Custodian REIT (LON:CREI) Full-year results and general update

Custodian REIT (LON:CREI) has released full-year results to March 31, 2020, including an update on trading post-period-end. The company notes that 70% of rents for the quarter ending June have been collected, with a further 12% covered by contractually agreed payment plans. We believe this is in line with market expectations and significantly better than some peers group, especially those with a bigger focus on retail properties.

Balance sheet net gearing remains at a moderate level at 22.4% as at March 31, 2020. The debt covenants stipulate less than 35% net gearing, and more than 250% interest cover, versus more than 600% achieved on a portfolio-wide basis in the quarter to March 2020. This would appear to leave headroom. Within the overall capital structure, there are individual debt facilities whose covenants could have come under pressure due to current market conditions, and these have been addressed by agreed covenant waivers vis-à-vis interest cover.

Total net asset value return per share (an industry-standard metric) was a positive 1.1% for the year, comprised of 6.2% dividends versus 5.1% capital value decrease.

The dividend

In order to maintain a healthy level of dividend cover Custodian announced on April 9th that it intends to re-base its dividend to 0.75p per share (minimum) for Q1 and Q2 of the new financial year, versus 1.6625p per quarter over the last year. In the latest release, Custodian reiterated those Q1 and Q2 dividends, and noted that the board hopes to restore the dividend to a level “akin to previous years”. In our view, investors should regard the rebased dividend as a floor level from which the company will aim to rapidly rebuild.

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