Monday, 1 June 2020

TR Property Trust - Full Year Results

I hold this property trust in my ISA and I also my Sipp drawdown portfolio.

The fund is managed by Thames River and aims to maximise the total return by investing in international property shares and direct property mostly in the south east of UK. Manager, Marcus Phayre-Mudge has been involved in property investment since 1992 and has been involved in running the Investment Trust since 2004.

At the end of April the largest geographic exposure was the 36% weighting in the UK, with France making up a further 13.5%, Sweden 9% and Germany 37%. Retail has been reduced and accounts for 15% of the portfolio (down from 22% in 2019) and office space 28%, with another 37% in residential and the remainder divided between industrials 23% and diversified such as storage, healthcare, supermarkets and student accommodation. 

The majority of the portfolio consists of UK and European shareholdings with a small allocation of 8% in UK direct property.


The trust has recently published results for the full year to end March 2020 (link via Investegate). It was all going so well until mid February...the Covid-19 pandemic had a dramatic impact on the European property markets in March and as a result net assets fell by 20% in the matter of just 3 weeks with the share price down over 30%. Over the past year, net asset total return has decreased by 11.5% reversing most of the previous year's gain of 15.5%. The share price declined by -16.8% ... although it has recovered by 15% during the past month.

Commenting on the results, outgoing chairman Hugh Seaborn said:

"Looking back over the last decade, the Trust has delivered a share price total return of 171% and a NAV total return of 157% versus a benchmark figure of 97%. This performance compares well to the FTSE All Share total return of 53% and the STOXX Europe (in EUR) total return of 72%. Income remains a crucial element of property's total return and our dividend payments over the same 10 year period (and including the final dividend announced today) have recorded a compounded annual growth rate of 9.3%.

Rarely has any 12m reporting period been so dominated by the events of the last six weeks of the financial year...

The low costs of borrowing and skinny yields on fixed income will remain a feature of the financial landscape, increasing the value of income particularly where it is index-linked. This will support the attractiveness of property as an asset class although not necessarily protect it against market fluctuations caused by macro events that move global equity markets, such as that which we have witnessed in the closing weeks of this financial year".

The crisis caused several companies in which TR invests not to pay dividends as expected. The company said it expected earnings to fall in the current financial year but that it expected to use reserves to pay its own dividends. "The company has a healthy level of revenue reserves which have been accumulated over time to provide resilience in the event of a crisis. These are used to supplement short to medium term falls in earnings until such time as conditions settle..."

Share price past 12 months


Revenues have increased slightly and as a result the final dividend will be increased to 8.8p (last year 8.6p) making a total of 14.0p for the year, an increase of 3.7% compared to the previous year (12.2p). It has produced compound annual dividend growth of 9.3% p.a. over the past 10 years and this has been fully covered by property revenues. The trust yields 3.8% at the current price of 365p.

So, Covid has impacted my holding in this company - having said that, the share price is still up 20% on my purchase price at the end of 2016 plus an additional 12% from dividends so mustn't grumble too much. I said last year that I was expecting a little volatility in the share price until the Brexit saga was resolved...but was unprepared for the coronavirus curve ball. However, the income seems fairly secure even if reserves may well be required over the coming year or two. I am happy to continue with my current holding as property offers diversity to my portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

No comments:

Post a Comment