Custodian REIT plc: Final Results

Custodian REIT plc (CREI) 
Custodian REIT plc: Final Results 
 
23-Jun-2020 / 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. 
 
23 June 2020 
 
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 2020. 
 
Financial highlights and performance summary 
 
  · Significant impact of the COVID-19 pandemic, with a GBP12.5m (2.2% of property portfolio) 
  valuation decrease in the final quarter of the year and 70% of rent collected relating to 
  the quarter ending 30 June 2020[1],* both largely attributable to the pandemic 
 
  · NAV total return per share[2],* of 1.1% (2019: 5.9%) comprising 6.2% dividends (2019: 
  6.1%) and a 5.1% capital decrease (2019: 0.2% capital decrease) 
 
  · EPRA[3] earnings per share[4],* of 7.0p (2019: 7.3p) 
 
  · Basic and diluted earnings per share[5] of 0.5p (2019: 6.0p) 
 
  · Profit before tax down 91% to GBP2.1m (2019: GBP23.6m) primarily due to a GBP25.8m aggregate 
  property valuation decrease[6] 
 
  · GBP25.3m[7] of new equity raised at average premium of 11% to dividend adjusted NAV* 
 
  · Target dividends per share* for the first half of the year ending 31 March 2021 of no 
  less than an aggregate 1.5p (2020: 3.325p ) 
 
  · Property value of GBP559.8m (2019: GBP572.7m) subject to a 'material uncertainty' clause in 
  line with prevailing RICS guidance: 
 
  · GBP25.8m aggregate valuation decrease ( 4.7% of property portfolio value) comprising a 
  GBP6.1m property valuation uplift from successful asset management initiatives and GBP31.9m 
  of valuation decreases, primarily due to decreases in the estimated rental value ("ERV") 
  of high street retail properties, negative market sentiment for retail assets and the 
  impact of the COVID-19 pandemic 
 
  · Disposal of two properties at valuation[8] for aggregate headline consideration of 
  GBP15.7m[9] 
 
  · GBP24.6m[10] invested in eight property acquisitions 
 
  · GBP2.8m capital expenditure incurred primarily on three significant refurbishments 
 
                                  2020              2019  change 
Return 
    NAV per share total return*   1.1%              5.9%  (4.8%) 
 Share price total return[11],* (5.0%)              4.2%  (9.2%) 
           Dividend cover[12],* 104.4%            110.4%  (6.0%) 
    Dividends per share[13] (p)   6.65              6.55    1.5% 
 
Capital values 
                       NAV (GBPm)  426.7             426.6    0.0% 
             NAV per share* (p)  101.6             107.1  (5.1%) 
               Share price* (p)   99.0             111.2 (11.0%) 
  Property portfolio value (GBPm)  559.8             572.7  (2.3%) 
    Market capitalisation* (GBPm)  415.9             442.8  (6.1%) 
    (Discount)/premium of share (2.6%)              3.8%  (6.4%) 
        price to NAV per share* 
              Net gearing[14],*  22.4%             24.1%  (1.7%) 
 
                          Costs 
    Ongoing charges ratio[15],*  1.55%             1.53%    0.2% 
                        ("OCR") 
  OCR excluding direct property  1.12%             1.12%    0.0% 
                 expenses[16],* 
 
     EPRA performance measures* 
                   EPRA EPS (p)    7.0               7.3  (4.1%) 
         EPRA NAV per share (p)  101.6             107.1  (5.1%) 
 EPRA net initial yield ("NIY")   6.2%              6.2%    0.0% 
           EPRA 'topped up' NIY   6.6%              6.4%    0.2% 
              EPRA vacancy rate   4.1%              4.1%    0.0% 
     EPRA cost ratio (including  16.6%             16.1%    0.5% 
          direct vacancy costs) 
     EPRA cost ratio (excluding  14.5%             14.5%    0.0% 
          direct vacancy costs) 
  EPRA capital expenditure (GBPm)   2.80              2.53   10.7% 
      EPRA like-for-like rental   40.0              39.1    2.3% 
                    growth (GBPm) 
 
*Alternative performance measures 
 
The Company reports the following alternative performance measures ("APMs") to assist 
stakeholders in assessing performance alongside the Company's results on a statutory basis: 
quarterly rent collection, 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, discount/premium to NAV per share, net gearing, ongoing charges ratios and 
EPRA Best Practice Recommendations. 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 Note 21. 
 
