A strategy of investing in Europe’s “winning cities” has helped deliver a 157% post-tax profit rise for global asset manager Schroder.
In the six months to 31 March, the Schroder European Real Estate Investment Trust made €10.8 million after tax, compared with €4.2 million during the same period last year.
Schroder said this was “driven by an uplift in portfolio values and growth in net income” helped by a buoyant European property market.
France provides the lion’s share of income
Profit per share was 8.1 euro cents, up from 7.7 euro cents in the full year to 30 September 2017, while dividends per share in the half-year, at 3.7 euro cents, were well over half the 5.2 euro cents in the full year.
Net asset value was €187.1 million, up 4.9% on the €178.3 million for the full year to 30 September.
The results cheered investors, with shares in the trust rising 0.87p today, or 0.76%, to 114.87.
income, Biarritz and Rennes in France, where, again, retail properties provided, respectively, 7.8% and 5.9% of total income, and Paris, where office rentals accounted for 36.3% of income.
Retail properties in Frankfurt and Berlin contributed 4.3% and 10% of income respectively, while office properties in Stuttgart and Hamburg accounted for 5% and 3.4% respectively of total income.
Eurozone growth driving the market
Office property in Apeldoorn in the Netherlands provided 14.9% of total income.
Sir Julian Berney, chairman, said: “The investment manager’s in-house research and local teams, which totals 145 people across eight key target markets in Europe, provide a market-leading platform to identify assets fitting the investment strategy. The focus is on locations that are benefiting from supply/demand imbalances, infrastructure improvements and competing land uses.”
He added: “Execution of this investment strategy has underpinned the delivery of shareholder returns. The company is keen to build on this by growing in a disciplined way that continues to improve earnings and value and brings additional benefits such as improved share liquidity.”
UK real estate investment trusts (REITs) are governed by a special set of rules. They must pay out 90% of their income to investors and be quoted on a recognised stock exchange. This allows ordinary investors to access property investments in a liquid manner and at reasonable prices.
At least 75% of the company’s profits must arise from property rental income and 75% of its assets must be connected to property rental.
In return for observing these rules, REITs pay no Corporation Tax or Capital Gains Tax on their property investments.