Ahead of its results for the period from 30 September 2019 to the 31 March 2020, which will be announced in on Tuesday, 19 May 2020, the Board of Tritax EuroBox plc, today provides an update on the impact of the COVID-19 pandemic on its business.
Tritax EuroBox invests in a high-quality portfolio of very large, prime logistics real estate assets located across Continental Europe. The Company’s portfolio comprises 12 properties totalling over 909,000 sqm in six European countries. These assets are let to 21 substantial companies on long leases, averaging 9.7 years.
Nick Preston, Fund Manager of Tritax EuroBox, commented: “Our ongoing priority remains to ensure the safety and well-being of our management team and to work closely with our tenants to support them through this challenging period. Despite the unprecedented nature of this crisis, we believe that the fundamentals driving demand for Continental European logistics assets remain strong. Supply chains have been severely tested, and this has highlighted occupiers’ growing need for modern, well specified, strategically located buildings close to major population centres and infrastructure.
Structural tailwinds driving demand in the big box logistics sector may be accelerated as a result of the impact of the COVID-19 pandemic. We anticipate that the recent marked increase in online retail usage in Europe will lead to retailers having an even greater focus on growing their e-commerce platforms. Other emerging themes include manufacturing moving closer to Europe from the Far East in order to shorten supply chains and also companies holding higher inventory levels to protect against potential supply chain disruption. All of these effects are likely to lead to companies growing their logistics functions. Meanwhile, the supply of logistics facilities remains constrained due to low land availability and little speculative development. We believe these supply and demand factors will help to underpin future valuations in the Continental European logistics space, and notwithstanding any short term issues arising from the current crisis, create further upward pressure on rental values.
We are taking a disciplined approach to maintaining a robust balance sheet and have temporarily paused investments and material new expenditure, given the lack of visibility on the depth or duration of the crisis. This robustness is further supported by the future cashflows we have secured through our strong and deepening relationships with our tenants. We remain confident that the quality of our portfolio, and the embedded asset management opportunities within it, will underpin growth in income and total returns to our shareholders.”
Impact of COVID-19 on the business
The Company’s diversified income stream is supported by a wide tenant base comprising
retailers, manufacturers, third party logistics providers, pharmaceutical, food and drink and packaging companies. 58% of the Company’s income is generated by occupiers in the retail sector, 80% of which are online retailers, either exclusively or significantly. The Management team has been in regular contact with all 21 tenants in the portfolio as the crisis has unfolded and is closely working with them on a case by case basis in a supportive and commercial way. All tenants are still operating their properties, although some are operating at reduced capacity due to lower business volumes or government restrictions. This continued usage, alongside the significant investment that our tenants have made in our buildings, demonstrates that these are key operating assets for their businesses, as well as being essential in providing the goods and services that the underlying customers continue to require.
All rents due for the quarter ended 31 March 2020 have been collected. With regard to the Company’s rental receipts for the quarter ending 30 June 2020, the position is as follows:
• While the Company has confidence in the financial strength of all tenant businesses, it has supported two tenants by temporarily delaying some of their rental payments by formally agreeing staged payment plans, and it is still in discussion with a third tenant.
• Approximately two thirds of the Company’s rental income is payable in advance on a monthly basis with the remainder payable on a quarterly basis.
• Of the total €10.14 million rent due to the Company between 1 April and 30 June 2020, an amount of €1.6 million (15.7%) has been agreed to be delayed and repaid during 2021.
• The Company is still in discussion with one tenant on the repayment terms of €0.35 million of rent (3.4% of the total quarterly rent demanded).
• The Company also has the additional security of 14 rental deposits and bank guarantees and seven parent company guarantees across its portfolio.
Financial Position
Tritax EuroBox is well capitalised with a strong balance sheet and significant headroom to its financial covenants.
• The Group has cash and undrawn facilities against its unsecured revolving credit facility in excess of €100 million as at April 2020, along with no material operational or capital expenditure expected for the remainder of the quarter ending 30 June 2020.
• As at 3 February 2020, the Company had an LTV ratio of 43%.
• Rental income and asset values would be required to fall by more than 50% and 30% respectively before any of the Company’s principal debt covenants were breached. The earliest refinance date of the RCF is September 2023, with the majority of debt maturing in September 2024.
Dividend
The Company’s last quarterly dividend equated to 1.10 cents per share. The focus remains on progressively increasing the dividend once there is more visibility on the effects of the crisis. The Board will announce the next dividend alongside its interim results in May. Notice of Half Year Results The Company will announce its half year results for the six months ended 31 March 2020 on Tuesday, 19 May 2020. The Company presentation of its half year results for analysts and investors will take place via a live conference call and webcast at 9am on the day, and a recording will be available on-demand later in the day via the Company website: www.tritaxeurobox.co.uk
