Questor Income Portfolio: Regional Reit, meanwhile, should pay us bigger dividends in future thanks to its intelligent asset management
Our portfolio, as shown in the table, is delivering on its target, paying an annualised yield of 5.9pc since launch.
Update: Premier Oil bonds
The oil and gas firm is doing the right things from a bondholder’s perspective. Most importantly, it is continuing to cut its debts, making the company less risky. Our only concern, of course, is that it is able to repay its retail bonds when they fall due in two years’ time, as well as the interest in the meantime.
In an update last month it said net debt had been reduced from $2.33bn (£1.83bn) at the end of 2018 to $2.25bn at the end of April. The company put this down to free cash flow generation of about $80m, which was ahead of forecast thanks to strong production and higher oil prices.
Better still, its free cash flow generation should increase over the remainder of the year as a result of the timing of capital expenditure and interest payments. At current oil prices, Premier forecast full-year net debt reduction at the upper end of the $250m-$350m range.
It said daily production was 14pc higher than in the same period last year thanks to operating efficiency of 97pc. The group has insulated itself from volatility in the oil price by hedging 42pc of its remaining 2019 oil production at $69 a barrel and 10pc of its 2020 oil volumes at $66 a barrel.
We feel secure about our bonds and are happy to hold on to them.
Questor says: hold
Bond price at close: £101.75
Update: Regional Reit
The property trust continues to deliver pleasingly steady performance. In a recent update it said its occupancy rate was about 89pc, while rents at a number of its properties had risen, in some cases by more than 30pc, as a result of its policy of active “asset management” – improving or reconfiguring sites and renegotiating leases.
Numis, the broker, said Regional Reit’s asset management was “more intensive than many of the peer group”. It said the trust’s aim was “to identify off-market acquisition targets offering value, improve the rental income and valuation through asset management, and then either sell the asset or hold for income”.
The broker said this strategy had paid off in 2018, when Regional disposed of £149.3m of properties (including almost half of its industrial portfolio into what it perceived as an overheated market) at an average yield of 5.7pc and acquired £73.3m of properties at an average yield of 8.7pc.
This can only augur well for our income in future. For now, the trust has increased the dividend for the first quarter of 2019 by 2.7pc to 1.9p per share, from 1.85p at the same time last year. It will be paid on July 12. The dividend for 2018 was 93pc covered by earnings but the trust expects this year’s payment to be fully covered.
Questor says: hold
Share price at close: 108.8p
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Update: ULS Technology
Share in ULS, whose technology brings together the various parties in property transactions, have drifted lower since we reported a drastic fall last autumn. But last month the firm published a reassuring update.
It said it expected full-year results, due on June 19, to be broadly in line with both market expectations and the previous year. It added: “The group continues to generate strong cash flow and the directors will, subject to shareholder approval, maintain the group’s policy of paying a progressive dividend for this financial year.”
We will report in more detail after the results.
Questor says: hold
Share price at close: 66p
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