Last close As at 05/08/2026
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▲ 2.00 (2.08%)
Market capitalisation
GBP159m
Research: Real Estate
Regional REIT (RGL) has confirmed a Q422 DPS of 1.65p, taking the total for the year to 6.6p. It expects this to be fully covered by EPRA earnings when results are published in March, supported by leasing progress and strong rent collection. Market-wide valuation yield widening reduced NAV and increased gearing, but RGL notes that it has ample headroom available across the debt facilities, which are fixed at a cost of 3.5%.
Regional REIT |
FY22 DPS covered and yields c 11% yield |
Valuation and |
Real estate |
27 February 2023 |
Share price performance
Business description
Next events
Analyst
Regional REIT is a research client of Edison Investment Research Limited |
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Regional REIT (RGL) has confirmed a Q422 DPS of 1.65p, taking the total for the year to 6.6p. It expects this to be fully covered by EPRA earnings when results are published in March, supported by leasing progress and strong rent collection. Market-wide valuation yield widening reduced NAV and increased gearing, but RGL notes that it has ample headroom available across the debt facilities, which are fixed at a cost of 3.5%.
Year end |
Net rental |
EPRA |
EPRA |
NAV**/ |
DPS |
P/NAV |
Yield |
12/20 |
53.3 |
28.1 |
6.5 |
98.6 |
6.40 |
0.63 |
10.3 |
12/21 |
55.8 |
30.4 |
6.6 |
97.2 |
6.50 |
0.64 |
10.5 |
12/22e |
62.3 |
33.5 |
6.5 |
72.1 |
6.60 |
0.86 |
10.6 |
12/23e |
64.3 |
34.5 |
6.7 |
72.0 |
6.70 |
0.86 |
10.8 |
Note: *EPRA earnings exclude revaluation movements, gains/losses on disposal and other non-recurring items. **NAV is EPRA net tangible assets (NTA) per share.
Operational progress mitigates valuation pressures
The end-December portfolio valuation was £790m (FY21: £906m; H122; £918m). The portfolio equivalent yield increased to 9.0% from 8.6% at H1 (FY21: 8.7%). The like-for-like reduction of 12.1%, all generated in H2 (H1: +1%), was driven by market-wide yield widening. MCI data indicate a negative c 17% capital return for offices outside London and the south-east in 2022. RGL’s outperformance benefited from strong new lettings, amounting to c £5.5m (of which c £2.8m in H2), well above the pre-pandemic (FY19) level. While net borrowing reduced by c 1% in H2, the loan to value ratio increased to 49.5% (H1: 43.2%) due to valuation movements. The balance sheet remains liquid (we estimate end-FY22 cash of more than £50m) and RGL notes ample headroom on all bank covenants. We have adjusted our forecasts to align with the valuation announcement, reducing FY22e NAV per share by 18% to 72.1p, but with no material changes to EPRA earnings. We will review our forecasts in detail with the results in March.
Income-led strategy
RGL has consistently targeted a higher-yield portfolio that would provide progressive, regular quarterly dividends with the potential for capital growth over the medium term. In the cyclical commercial property sector, income returns have historically been significantly more stable than volatile capital values and provide a more consistent measure of value. Uncertainty about the future use of, and demand for, office space has hung over the office sector (92% of the RGL portfolio) for the past year or more, but strong leasing and an accelerating return to the office are very positive indicators. A November study by RGL, of its more than 1,000 tenants, showed that 99% had returned to the office, particularly with hybrid working.
Valuation: High yield despite sustained distributions
RGL continues to offer one of the highest fully covered dividend yields in the UK REIT sector, a combination of its income-led strategy and the market valuation of its shares. The FY22 NAV reduction had been significantly discounted by the market and the discount to FY22 NAV remains at c 15%.
Exhibit 1: Financial summary
Year end 31 December (£m) |
2019 |
2020 |
2021 |
2022e |
2023e |
INCOME STATEMENT |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
Rental & other property income |
64.4 |
62.1 |
65.8 |
76.8 |
77.4 |
Non-recoverable property costs |
(9.4) |
(8.8) |
(9.9) |
(14.4) |
(13.1) |
Net rental & related income |
55.0 |
53.3 |
55.8 |
62.3 |
64.3 |
Administrative expenses |
(10.9) |
(11.3) |
(10.6) |
(11.6) |
(12.3) |
EBITDA |
44.1 |
42.0 |
45.2 |
50.7 |
52.0 |
EPRA cost ratio |
31.6% |
32.4% |
31.2% |
33.9% |
32.8% |
Gain on disposal of investment properties |
1.7 |
(1.1) |
0.7 |
(3.3) |
0.0 |
Change in fair value of investment properties |
(3.5) |
