Unaudited Quarterly Net Asset Value & Operational Update
NextEnergy Solar Fund, a leading specialist investor in solar energy and energy storage, announces its unaudited Q3 Net Asset Value (“NAV”) and operational update for the period ended 31 December 2023, alongside an update to its first Standalone Energy Storage asset (“Camilla”) and its Revolving Credit Facilities (“RCF”).
Key Highlights
Financial:
· NAV per ordinary share of 107.7p (30 September 2023: 108.3p).
· Ordinary shareholders’ NAV of £636.4m (30 September 2023: £640m).
· Total gearing (including preference shares) of 45.7% (30 September 2023: 46.4%).
· Financial debt gearing (excluding preference shares) of 28.8% (30 September 2023: 29.8%).
· Weighted average cost of capital of 6.4% (30 September 2023: 6.3%).
· Weighted average discount rate unchanged at 8.0% (30 September 2023: 8.0%).
Dividend:
· Total dividends declared of 6.26p per ordinary share for the nine months ended 31 December 2023 (31 December 2022: 5.64p).
· On track to achieve target dividend of 8.35p per ordinary share for the year ending 31 March 2024.
· Forecasted target dividend cover remains c.1.3x for the year ending 31 March 2024.
· Total dividends declared since IPO of £333m or 65.7p per share.
Portfolio:
· 100 operating solar assets (30 September 2023: 100).
· Total installed capacity of 933MW1 (30 September 2023: 933MW1).
· Remaining weighted asset life of 26.1 years (30 September 2023: 26.4 years).
Rising interest rates and volatile power prices have hurt clean energy funds but annual results from The Renewables Infrastructure Group yesterday demonstrate their sell-off has gone too far and the shares look attractive.
Managed by InfraRed Capital Partners, TRIG’s generating capacity of over 2.8 gigawatts (GW) can power 1.9 million homes and avoid 2.3 million tonnes of carbon emissions a year. This makes it appealing for investors worried about climate change, although being green hasn’t been easy in the past two years.
TRIG’s market value has fallen to £2.5bn as the shares have tumbled to 101.6p from a peak of 145p in September 2022 when energy prices soared after Russia’s invasion of Ukraine.
At its height TRIG stood at a 9pc premium over net asset value (NAV) but the shares have de-rated to a 20pc below NAV of 127.7p as investors have turned to UK government bonds, or gilts, for reliable income.
Buy this renewable fund’s clean and well-covered 7pc dividend
InfraRed’s Richard Crawford and Minesh Shah and TRIG’s operation managers at Renewable Energy Systems (RES) had to work hard to deal with rising finance costs, technical challenges and lower-than-expected wind generation.
Yet despite the difficulties, which knocked 6.9p off NAV per share and saw earnings drop £67m, or 10pc, to £610m, TRIG’s quarterly dividends rose 5pc to 7.18p per share, comfortably covered 1.6 times by revenues.
TRIG lifted this year’s dividend target by 4pc – the rate of inflation it sees across its markets – to 7.47p per share. That puts the shares on a 7.4pc yield, which is good against long-term gilt yields of 4.6pc but in line with its 11 pee
Power prices are expected to fall as Europe ramps up gas storage in response to the threat from Russia and weak economic growth reduces demand, so it was reassuring to see over half of TRIG’s forecast revenues for the next 10 years are linked to inflation.
There was good news on borrowing, with TRIG’s expensive, floating rate overdraft set to shrink from £364m to £150m this year as the managers sell assets to generate cash. Encouragingly, the preliminary offers TRIG has received are either at or above their latest valuation, which suggests the current discount is too wide.
TRIG isn’t just an income fund. It invests for growth and this month bought battery storage developer Fig Power for £20m giving it a 400MW pipeline of projects to either build or sell on.
Encouragingly, TRIG says it can fund its entire 1GW development pipeline from cash without raising money from shareholders.
