CAPE TOWN – Spear Reit shot up as much as 4.65 percent on Thursday after distribution per share increased 7 percent to 44.64 cents per share in the six months to end August.
Chief executive Quintin Rossi said in an interview that while it had been a tough year so far, Spear’s Western Cape focus had allowed management to be “close at hand” to “problem solve and batten down the hatches” where necessary.
The group said its revenue increased 18 percent to R251.1 million, compared with the same period last year.
Spear has more than 30 properties in the Western Cape and achieves diversification from investing in different asset types. Some 7 percent of its lettable area is in hotels, 8 percent in retail, 32 percent in commercial and 63 percent in industrial assets.
Rossi said strong demand for industrial, office and retail space had underpinned growth, but their hotels were under pressure due to some residual impact of the water crisis on tourism, a weak economy and slower corporate spending, which hurt the business tourism trade.
The fair value of two hotels in the group was lowered by R53m in the interim period. The hospitality sector made up 8 percent of group revenue, 2.5 percent of that income was fixed, and only 5.5 percent was variable.
Rossi said he expected the hospitality sector in the province to remain under pressure in the next 12 to 18 months. He said rand weakness, additional international flights to Cape Town, and the easing of children’s visa requirements would benefit tourism in time.
The group declared an interim dividend of 44.64c per share. Distribution per share growth for the full year was on target for 6 percent to 8 percent growth.
Rossi said management, who were aligned with share price performance through a more than 32 percent shareholding, were focused on distribution growth. He said net asset value per share increased by 0.04 percent to R11.67 a share, from R11.66 per share in the prior corresponding period.
Loan to value improved by 2.91 percent to 38.43 percent, from 39.58 percent as at February 28, 2019, but management were comfortable raising it in the second half in pursuit of some opportunities that they could not yet disclose to the market, said Rossi.
The investment property value rose 16.13 percent to R3.92 billion. Headline earnings per share increased by 2.75 percent to 45.47c per share.
Spear shares closed 4.65 percent higher on the JSE on Thursday at R9.