TIDMBBOX
RNS Number : 8494U
Tritax Big Box REIT plc
04 August 2022
TRITAX BIG BOX REIT PLC
Results for the six months ended 30 June 2022
Record letting activity - continued growth - strategically well
positioned
Tritax Big Box REIT plc (the Group) reports its results for the
six months to 30 June 2022 (H1 2022 or the Period).
30 June 30 June Change
2022 2021
Operating profit(1) GBP88.8m GBP84.1m +5.6%
Adjusted earnings per share(2) 3.73p 4.03p -7.4%
Adjusted earnings per share ( ex. additional
development management income) (3) 3.73p 3.69p +1.1%
IFRS earnings per share 24.55p 21.96p +11.8%
Dividend per share 3.35p 3.20p +4.7%
Dividend pay-out ratio (ex. additional
development management income) (3) 90% 87%
Total Accounting Return 10.7% 12.5% -1.8 pts
EPRA cost ratio (including vacancy
cost) 15.2% 14.1% +1.1 pts
30 June 31 Dec
2022 2021
Contracted annual rent roll GBP216.1m GBP195.6m +10.5%
EPRA Net Tangible Assets per share 242.88p 222.60p +9.1%
IFRS net asset value per share 239.23p 218.26p +9.6%
Portfolio value(4) GBP6.03bn GBP5.48bn +10.0%
Loan to value (LTV) 23.7% 23.5% +0.2 pts
Strategic delivery supporting continued growth
-- 5.6% operating profit growth from strategic delivery of
development completions, asset management and LFL rental
growth.
-- Adjusted EPS of 3.73p (H1 2021: 4.03p) reflecting reduced
development management (DMA) income partially offset by development
completions and rental growth.
o Excluding additional DMA income in prior period, Adjusted EPS
increased 1.1% to 3.73p(3) , with development completions and
rental growth offsetting 8.7% increase in average share count
following 2021 equity raise.
-- 10.5% growth in contracted annual rent primarily through
development letting activity supporting future accretive earnings
growth.
-- 4.7% dividend growth to 3.35p, representing 90% pay-out ratio
when adjusting for additional DMA income(3) .
-- Total Accounting Return of 10.7% (H1 2021: 12.5%) driven by
continued execution of strategy.
-- EPRA cost ratio of 15.2% expected to return to previous
levels as Current Development Pipeline becomes income
generating.
-- Strong balance sheet with low LTV, no near-term refinancing
requirements and 100% of drawn debt benefiting from either fixed or
capped interest rates with an average cost of debt of 2.52%.
Market supported by positive and enduring structural drivers
resulting in record occupier demand
-- Record market take-up of 22.6 million sq ft in H1 2022, up
9.5% on H1 2021, as occupiers continue to enhance their supply
chains.
-- Supply of logistics space remains highly constrained; 1.2%
vacancy rate resulting in rapid leasing of buildings and rental
growth.
-- H1 2022 investment volumes remained healthy at GBP4.2 billion
(H1 2021: GBP5.2 billion) supported by structural drivers in
logistics real estate.
Record development lettings with GBP17.8 million of contracted
annual rent secured
-- During H1 2022 we made significant development progress, delivering:
o 2.4 million sq ft of development lettings, increasing
contracted annual rent by GBP17.8 million or 9.1%.
o 2.2 million sq ft of construction starts, formed of:
-- 1.6 million sq ft of developments pre-let or let during
construction, adding GBP11.1 million to contracted annual rent;
-- 0.6 million sq ft of developments on a speculative basis,
with the potential when let to add GBP6.1 million to contracted
annual rent, 45% of which is under offer.
o Planning consent secured for a further 0.6 million sq ft of
development, across two sites.
-- Current Development Pipeline of buildings under construction
(includes 2021 starts) totals 3.4 million sq ft of which 1.8
million sq ft (53%) has been pre-let or let during construction; a
further 15% is under offer.
-- On-track to deliver increased target of 3-4 million sq ft of
development starts with strong ESG credentials in FY 2022:
o Maintaining 6-8% yield on cost target range;
o New buildings delivered to high ESG standards with EPC ratings
of A and minimum BREEAM "Very Good";
o Expected positive earnings impact from mid-2023, in line with
completions, with full effects felt in FY 2024.
