By Nick Wilson

UK-based property company Liberty International on Thursday reported a 20% increase in its dividend to 16,5p for each ordinary share for the six months to June and a 34% surge in earnings an ordinary share to 18,8p.

Speaking from London, Liberty International CE David Fischel said this was partly on the back of underlying growth from the company’s property portfolio. The company also reported a 16% increase in underlying profit before tax for the six months.

Fischel said Liberty International also had a much lower tax charge since converting to a real estate investment trust (Reit). A Reit company invests in property and enjoys a measure of protection from corporate tax in return for an obligation to distribute a significant amount of the Reit’s cash flows to shareholders. They are exempt from capital gains tax.

Fischel said the 20% increase in dividends included an extra increase to reflect the savings from converting to a Reit structure.

He said the company, which is predominantly focused on regional shopping centres, also maintained a high occupancy rate of 98,6%.

Liberty International chairman Robert Finch said the company had “moved decisively to take advantage” of its new Reit status.

“First we have introduced GIC Real Estate from Singapore, one of the world’s leading global real estate investors, as a strategic 40% partner in MetroCentre (shopping centre), Gateshead, for a gross consideration of £426m. Secondly, we transferred £300m of central London properties into a £460m partnership with Great Portland Estates, pooling assets which fitted together logically and realising nearly £70m of cash from the transaction,” said Finch.

He said the company’s financial position was strong, with a debt to assets ratio on June 30 of 36%, £199m of cash and £405m of committed bank facilities.

But the shares of UK-listed property companies have come under pressure this year. Finch said the FTSE-350 real estate index dropped 18,5% in the six months ended June, while Liberty International’s share price dropped 18% in the same period.

He said this indicated some measure of investor uncertainty surrounding the property industry.

Len van Niekerk, head of quoted property at the Old Mutual Investment Group, said a lot of the weakness seen in Liberty International’s UK share price had been a “consequence of poorer sentiment towards what is perceived to be interest rate-sensitive stocks”.

“Liberty International offers a secure income despite higher short-term interest rates because of the demand for their quality properties and their debt is hedged to protect them against shorter-term interest rates,” said Van Niekerk.

He said the rate of Liberty International’s fixed debt would decline over the next few years.

Edwin Schultz, portfolio manager at Coronation Fund Managers, said Liberty International had reported “solid results”.

“There are interesting trends. Rises in capital value seem to have come to an end.

“There was a marginal increase in NAV (net asset value)”, partly due to rising interest rates in the UK, said Schultz.