Release Date: November 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Burstone Group Ltd (JSE:BTN, Financial) has successfully transitioned into third-party asset management, managing 42 billion in gross asset value across nine countries.
- The company completed a significant transaction with Blackstone, which will increase third-party assets under management to 23-24 billion.
- Fee revenue for the first half increased to 34 million, contributing 8.5% to earnings, up from 5.4% the previous year.
- Cost-saving initiatives have resulted in a 7 million reduction in expenses, equating to a 5% cost drop.
- The company's LTV ratio has decreased from 44% to 33.5% post-Blackstone transaction, providing more headroom for growth.
Negative Points
- First-half earnings dipped by 3%, aligning with the lower end of the company's guidance.
- South African operations saw a like-for-like NOI decrease of 1.2%, primarily driven by office sector challenges.
- The company absorbed increased funding costs of around 40 million due to higher interest rates.
- NAV decreased by 9.7% due to impairments on the P/E L portfolio.
- The European market showed a marginal uptick in vacancy rates, impacting like-for-like NOI growth.
Q & A Highlights
Q: How much benefit did Burstone Group receive from the suspension of load shedding over the past six months?
A: Year-on-year, the company spent significantly less on diesel, dropping from 37 million rand to 450,000 rand, resulting in a savings of approximately 3 to 3.5 million rand. (Respondent: Unidentified_4)
Q: Can you explain the impact of the Blackstone transaction on Burstone's debt and gearing levels?
A: The Blackstone transaction reduced Burstone's gearing from 44% to 33.5%, with a look-through gearing now at 41%, down from 58% in March. This provides significant headroom for future growth. (Respondent: Unidentified_1 and Unidentified_2)
Q: Are there any assets within the office or industrial portfolios that present material reversionary risk?
A: Most of the major reversionary risks are behind us, particularly the long-dated leases. The focus is now on shorter-dated leases, which show a narrowing of the reversionary gap. (Respondent: Unidentified_4)
Q: With the economy expected to pick up, is Burstone considering local acquisitions?
A: Burstone sees value in the industrial space in South Africa and is open to opportunities, but decisions will be based on risk-adjusted returns and management skill. (Respondent: Unidentified_4)
Q: How does Burstone plan to manage potential conflicts of interest in its South African fund management strategy?
A: Conflict management is a critical part of governance structures, with dedicated teams and clear protocols to manage tenant and acquisition opportunities. This approach is consistent across all regions. (Respondent: Unidentified_1)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