Exceptional quality and efficiency of portfolio underpins value
and income security
-- Portfolio value up 10.0% to GBP6.03 billion (31 December
2021: GBP5.48 billion), reflecting development gains, active asset
management activity and strong underlying market conditions,
including a LFL valuation surplus of 7.0% (net of capex).
-- The portfolio's high-quality, long-term and resilient income is reflected in:
o WAULT of 12.8 years as at 30 June 2022 (31 December 2021: 13.0
years);
o 0% vacancy (H1 2021: 0%). 100% rent collected;
o Highly efficient portfolio with minimal cost leakage and low
capital expenditure requirements;
o Focused on modern, sustainable high-quality buildings critical
to the supply chains of well capitalised blue-chip customers.
Creating value through active management of portfolio and
customer engagement
-- GBP2.7 million added to passing rent from rent reviews and
lease renewal, achieving an 8.4% increase across 16.3% of the
portfolio.
-- Like-for-like ERV growth of 5.8% in the period, with 14.7%
portfolio rental reversion at the period end. EPRA like-for-like
rental growth of 3.3% over the period.
-- One lease extension and one lease renewal completed, adding
15 years and 10 years respectively to create significant value.
-- Enhancing ESG performance through supporting our customers
fulfil their Net Zero Carbon ambitions.
Aubrey Adams, Chairman of Tritax Big Box REIT plc,
commented:
"We have delivered another strong first half, with good
operational and financial performance and excellent progress within
our accelerated development programme, which continues to gather
momentum. Long-term structural drivers, and existing favourable
market dynamics, are generating strong occupier interest in both
our standing investment portfolio and in the new space we are
creating through our development activity. By successfully
implementing our strategy we have secured record lettings on 2.4
million sq ft of new space so far this year, adding GBP17.8 million
to our contracted annual rent roll and supporting future earnings
growth in 2023 and 2024."
"We continue to see strong occupier demand for space although
inflation and geopolitical issues have made the economic
environment more uncertain. We benefit from a combination of
high-quality investment assets which provide the business with a
strong base of secure, long-term income, and attractive rental
growth potential driven by a favourable structural supply/demand
imbalance in our market. Our dynamic and profitable development
programme is a capital efficient growth engine for our business
that is delivering now and for the long-term. The Group has a
strong balance sheet and high levels of liquidity, giving us the
resources to implement our strategy and respond quickly to changing
market conditions. Consequently, we are well positioned to continue
delivering attractive and resilient performance over the longer
term."
Presentation for analysts and investors
A Company presentation for analysts and investors will take
place via a live webcast at 9.30am (BST) today and can be viewed
at:
https://stream.brrmedia.co.uk/broadcast/62bd6c2ec0d3e61cd0c965ac
To join the presentation via conference call:
UK: +44 (0) 33 0551 0200
UK (toll free): 0808 109 0700
US: +1 212 999 6659
Password: Tritax
The presentation will also be accessible on-demand later in the
day on the Company website:
https://www.tritaxbigbox.co.uk/investors/results-and-presentations/
Notes
1. Operating profit before changes in fair value and other adjustments.
2. See Note 6 to the financial statements for reconciliation.
3. The anticipated run rate for development management income is
GBP3.0 - 5.0 million per annum over the medium term. Adjusted EPS
becomes 3.73p when excluding development management income above
this anticipated run rate ('additional' development management
income). GBP2.6 million of development management income is
included in the 3.73p Adjusted earnings per share in H1 2022 (H1
2021 GBP 8.9 million included in 4.03p Adjusted earnings per
share).
4. The Portfolio Value includes the Group's investment assets
and development assets, land assets held at cost, the Group's share
of joint venture assets and other property assets.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Tritax Group
Colin Godfrey, CEO Tel: +44 (0) 20 8051 5060
Frankie Whitehead, CFO bigboxir@tritax.co.uk
Ian Brown, Head of Investor Relations
Kekst CNC
Neil Maitland/Tom Climie Tel: +44 (0) 7971 578 507
+44 (0) 7760 160 248
Email: tritax@kekstcnc.com
The Company's LEI is: 213800L6X88MIYPVR714
NOTES:
Tritax Big Box REIT plc (Tritax Big Box or the Company) is the
largest listed investor in high-quality logistics warehouse assets
and controls the largest logistics-focused land platform in the UK.
