Results analysis from Kepler Trust Intelligence

Schroder Real Estate (SREI)

11/05/2025

Results analysis from Kepler Trust Intelligence

Schroder Real Estate's (SREI) final results to 31/03/2025 show a NAV total return of 11.0% for the year, comprising a 4.8% increase in NAV per share and a 3.5p dividend (2024: 3.34p +4%). The dividend was 100% covered by earnings and at the current share price SREI's dividend yield is 6.6%.

SREI's underlying property portfolio gave a total return of 9.1%, a continuation of the long-term outperformance of the benchmark MSCI UK Balanced Portfolios Quarterly Property Index, which saw a total return of 6.2%.

Performance was driven by a mixture of sector weightings compared to the benchmark, with SREI's overweight positions in retail warehouse and industrial sectors, detailed below, and active management, with capital expenditure on targeted assets and leasing up on SREI's flagship net zero industrial asset at Stanley Green all contributing to the outperformance.

SREI has always had a focus on high-yielding assets and this means that SREI's net initial yield, 5.6%, is still at approximately a 100bp premium to UK 10-year gilts, and the dividend yield, 6.6%, over 200bps. On the basis of a snapshot today this is about right for property, but of course SREI isn't a static portfolio and one of the most striking numbers is SREI's reversionary yield, 8.4%, compared to the benchmark's 6.2%. The potential for the manager to grow income is therefore very strong. While SREI's current 14% discount is obviously much narrower than it has been, the forward looking potential for the NAV and income to grow is high, and thus SREI remains, in our view, undervalued.

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