Texton shareholders bide time for dividend increase
Struggling real-estate group Texton Property Fund needs at least another year before it can reward investors with meaningful returns.
The diversified real estate investment trust (Reit) maintained its dividend in the six months to December, results showed on Monday, with its net property income barely growing 2% from R208.2m to R212.4m.
"Low economic growth associated with the current South African environment coupled with economic uncertainty in the UK has perpetuated a challenging operating environment for Texton. While the company is defensively positioned, downward pressure on rentals, combined with a sluggish economy impacting tenants, has resulted in a low growth environment," it said.
The board declared an interim dividend of 47.95c per share for the six months ended December 31 2017, which was in line with market guidance and its prior year dividend. This was achieved because of a solid performance from the core portfolio, according to the board. It said growth in dividends should return when market conditions improved and after the full 2018 financial year.
Recently appointed CEO Nosiphiwo Balfour said Texton had rationalised its portfolio but it was still operating in a challenging economy with weak local property fundamentals.
"We continue to maintain a defensive office portfolio, which has performed admirably considering the oversupply and vacancies currently experienced in the major property nodes. Our industrial portfolio has performed in line with budget other than the vacancy at Hermanstad. Our retail portfolio has remained robust, with tenant waiting lists at Woodmead Commercial Park," she said.
"Operationally, the past six months have been about changing the way we do things and being aligned with the right service providers. We believe the results of this change will start to show in the way we operate and the unlocking of efficiencies. Furthermore, managing a tight ship with arrears is important in this trading environment as that will be key to income protection alongside strong tenant covenants."
Evan Robins, listed property manager for Old Mutual Investment Group’s MacroSolutions boutique, said market commentators had expected Texton’s results to be weak.
"Texton is one of the cheapest shares in the property sector, so it was priced for poor performance," he said.
During the period, Texton paid R180m to cancel an agreement with its asset manager, thereby internalising management, which diluted earnings.