There was disappointing news with Crawford, the lead fund manager since flotation in 2013, announcing his retirement. Shah, his deputy for the past four years, will take charge in July. Peel Hunt analyst Markuz Jaffe said his departure was a ‘shame’ but took comfort in the big team behind Shah.
Normally a change in fund manager would have Questor hold off making a “buy” recommendation, but we are reassured by Liberum’s Alex O’Hanlon saying TRIG’s strong balance sheet, diverse portfolio and dividend cover mean it is “one of the best-placed” renewable funds to re-rate this year, while Numis’ Colette Ord described the discount as “excessive”.
The six months to 31 December 2023 (“H1 23/24”, or the “Period”) have seen a further half year of strong results for your Company. Although spot power prices have softened recently, BSIF was the beneficiary of our Investment Adviser’s strategy of fixing prices up to 36 months in advance, with the result that, despite irradiation levels some 13% below those experienced in the second half of calendar 2022, our revenues for the Period grew as compared with the previous year. West Raynham (at 50MW our second largest generating asset) was unavailable for the first three months of the Period, resulting in an additional constraint on power production.
The Company continues to work on its extensive development programme; as at 31 December 2023 we had 660MW under active development and 778MW in pre-construction, comprising a mixture of solar PV and battery storage projects, as well as some wind projects. Our ability to convert this pipeline into electricity generating assets is significantly restricted by current conditions in the capital markets, which make it difficult for us – and most participants in the renewable energy sector – to raise additional equity. In response to this constraint, the Company has entered into a Strategic Partnership with GLIL Infrastructure (“GLIL”), covered in more detail below.
After the Period end, we saw a significant widening in the discount to Net Asset Value (“NAV”) at which BSIF’s shares trade and this prompted the Board to announce a share buyback programme, to which an initial £20 million has been allocated. This will commence once the Company is outside the current closed period, which ends with the publication of this Interim Report.
The main features of the Period under review are:
· The Company announced signing a Memorandum of Understanding (‘MOU’) with GLIL Infrastructure;
· Work on the Company’s development pipeline continued apace, with planning consents being secured on 137MW of solar projects and 90MW of battery projects, while the wider pipeline grew to approximately 968MW of solar and 563MW of battery storage;
· The Group reduced the outstanding balance on its revolving credit facility (RCF) by £10 million, resulting in a loan balance of £167 million as at 31 December 2023;
· At the November AGM, BSIF’s shareholders voted overwhelmingly in favour of the continuation of the Company for a further five years;
· The NAV per share decreased modestly, to 135.95pps as at 31 December 2023 (30 June 2023: 139.70pps);
· BSIF’s closing share price on 31 December 2023 was 13% below the Directors’ Valuation, resulting in a discount to NAV consistent with FY22/23. (30 June 2023: 14%);
· The dividend target for FY23/24 has been set at not less than 8.80pps, up from the 8.60pps dividends paid in respect of FY 22/23;
· Consistent with that target, a first interim dividend for FY23/24 of 2.20pps was declared on 26 January 2024;
· Following the end of the Period, the first phase of the GLIL Strategic Partnership was successfully completed, with an equity investment by BSIF of £20 million and £200 million from GLIL to fund the acquisition of a 247MW portfolio from Lightsource bp;
· Post Period end one solar project of 50MW received planning permission.
At the end of 2023, the Group’s total outstanding debt stood at £577 million, and its leverage was 41% (31 December 2022: £531.1 million and leverage was 38%).
· Adjusted earnings per share increased by 3.0% to 6.8p (2022: 6.6p) marginally ahead of analyst consensus
· IFRS earnings per share decreased by 52.4% to 2.0p (2022: 4.2p) reflecting non-cashflow losses arising on the valuation of the Group’s property portfolio, convertible bond and interest rate derivatives
· Contracted annualised rent roll increased by 3.8% to £150.8 million (31 December 2022: £145.3 million)
· Additional annualised rental income on a like-for-like basis of £4.3 million or 3.0% from rent reviews and asset management projects (2022: £3.3 million or 2.4%)
· EPRA cost ratio 10.7% (2022: 9.9%), representing one of the lowest in the UK REIT sector
· Quarterly dividends totalling 6.7 pence (2022: 6.5 pence) per share distributed in the year, a 3.1% increase
· First quarterly dividend of 1.725 pence per share declared and paid on 23 February 2024, equivalent to 6.9 pence on an annualised basis and a 3.0% increase over the 2023 dividend per share, marking the Company’s 28th consecutive year of dividend growth
· The Company intends to maintain its strategy of paying a progressive, fully covered dividend.
