South: McKay Securities ‘well placed for future growth’

McKay Securities plc, the only Real Estate Investment Trust (REIT) specialising exclusively in the London and South East office, industrial and warehouse markets, has announced its full-year results for the year ended March 31, 2019.

Financial Highlights

  • Adjusted profit before tax up 2.3% to £9.27 million (March 2018: £9.07m)
  • Adjusted basic earnings per share up 2.1% to 9.85p (March 2018: 9.65p)
  • Gross rental income of £21.61m (March 2018: £21.84m), up 6.6% on a like-for-like basis after adjusting for loss of income from prior year disposals and planned development activity
  • IFRS profit before tax of £13.19m (March 2018: £43.44m), with reduction primarily due to a lower valuation contribution
  • NAV (EPRA) up 1.2% to 326p per share (March 2018: 322p)
  • NNNAV (EPRA) up 1.2% to 326p per share (March 2018: 322p)
  • Loan to value ratio of 33.3% (March 2018: 31.6%), with the slight increase due to £13.79m of capital expenditure being invested on portfolio development and refurbishment projects
  • Final dividend up 2.8% to 7.4p per share (March 2018: 7.2p per share)

Portfolio Highlights

  • 1.4% (£6.47m) valuation surplus with portfolio valuation at a historic high of £482.70m
  • 2.1% increase in rental value, taking portfolio ERV to £33.83m pa (net)
  • 19 open market lettings (8.1% ahead of ERV) completed at a combined contracted rent of £1.29m pa, in addition to 21 lease renewals at a 31% increase to prior contracted rents
  • Practical completion of 30 Lombard Street, EC3 achieved in January 2019, triggering commencement of the 15 year pre-let secured in March 2018 for the entire building, at a rent of £3.4m pa (net)
  • Development of a new 134,430 sq ft logistics warehouse at Junction 12 of the M4 at Theale underway with December 2019 completion
  • Substantial 24.3% portfolio reversion of £6.61m pa, well placed to deliver future value and income growth, building on track record of delivery
  • Recognition of ESG efforts with a GRESB (Global Real Estate Sustainability Benchmark) Green Star award for the third year running

Richard Grainger, chairman of Reading-headquartered McKay, said: “I’m pleased to be able to report another successful year of delivery for McKay which concludes five years of exceptional growth since our 2014 capital raise. The past year saw further delivery against our long-term strategic objectives as it captured more of the portfolio’s reversion for the benefit of shareholders, despite navigating a turbulent market environment. McKay’s concerted focus on the office, industrial and logistics markets of London and the South East continues to deliver robust performance, whilst the substantial income potential still to be released, and our proven ability to unlock this, leaves us well placed to deliver future value.”

Simon Perkins, Chief Executive of McKay, said: “The growth delivered across all key metrics is a direct result of the carefully selected and actively managed portfolio that we have built up over recent years, combined with our ability to enhance and release its potential, which has resulted in rental and capital uplifts out-performing the market over the period.

“Our office development programme has been significantly de-risked following the completion of our 30 Lombard Street, EC3 scheme, which triggered commencement of the 15 year pre-let secured last year. On-going construction is now limited to our warehouse development at Theale Logistics Park at Junction 12 of the M4, an area with deep occupier appeal. While our focus on the office, industrial and logistics sectors of the UK’s strongest regions puts us in a strong position for the future, we now also benefit from enhanced operational flexibility following the new debt facility that was secured following period-end, which provides us with an additional £55m of firepower for opportunistic investment activity.

“We remain wary of the political uncertainty affecting our operating environment, however the strong fundamentals underpinning our markets and significant reversion that remains to be unlocked within our portfolio leaves us well positioned to deliver future growth.”