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AEW net asset value slips as it awaits Brexit clarity

By Josh White

Date: Thursday 28 Nov 2019

LONDON (ShareCast) - (Sharecast News) - AEW UK REIT reported an unaudited net asset value of £147.55m, and of 97.36p per share in its half-year results on Thursday, compared to £149.46m and 98.61p per share at the end of March.
The London-listed real estate investment trust said its operating profit before fair value changes was £7.26m for the six months ended 30 September, up from £6.86m year-on-year, while its profit before tax was £4.16m, or 2.74p per share, falling from £11.68m and 7.71p per share.

It said the profit before tax figure included a £2.41m loss arising from changes to the fair value of its investment properties in the period, compared to a gain of £5.65m a year earlier, explaining the "significant fall" in profit before tax for the period.

Unadjusted EPRA earnings per share for the period totalled 4.37p, up from 4.1p.

Total dividends of 4p per share had been declared for the period, in line with the prior year, while the shareholder total return for the period had improved to 5.5% from 3.56% year-on-year.

The price of the company's ordinary shares on the main market in London was 93.90p as at 30 September, up from 92.80p.

As at 30 September, the company said it had drawn £50m of a £60m term credit facility with the Royal Bank of Scotland International, in line with last year, and was geared to 25.5% of the portfolio valuation, up marginally from 25.3% at the end of March.

It held cash balances totalling £2.01m at period end, down from £2.13m at the end of the financial year.

Under the terms of its loan facility, the firm said it could draw a further £1.64m up to the maximum 35% loan-to-net asset value at drawdown, compared to £2.31m on 31 March.

Looking at the portfolio, as at 30 September, AEW's property had a fair value of £196.05m across 35 properties, down slightly from the £197.61m across 35 properties reported at the end of March, with it carrying a historical cost of £197.02 m, up from £196.86m.

As at 30 September, its property portfolio had an EPRA vacancy rate of 3.96%, up from 2.99% six months earlier, while rental income generated totalled £8.78m for the period, up from £8.46m year-on-year.

The number of tenants as at period end was 92, down from 95 at the end of the last financial year.

AEW's EPRA net initial yield was 7.45% as at 30 September, compared to 7.62% six months earlier, while its weighted average unexpired lease term was 4.33 years to break and 5.82 years to expiry, compared to 4.87 years to break and 6.10 years to expiry six months prior.

"The board and the investment manager are pleased with the strong income returns delivered to shareholders to date," said chairman Mark Burton.

"Based on annualised dividend payments of 8p per share, the company delivered a dividend yield of 8.52% as at 30 September.

The company was fully invested at the start of the period and achieved returns during the period which fully covered its dividend payments."

Burton said the board expected that level of returns to continue, based on the projected income from the portfolio, which he noted had a net initial yield of 7.45% and a reversionary yield of 7.82% at period end.

"In the wider political and economic environment, the country is preparing for a general election on 12 December.

"The outcome of this should provide better clarity to the ongoing Brexit debate, for which the deadline to reach an agreement with the EU has been pushed back to 31 January 2020.

"It is hoped that the coming months will see an end to the continued uncertainty which has hampered the investment markets."

Looking forward, Mark Burton said the firm's focus remained on continuing to grow the company as part of the 12 month share-issuance programme, closing on 28 February 2020.

"Subject to future fund raising, the investment manager will focus on finding further acquisitions which will deliver an attractive return as part of a well-diversified portfolio.

"There will be a continuation vote at the annual general meeting of the company to be held in 2020 ... at which the board will propose an ordinary resolution that the company continue its business as presently constituted."

At 1114 GMT, shares in AEW UK REIT were down 1.58% at 92.91p.

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