Schroder Real Estate Investment Trust is positioning itself for future growth as it returns to the black in its interim results.
The listed property investment trust reported a profit of £4.2m for the six months to the end of September, up from a loss of £10.6m at the end of March and a loss of £3.3m in the comparable period last year.
The closed-ended fund also continues to claw back net asset value with a marginal NAV rise from 45.1p in March to 45.4p over the six months.
Its underlying earnings per share were 1.2p compared with a loss of 1p a share a year ago. SREIT announced a 1.5p dividend for the half year.
Fund manager Schroders is expected to continue its focus on asset management initiatives, new investments and the redeployment of proceeds from disposals of lower-yielding assets in the short term.
However, looking further ahead, board chairman Andrew Sykes, raised the prospect of an equity raise in line with a growth strategy.
He said: “We expect a more buoyant market to offer opportunities to enhance shareholders’ returns through a judicious growth strategy.
“The board will pursue only growth options that are not dilutive to shareholders. If the company seeks to raise equity, it will do so within a disciplined framework, where proceeds can be efficiently deployed into assets that offer an attractive level of income and the potential for income and capital growth, and continue to support the company’s strategy to improve dividend cover.”
During the period the 52-strong, office- focused fund completed a £129.6m long-term refinancing, with Canada Life giving it £130m of fresh debt.
It disposed of Reynards Trading Estate, Brentford for around £20m and won planning at its Wembley Olympic Office Centre site.
SREIT also reduced its portfolio void rate as a percentage of rental value from 14.4% to 13%. The portfolio was valued at £263.44m, an increase from £258.6m in March 2013.
Duncan Owen of Schroder Property Investment Management said: “The new long- term debt position created by the successful refinancing in April and the subsequent rebasing of the dividend to a more sustainable level were significant milestones for the company.
“Coupled with a high level of asset management activity during the period, the company now has a strong and stable platform from which to deliver future growth and enhanced recurring net income.
“Over the next 24 months we expect the property market recovery to gain momentum, providing good opportunities to create additional value. As such, our property strategy will continue to focus on growth markets including London and other parts of the market offering sustainable income as well as potential for alternative uses by occupiers.
“To be able to capitalise fully on the improved sentiment in the sector, it may be appropriate to supplement the company’s current limited cash resources.
“As the chairman’s statement highlights, there is a clear rationale to support a gradual increase in the size of the portfolio, which would provide further benefits in terms of more flexible portfolio management, improved liquidity and economies of scale.”