Tritax Big Box is committed to delivering attractive and
sustainable returns for shareholders by investing in and actively
managing existing built investments and land suitable for logistics
development. The Company focuses on well-located, modern logistics
assets, typically let to institutional-grade tenants on long-term
leases with upward-only rent reviews and geographic and tenant
diversification throughout the UK. The Company seeks to exploit the
significant opportunity provided by the imbalance between strong
occupational demand and constrained supply of modern logistics real
estate in the UK.
The Company is a real estate investment trust to which Part 12
of the UK Corporation Tax Act 2010 applies, is listed on the
premium segment of the Official List of the UK Financial Conduct
Authority (Ticker: BBOX) and is a constituent of the FTSE 250, FTSE
EPRA/NAREIT and MSCI indices.
The Company's LEI is: 213800L6X88MIYPVR714
Further information on Tritax Big Box REIT is available at
www.tritaxbigbox.co.uk
CHAIRMAN'S STATEMENT
This was another very positive period for the Group, as we
continued to expand the scope of our profitable development
activities and delivered further growth in recurring earnings,
dividends and net asset value. In an increasingly uncertain
economic and geopolitical environment, the exceptional quality of
our portfolio and customer base, together with our strong financial
position, are standing us in good stead and will continue to do
so.
Strong operational performance supporting acceleration in future
earnings growth
We are successfully deploying the proceeds of our September 2021
equity raise into accelerated development activity. The deployment
is progressing in line with our expectations and we are quickly
letting this space with 2.4 million sq ft let so far this year and
adding GBP17.8 million of new rent to our annual contracted rent
roll. This positive development momentum underpins future income
growth as these assets are built and expected to become income
producing from mid-2023 and 2024, supporting further EPS and
dividend progression.
Our financial performance is in line with our expectations and
in part reflects the effects of the 2021 equity raise. Operating
profit before changes in fair value and other adjustments was
GBP88.8 million (H1 2021: GBP84.1 million) as we continued to
increase our net rental income. The change in our Adjusted EPS
figure reflected a combination of a reduction in DMA income from
the elevated levels received in the prior period, and the increase
in the number of shares following our equity raise, in part offset
by increased rental income from development completions and rent
reviews. As a consequence, Adjusted EPS fell by 7.4% to 3.73 pence
(H1 2021: 4.03 pence) and excluding exceptional DMA income,
Adjusted EPS increased 1.1% to 3.73 pence (H1 2021: 3.69 pence).
The portfolio delivered a fair value gain of GBP390.5 million,
resulting in a 9.1% increase in EPRA Net Tangible Assets to 242.88
pence per share (31 December 2021: 222.60 pence), reflecting the
overall high-quality of our assets and the successful
implementation of our strategy.
Our dividend policy is to provide an attractive and progressive
level of dividend for shareholders, aiming to achieve an overall
pay-out ratio greater than 90% of Adjusted earnings. The
distribution methodology is for each of the first three quarterly
dividends to represent 25% of the previous full year dividend. We
use the fourth-quarter dividend to determine the level of any
progression. In line with that, we have declared two interim
dividends of 1.675 pence each, to give a total for the period of
3.35 pence, up 4.7% on H1 2021. Along with the growth in EPRA NTA,
this resulted in an attractive Total Accounting Return of
10.7%.
Strong occupational market supported by enduring structural
drivers
Year to date, the occupational market has been very strong with
record demand from a wide range of occupiers leading to
historically low vacancy rates and driving attractive levels of
rental growth. Occupational demand is supported by long term
structural drivers, some of which have been accelerated by the
pandemic, such as the transformation of retail due to demographic
and technological change, the drive to enhance sustainable
performance, and the need to increase supply chain efficiency.
Looking forward, the extent of this demand gives us confidence in
both the ongoing strength of the occupational market and our
ability to support our customers by producing solutions which
enhance efficiency and supply chain resilience.
Investment demand remained high in the first quarter of the
year, with pricing for high-quality investments supported by the
significant weight of money looking to be deployed into the sector.
