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RDI REIT PLC - Short form announcement: Preliminary results for the year ended 31 August 2019

Release Date: 24/10/2019 08:00
Code(s): RPL     PDF:  
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Short form announcement: Preliminary results for the year ended 31 August 2019

RDI REIT P.L.C.
("RDI" or the "Company")
(Incorporated in the Isle of Man)
(Registered number 010534V)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00BH3JLY32
LEI: 2138006NHZUMMRYQ1745

SHORT FORM ANNOUNCEMENT 
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 AUGUST 2019   

RDI, the income focused UK REIT, which has a primary listing on the London Stock Exchange and a
secondary listing on the Johannesburg Stock Exchange ("JSE"), today announces its results for the year ended
31 August 2019.

Gavin Tipper, Chairman, comments:

"A significant amount of work has been undertaken over the past twelve months, and particularly since we set
out our intentions at the half year to further reduce leverage and accelerate the reweighting of the portfolio
through the disposal of certain retail assets. I am pleased to report that important steps have been taken towards
reaching these goals, with our retail holdings as the date of this report having been reduced by approximately
15 per cent, and that, despite the difficult market backdrop, operational results across the business remain
robust, reflecting the portfolio's increasing exposure towards growth subsectors and stronger economic
locations."

Financial highlights

                                                                     Year ended       Year ended    Increase/   
                                                                 31 August 2019   31 August 2018   (decrease)   
Income statement                                                                                                
Revenue (GBPm) (1)                                                         93.5             95.1        (1.6)   
Net operating income (GBPm) (1)                                            70.3             73.1        (2.8)   
Headline earnings per share (p)                                             8.2             12.0        (3.8)   
Underlying earnings per share (p)                                          13.0             14.2        (1.2)   
Underlying earnings per share - Excl.                                                                           
Aviva Portfolio (p) (2)                                                    11.8             11.9        (0.1)   
Basic earnings per share (p)                                             (20.4)             23.6       (44.0)   
Dividend per share (full year) (p)                                         10.0             13.5        (3.5)   
Balance sheet                                                                                                   
EPRA NAV per share (pence)                                                185.5            213.8       (28.3)   
IFRS NAV per share (p)                                                    180.4            211.3       (30.9)   
Loan to value (%)                                                          46.8             46.2          0.6   
Loan to value (%) - pro forma (3)                                          42.0             47.3        (5.3)   

The table above include certain non-IFRS performance measures which are considered Alternative
    Performance Measures.

(1) Revenue and Net operating income from continuing operations, excluding the European segment which is
    now classified as a discontinued operation.
(2) Further details on the exclusion of the Aviva Portfolio from underlying earnings is provided in the Financial
    Review of the Full-Year Results announcement.
(3) LTV adjusted to reflect transactions between year-end and date of announcement.

Robust operational and asset management performance

- 131 leasing events completed during the year, 4.7 per cent (GBP0.7 million) above ERV
- EPRA occupancy remained high at 95.9 per cent (31 August 2018: 97.1 per cent)
- Positive letting progress post year end with occupancy increasing to 97.2 per cent
- On a like-for-like basis, net rental income remained flat over the year
- Stable income returns from the London Serviced Office portfolio with average occupancy at 93.6 per cent
  (31 August 2018: 92.2 per cent)
- Managed hotel portfolio RevPAR increased 2.9 per cent to GBP84.9 (31 August 2018: GBP82.5)
- Planning permission granted for additional 16,576 sq ft at Charing Cross Road, London

Investment activity repositioning the portfolio to growth areas

- GBP26.3 million acquisition of Southwood Business Park Industrial Estate, Farnborough reflecting a net initial
  yield of 6.2 per cent, on acquisition
- GBP26.0 million forward funding of two distribution units at Link 9 in Bicester; targeting a yield on cost of
  6.5 per cent
- GBP121.5 million of disposals at an average premium of 2.5 per cent to market value (including transactions
  post year end)
- Retail exposure reduced to 35.3 per cent (31 August 2018: 45.6 per cent) with a further reduction to 31.0
  per cent based on disposals agreed post year end
- UK Retail reduced to 17.9 per cent (31 August 2018: 29.0 per cent), including a reduction in UK Shopping
  Centre exposure to 5.7 per cent

