DURBAN - Resilient, a real estate investment trust (Reit), is confident of achieving its targeted 5percent distribution growth in the full-year results despite its concerns of a tough retail environment weakened by power outages, continued hikes in electricity and utility prices and a subdued economy, which was hurting its tenants. On Friday, it reported a 1.63percent increase in the six months to end December.
Resilient said on Friday that the board was concerned about South Africa’s continued above-inflation increases in administered prices, particularly utilities and electricity rates, in the subdued economic environment.
“The board has reconfirmed its guidance of approximately 5percent for the full financial year. The growth is based on the assumptions that there is no further deterioration of the macro-economic environment, that no major corporate failures will occur and that tenants will be able to absorb the recovery of rising utility costs and municipal rates,” the group said.
Resilient also based the forecast on the assumption that Lighthouse and Nepi Rockcastle would achieve distributions in line with market expectations and it intends to benefit from the recent decrease in the prime rate as a result of its interest rate caps.
“This benefit is, however, largely offset by increased unbudgeted repairs and maintenance of electrical equipment ascribed to the repeated interruptions in power supply,” Resilient said.
Resilient owns more than 75.52 million shares in Nepi Rockcastle as well as about 136.24 million shares in Lighthouse. It owns 28 retail centres in South Africa and three retail centres in Nigeria. Resilient reiterated that it was in negotiations with third parties to sell a number of its property assets.
The company in November announced that it was selling six South African assets.
It was also continuing to increase its offshore exposure, while maintaining its conservative gearing and hedging policies.
Resilient’s retail centres achieved a 4.2percent sales growth in South Africa, ahead of the 3.9percent inflation rate for the period, despite a subdued economic environment.
The group said the Mams Mall and The Crossing Mokopane were excluded from this performance, as they were under construction during the comparable period.
However, the group said for the month of December, which was comparable, Mams Mall achieved sales growth of 29.3percent.
Resilient also owns 60.94percent of Resilient Africa in partnership with Shoprite Checkers, and Resilient Africa owns Asaba Mall, Delta Mall and Owerri Mall, together with local partners.
At its retail centres in the three malls, vacancies declined to 4.5percent - down from 8.1percent compared to last year - with retail centres negatively affected by civil unrest resulting from xenophobia in South Africa and, as a result, only a marginal improvement in rentals was achieved.
In the results, the group reported a slight increase in revenue of R1.9billion, down from R1.91bn, while its net profit shot up to R553.47million from R83.47m.
Its basic earnings per share surged to 148.52cents, up from 16.57c, and headline earnings per share increased to 155.91c compared to 27.81c reported last year.
The group attributed improvement in earnings to a fair value gain on currency derivatives of R299m compared to last year’s R123m and a R424m fair value loss on investment in Nepi compared to last year’s loss of R705m.