Atlantic Leaf interim results reflect stable environment | Fin24
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Atlantic Leaf interim results reflect stable environment

Oct 16 2017 14:20
Carin Smith

Cape Town - Mauritius based Atlantic Leaf Properties (ALP) reported total assets under management of £304m for the six months ended August 31.

This is up 15% from the half year results in 2016.

Total rental revenue for the period under review was £12m - up 17% from the 2016 interim results. A total distribution of 4.5 pence per share was declared, which is 7% more than in the 2016 interim results.

ALP focuses on commercial property assets in strategically positioned light-industrial and distribution nodes in the UK.

According to CEO Paul Leaf-Wright, the results are reflective of the stable environment in which it operates and the quality of its assets, which remain 100% occupied with long leases and quality tenants.

For the year to date management has met or exceeded the key targets it has set in order to establish the company as a property investment company in the UK market.

"This strong delivery on our growth objectives underpins our strategy to continue to grow distributions to shareholders on an annual basis and based on cash flow earnings that the company has achieved,” said Leaf-Wright.

He told Fin24 that future plans would be to continue growing the asset base and eventually to be based in London.

"We want to grow our business and become a relevant player in the property sector. You have to start somewhere. You have to grow. We are pleased with our growth. Hopefully we will reward our shareholders with strong growing dividends going forward," he said.

The company reported a net asset value (NAV) of £155.4m and a NAV per share of £1.09 per share, for the period under review. The group’s gearing is around 50% loan to value (LTV). Given the long-term nature of the leases it has in place, management is comfortable with the LTV level combined with the benefit of the overall cost of debt of approximately 3.2% per annum.

Hedged debt

Currently, 76% of Atlantic Leaf’s debt has been hedged with interest rate swaps to protect against rises in interest rates. Atlantic Leaf currently earns a forward yield of 7.4% on its investment properties.

Leaf-Wright told Fin24 that the biggest challenge for the company at the moment is to get its share liquidity up.

"Being a small company, we need to continue to grow to become more relevant to institutions. Our challenge is to get bigger and find the right yield," he said.

"We want to feel our investments are still good in the long term, for instance buying the right property and not buying just to grow. Our challenge is, therefore, to get our share price up so our cost of equity can go down a bit."

Leaf-Wright told Fin24 that the majority of investors at the moment are South African and institutions. Vukile is a key shareholder at about a 35% stake.

"Vukile is SA listed and we are their entry into the UK market. Our shareholders are also normal pension funds and asset managers looking for a good income. We would like to get more private individuals as investors. I think we offer a good dividend distribution," he told Fin24.

In September 2017, the company raised £47m of new equity through an accelerated book build exercise, in which 46 305 419 new shares were issued. From the proceeds of the capital raised, the company purchased a 45% share in a portfolio of 11 properties tenanted by DFS Trading, at a cost of £24.8m (including acquisition costs).

The balance of the cash is available for investment. Leaf-Wright told Fin24 that ALP hopes to do another investment into something before the end of the calendar year. He also said the company is on track to deliver a full year dividend of about 9.1 pence per share - which would represent a 7.1% increase over the prior year - demonstrating its track record of growth.

Investment focus

Chief Investment Officer Shaun Fourie said the company's investment focus remains firmly in the UK property market.

"We will continue to seek new asset opportunities in the UK which meet our investment criteria. The joint venture (JV) with LondonMetric also provides us with a platform into the retail park asset class where we see good value and an opportunity to work with LondonMetric to add assets to this JV,” said Fourie.
According to Leaf-Wright, the UK property sector remains very active, especially in the UK industrial logistics properties and Atlantic Leaf is well placed in this market and to seek out further properties that meet its overall investment objectives.

"Our focus remains on growing our annual distributions at a rate higher than the UK inflation rate,” he said.

Leaf-Wright told Fin24 the reason for the focus on the UK market is that it is a very big market.

"We feel the UK still has a lot growth potential and it is a very liquid market so all our assets can be easily traded. We are not dominant in the market so we can always sell the properties and always find new properties," he said.

"We understand the market. We spent lot of time understanding the market. Rather than being in multiple jurisdictions, many investors feel as if they want UK exposure they can just buy us."

In answer to a question about any impact from Brexit on the company, Leaf-Wright told Fin24 the greatest impact so far has been on the pound exchange rate.

"Businesses we deal with are local operators and supply to the UK economy. We are not exposed to huge international or cross-border moves, but the weaker pound has impacted us and some of the businesses we deal with," he said.

"At the same time, I don't think they will suddenly have to move to operate in a different jurisdiction. That is not the target market of our tenants."

By mid-afternoon trade on Monday ALP's share price was unchanged at R18.55.

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