Balance sheet and leverage

- EPRA NAV per share declined 13.2 per cent to 185.5 pence per share; largely due to the derecognition of
  the Aviva portfolio and a reduction in the like-for-like portfolio value of 2.9 per cent
- Pro forma LTV at today's date reduced to 42.0 per cent (31 August 2018: 46.2 per cent)
- GBP350 million of financing facilities extended during the year
- Average debt maturity increased to 3.7 years (31 August 2018: 2.9 years, excluding the Aviva Portfolio)
- Cost of debt reduced to 2.9 per cent (31 August 2018: 3.0 per cent, excluding the Aviva Portfolio)

CHIEF EXECUTIVE'S STATEMENT

At the interim results we set out specific initiatives to accelerate our strategic objectives including a lower
leverage capital structure, reduction in retail exposure and more focused allocation of capital. A number of
strategic disposals were identified including the disposal of our European portfolio consisting of German retail
properties and certain ex-growth UK assets comprising largely regional offices and smaller retail assets. We
expect these disposals, once complete, to materially reduce our exposure to an underperforming retail sector
and further strengthen our balance sheet.

It has been a challenging year for the business, not least due to the uncertainty around the Aviva shopping
centre portfolio. As previously announced, in light of the material valuation declines of this specific portfolio,
material break costs associated with repayment of the facility and continued uncertainty in the retail sector,
the Board took the decision not to commit further capital to this portfolio or the financing facility. As a result,
and following extensive discussion with Aviva, a Standstill Agreement was entered into on 23 April 2019
which included an agreement to a consensual sales process. This has resulted in the net assets of this portfolio
being derecognised from our accounts. Non-IFRS operational and financial comparisons have therefore been
disclosed excluding the performance of the Aviva Portfolio. The facility remains non recourse to the Group.
Further details are contained within the Financial Review.

Further details of the Aviva Portfolio derecognition are contained within the Financial Review of the full
results announcement.

Earnings and dividend

Underlying earnings decreased by 7.7 per cent to GBP49.4 million (31 August 2018: GBP53.5 million). Underlying
earnings per share decreased by 8.5 per cent to 13.0 pence per share (31 August 2018: 14.2 pence per share).

During the year, net operating cash flows from the Aviva Portfolio were retained within the facility, following
the Standstill Agreement on 23 April 2019. Underlying earnings for the year, excluding those from the Aviva
facility, were 11.8 pence per share (31 August 2018: 11.9 pence per share) which provides a comparative
measure of performance.

The Board has declared a second interim dividend of 6.0 pence per share, taking dividends for the full year to
10.0 pence per share. The dividend reflects a pay-out ratio of 76.9 per cent of underlying earnings for the full
year. The lower pay-out ratio reflects the operational cash flows restricted within the Aviva facility to the
point of derecognition on 23 April 2019 and therefore unavailable for distribution to shareholders.
Notwithstanding the lower pay-out ratio, the full year dividend meets the UK REIT rules in respect of
distributions, as it represents over 90.0 per cent of the Group's UK property rental income.

Balance sheet and financing

EPRA NAV decreased by 13.2 per cent to 185.5 pence per share (31 August 2018: 213.8 pence per share)
largely as a result of the derecognition of the Aviva Portfolio and a like-for-like portfolio value decline of 2.9
per cent for the year. Unsurprisingly, valuation movements varied significantly between sectors with the UK
Distribution and Industrial portfolio increasing 3.2 per cent or GBP5.7 million, while UK Retail declined 11.7 per
cent or GBP33.6 million.

The Group's proportionate share of net debt reduced to GBP666.6 million (31 August 2018: GBP748.4 million),
partly as a result of the derecognition of the Aviva Portfolio financing facility. GBP103.7 million of largely retail
disposals have completed or exchanged post year end which will reduce the Group's LTV on a pro forma
basis to approximately 42.0 per cent (31 August 2018: 46.2 per cent).

GBP350.0 million of financing facilities were extended during the year delivering a longer average debt maturity
and securing attractive rates in the current low interest rate environment.

Operating performance

Despite tough trading conditions, a strong asset management performance delivered robust operational results
across the majority of the portfolio. Occupancy remains high at 95.9 per cent and increased to 97.2 percent
post period end with a number of lettings and re-gears being agreed. 131 leasing events were concluded during
the year totalling GBP15.1 million of gross rental income, 4.7 per cent ahead of ERV. Overall, the portfolio's
like-for-like gross rental income increased 1.8 per cent on an annualised basis including leasing activity shortly
after year end. Underlying operational performances from both the Hotels and London Serviced Office
portfolios remained resilient despite Brexit uncertainty, highlighting the strength of these assets and their
operating platforms.

