Coronavirus Update

McKay Securities - Full Year results

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McKay Securities 

Full Year Results


McKay Securities Plc, the only UK REIT specialising entirely in the office, industrial and logistics markets of the South East and London, today announces its Full Year results for the year ended 31 March 2020.

Financial Highlights

  • NAV (EPRA) up 0.9% to 329 pence per share (March 2019: 326 pence)
  • NAV (IFRS) down 0.9% to 328 pence per share (March 2019: 331 pence)
  • Adjusted profit before tax up 5.0% to £9.73 million (March 2019: £9.27 million)
  • IFRS profit before tax of £9.49 million (March 2019: £13.19 million), lower mainly as a result of the positive revaluation surplus being smaller than the prior year
  • Adjusted basic earnings per share up 4.8% to 10.32 pence (March 2019: 9.85 pence)
  • IFRS basic earnings per share of 8.6 pence (March 2019: 14.0 pence)
  • Gross rental income up by 16.4% to £25.16 million (March 2019: £21.61 million), following annualised contributions from prior year development projects and active asset management
  • Loan to value ratio of 37.6% (March 2019: 33.3%), which will reduce to c.28.0% following completion of the conditional disposal of 30 Lombard Street, EC3
  • Final recommended dividend of 4.4 pence per share (March 2019: 7.4 pence), reduced by 40.5% to maintain a higher cash position ahead of greater visibility of market conditions and business progress in response to COVID-19
  • Total dividend for the year of 7.2 pence per share (2019: 10.2 pence), down 29.4%

 Portfolio Highlights

  • Portfolio valuation of £510.00 million (March 2019: £482.70 million), resulting in a valuation surplus of £0.11 million (March 2019: £6.47 million)
  • Total portfolio return of 4.7%, significantly outperforming the MSCI Index of -0.1%
  • Completion of 134,430 sq ft speculative warehouse development at Theale Logistics Park, on Junction 12 of the M4, shortly after the year end
  • 22 open market lettings at a combined contracted rent of £1.31 million pa (1.4% ahead of ERV) completed, in addition to 12 lease renewals 12.0% ahead of prior contracted rents
  • 2.4% increase in rental value (LFL), taking portfolio ERV to £34.91 million pa (net)
  • Portfolio reversion of 23.3% (£6.58 million pa) replenished, providing potential to deliver future value and income growth
  • Substantial transaction activity during the period, which will position the business well to capitalise on future opportunities:
  • Agreed disposal of 30 Lombard Street, EC3 for £76.50 million (yield of 4.16%) which, upon completion (est. Q3/2020), will reduce LTV to c.28.0% and provide further capacity to reinvest proceeds into higher yielding assets as opportunities become available
  • Opportunistic disposal of Station Plaza, Theale for £8.23 million, representing a 32.7% premium to book value
  • Acquisition of Rivergate House, Newbury, a multi-let office building, with rental growth prospects, for £15.50 million (yield of 7.5%)

Undrawn facilities of £51.00 million combined with agreed and completed disposal proceeds provides the Company with substantial capital flexibility and retained potential firepower of c. £100.00 million

Defensively positioned to undertake portfolio expenditure and new acquisitions at a potentially opportune time in the market 

Covid-19 Update

  • 73.0% of the rent due for the quarter to 30 June 2020 collected, which increases to 95.0% when including rent which is now being paid monthly, or is subject to agreed deferment plans
  • All assets have remained open, whilst complying with Government guidelines on providing safe office space

Richard Grainger, Chairman of McKay, said:

"The financial results for the year under review reflect another productive period for McKay. The investment in our portfolio over recent years has delivered strong growth in earnings, and we ended the period with significant existing portfolio potential together with substantial funds for future investment to capitalise on potential opportunities as prospects become clearer. This performance has since been overshadowed by Covid-19 at the very end of the reporting period. We face this period of uncertainty with the benefit of a high-quality portfolio invested in resilient markets and sectors, and with characteristics that could benefit in the post Covid-19 world.

Simon Perkins, Chief Executive of McKay, said:

"The positive momentum maintained over the latest financial year has since been disrupted by Covid-19. As a result of the strategic decisions taken during this and previous years, we have many strengths to cushion the impact and to respond to the opportunities that future changes in working practices will bring. We continue to benefit from our consistent focus on the more robust office, industrial and logistics markets of the South East and London. We expect to see an acceleration of many of the trends we have positioned the portfolio to respond to over recent years, such as flexible lease structure, competitive rents, smart technology, strong sustainability credentials and high standards of customer service. If factors such as lower occupational costs, flexible transport options and generous car parking result in further decentralisation post Covid-19, we are well placed to take advantage."