Collins Property Group’s share price plunged 12.9% on Friday despite raising distributable income for the year to end-February 2025 to 109 cents from 94 cents and maintaining its final dividend at 50 cents.
The dividend payout ratio was lower at 92% versus 95% last year. The dividend for the year came to 100 cents versus 90 cents last year. Loan-to-value (LTV) at 49.8% versus 50.8% was relatively high compared with other REITs. The share closed at R9.64 on Friday.
The company directors said however that the LTV was based on conservative valuations, as demonstrated by historically selling properties at or above book values, including lease cancellation fees. Investment properties were only written up by 1.7%, well below the average inflation rate.
The vacancy rate fell to 1.8% from 3.9%, and the rental collection rate improved to 99.9% from 99.3%. The all-in cost-to-income ratio of 18% was also the same as last year—these metrics indicate the group performed well operationally during the year.
The directors said the year had felt like a tale of two cities. In the first half, activity was subdued as businesses in general were waiting to see the outcome of the South African elections in May 2024.
“There was very little commitment during this period, and this could be seen in our vacancies at 3% halfway through the year,” they said.
Post the elections and the formation of the Government of National Unity (GNU), reduced load shedding and falling interest rates helped boost business confidence, which fed through to increased activity in the business.
However, the confidence and optimism felt going into the December break did not carry through into the first quarter of 2025, primarily due to geopolitical risks, US tariffs, and resultant trade frictions.
The South African National Budget impasse has had a negative impact on the strength of the GNU, introducing more pressure on the South African economy.
Profit from continuing operations was R573 million versus R1.21 billion in 2024. The previous year’s profit was inflated by R667 million due to the write-back of deferred tax liabilities due to the REIT conversion.
Revenue only increased by 1% due to the sale of non-core assets, and finance costs fell by R28m due to lower interest rates. Distributable income grew by 15.8% to R361m from R311m.
The Industrial and Logistics sector portfolio of 54 properties, which represents 65% of the group asset value, saw the vacancy rate improve to 0.9% from 2.7%, which management attributed to continually enhancing the product offering and, where possible, providing risk-mitigating solutions when municipal services fail.
The 43 properties in the retail sector, which account for 28% of the group asset value, saw vacancies decrease well to 4.7% from 8.1%.
The office sector, making up 7% of the gross asset value, saw vacancy improve slightly to 18.4% from 21.7%, and opportunities to sell down on these 14 assets continued to be explored.
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