More focused allocation of capital and reduction in retail exposure

Investment activity during the year supported the continued repositioning of the portfolio to stronger growth
sectors. The acquisition of Farnborough and forward funding of Bicester have increased exposure to the South
East industrial and distribution market. The combined acquisitions totalled GBP52.3 million (excluding costs)
and are anticipated to deliver a yield on cost of approximately 6.6 per cent.

Disposal activity was weighted towards the second half of the year with a number of larger disposals
completing post year end. Disposals (including those exchanged or completed post year end) totalling
GBP121.5 million were agreed at prices 2.5 per cent ahead of the last reported market values, supporting a pro
forma reduction in retail exposure to 31.0 per cent.

Our remaining UK retail exposure is now heavily weighted to Greater London and the South East in locations
with stronger demographics and retailer demand. UK Shopping Centres now make up less than 6.0 per cent
of the overall portfolio with the balance of the UK Retail portfolio consisting largely of retail parks which
have demonstrated solid occupier demand.

The remaining disposals programme is targeted at further reducing retail exposure to approximately 20 per
cent and to a weighting of the overall portfolio to London and the South East of approximately 75 per cent.

About this announcement:

This short-form announcement is the responsibility of the Directors of the Company. It is only a summary of
the information contained in the full results announcement for the year ended 31 August 2019 and does not
contain full or complete details.

Any investment decision by investors and/or shareholders should be based on consideration of the full results
announcement available on the Company's website at:
https://www.rdireit.com/investors/results-centre

Alternatively, the full results announcement is also available via the JSE at:
https://senspdf.jse.co.za/documents/2019/jse/isse/RPL/FY2019.pdf

Copies of the full results announcement can also be obtained from, or inspected at, our Corporate Head Office,
at no charge, during normal business hours:

Address:       RDI REIT P.L.C.
               33 Regent Street
               London
               SW1Y 4NB

Email:         info@rdireit.com

Tel:           +44 (0) 20 7811 0100

In addition, copies of the full results announcement can be obtained from, or inspected at, our sponsor's
office, at no charge, during normal business hours:

Address:       Java Capital
               6A Sandown Valley Crescent
               Sandown
               Sandton
               South Africa
               2196

Tel:           +27 (0) 11 722 3050

Use of Alternative Performance Measures (APMs):

The Board uses a number of financial measures to assess and monitor its performance and position, most
notable of which are Underlying earnings, EPRA earnings and EPRA net asset value. Although a number of
these are industry standard metrics, they are not defined under IFRS and therefore considered alternative
performance measures (APMs). APMs are presented to provide a balanced view and useful information to the
readers of the Group's results. Detailed disclosures of alternative performance measures including, where
applicable reconciliation to IFRS, are presented in the full results announcement.

The Group has considered the European Securities and Markets Authority (ESMA) 'Guidelines on Alternative
Performance Measures' in disclosing additional information on its APMs.

By order of the Board,

Mike Watters                                                 Donald Grant
Chief Executive                                              Chief Financial Officer

24 October 2019

For further information, please contact:
RDI REIT P.L.C.
Mike Watters, Donald Grant                                   Tel: +44 (0) 20 7811 0100

FTI Consulting
UK Public Relations Adviser                                  Tel: +44 (0) 20 3727 1000
Dido Laurimore, Claire Turvey, Ellie Sweeney
rdireit@fticonsulting.com

Instinctif Partners
SA Public Relations Adviser                                  Tel: +27 (0) 11 447 3030
Frederic Cornet
RDI@instinctif.com

JSE Sponsor
Java Capital                                                 Tel: +27 (0) 11 722 3050

About RDI:

RDI is an income focused UK-REIT with a diversified portfolio invested principally in the UK. The
investment approach is driven by an in depth understanding of occupational demand including the impact of
technology, transport and infrastructure investment. The portfolio has been repositioned in recent years to
increase its weighting to London and the South East and to provide greater exposure to our leading hotel and
serviced office operating platforms.

RDI is committed to delivering attractive income led total returns across the real estate cycle. The current
strategic objectives of a lower leverage capital structure and more focused allocation of capital are targeted at
delivering an industry leading and sustainable income return.

RDI is a UK Real Estate Investment Trust (UK REIT) and holds a primary listing on the London Stock
Exchange and a secondary listing on the JSE. The Company is included within the EPRA, GPR, JSE All
Property and JSE Tradeable Property indices.

For more information on RDI, please refer to the Company's website www.rdireit.com



Date: 24/10/2019 08:00:00
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