Commenting on the final results, David Hunter, Chairman of Custodian REIT, said: 
 
"Until the outbreak of the COVID-19 pandemic, Custodian REIT had delivered on its 
objectives for the financial year, despite a struggling retail sector which contributed the 
majority of the property valuation decreases in the first three quarters of the financial 
 year. However, the COVID-19 pandemic is taking effect, leading to a GBP12.5m property 
valuation decrease in the final quarter of the financial year, giving a total fall for the 
  year of GBP25.8m after asset management gains of GBP6.1m. 
 
"The recent turmoil in markets has emphasised the importance of having a well-diversified, 
income focused property portfolio. In the year ended 31 March 2020 Custodian REIT delivered 
a NAV per share total return of 1.1% (2019: 5.9%) with dividends of 6.65p per share 
supporting a positive NAV total return despite the impact of the COVID-19 pandemic on 
valuations in the final quarter. 
 
"The outlook for real estate investment is likely to become clearer and potentially more 
positive as lockdown eases and most sectors of the economy have the opportunity to re-open. 
Real estate is likely to remain a key asset for investors looking for income and as rent 
collection stabilises and deferred rents are recovered, the ability to pay dividends at 
more meaningful levels will return. 
 
"Property yields are currently showing a circa 6% margin over UK 10 year gilts, which is 
the widest margin on record. In expectation of continued low gilt rates this margin is 
likely to support real estate pricing despite a recent decline in capital values. The 
combination of resilient capital values and an anticipated return to relatively high 
dividends should lend support to Custodian REIT's objective to be the REIT of choice for 
private and institutional investors seeking high and stable dividends from well-diversified 
UK real estate." 
 
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 / Ed Moore /     Tel: [phone] 
Ian Mattioli MBE 
                                    www.custodiancapital.com [2] 
 
Numis Securities Limited 
Hugh Jonathan / Nathan Brown Tel: [phone] 
                                    www.numiscorp.com 
 
Camarco 
Hazel Stevenson/ Emily Hall Tel: [phone] 
                                   www.camarco.co.uk 
 
Analyst presentation 
 
There will be an analyst presentation to discuss the results at 9.30am today. 
 
Those analysts wishing to take part are asked to register at: 
 
https://numiscorp.zoom.us/webinar/register/WN_ybM1V6rvRvijt5Rdmz1Z7Q [3] 
 
After registering, you will receive a confirmation email containing information about 
joining the webinar. 
 
If you have any questions please contact Justin Bell on [phone] or at 
[e-mail]. 
 
Chairman's statement 
 
Until the outbreak of the COVID-19 pandemic, Custodian REIT had delivered on its objectives 
for the financial year, despite a struggling retail sector which contributed the majority 
 of GBP13.3m of property valuation decreases for the first three quarters of the financial 
 year. However, the COVID-19 pandemic is taking effect, leading to a GBP12.5m property 
valuation decrease in the final quarter of the financial year, giving a total fall for the 
  year of GBP25.8m after asset management gains of GBP6.1m. 
 
The health and safety of colleagues, tenants and our wider stakeholders remains the 
Company's top priority. Our current operational focus is on managing liquidity to mitigate 
the risks associated with the uncertainty created by the global health emergency, working 
with our tenants to optimise rental income and maintaining a level of distributions to 
investors broadly linked to net rental receipts. 
 
These have been testing times which have necessitated an exceptional effort from the 
Investment Manager, both in pursuing rents and in operating remotely as a team, and I would 
like to acknowledge the positive tangible results of that. I should also thank my fellow 
Board members who have been flexible and supportive during a period which has required 
numerous formal and informal additional Board meetings. 
 
  During the year GBP25.3m was raised from the issue of new shares and GBP15.7m[17] was raised 
from property disposals. These sums funded property acquisitions and capital expenditure of 
  GBP27.4m, primarily the GBP24.6m acquisition of eight distribution units ("the Menzies 
Portfolio") through a sale and leaseback to Menzies Distribution Limited. This transaction 

(MORE TO FOLLOW) Dow Jones Newswires

June 23, 2020 02:01 ET (06:01 GMT)