File picture: James White
CAPE TOWN - Texton Property Fund yesterday warned shareholders that its total dividend was set to decline even further after falling 20.1percent to 71.37cents per share during the year to end June. The group said it anticipated another 20percent decline for 2020.

New chief executive Marius Muller described the past year as the most difficult in the company’s history, but said that the group would resolve inherited legacy issues in the next financial year. Muller said he declined his contractual bonus and increase in compensation. He said difficult but necessary decisions had to be made to bring Texton back in line with shareholder and stakeholder expectations.

The like-on-like held property portfolio value decreased 13.2percent to R4.15billion, with most of the reduction contributed by the SA unit due to economic erosion and resulting rental reversions.

Muller said the lower distribution was attributed negative market factors including vacancies, an oversupply of space, prolonged let-up periods, lower foreign exchange gains and increased funding costs, which he described as in line with expectations.

“Rather than dwelling on factors over which we have no control, we remained firmly focused on what we can manage,” he said. “We made pleasing operational advances that place Texton on a much firmer footing for the future.”

Texton has 58.5percent of its assets in South Africa and 41.5percent in the UK.

In April, the Public Investment Corporation increased its stake in the group to 18.9percent to become its biggest shareholder, following a transfer of shares formerly held by Texton Broad-Based Empowerment to the corporation.

Muller said their focus now was to decrease gearing. Progress was not yet showing in the numbers - loan-to-value ratio increased to 47.7percent from 42.7percent by year end. The aim was to reduce this to 40percent and to diversify the lending portfolio.

Non-core asset disposals were being stepped up to reduce debt and reposition the portfolio.

In the UK, Tesco Chobe at Quorum Business Park in Newcastle, was sold for £12million (R219.5m). The property transferred eight days after year-end. Proceeds would used to de-leverage the Santander loans repayable in February 2020.

In SA, Texton sold two properties and allocated the proceeds to reduce debt. A further 13 properties of R326.8m were already held for sale in the year ahead. “As a small market cap company, Texton is relatively more exposed to the impacts of the difficult operating environment. It would, however, be equally able to benefit from and capitalise on a future upturn in the market,” Muller said.

Texton was successful in securing new lettings, retaining tenants and protecting property income streams through early renewals, which resulted in portfolio occupancies, including its 50percent stake in Broad Street Mall in the UK, improving to 9.2percent from 10.5percent.

Texton shares rose 4.73percent on the JSE yesterday to close at R3.10.