I am pleased to present the unaudited half-yearly report of Alternative Income REIT plc (the Company) together with its subsidiaries (the Group) for the half year ended 31 December 2023.
During the period under review the Company’s portfolio was not immune to the sector wide downward movement in valuations and for the half year ended 31 December 2023 the Group’s net asset value fell by £2.1 million to £65.7 million (30 June 2023: £67.8 million). That said, our portfolio has shown some resilience as the valuation fall has, in the main part, been materially lower than the benchmark property indices and the Company’s peer group.
95.8% of the Group’s portfolio benefits from index-linked rent reviews, 35.9% on an annual basis. Combining this with a strong balance sheet, modest overheads and low fixed borrowing costs until 2025, helps ensure that the Company is well positioned to ride-out the current economic storm and to continue to deliver attractive, secure and progressive income to our shareholders. The biggest risk factor for the Group remains tenant default, although the Group has an excellent record of rent collection in recent years.
Portfolio Performance
The fair value of the Group’s property portfolio amounted to £103.3 million across 19 properties (30 June 2023: £107.0 million across 19 properties). On a like for like basis, the Company’s property values decreased by £1.9 million or 1.8% for the half year ended 31 December 2023. The portfolio had a net initial yield of 6.9% at 31 December 2023 (30 June 2023: 6.6%), and a WAULT to the first break of 16.6 years (30 June 2023: 17.0 years) and a WAULT to expiry of 18.5 years (30 June 2023: 18.9 years).
Property Transactions
On 8 August 2023, the Company completed the sale of the Mercure City Hotel, Ingram Street, Glasgow, for a total consideration of £7.5 million to the current tenant, S Hotels & Resorts (UK) Limited. This property represented 6.5% of the Group’s portfolio capital valuation at 30 June 2023. The disposal represented a 7.9% premium above the book value at 30 June 2023 and a net exit yield of 8.9%. The sale proceeds are being reinvested, firstly, through the acquisition of the Virgin Active in Ockley Road, Streatham for £5.5 million (gross of acquisition costs) with the transaction completed on 18 December 2023 and the Group is looking to reinvest the remaining proceeds in another property by the end of March 2024.
Dividends & Earnings
The Company declared increased interim dividends totalling 2.85pps in respect of the half year ended 31 December 2023 (half year ended 31 December 2022: 2.75pps). Dividends declared for the Period are in line with the Board’s target annual dividend of at least 5.9pps , which is expected to be fully covered.
As set out in Note 8 to the Condensed Consolidated Financial Statements, these dividends were marginally uncovered by the Group’s EPRA Earnings of 2.75pps (31 December 2022: 3.45pps), but were well covered by the Group’s Adjusted EPS (representing cash) of 2.96pps (31 December 2022: 3.35pps). All dividends were paid as Property Income Distributions.
Financing
At 31 December 2023, the Group had fully utilised its £41 million loan facility with Canada Life Investments. The weighted average interest cost of the Group’s facility is 3.19% and the loan is repayable on 20 October 2025.
Discount
The discount of the Company’s share price to NAV at 31 December 2023 reduced to 12.4% from 23.1% at 30 June 2023. The Board monitored the discount level throughout the Period and has the requisite authority from shareholders to both issue and buy back shares.
