Property and administration costs hamper Newpark’s first half

Property group Newpark, which includes the JSE’s head office in its portfolio, has reported a decline in funds from operations at the halfway stage as property and administration costs increased.

Revenue for the six months to end-August increased 0.1% to R68.8m and operating profit before fair value adjustments was R46m, down 5.9%, it said in a statement on Thursday.

Funds from operations per share, a measure of the cash generated by a Reit, declined 11.7% to 35.5c. The decrease is attributed to the reversion in rental at HellermannTyton and increased property and administration costs, the company said.

A dividend of 30c per share was declared from 35c a year ago.

The group said notwithstanding subdued market conditions, the valuations of Newpark’s property portfolio had remained in line with the end of February values, with the only change being to the value of the JSE building where the lease has been extended to December 2030.

During the period, there was a R2.5m downward adjustment in value on the interest rate hedges and a downward adjustment of R13.4m on investment properties.

The negative effects were partially offset by escalations in rentals at the JSE and Crown Mines properties as well as increased retail occupancies and advertising income at 24 Central.

Newpark’s balance sheet remains financially sound with a loan-to-value level of 41.7%. 

Debt facilities of R150m will mature in May 2025 and management is engaging with debt providers to extend the maturity dates of the facilities.

After having concluded the lease extension with the JSE, the weighted average lease expiry for the portfolio had increased to 5.8 years, providing a positive outlook for the group with its high-quality, medium term predictable cash flows, it said.

The positive outlook was further supported by improving market conditions and the start of the interest rate cutting cycle.

Guidance given to the market on Newpark’s budgeted funds from operations per share (FFOPS) for the year to end-February 2025 was between 50c and 60.11c, a decrease of 25.9%-38.4% from the previous year. The board has now updated the guidance to FFOPS of 67c-78c, being a decrease of between 3.8%-17.4% from the previous year's 81.11c.

The revised budgeted FFOPS takes into account the terms of the early JSE lease extension, with the negative effect of the rental reversion in terms of the lease having been deferred until the next financial year.

The contracted lower rentals in terms the JSE lease extension will result in a 48.5% reduction in rent receivable from the JSE for the financial year ending February 2026.

The dividend per share for the year to end-February 2025 was budgeted to be in line with the revised FFOPS of 67c-78c per share, between 4.8% below and 10.8% above the total dividend of 70.37c at the February 2024 year-end, it said.

mackenziej@arena.africa