Redefine forecasts flat financials for the new year

Andrew Konig, CEO Redefine Properties

Andrew Konig, CEO Redefine Properties

Published Nov 7, 2023

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Redefine Properties raised its dividend only 1.9% to 43.80 cents for the year to August 31, but its management believes there is cause for optimism that the property cycle has bottomed.

They believe 2024 will be a turning point when interest rates begin to ease. Although the environment was uncertain, the group forecast financial 2024 distributable income to be between 48 and 52 cents a share.

CEO Andrew König said in an online presentation, however, the reason for the flat forecast was due to the prediction of interest rates only declining towards the end of 2024, outside their 2024 financial year.

He said the group would by then have “taken the pain” of the high interest rate environment, and would benefit more from lower interest rates through a “multiplier effect” because of the relatively high level of gearing.

König said interest rates had already declined in Poland, and political change in that country meant that EU infrastructure funding should again become more available to Poland in the future.

He said the integration of Poland retail subsidiary EPP was successfully completed, and they had achieved a 25% reduction in energy consumption through better collaboration with tenants.

Distributable income per share for one of the most actively traded shares on the JSE increased 4.1% to 53.71. Revenue was up 20.2% to R9.91 billion. Distributable income decreased by 4.1% to R3.5bn.

At August 31, Redefine’s local property assets were valued at R59.9bn (R26.8bn). The offshore retail, logistics and self-storage assets in Poland were valued at R36.9bn (R30bn), representing 38.1% (33.7%) of the total property asset platform.

König said it had been a pleasing result for the year in particular that asset values had stabilised, which spoke to the cash flow deliverability of the asset platform.

“We need to build on the positive momentum seen in the stabilised operating metrics and opt for the upside while remaining laser-focused on the execution of our strategic priorities,” the group said about the second half.

Capital would be cost-effectively sourced and allocated, while operating efficiently in an environment with higher operating costs and a competitive rental market.

“Navigating the effectiveness of the structural energy transition and the expected shift of the interest rate cycle and responding to evolving stakeholder needs will be critical to positioning Redefine for its growth trajectory beyond 2024,” the group said.

A dividend payout ratio of between 80% and 90% was anticipated for the new financial year, dependent on operational capital expenditure requirements, liquidity events and tax.

The increase in the value of the property asset platform was mainly due to the depreciation of the rand, the acquisition of local properties, and expansion through logistics development activity in Poland, marginally offset by non-core asset disposals.

Redefine CFO Ntobeko Nyawo said in a statement the balance sheet held sufficient short-term liquidity headroom of R5.5bn – consisting of cash and access to undrawn facilities. This, with a flat debt maturity profile, placed the business in a comfortable position to mitigate the anticipated volatility of the constrained capital environment.

Nyawo said the “The sustained value creation” of the past year was a result of "a stable and healthy balance sheet despite the volatile environment with a loan-to-value ratio of 41.1%, which is marginally outside our internally set medium-term optimal gearing range largely due to Rand depreciation during the financial year."

He said Redefine’s local portfolio held a stable net profit margin of 78% through the year, while in Poland, EPP’s net profit margin improved by a strong 9% to 74%.

“EPP's delivery in its first financial year of ownership in the Redefine stable shows it has been restored into a yielding asset post the corporate restructure and now makes for a strong contributor to the group’s earnings,” Nyawo said.

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