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McKay Securities Plc - Full Year results

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McKay Securities Plc

Full Year results

SOUTH EAST REGIONAL FOCUS, UNDERPINNED BY ROBUST TRADING AND ACHIEVEMENT OF KEY MILESTONES, LEAVES McKAY WELL PLACED FOR THE FUTURE

McKay Securities Plc, the only Real Estate Investment Trust (REIT) specialising exclusively in the South East and London office, industrial and logistics markets today announces its Full Year results for the year ended 31 March 2021.

Financial Highlights

  • Adjusted profit before tax up 2.4% to £9.96 million (31 March 2020: £9.73 million)
  • Adjusted earnings per share increased by 2.3% to 10.56 pence (31 March 2020: 10.32 pence)
  • IFRS loss before tax of £16.58 million (31 March 2020: £9.49 million profit) due to a valuation deficit compared with a surplus in the comparable period
  • EPRA EPS: 10.21 pence (31 March 2020: 10.60 pence)
  • Gross rental income down 2.1% to £24.62 million (31 March 2020: £25.16 million) following disposals in the current and prior period
  • Portfolio ERV £31.45 million (31 March 2020 £34.91 million) down 2.0% on a like for like basis
  • IFRS NAV per share down 5.8% to 309 pence (31 March 2020: 328 pence)
  • Portfolio valuation of £437.90 million (31 March 2020: £510.00 million), resulting in a 4.7% valuation deficit of £21.58 million
  • EPRA NTA down 6.1% to 309 pence per share (31 March 2020: 329 pence)
  • LTV reduced to 32.4% (31 March 2020: 37.6%) following the disposal of 30 Lombard Street, EC3 for £70.06 million (net
  • Cash and undrawn facilities of £103.25 million, well placed for new opportunities
  • Share buy-back programme of up to £10.00 million (announced in March 2021) underway, accretive to both NAV and EPS
  • 538,542 shares acquired by the year-end at a cost of £1.15 million
  • Final dividend up 25.0% to 5.5 pence per share (31 March 2020: 4.4 pps), making a total dividend for the year of 8.3 pence per share (31 March 2020: 7.2 pps)

Portfolio and Operational Highlights

ESG - Defined pathway towards reducing carbon across portfolio

  • Company entering the next stage of its ESG journey through the announcement today of its 2021 Net Zero Carbon Pathway which provides details of its target to reduce the use of carbon across the portfolio
  • ESG ambitions build on established track record, recognised through achieving a GRESB (Global Real Estate Sustainability Benchmark) Green-Star award for the fifth year running, and BREEAM Excellent rating at 135 Theale Logistics Park 
  • Strong rent collection and robust leasing activity

Strong rent collection throughout the period, with 98.0% of contracted rent received or agreed

18 open market lettings completed at a combined contracted rent of £2.56 million pa, marginally ahead of ERV 

10 year lease completed with Amazon at 135 Theale Logistics Park (135,095 sq ft)

34 lease renewals at a contracted annual rent of £3.87 million pa, securing a 10.4% uplift, including 37,400 sq ft at Swan Court, Wimbledon to D&G on a new 10 year lease

Circa 75% of occupiers choosing to remain with McKay at lease break or expiry over the period despite the challenging backdrop

Portfolio occupancy decreased slightly from 88.7% to 85.3%, providing scope to grow income through planned asset management initiatives 

  • Acquisitions and active asset management driving future rental growth:

Acquisition of Willoughby Logistics Park, Bracknell, comprising two fully let modern, self-contained units totalling 54,157 sq ft for £10.00 million (5.6% yield)

McKay+ refurbishments continue to attract new occupiers to the portfolio, including Maersk Line UK Limited who signed a five year lease on the 6th floor of Portsoken House, EC3 at a contracted rent of £0.98 million pa

Refurbishment of two floors at Corinthian House, Croydon completed with terms agreed on 51.0% of the new accommodation above ERV, reflecting McKay's ability to grow income through active asset management

Lease expiries at Sopwith Drive, Weybridge (logistics: 63,140 sq ft) in March 2021 and at Great Brighams Mead, Reading (office: 84,840 sq ft) in April 2022 provide pipeline scope for future refurbishment, redevelopment or sale

28.0% of portfolio now weighted towards the industrial and logistics sector (31 March 2020: 18.0%), which continues to benefit from the accelerated rise in e-commerce 

Simon Perkins, Chief Executive of McKay, said:

"McKay has delivered another positive set of results against a market backdrop that continues to be dominated by Covid-19, reflecting the portfolio's resilience during these challenging market conditions. As a result of our active asset management efforts, we exit the third lock down with a reduced LTV compared with twelve months ago, having completed a meaningful level of lettings and lease renewals at or above ERV, as well as achieving a number of substantial milestones. These included the sale of 30 Lombard Street, EC3;  the letting of Theale Logistics Park to Amazon within six months of completion; and the acquisition of Willoughby Logistics Park, Bracknell, which has increased our portfolio weighting in the industrial and logistics sector to 28.0%.

"The successes we have achieved in office leasing this year reinforces our conviction that the office will continue to play an essential role within corporate life, while our assets, due to both their location and specification, remain well placed to support hybrid working practices as these evolve. We remain active in recycling our capital to drive income potential both in terms of refurbishment of vacant floorspace and acquisitions. The pace of recovery and market sentiment will influence the speed at which we are able to recycle capital from recent disposals. However with our South East focus, portfolio strength and substantial cash and undrawn facilities, we believe we are well positioned to benefit from this recovery and to respond quickly as opportunities present themselves."