National Storage REIT today announced its financial results for the year ended 30 June 2020 with occupancy down -3.4%, earnings per security down -13% and distributions down -15.6%.
NSR were one of the few groups to tap the equity markets for additional capital thus diluting the earnings per share for the relevant period. The Group also were under pressure from the take over proposals from GAW, Public Storage and Warburg Pincus which slowed progress on a number of developments.
NSR has however grown its portfolio of owned, managed and licenced centres by 17% during the last 12 months to $2.28 billion as at 30 June 2020, taking to 194 centres. NSR now manages approximately 95,000 storage units across approximately 950,000 square metres of net lettable area in Australia and New Zealand. .
Managing Director Mr Andrew Catsoulis said, “Despite the combined challenges of significant M&A activity attracted by NSR in FY20 and the COVID-19 pandemic, NSR has delivered another strong result as we continue to execute our growth strategy.”
Key Highlights
- A-IFRS profit after tax of $121.8 million
- FY20 underlying earnings of $67.7 million, up 9%
- FY20 underlying EPS1 of 8.3cps in line with guidance
- Total return for FY20 of 6.2%
- Final distribution of 3.4cps bringing total FY20 distribution to 8.1cps
- Total assets under management (AUM) $2.28 billion, up 17%
- Net tangible assets $1.65 per stapled security, up 1.2%
- 22 acquisitions totalling $218 million settled in FY20
- 7 acquisitions completed to date in FY21 totalling $134 million
- FY21 earnings guidance – 7.7cps – 8.3cps
- Distribution guidance 90% – 100% of underlying earnings
FY20 earnings were impacted by delays in joint venture development income as a result of the takeover activity in the three months up to COVID-19; and then COVID-19, which also impacted on short term operational results.
Underlying earnings for the period increased by 9% to $67.7 million. Despite the disruptions, NSR continued to successfully execute its acquisition and development strategy with 22 acquisitions settled totalling $218 million, and 15 active construction projects with five already underway.
NSR’s NTA per security increased modestly to $1.65, while its total AUM increased significantly by 17% to $2.28 billion. NSR confirms the final distribution of 3.4cps (totalling 8.1cps for FY20) as previously estimated on 16 June 2020 and confirms the payment date of 7 September 2020.
“Despite the challenging nature of COVID-19 lockdowns impacting all markets in which NSR operates, NSR again demonstrated the strength and resilience of its business throughout this period, said Mr Catsoulis.
Combined Australian and New Zealand occupancy finished the year at 78.9%, down modestly from the previous year, however has improved significantly to 81.5% as at 23 August 2020. In the seven-week period post 30 June 2020, occupancy has rebounded strongly with most Australian states showing positive growth, particularly Western Australia, New South Wales and Queensland. New Zealand occupancy continues to remain strong at 84.9%. As a business, NSR continues to execute its “four pillars” growth strategy. This strategy focuses on achieving organic growth through rate and occupancy increases, maintaining its strong acquisition pipeline, undertaking high-quality developments and expansions in key markets – all overlayed by its use of new technology and innovation initiatives.
NSR has significant built capacity within the existing portfolio of approximately 140,000m2 of occupancy “runway” available in Australia before NSR reaches its target stabilised occupancy level of 90%, which should generate up to $35 million of additional revenue if achieved. Given NSR’s relatively fixed cost base, the majority of this potential revenue should fall to underlying earnings.
“NSR continues to roll out its “Revive” program – an operational transformation plan, focused on delivering improved functionality and an enhanced customer experience while adding to bottom line revenue generation”, said Mr Catsoulis.
Outlook
Subject to no material changes in market conditions or operating environments, including no material deterioration in COVID-19 restrictions, regulations and impact, NSR’s FY21 guidance range for underlying earnings will be 7.7 to 8.3 cents per stapled security. NSR’s distribution guidance is in line with NSR’s distribution policy of 90% – 100% of underlying earnings.
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