Sentiment shifted through the second quarter as the deteriorating
economic environment caused reduced investment activity. Our
high-quality investment portfolio is focused on prime assets, let
on long leases to resilient customers and with strong ESG
credentials; we therefore expect our relative performance to remain
attractive in the face of a potentially more uncertain investment
market.
A consistent strategy designed for all market conditions
Our strategy aims to deliver sustainable and attractive returns
to shareholders through a focus on high-quality logistics assets.
Supporting our strategy is a considered approach to risk and a
long-term view on performance through the economic cycle. By
strategically focusing on modern, high quality logistics assets in
key locations let to financially resilient customers on long-dated
leases, we reinforce the reliable income generating characteristics
of our investment portfolio. We complement this strong foundation
with our internal growth opportunities through an active approach
to asset management, identifying and realising opportunities to
further enhance income and value, and creating new high-quality and
sustainable assets through our development pipeline.
The investment portfolio, which comprises more than 90% of our
gross asset value, has been carefully constructed for quality and
resilience and underpins our income generation. We believe our
portfolio is the one of the best among our listed European peers,
making us confident that we will continue to receive stable and
growing income that supports our dividends. Our active asset
management programme continues to drive income and capital values,
including the settling of rent reviews and negotiating lease
extensions.
We are also focused on continuing to enhance our ESG performance
through our proactive approach. This has included engaging with
customers to understand their ESG objectives and identifying
opportunities to support their needs while, in parallel, also
enhancing the quality of our assets by embedding initiatives that
will enable us to meet our own ESG targets. We provide more details
on our ESG activity during the Period in the Managers Report.
Our development programme provides the opportunity to more than
double the scale of our business in the long term, continually
improve the quality of our investment portfolio, and deliver
ongoing attractive income and capital growth. We are on track to
meet our increased target of 3-4 million sq ft of construction
starts in 2022, with 2.2 million sq ft of construction already
commenced in the period. While we are confident in the prospects
for our development programme, we remain highly attuned to risk.
The strength of occupational demand means we are typically either
securing pre-lets or letting our speculative buildings during the
construction process, noting that we only commence speculative
development where there is clear occupational demand for the space
that we are creating. In total, we have 3.4 million sq ft within
our Current Development Pipeline, with the potential to add GBP27.6
million to annual rent, of which GBP12.7 million of rent has
already been contracted. In addition, a further 0.6 million sq ft,
representing approximately GBP5.1 million per annum of rent has
exchanged in our Near-term Development Pipeline, where construction
has not yet commenced.
With 88% of our land portfolio being held under long-term
options, we have a capital-light model and the flexibility to
increase or decrease the rate of development according to market
conditions.
Enhancements to the Investment Management Agreement
Following consultation with and the approval of shareholders, a
new Investment Management Agreement (IMA) between the Company and
Tritax Management (the Manager) became effective on 4 May 2022,
with a new fee scale effective from 1 July 2022. The key changes
include a reduction in the overall investment management fee
payable, which is expected to have a beneficial effect on the
Company's EPRA cost ratio, and an extension to the term of the
agreement. The extension, along with an expansion of key person
principles, provides additional security to the Company in terms of
its main service provider as well as supporting the recruitment and
retention of key personnel in the Manager. See the Manager's Report
for further details.
Outlook supported by long-term structural drivers, strategic
positioning and strong balance sheet
We have made a very good start to the year with excellent
progress across all aspects of our business. We remain confident in
our future performance supported by positive and enduring
structural drivers in the occupier market, the quality and
flexibility of our portfolio and our strong balance sheet.
While noting the increasingly uncertain economic outlook, we
continue to see strong occupier demand from a more diverse range of
customers which is driving rents and supporting our ability to
mitigate the effects of higher inflation.
Our strategy is designed to deliver both growth and resilience
which we believe will continue to provide attractive relative
performance. Our investment portfolio, formed of mission critical
buildings let on long-leases to customers who are well positioned
to weather economic challenges, provides a solid foundation to our
income generation and our development pipeline, the vast majority
of which is held under long-dated capital efficient options, is
highly flexible allowing us to respond rapidly to changes in demand
to capture opportunities and minimise risk. Favourable long-term
market dynamics, our procurement capabilities and capital-light
land portfolio allow us to mitigate much of the impact of
inflationary pressures on development yields and margins.
