Schroder European Real Estate Investment Trust (SERE) H1 2024 earnings summary

Executive summary

• Provides diversified exposure to real estate assets in growth cities across continental Europe, focusing on annual indexation, strong tenant covenants, and sustainability initiatives.

• Maintained a conservative capital position, resulting in strong balance sheet flexibility and readiness for growth initiatives.

• NAV as of 31 March 2024 was €165.3m (123.6c/share), down from €171.4m (128.2c/share) at 30 September 2023, reflecting a -1.3% NAV total return for the interim period.

• Share price trades at a 40% discount to NAV, with an 8% dividend yield that is 109% covered.

• Portfolio value (directly held assets plus cash) was €234.5m, with 15 properties, 48 tenants, and a 96% occupancy rate.

Financial highlights

• EPRA earnings increased 3% to EUR 4.3 million for the six months ended 31 March 2024, driven by rental uplift, indexation, and strong occupancy.

• Dividend cover improved to 109%, with all income inflation-linked and 80% subject to annual indexation.

• IFRS loss after tax for the period was €2.2m, compared to a €8.7m loss in the same period last year.

• All rents collected for the period, excluding Seville, which was previously written down to nil.

• Dividend of EUR 0.0148 per share declared over the last four quarters, with annualized yield of ~8%.

Outlook and guidance

• Expectation of further interest rate cuts by the ECB in 2024, which could support real estate investment and valuations.

• Forecasts for indexation-driven rental growth of 2–2.5% in 2025 and 2026, with potential for ERV growth above indexation in supply-constrained markets.

• The company aims to achieve Article 8 SFDR status and the 'Sustainability Improver' label, with FCA approval targeted for later in 2024.

• Focus on asset management initiatives, lease regearing, and sustainability improvements to drive earnings and value.