly comparable with other companies' adjusted measures, and APMs
are not intended to be a substitute for, or superior to, any IFRS measures of performance.
Supporting calculations for APMs and reconciliations between APMs and their IFRS
equivalents are set out in the Alternative performance measure workings section of the
Annual Report.
Commenting on the final results, David Hunter, Chairman of Custodian REIT, said:
"I am pleased to report that five years since its initial public offering ("IPO") Custodian
REIT is continuing to deliver on its objectives and performing for shareholders. The
Company's market capitalisation has grown from GBP132m to GBP443m through managing a portfolio
of increasingly well diversified regional properties with a gross value that has increased
from GBP95m at IPO to GBP573m. Since IPO the Company has successfully deployed new equity,
reached target net gearing and grown dividends annually. While property market dynamics may
have assisted performance through much of the last five years, we expect our focus on
income to provide a stable platform to deliver positive shareholder returns in the future.
"Custodian REIT's shares have continued to trade at a premium to NAV while many in its
direct peer group have moved to a discount. The premium undoubtedly reflects the relatively
high dividend yield coupled with a diverse, regional property strategy.
"The Company paid an interim dividend of 1.6375p per share for the quarter ended 31 March
2019 on 31 May 2019, meeting the Company's target of paying an annual dividend per share
relating to the year of 6.55p (2018: 6.45p), 110.4% covered by net recurring income".
Further information
Further information regarding the Company can be found at the Company's website
www.custodianreit.com [1] or please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Nathan Tel: +44 (0)116 240 8740
Imlach / Ian Mattioli MBE
www.custodiancapital.com [2]
Numis Securities Limited
Hugh Jonathan / Nathan Brown Tel: +44 (0)20 7260 1000
www.numiscorp.com
Camarco
Hazel Stevenson/ Emily Hall Tel: +44 (0)20 3757 4989
www.camarco.co.uk
Analyst presentation
There will be an analyst presentation to discuss the results at 10.30am today.
Those analysts wishing to take part are asked to contact Emily Hall on +44 (0) 20 3757 4996
or at emily.hall@camarco.co.uk.
Chairman's statement
I am pleased to report that five years since its initial public offering ("IPO") Custodian
REIT is continuing to deliver on its objectives and performing for shareholders. The
Company's market capitalisation has grown from GBP132m to GBP443m through managing a portfolio
of increasingly well diversified regional properties with a gross value that has increased
from GBP95m at IPO to GBP573m. Since IPO the Company has successfully deployed new equity,
reached target net gearing and grown dividends annually. While property market dynamics may
have assisted performance through much of the last five years, we expect our focus on
income to provide a stable platform to deliver positive shareholder returns in the future.
The Company has delivered strong NAV per share total returns through its first five years.
The commitment to delivering income from well-located properties predominantly let to
institutional grade tenants has underpinned returns with income accounting for 78% of NAV
per share total return over the last five years. The recent turmoil in the High Street has
underscored the importance of having a well-diversified, income focused portfolio that can
perform even when valuations are under pressure in certain sectors.
In the year ended 31 March 2019 Custodian REIT delivered a NAV per share total return of
5.9% (2018: 9.6%).
We continue to target growth to realise the potential economies of scale offered by the
Company's relatively fixed administrative cost base and the reducing scale of management
charges. These economies of scale and a continued focus on controlling costs have reduced
the ongoing charges ratio (excluding direct property expenses) from 1.41% during the
financial year ended 31 March 2015 to 1.12% in the financial year ended 31 March 2019,
demonstrating the benefits to shareholders of scale and growth.
The Company pays one of the highest fully covered dividends amongst its peer group of
listed property investment companies[14]. During a period of further growth we have
mitigated the impact from 'cash drag' following the issue of new shares by taking advantage
of the flexibility offered by the Company's revolving credit facility ("RCF"). Total funds
available under the RCF were increased from GBP35.0m to GBP45.0m in January 2019 for six months
to provide further flexibility to exploit potential acquisition opportunities. The Board
expects the RCF facility to be permanently increased to GBP45m later this year.
The Company's stable share price performance in a volatile market has allowed the Board to
issue equity at an average premium of 11% above dividend adjusted NAV, more than covering
the costs of issue and deployment.
While we have taken a cautious approach to investment through the year, I am pleased to
report that GBP58m has been invested across 11 acquisitions, the completion of one pre-let
development and two significant refurbishments, funded principally by GBP13.4m raised from
the issue of new shares and through the Company's existing debt facilities. The new
acquisitions reflected an average net initial yield[15] ("NIY") of 6.8%. The Company
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