Texton Property Fund set to continue to focus on de-risking its balance sheet
By Philippa Larkin
JOHANNESBURG - Texton Property Fund has said it would continue to focus on de-risking its balance sheet by reducing debt and selling non-core assets following Covid-19 headwinds that battered its operation during the year to end June.
The group, which manages a R4.5billion property portfolio, on Wednesday said its operations were hampered by the UK economy’s record 20.4percent and South Africa’s 51percent contractions in the second quarter.
Texton has a 55.9percent exposure in South Africa and 44.1percent in the UK. The group said total distributable income before the effects of implementation of a payout ratio decreased 46.1percent from R268.4m the prior year due to a foreign exchange loss as well as the higher provision for bad debts.
Revenue slid 6.5percent to R521m with a net property income of R307.8m (year on year), a decrease of 15.4percent.
Its loan-to-value (LTV) improved to 46.2percent from 47.2percent at year-end. Fund managers in South Africa prefer the LTVs of property companies to have a ratio of less than 40percent.
Texton said it managed to dispose of R209m non-core assets to streamline operations from R286.4m the corresponding year to pay down its debt.
It said the vacancy rate in South Africa increased 2percent to 12.7percent, while its letting performance remained strong, with 90percent of expiring gross lettable area being re-let.
Texton said it realised a 90percent collection rate during the Covid-19 lockdown period from April to June improving to 93percent after year end.
It said in the UK it had managed to 100percent let its portfolio. Texton had a collection rate of 97percent during the Covid-19 pandemic.
The sale of Tesco Chobe was completed in July 2019, resulting in the continued repositioning of the property portfolio continuing towards industrial and logistic properties
Texton said it had deferred the decision relating to the payment of a final dividend as the JSE in June had announced exemptions for real estate investment trusts (Reits).
However, the stock exchange said on Wednesday, the same day Texton released its results, that the Financial Sector Conduct Authority had indicated it was not in a position to grant further distribution exemptions to Reits.
“Due to the timing of the JSE’s announcement and Texton’s results announcement, Texton will need to assess the implications of this announcement and will make a dividend decision within the required time frame,” it said.
Texton said the South African economy was expected to contract by up to 7.3percent in the current year.
“Our operating environment will remain challenging for the foreseeable future, characterised by pressure on rental incomes and an ever-increasing cost environment. Electricity supply is expected to be constrained and rates continue to rise in excess of inflation,” it said.
In the UK, it said the economy was forecast to contract by 7.2percent this year.
As a result, Texton said it planned to continue to strengthen its balance sheet through the lowering of its LTV.
“Looking ahead, we intend adopting a variable dividend pay-out policy going forward, which may include a lower pay-out ratio as well as variable timing of the dividend payment,” it said.
Texton rose 11.25percent on the JSE on Wednesday to close at R0.89.