(54.8) |
(8.3) |
(125.5) |
0.0 |
Change in fair value of right to use asset |
(0.2) |
(0.2) |
(0.0) |
(0.2) |
(0.2) |
Operating Profit (before amort. and except.) |
42.0 |
(14.1) |
37.6 |
(78.3) |
51.8 |
Net finance expense |
(13.7) |
(14.0) |
(14.9) |
(17.2) |
(17.5) |
Fair value movement in interest rate derivatives & goodwill impairment |
(2.0) |
(3.1) |
6.0 |
11.9 |
0.0 |
Profit Before Tax |
26.3 |
(31.2) |
28.8 |
(83.6) |
34.3 |
Tax |
0.3 |
0.2 |
0.0 |
0.0 |
0.0 |
Profit After Tax (FRS 3) |
26.5 |
(31.0) |
28.8 |
(83.6) |
34.3 |
Adjusted for the following: |
|||||
Net gain/(loss) on revaluation/disposal of investment properties |
1.9 |
55.9 |
7.6 |
128.7 |
0.0 |
Other EPRA adjustments |
2.6 |
3.2 |
(6.0) |
(11.6) |
0.2 |
EPRA earnings |
31.0 |
28.1 |
30.4 |
33.5 |
34.5 |
Period end number of shares (m) |
431.5 |
431.5 |
515.7 |
515.7 |
515.7 |
Fully diluted average number of shares outstanding (m) |
398.9 |
431.5 |
459.7 |
515.7 |
515.7 |
IFRS EPS - fully diluted (p) |
6.6 |
(7.2) |
6.3 |
(16.2) |
6.6 |
EPRA EPS (p) |
7.8 |
6.5 |
6.6 |
6.5 |
6.7 |
Dividend per share (p) |
8.25 |
6.40 |
6.50 |
6.60 |
6.70 |
Dividend cover (x) |
0.94 |
1.02 |
1.02 |
0.99 |
1.00 |
BALANCE SHEET |
|||||
Non-current assets |
806.0 |
749.5 |
925.2 |
816.0 |
823.8 |
Investment properties |
787.9 |
732.4 |
906.1 |
789.5 |
797.5 |
Other non-current assets |
18.1 |
17.2 |
19.0 |
26.5 |
26.3 |
Current Assets |
69.4 |
101.1 |
85.5 |
79.1 |
73.0 |
Other current assets |
32.2 |
33.7 |
29.4 |
27.3 |
30.1 |
Cash and equivalents |
37.2 |
67.4 |
56.1 |
51.8 |
42.9 |
Current Liabilities |
(36.2) |
(49.1) |
(58.4) |
(60.9) |
(62.1) |
Borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other current liabilities |
(36.2) |
(49.1) |
(58.4) |
(60.9) |
(62.1) |
Non-current liabilities |
(355.5) |
(380.9) |
(449.9) |
(449.7) |
(450.3) |
Borrowings |
(287.9) |
(310.7) |
(383.5) |
(387.5) |
(388.6) |
Other non-current liabilities |
(67.6) |
(70.3) |
(66.4) |
(62.2) |
(61.7) |
Net Assets |
483.7 |
420.6 |
502.4 |
384.6 |
384.4 |
Derivative interest rate swaps & deferred tax liability |
2.6 |
5.0 |
(1.0) |
(12.9) |
(12.9) |
Goodwill |
(0.6) |
0.0 |
0.0 |
0.0 |
0.0 |
EPRA net tangible assets |
485.7 |
425.6 |
501.4 |
371.7 |
371.5 |
IFRS NAV per share (p) |
112.1 |
97.5 |
97.4 |
74.6 |
74.5 |
EPRA NTA per share (p) |
112.6 |
98.6 |
97.2 |
72.1 |
72.0 |
EPRA NTA total return |
4.9% |
-5.8% |
5.0% |
-19.0% |
9.2% |
CASH FLOW |
|||||
Cash (used in)/generated from operations |
26.0 |
48.0 |
56.9 |
55.1 |
50.4 |
Net finance expense |
(12.2) |
(12.5) |
(13.1) |
(15.4) |
(16.1) |
Tax paid |
(0.8) |
0.2 |
0.0 |
0.0 |
0.0 |
Net cash flow from operations |
13.0 |
35.7 |
43.8 |
39.7 |
34.3 |
Net investment in investment properties |
(25.6) |
(0.3) |
(98.3) |
(12.1) |
(8.0) |
Acquisition of subsidiaries, net of cash acquired |
(43.9) |
0.0 |
0.0 |
0.0 |
0.0 |
Other investing activity |
0.2 |
0.1 |
0.0 |
0.0 |
0.0 |
Net cash flow from investing activities |
(69.4) |
(0.2) |
(98.2) |
(12.1) |
(8.0) |
Equity dividends paid |
(32.5) |
(26.7) |
(27.8) |
(34.0) |
(34.4) |
Debt drawn/(repaid) - inc bonds and ZDP |
3.5 |
22.2 |
73.8 |
3.0 |
0.0 |
Net equity issuance |
60.5 |
0.0 |
(0.1) |
0.0 |
0.0 |
Other financing activity |
(42.7) |
(0.8) |
(2.7) |
(0.9) |
(0.8) |
Net cash flow from financing activity |
(11.2) |
(5.3) |
43.2 |
(31.9) |
(35.3) |
Net Cash Flow |
(67.6) |
30.1 |
(11.2) |
(4.3) |
(8.9) |
Opening cash |
104.8 |
37.2 |
67.4 |
56.1 |
51.8 |
Closing cash |
37.2 |
67.4 |
56.1 |
51.8 |
42.9 |
Balance sheet debt |
(337.1) |
(360.1) |
(433.1) |
(437.2) |
(438.5) |
Unamortised debt costs |
(6.9) |
(6.0) |
(6.9) |
(5.6) |
(4.4) |
Closing net debt |
(306.8) |
(298.8) |
(383.8) |
(391.0) |
(400.0) |
LTV |
38.9% |
40.8% |
42.4% |
49.5% |
50.2% |
Source: Regional REIT historical data, Edison Investment Research forecasts
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Research: TMT
CLIQ Digital demonstrated another year of strong revenue growth, driven by elevated levels of marketing expenditure in the year. Margins fell slightly year-on-year due to higher advertising prices and investment into platform development and licensed content to support the group’s growing customer base. The substantial uplift in the scale of the business and the strong balance sheet support the 63% increase in the proposed dividend for the year, with the shares offering a premium yield of 6.6% at the current price. We have adjusted our FY23 forecasts to reflect management’s updated guidance and introduce our FY24 forecasts, and highlight our expectations for CLIQ to continue the positive momentum.