Redefine International pencils in record profit

Redefine International CEO Mike Watters said the company’s assets in the UK and Germany had performed especially well, due to strong consumer spending.

Redefine International says although other SA property counters are on the acquisition trail in the UK and Germany, it is well entrenched in those markets and able to ward off competitors.

The company, which released its interim results on Wednesday, grew its earnings by nearly 20% in the six months to February, compared with the same period last year, on strongly performing assets in the UK and Germany.

Earnings available for distribution grew from £17.9m to £21.4m. This growth led to the company increasing its interim dividend 6.7% to 1.6p per share.

Redefine International CEO Mike Watters said the company’s assets in the UK and Germany had performed especially well, due to strong consumer spending.

"These two countries’ economies are performing well. This has resulted in solid returns from our retail assets but also from our hotels and offices.

"I appreciate that other South African companies are trying to get a piece of the market but we are firmly positioned. It will take a while for smaller South African funds to gain a footing in these markets," said Mr Watters.

"Our main competition for acquisitions is currently coming from US and Chinese investment groups," he said.

Mr Watters said the company had strong contracts in place with leading retailers in the UK and German markets. A number of these operated in discount retailing.

"Discount and convenience retailing is one sector in particular that remains on a growth trajectory with operators such as B&M Bargains, Home Bargains, Poundland and Iceland looking to expand their UK footprint."

The company had also reworked its portfolio and sold properties that had matured or it felt were non-core. "We managed to sell some Swiss assets and government-let properties, which we believe would not fit into our portfolio going forward," said Mr Watters.

Following the asset sales, more than 40% of the Redefine group’s £1bn portfolio was located in London and in Germany.

"The focus for new acquisitions will remain in these two countries; however, we will still own assets in the Netherlands, Switzerland and Australia," Mr Watters said.

Investec Asset Management’s sector head for property, Peter Clark, said while income growth was strong, currency exchange rates affected the capital growth of Redefine International.

"It was a solid set of results with strong income growth but limited capital growth, which was negatively affected by the weak euro and Australian dollar, which represent circa 32% of the company’s exposure," he said.

He said Redefine International remained an attractive stock to invest in when trying to hedge against rand weakness.

"Management have done very well at positioning the portfolio with the majority of the legacy non-core assets largely disposed.

"Growth is expected to be limited but the stock offers an attractive hard currency yield."