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10 Mar 2021 | 07:34

Record sector demand drives earnings growth at Tritax Big Box

(Sharecast News) - Record demand for logistics space saw earnings per share at Tritax Big Box improve by 8% to 7.17p in 2020, it announced on Wednesday. The FTSE 250 real estate investment trust said that was driven by development completions, active asset management and development management income, net of disposals.

Excluding the impact of development management income in excess of the company's anticipated run-rate, adjusted earnings per share rose 4.1% to 6.91p.

The board declared a fourth quarter dividend of 1.7125p, resulting in a total dividend per share in 2020 of 6.4p, down from 6.85p year-on-year, and making for a pay-out ratio of 90%, or 93% when adjusting for development management income.

Tritax said its total accounting return came in at 19.9% for the year ended 31 December, up from 3.8% year-on-year, driven by the implementation of its strategy coupled with a positive market backdrop.

The firm said it had a "strong" balance sheet with a loan-to-value ratio of 30%, providing "firepower" to support its strategy.

Operationally, Tritax said it saw record demand for logistics space during the year, driven by an acceleration of structural changes in the sector as a result of ongoing growth in e-commerce, and the increasing need for "modern, efficient and resilient" supply chains, which the Covid-19 pandemic and the impact of Brexit reinforced.

Its portfolio value increased to £4.41bn from £3.94bn at year-end, which it said was driven by development gains, asset management and the strength of its market, including a capital valuation surplus of 9.5%, net of capital expenditure.

Rent collection was strong, with 99.4% of 2020 rent collected and all arrears expected to be received in 2021.

The firm's weighted average unexpired lease term stood at 13.8 years as at 31 December, down from 14.1 years year-on-year, with 65% of rent generated by leases having an unexpired term of more than 10 years.

During 2020, Tritax grew its contracted annual rent roll by £13.9m, or 8.4%, to £180.6m, which the board said was driven by asset management and the letting of development assets, net of disposals.

A total of 21.7% of the portfolio was subject to rent review or variation in 2020, achieving a 5.4% increase and adding £2m to contracted rent, while lettings of development assets added £16.9m to the contracted rent roll.

The company disposed of four assets for £134m, delivering a weighted levered internal rate of return of 12.9% per annum, net of corporate costs.

It said it was redeploying the disposal proceeds into higher-returning development opportunities and the acquisition of a prime 325,000 square foot south coast distribution logistics building with "significant" value-add potential.

Tritax explained that it was targeting long-term outperformance through the development of the UK's largest logistics-focussed land bank.

It let 2.9 million square feet of development assets, increasing its contracted annual rent roll by £16.9m, as it achieved 2.4 million square feet of pre-lets growing contracted annual rent by £13m.

The company let four buildings, including two to Apple and a recent 20-year lease to Ocado, adding £3.9m to rent, while planning consent was received on a further 5.4 million square feet of prime logistics space during the year.

It said its near-term development pipeline stood at 10.2 million square feet across 12 sites, of which 74% had planning consent as at 31 December.

"Despite the challenges presented by Covid-19, Tritax Big Box built significant momentum in 2020 as the benefits of complementing our strong investment portfolio with our development land bank begin to crystalise," said chairman Sir Richard Jewson.

"This progress was evidenced in the Group's strong performance during the year, with extensive letting activity on our development portfolio, increasing values through asset management and the successful recycling of capital.

"In addition to these active steps that the manager has taken, we have seen a strengthening in the UK logistics market driven by heightened occupier and investor demand, which we are well placed to capitalise upon in the coming years."

Jewson said the company believed the "positive structural drivers" currently being experienced in the UK logistics sector were at an early stage, and those trends would continue to have a favourable lasting impact on the firm's market in the long-term.

"As a business we have the necessary capabilities and resources to capture this opportunity to deliver long-term sustainable income and capital growth for our shareholders.

"Progress is expected to continue in 2021, as we drive income and enhance value from the existing portfolio through asset management and rent reviews, and as our development portfolio increasingly contributes to our financial performance."

The company had seen "significant and increasing" levels of occupational interest in its development pipeline, Sir Richard Jewson said, giving the board confidence in the company's ability to deliver further long-term sustainable growth.

"We expect to continue to pay an attractive dividend to shareholders, while ensuring we have the capacity to invest in the opportunities that will drive earnings and dividend growth over the coming years."

At 0804 GMT, shares in Tritax Big Box were up 2.23% at 183p.
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