Johannesburg - The grim results released by Liberty International earlier on Thursday are a telling reflection of how the UK property market has been devastated by the global banking crisis.
Investors in the dual-listed (JSE and FTSE) real estate company have not only seen the share price drop by nearly 70% over the past year, but dividends have also been slashed in half.
The UK shopping mall owner announced on Thursday that dividend payments for 2008 will be restricted to the 16.5 pence already paid in first half 2008.
That means income payouts have dropped 51.5% from 34.1p to 16.5p for the 12 months to December 2008. This is the first time since 1985 that Liberty International has declared negative growth in dividends. Earnings per share dropped 19%, from 36p in 2007 to 29p in 2008.
Liberty International chairperson Patrick Burgess says 2008 has been a year that the UK property industry would like to forget, but no doubt its "unremitting gloom" will be long remembered. And it seems more bad news is in the offing.
Burgess says although the dramatic fall in UK property values in 2008 has been of record proportions, the market anticipates further weakness. He says: "2009 will undoubtedly be a further difficult year for the UK economy and property industry."
Burgess says the massive drop in Liberty International's share price is indicative of just how depressed market conditions are. In 2008 alone, the pound price on the FTSE dropped 55.5% from 1 077p to 478p. The counter tumbled another 31.5% since January 1, closing at 328p on Wednesday.
Burgess says while the company's high-quality assets are resilient, with prime regional shopping centres accounting for 70% of the portfolio value, Liberty International is not immune to soft consumer spending and tenant failures.
SA shareholders not amused
A number of UK retail groups - including Woolworths - have gone belly-up in recent months, leaving mall owners with a growing number of vacant stores. Liberty International's vacancy has already tripled in the year to December 2008, from less than 1.5% to 4.6%. Management says it's likely that vacancies will rise further in 2009.
However, Burgess is confident that the company will be in a strong position to benefit once the market bottoms. "We have always focused on quality and we are ready to benefit when the market recovers in due course. We believe prime retail property should be at the forefront of such a recovery."
Meanwhile, management plans to focus primarily on strengthening the company's financial position. A key challenge now is to sell non-core properties and raise new capital to restore the balance sheet and honour loan covenants with banks.
Burgess says there have been amendments since year-end to key terms of a £360m corporate bank facility, conditional in raising £350m of additional equity.
Coronation Fund Managers property analyst Anton de Goede says results were not entirely unexpected. "Liberty International has exhibited the resilient nature of its portfolio within a very dire UK retail environment."
However, De Goede says it's disappointing that management didn't disclose more details regarding the potential capital raising alluded to in the results announcement. "This uncertainty could further hamper share price performance."
Liberty International owns some of the biggest shopping centres in the UK, with a property portfolio worth £7.1bn (R99.4bn). SA investors, who hold more than 35% of Liberty International stock, did not react favourably to Thursday's results announcement.
The stock fell 1.2% in early trade, hitting a five-year low of 4 679. The counter was still trading at levels of about R160 in April 2008.
- Fin24.com