National Storage REIT (ASX: NSR) has reported its half-year result for the six month period to 31 December 2017.
National Storage is the largest self-storage provider in Australia and New Zealand with over 125 centres. It operates as a real estate investment trust (REIT).
Here are some of highlights compared to the prior corresponding period:
Storage revenue increased by 22% to $59.6 million. One of the key drivers of National Storage's income is revenue per available square metre (REVPAM), same centre REVPAM increased by 4% to $216. Occupancy for the whole portfolio grew by 1.6% to 79% compared to June 2017.
Operating profit increased by 25% to $34.5 million because operating centre expenditure only increased by 19%. The operating margin increased to 54% from 53%, showing that National Storage's economies of scale is helping.
Management said that finance costs increased by 53% to $9.5 million because its recent acquisitions required higher borrowings.
The increase in finance costs meant that underlying earnings only grew by 11% to $22.4 million. Underlying earnings per share (EPS) increased by 4.9% to 4.3 cents.
Underlying earnings excludes certain accounting adjustments like the change in value of properties. The $33.7 million fair value adjustment of properties was the main reason why profit after tax increased by 152% to $59.8 million. Statutory EPS increased by 140%.
Debt decreased from $481.8 million at June 2017 to $477 million at the end of December 2017, which meant the gearing ratio was 35%.
Net tangible assets (NTA) per share increased by 5% to $1.41, which was helped by its acquisitions during the six months.
National Storage increased the distribution by 2.17% to 4.7 cents per share.
Outlook
Management are predicting that underlying earnings per share for FY18 will be between 9.6 cents to 10.1 cents, which would represent growth of 4.4% to 9.8% compared to FY17. The REIT also gave guidance that the distribution will be between 9.6 cents to 10 cents for FY18.
Foolish takeaway
National Storage is trading with a yield of between 6.34% to 6.6% based on full-year distribution guidance.
I thought this was a decent result from National Storage because underlying earnings and the distribution both increased, which is the main thing investors should want from the REIT. As long as debt and gearing are kept under control the REIT should a solid income choice for the medium-term.
