14th January 2019: Brexit-proof shares

Tritax Big Box REIT plc is a real estate investment trust (REIT) focused on investing in logistics facilities in the United Kingdom.

It invests in and manages both standing assets and pre-let forward funded developments. The Company focuses on well-located, modern Big Box logistics assets, typically greater than 500,000 square feet, let to institutional-grade tenants on long-term leases (typically at least 12 years in length) with upward-only rent reviews and geographic and tenant diversification throughout the UK.

Victrex is engaged in the manufacture and sale of various polymers. The Company’s operating segments include Industrial (Victrex Polymer Solutions) and Medical (Invibio Biomaterial Solutions). The Victrex Polymer Solutions segment focuses on automotive, aerospace, electronics and energy markets. The Invibio Biomaterial Solutions segment focuses on providing specialist solutions for medical device manufacturers.

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Tritax Big Box REIT PLC (BBOX)

Tritax Big Box REIT plc is a real estate investment trust (REIT) focused on investing in logistics facilities in the United Kingdom.

It invests in and manages both standing assets and pre-let forward funded developments. The Company focuses on well-located, modern Big Box logistics assets, typically greater than 500,000 square feet, let to institutional-grade tenants on long-term leases (typically at least 12 years in length) with upward-only rent reviews and geographic and tenant diversification throughout the UK.

Tritax updated the market on its trading ahead of its results for the year ended 31 December on Thursday, re-porting that its portfolio of 54 ‘big box’ assets and 114 acres of prime London distribution development land was independently valued at £3.42bn as at year-end, including all forward funded development commitments.

The portfolio was 100% let or pre-let to 39 institutional quality tenants, with contracted annual rental income of £161.1m, and all leases providing for upward-only rent reviews, of which 45% were RPI or CPI-linked, 37% were open market, 11% were fixed and 7% are hybrid.As at 31 December, the firm’s largest tenant exposure was to Amazon, representing 13.6% of its total contracted rental income, up from 4.1% on 30 June. On the investment front, Tritax acquired eight new big box investments in 2018, including seven pre-let forward funded developments, with an aggregate purchase price commitment of £641.5m.

Planning permission had been secured for the first phase of Tritax’s prime London distribution development site at Littlebrook in Dartford, comprising the proposed development of a 450,000 square foot logistics facility. Seven pre-let forward funded developments, totalling 6.6 million square feet, were under construction as at 31 December. It also completed a 10-year lease extension with Kellogg’s at its distribution centre at Trafford Park in Manchester, reflecting an increase in annual rent of 20.0% from the previous passing level.

The company said it intended to maintain its progressive dividend policy during 2019 and thereafter.

Despite the ongoing uncertainty around Brexit, logistics lettings in 2018 reached near record high levels and market rents continued to grow even though speculative supply had increased. This occupier demand has been under-pinned by the continued growth in e-commerce and occupiers seeking improved supply chain efficiency through the application of larger, flexible and automated logistics property solutions. The outlook for our company remains positive and we expect UK logistics to remain a robust property investment sector during 2019.

Victrex (VCT)

The Company is engaged in the manufacture and sale of various polymers. The Company’s operating segments include Industrial (Victrex Polymer Solutions) and Medical (Invibio Biomaterial Solutions). The Victrex Polymer Solutions segment focuses on automotive, aerospace, electronics and energy markets. The Invibio Biomaterial Solutions segment focuses on providing specialist solutions for medical device manufacturers.

The Company’s geographical locations include the United Kingdom; Europe, Middle East and Africa (EMEA); Americas, and Asia-Pacific. Its solutions are used in a range of applications, such as braking systems in automotive market, seal rings in energy market, mobile devices in electronics market and implanted devices in medical market.

Victrex reported a jump in full-year profit in DEC as it said it was stockpiling ahead of Brexit. In the year to 30 Sep-tember 2018, pre-tax profit rose 15% to £127.5m on revenue of £326m, up 12% from the year before. Earnings per share were up 11% to 128.8p and group sales volumes increased 10% to 4,407 tonnes.

Chief executive Jakob Sigurdsson said: “This has been a strong year for Victrex, with broad based growth in our core polymer business and further good progress in our new product pipeline. We delivered a range of notable mile-stones across each of our mega-programmes and we are currently closing in on larger opportunities in Gears, as well as being in advanced discussions for new strategic Aerospace alliances.”

Strong cash generation continues to offer the opportunity of attractive returns to shareholders and VCT announced a special dividend of 82.68p, whilst retaining the current dividend distribution policy, thereby balancing investment for growth with shareholder return.

As far as Brexit is concerned, the company said the main risk is that there could be a sustained period when it’s not able to import certain raw materials or export finished goods through customs, which could curtail sales if regional inventory levels were depleted. To mitigate this, it has secured additional warehousing for finished goods stocks in mainland Europe and China, which will allow a minimum of eight weeks of finished goods stock to be held outside the UK by the end of March 2019. Victrex has also secured some additional raw material stocks and said group in-ventories could exceed £80m through FY19 as a result, up from £69.3m.

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