Schroder Real Estate – NAV and Dividend for Quarter to 31 December 2023▼
For release 27 February 2024
Schroder Real Estate Investment Trust Limited
(‘SREIT’ or the ‘Company’)
NAV AND DIVIDEND ANNOUNCEMENT FOR THE QUARTER TO 31 DECEMBER 2023
Schroder Real Estate Investment Trust Limited (‘SREIT’ or the ‘Company’), the actively managed REIT focused on improving the sustainability performance of buildings to generate higher income, announces its net asset value (‘NAV’) and dividend for the quarter to 31 December 2023 and provides an update on portfolio activity.
Highlights:
· NAV decline to £287.0 million or 58.7 pence per share (‘pps’) (30 September 2023: £296.0 million or 60.5 pps), driven by a 1.6% decline in capital growth, which compared to a 2.3% decline in capital growth for the MSCI UK Balanced Portfolios Quarterly Property Index
· NAV total return of -1.6%
· Announcement of an interim dividend of 0.836 pps for the period 1 October 2023 to 31 December 2023, and paid on 28 March 2024
· Net loan to value of 36.6%, with an average interest cost on debt drawn of 3.5%, an average loan duration of 10.0 years and no debt maturities until June 2027
· Continued leasing momentum since 1 October 2023 with 32 new lettings, renewals and rent reviews completed across 378,159 sq ft. This includes:
o Two new lettings totalling 24,683 sq ft at the Company’s net zero warehouse on Stanley Green Trading Estate, 31% ahead of underwrite, demonstrating the rental premium for buildings with the highest sustainability credentials
o 85,814 sq ft lease renewal with the University of Law at Bloomsbury, 39% above the previous passing rent by December 2028
· Disposed of an office asset, Coverdale House, in Leeds, for £3.8 million, at a 16% premium to the independent valuation as at 30 September 2023
· Sustained outperformance versus the MSCI UK Balanced Portfolios Quarterly Property Index (the ‘Benchmark’) over three months, twelve months, three years and since inception in 2004
· Strong shareholder support to change the investment objective and policy to formally include sustainability at the centre of the Company’s investment proposition, with a sustainability improvement and decarbonisation strategy focused on adapting existing buildings into those that are both modern and fit for purpose
Alastair Hughes, Chair of the Board, commented: “Despite continuing market uncertainty the Company remains well placed with an above average rental income profile and the longest duration, fixed-rate debt in the peer group. These factors enable us to continue paying an attractive dividend, with good visibility on future earnings growth. I am also delighted shareholders provided strong support to the evolution of our strategy which places sustainability at the centre of our investment proposition, and we will provide a detailed update on progress implementing this strategy in our forthcoming year end results.”
Nick Montgomery, Fund Manager, added: “This has been an encouraging period of leasing activity, with a high volume of deals closed and under offer. We are also working up a pipeline of new asset management initiatives to further grow earnings, with a focus on delivering projects to a high sustainability specification such as our Stanley Green operational net zero warehouse development.”
NAV
The unaudited NAV as at 31 December 2023 was £287.0 million, or 58.7 pps, a decrease of -3.0% compared with the NAV as at 30 September 2023 (£296.0 million, or 60.5 pps).
Including the quarterly dividend of 0.836 pps paid in December 2023, the NAV total return for the quarter was -1.6%.
Dividend payment
The Company announces an interim dividend of 0.836 pps for the period 1 October 2023 to 31 December 2023. The dividend payment will be made on 28 March 2024 to shareholders on the register at the record date of 8 March 2024. The ex-dividend date will be 7 March 2024.
The dividend of 0.836 pps will be wholly designated as an interim property income distribution (‘PID’).
Property portfolio
As at 31 December 2023, the underlying portfolio comprised 39 properties valued at £457.8 million. It generated an annual rent of £29.2 million, reflecting a net initial yield of 6.0%. The portfolio’s estimated rental value (‘ERV’) is £38.5 million per annum, reflecting a reversionary yield of 8.4%.
The void rate was 12.0% calculated as a percentage of ERV, and since the quarter end 2.9% of this has let or is under offer, and a further 0.7% undergoing refurbishment. The weighted average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 5.3 years.
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