Heriot REIT reports record distributable earnings growth of 26.1%

Heriot REIT, the AltX-listed diversified South African property company, saw a landmark year after it increased distributable earnings by 26.1%, its most ever, to R389.21 million for the year to June 30.

The distribution per share (DPS) increased by 14.3% to 121.91 cents in the year to June 30. The growth in DPS was not directly aligned with distributable earnings, as the Thibault REIT acquisition initially led to an about 4% dilution in DPS, but delivered a 7% increase in net asset value per share.

A final dividend of 65.07 cents a share, on a 100% payout ratio, was declared for the six months to June 30, a 14.5% increase compared to the final dividend for the same period in 2024.

The company’s management said on Friday that the results reflect the resilience of its portfolio, with a strong performance by its emerging market retail and industrial assets, in spite of persistent local and global macroeconomic headwinds.

“The company delivered robust results, reflecting management's expertise, disciplined investment strategy, and a portfolio anchored by blue-chip national tenants,” they said.

The “remarkable growth” was driven by the acquisition of Thibault REIT on June 28, 2024 - it contributed R61.9m to distributable earnings, while the 10% shareholding in Safari added R19.1m to the total.

Thibault's contribution to distributable earnings received an uplift from its investment in Texton, which declared two distributions during the year to 120.1 cents per share.

The results were also boosted by the disposal of non-current assets held for sale - R15m from the sale of an investment property was included in distributable earnings.

In 2024, Safari changed its financial year-end from March to June to align with Heriot's reporting period, resulting in 15 months of Safari's distributable earnings being included in Heriot's 2024 financial results.

Consequently, Safari's year-on-year distribution declined from 78 to 73.6 cents per share, reflecting the inclusion of only 12 months of earnings in its 2025 results, compared to 15 months in the prior period.

However, Heriot's increased shareholding in Safari following the Thibault acquisition had a positive impact on distributable earnings, increasing its share of distributable profits from R103.39m to R111.37m.

The 100-basis point reduction in the repo rate positively impacted the company's earnings, as the debt is linked to floating rates.

The Aparthotel sector performance improved due to new developments coming online, upgrades to properties, and outsourcing management to hotel operators.

The industrial sector performance significantly improved from letting vacant space and increased rentals on lease renewals. Group vacancies also remained low at 1.6% versus 3.1% in 2024.

Heriot's net asset value per share increased 17.5% to R20.59 by June 30. This was driven by an increase in the property portfolio value, supported by positive rental escalations on renewals and re-lets. The share price was unchanged at R16 per share on Friday.

The directors said that while challenging local and global macroeconomic conditions had persisted, recent developments created a platform for short- to medium-term growth. These included improved energy availability from Eskom, the Government of National Unity remaining in place, and lower interest rates.

“The group will continue to pursue strategic initiatives to unlock value from its existing portfolio while expanding its asset base through the acquisition of high-yielding properties in target markets,” they said.

The directors said they would pursue growth of 10% to 15% in the dividend per share for the year ending June 30, 2026.

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