Sirius Real Estate Limited, a Guernsey-based company with listings on the JSE (Share Code: SRE) and LSE (GBP Share Code: SRE), has reported robust financial results for the six months ending 30 September 2023. The company, known for its investment in commercial properties, has seen a 9.3% increase in Funds from Operations (FFO) to €53.0 million, demonstrating strong rental growth. Key highlights include a 7.0% and 9.0% increase in like-for-like annualized rent roll in Germany and the UK, respectively. The H1 2024 dividend has been increased by 11.1% to 3.00c per share, continuing the company’s progressive dividend approach.
Financial Performance
Funds from Operations (FFO) and Rental Growth
Sirius Real Estate’s FFO for the period increased by 9.3% to €53.0 million, showcasing the company’s resilience and operational strength. This growth is attributed to robust rental performance, with a 7.0% increase in like-for-like annualized rent roll in Germany and a 9.0% increase in the UK. The quality of assets and sustained occupier demand have contributed to the overall positive rental growth, with Germany reaching €122.5 million and the UK at £50.7 million (€58.6 million).
Dividend Growth
The company’s commitment to shareholders is evident in the 11.1% increase in the H1 dividend to 3.00c per share, compared to 2.70c per share in the same period last year. This dividend represents 66% of FFO, reflecting Sirius’s dedication to providing returns to its investors.
Asset Recycling and Financial Position
Post balance sheet date, Sirius engaged in asset recycling, with disposals amounting to €100 million. These transactions achieved a 5% combined premium to book value, illustrating the company’s strategic approach to optimizing its portfolio. The strong financial position is reflected in the total cash balance of €115.7 million, providing significant capacity for potential acquisitions and investments.
Debt Management
Sirius Real Estate has proactively managed its debt, with 97% of the total Group debt (€954.2 million) at fixed interest rates for the next 2.5 years. The net loan-to-value (LTV) ratio stands at 40.8%, demonstrating a prudent approach to debt management.
Operational Performance
CEO Commentary
Andrew Coombs, Chief Executive Officer of Sirius, expressed satisfaction with the company’s operational performance. He highlighted the delivery of another six months of strong results, attributing dividend and FFO growth to robust trading and continued occupier demand for high-quality affordable products. Coombs emphasized the company’s ability to unlock value through successful asset management and highlighted the positive outlook for the future.
Dividend Declaration
The board of directors has authorized a dividend of 3.00c per share for the six months ended 30 September 2023. This represents an 11.1% increase from the previous year and is based on 66% of FFO. The dividend is scheduled to have an ex-dividend date of 12 December 2023 for South African shareholders and 14 December 2023 for UK shareholders. The record date is set for 14 December 2023 for South African shareholders and 15 December 2023 for UK shareholders.
Dividend Reinvestment Plan (DRIP)
While no scrip dividend alternative is offered, shareholders interested in receiving dividends in the form of shares can participate in the Dividend Reinvestment Plan (DRIP). Further details on the DRIP can be found in the upcoming Dividend Announcement, set to be released on 20 November 2023. Information will also be available on the company’s website.
Analysis and Outlook
Financial Analysis
Despite a 42.5% decrease in operating profit to €47.5 million, primarily driven by valuation gains in the comparable period, Sirius Real Estate demonstrated financial resilience. Basic earnings per share decreased by 54.8% to 2.70c, while headline earnings per share increased by 11.2% to 4.06c. The company’s strategic approach to asset recycling and debt management has contributed to its overall financial stability.
CEO’s Perspective
CEO Andrew Coombs highlighted the strong balance sheet, supported by Fitch’s recent reaffirmation of the BBB investment grade rating and stable outlook. He emphasized the flexibility this provides for leveraging future opportunities. The €100 million asset recycling, with disposals in Germany and acquisitions in the UK, underscores Sirius’s ability to crystallize returns and strategically optimize its portfolio.
Growth Prospects
Coombs expressed confidence in the Group’s growth prospects, acknowledging the uncertain market backdrop. Sirius Real Estate’s asset management and marketing initiatives, coupled with a positive outlook, position the company well for continued success. The ability to unlock value and grow rental income through the asset management platform remains a key focus.
Conclusion
Sirius Real Estate Limited’s H1 2024 results reflect a resilient and well-performing real estate portfolio. The company’s focus on operational strength, dividend growth, and strategic financial management has contributed to its positive financial position. As Sirius continues its trajectory of growth, shareholders can anticipate attractive risk-adjusted returns. The upcoming Dividend Announcement on 20 November 2023 will provide further details, and shareholders are encouraged to consider the full announcement for comprehensive insights.
