TR Property Investment Trust plc
London Stock Exchange Announcement
Unaudited results for the six months ended 30 September 2024
Legal Entity Identifier: 549300BPGCCN3ETPQD32
Information disclosed in accordance with Disclosure Guidance and Transparency Rule 4.2.2
Kate Bolsover, Chairman:
“The rapid rise in interest rates over the last three years led a number of our companies to pause dividend payments but these are starting to pick up again. Falling interest rates are helping to reduce borrowing costs, which in turn supports real estate values and boosts income. We needed patience for the peak in interest rates and the focus has now shifted to further rate cuts, with attention on their timing and scale. This progress reinforces our confidence in the future.”
Marcus Phayre-Mudge, Fund Manager:
“We are seeing an encouraging, albeit bumpy, recovery in listed real estate. Demand for top-quality properties is outstripping supply in nearly all sectors. Over this period, there has been a positive shift in sentiment, marked by a renewed wave of offensive capital raising alongside continued merger and acquisition activity. However, we remain in a divided market: the best buildings in prime locations are attracting strong tenant demand, while others are struggling. This bifurcated environment supports TR Property’s investment approach and appeal given our underlying asset exposure.”
Financial highlights and performance
| Balance Sheet | At 30th Sept 2024 | At 31st March 2024 | Change |
| Net asset value per share | 378.61p | 351.50p | +7.7% |
| Shareholder’s funds (£’000) | 1,201,522 | 1,115,503 | +7.7% |
| Shares in issue at the end of the period (m) | 317.4 | 317.4 | 0.0% |
| Net debt1,5 | 13.9% | 10.8% | |
| Share Price | |||
| Share price | 355.50p | 325.00p | +9.4% |
| Market Capitalisation | £1,128m | £1,031m | +9.4% |
| Revenue | Half year ended 30th Sept 2024 | Half year ended 30th Sept 2023 | Change |
| Revenue earnings per share | 8.16p | 7.31p | +11.6% |
| Interim dividend per share | 5.65p | 5.65p | 0.0% |
| Performance: Assets and Benchmark | Half year ended 30th Sept 2024 | Half year ended 30th Sept 2023 | |
| Net Asset Value total return2,5 | +10.9% | +21.1% | |
| Benchmark total return | +9.3% | +15.4% | |
| Share price total return3,5 | +13.0 | +22.9% | |
| Ongoing Charges4,5 | |||
| Including performance fee | 0.87% | 1.81% | |
| Excluding performance fee | 0.74% | 0.82% | |
| Excluding performance fee and direct property costs | 0.72% | 0.78% | |
1 Net debt is the total value of loan notes, loans (including notional exposure to contracts for differences (‘CFDs’)) less cash as a proportion of net asset value (‘NAV’).
2 The net asset value total return is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Dividends are deemed to be reinvested on the ex-dividend date as this is the protocol used by the Company’s benchmark and other indices.
3 The share price total return is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date.
4 Ongoing Charges are calculated in accordance with the AIC methodology. The ratio for 30 September 2024 is based on forecast expenses and charges for the year ending 31 March 2025.
5 Considered to be an Alternative Performance Measure.
Chairman’s statement
Market backdrop
My concluding remarks in the Annual Report in June focused on our hope and expectation that we were much closer to the peak in the interest rate cycle. This turned out to be the case. The various false dawns which had punctured investor optimism in the previous year are now behind us. The focus is now on ‘how many cuts and when’ following the initial moves by the US Federal Reserve, the Bank of England and the European Central Bank.
This step change in central bank behaviour, whilst largely anticipated, did extend the boost to real estate equity prices which, even after the springtime recovery, were still heavily discounted and unloved. This ongoing price recovery helped the Company’s net asset value total return reach +10.9% for the six months, with the share price total return of +13.0% exceeding that figure. Over the same period, the total return from the benchmark index was +9.3%.
The period under review saw not only short-term base rates begin to fall but also growing stability in the longer end of the yield curve (3-5 years+) which is where most property companies seek to maintain the majority of their finance. This improvement has also led to further margin reductions as more lenders re-enter the market. The cost of capital therefore fell in the period and this encouraged not only capital raising by a wide range of listed companies but also merger and acquisition (‘M&A’) activity. Such interest from both public and private equity in a range of undervalued listed companies provides a valuable pricing underpin. Much more detail is provided in the Manager’s Report, covering our participation in capital calls as well our positioning in the M&A activity.
Our physical property exposure remained at an historic low over the period. Whilst I have already reported that this reduced level would be temporary, the timing of the rotation of capital from our largest ever property sale (£33.5m in March) into equities proved beneficial.
Revenue Results, Outlook and Dividend
Earnings at 8.16p per share are around 12% ahead of the level reported for the half year to 30 September 2023 but still significantly below September 2022 levels.
We are seeing a recovery in earnings. However, as anticipated, some of the companies which suspended dividends in 2023 have returned to distributing at lower levels than previously and a few have yet to resume. Encouragingly, we are seeing growth in some areas. Our rental income from the direct property portfolio has significantly reduced following the sale of The Colonnades and due to the development activity at Wandsworth but we expect this to be temporary as we are seeking to add to the portfolio and as the refurbished units at Wandsworth come on stream.
Against that backdrop the Board has maintained the interim dividend at the prior year level of 5.65p. Although we expect the improving trend to continue through the second half of the financial year, we do anticipate that it will take some time to build earnings back to previous levels and that the full year distribution will not be covered by our earnings.
Outlook
These results cover the six months to the end of September, a period of growing optimism for our sector. However, October has been a reminder of how quickly macro influences can once again weigh on sentiment, particularly towards a leveraged asset class such as real estate. In the UK (broadly one third of our portfolio) the new Government’s tax and spend strategy will see an average additional borrowing of £28bn per year. This has unsettled markets and the yield on ten year Government bonds has climbed back to where it was at the beginning of March. At the same time both the Bank of England and the Riksbank have continued to reduce base rates which is supportive for short term debt costs.
Germany, Europe’s largest economy and largest exporter has seen a slowdown in demand particularly from Asia and our expectation is that the ECB may well prove to be more dovish with larger cuts to their base rate as recessionary forces grow. The US election result has also contributed to investor concerns about the new administration’s attitude towards tariffs and the impact on EU exports. Additional geo-political tensions around the outcome for Ukraine and the likely increase in defence spending by the European members of NATO adds to an air of collective concern across Europe.
This leads us to focus even more on those businesses with healthy, affordable income streams and strong balance sheets. Our Investment Manager remains optimistic that there is ongoing demand/supply disequilibrium across key sub-sectors and the recent pull-back in real estate equity prices is an opportunity given the downward trajectory in the cost of capital.
As the listed sector has performed better and physical property once gain offers better value, we have been actively seeking out direct property assets. Following the end of the half year, the Company has acquired two industrial assets, a single let unit in Northampton and an estate in Bicester for a combined cost of £19.3m. On a proforma basis, physical property is now 5.3% of our net assets.