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Hansteen Holdings plc

Hansteen shares gain as property values rise despite Brexit uncertainty

Hansteen has decided end its long-term incentive plan after forking out a significant payout to joint chief executives Ian Watson and Morgan Jones.

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The group raised its full year dividend to 6.2p per share from 6.1p the prior year

Hansteen Holdings plc (LON:HSTN) shares edged higher on Monday after the landlord reported growth in the value of its property portfolio for 2018 despite Brexit uncertainty.

The FTSE 250 firm, which buys and manages business parks and industrial estates, said the like-for-like property valuation increased 6.5% to £39.6mln last year, led by gains in the Midlands and the North West.

Like-for-like contracted rent jumped 88% to £1.7mln.  

Normalised total profit from continuing operations rose to £45.8mln from £37.5mln a year ago, boosted by the sale of assets.  

Shareholder payout drags NAV lower 

However, normalised income profit from continuing operations fell to £25.8mln from £31.3mln and the net asset value per share dropped to 102.7p from 130.6p.

The sale of £294.5mln of assets above book value and the acquisition of £56.9mln of property enabled the group to return £144.5mln, or 35p per share, to shareholders but this led reported profit measures and NAV lower.

"The team is well placed to manage the portfolio going forward,” chairman Melvyn Egglenton said.

 “We believe that our diverse portfolio and management focus presents a rare combination in today's property sector that can achieve both income and capital growth."

The company plans to focus its investments on urban multi-let industrial property, which it believes is likely to outperform most other property investments in terms of returns and earnings over the next few years.

Hansteen well placed to handle possible Brexit fallout

On Brexit, the group said the uncertain outcome of the government’s negotiations makes it difficult to assess the future impact on Hansteen but believes the “fundamentals of occupational supply and demand will continue to be strong despite the short-term economic and political volatility”.

Hansteen said it has not yet seen any negative impact from Brexit uncertainty on its tenants' take-up of space with  its regional offices reporting “good levels of enquiries and good levels of new lettings” so far in 2019.

With a cash balance of £55.1moln and further funds that can be drawn under its existing debt facility, the company considers it to have “adequate available resources to moderate the impact of any future macro-economic challenges while being able to take advantage of any investment opportunities that may arise”.

The group raised its full year dividend to 6.2p per share from 6.1p the prior year.  

Liberum maintained a ‘hold’ recommendation and target price of 105p, saying the results were ahead of its forecasts.

“A 35p special dividend and ~6% long-term incentive plan (LTIP) dilution reduced NAV -21% to 102.7p, 3% ahead of forecast,” the broker said.

“This masked a strong +6.5% LFL valuation gain reflecting favourable cyclical and structural conditions for industrial real estate.”

Hansteen to end long-term incentive plan after significant payout to joint CEOs

The broker thinks Hansteen continues to offer strong total return prospects, which in future will be helped by the company’s decision to end its LTIP after forking out a significant payout to joint chief executives Ian Watson and Morgan Jones.

The LTIP pays out to the executives every three years if the value of the company’s assets increases sufficiently.

For the three years ended December 2018, the CEOs will be issued with 11.6 million shares each after the deduction of PAYE and National Insurance contributions.

Based on Monday’s 93.7p share price, their holdings are worth a combined £21.7mln.

Quick facts: Hansteen Holdings plc

Price: £0.89

Market: AIM
Market Cap: £380.3 m
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