These attributes, combined with low levels of leverage, no near
term refinancing requirements, and debt facilities which are 100%
fixed or hedged, underpin confidence in our ability to execute our
strategy and continue to deliver attractive returns for
shareholders over the longer term.
MANAGER'S REPORT
Market review
Long-term structural drivers enhance the attractions of the
sector
Three long-term drivers continue to underpin occupier demand for
logistics real estate in the UK. Our strategy is aligned to these
drivers, which are:
1. The growth of e-commerce
Consumer demand for flexibility in how they shop as well as
faster and more convenient ways to buy has led to a rise in
e-commerce in recent years, which was accelerated by physical store
closures during the Covid-19 lockdowns. Online penetration remains
comfortably above pre-pandemic levels; online sales accounted for
27% of total retail sales in H1 2022, up from 19% in 2019 [1] .
Growing penetration of the internet and the use of smartphones is
expected to see online retail sales continue to grow over the
medium term.
To fulfil this demand, companies have developed extensive and
often increasingly complex supply chains. Logistics real estate
plays a fundamental role, from highly automated large-scale
fulfilment centres to small urban or last journey warehouses.
Online retail supply chains also require more warehouse space than
traditional high street models. Research suggests every GBP1
billion of additional online sales typically generates demand for
new logistics property of anywhere between 0.8 million sq ft and
1.4 million sq ft [2] .
2. The need to increase productivity, reduce costs and boost
resilience
Current economic conditions, with high inflation and pressure on
consumer finances, have intensified the need for companies to win
market share, grow revenue and protect margins. Optimising supply
chains with a focus on resilience, efficiency, and where
appropriate speed, is an important part of this process. One
outcome of this is that some occupiers are choosing to consolidate
older disparate units into larger distribution centres, which offer
economies of scale and the ability to optimise staffing and stock
levels. They are also deploying automation and technology to stock,
retrieve and process products in volume. These systems are
typically found in large, modern logistics buildings.
Events such as Covid-19, Brexit and the war in Ukraine have also
highlighted the risks to long supply chains. Customers are
responding by increasing their inventory onshore and / or reviewing
every aspect of their supply chain from manufacturing and
transportation to storage. This has increased demand for
high-quality logistics space closer to the end consumer.
3. The drive to enhance sustainability performance
Most organisations are now striving to be more sustainable. This
can reduce their environmental impact, cut energy costs, and
increase employee engagement, which is important in a highly
competitive labour market. Modern large-scale logistics assets
feature enhanced insulation, LED lighting and large roof spaces
capable of accommodating solar PV. These buildings are also more
likely to meet future regulations, such as the minimum rating of B
for Energy Performance Certificates (EPC). In addition, larger,
modern buildings lend themselves to better facilities for staff
welfare, such as gyms, canteens, and offices. Modern sites also
have more scope for green space, which can be used to support
biodiversity and outdoor amenities.
Record demand and historically low availability driving rental
growth
Occupational demand remains at record levels
In the last two calendar years, take up of industrial and
logistics space has exceeded 42 million sq ft annually, well ahead
of the longer-term rate of 26 million sq ft [3] . Demand reached a
new first half high in H1 2022, with take up of 22.6 million sq ft3
(H1 2021: 20.6 million sq ft).
Demand for space has been very diverse, with omni-channel
retailers and the manufacturing sector becoming increasingly
prominent. Third-party logistics providers (3PLs) have also
remained very active. The diversity of occupier demand is reflected
in enquiries in our own development pipeline where omni-channel
retailers, manufacturing, automotive, and other companies comprise
nearly two-thirds of enquiries.
Demand remains strong for all size bands. 80 deals completed in
H1 2022 with 10 of those being for buildings over 500k sq ft (full
year 2021: 18)3. 28% of all deals (by number) have been for
built-to-suit projects. While tight market conditions are clearly a
factor, we also believe companies are increasingly committing to
such schemes as they evolve from meeting their immediate
pandemic-related needs to a more strategic build out of their
future networks.
While the current macro-economic environment may affect some
occupiers' leasing decisions, well-capitalised corporates such as
those that typically occupy our buildings continue to invest.
Solving their supply chain challenges is critical to them as
evidenced by space under offer at the end of Q2 2022 which totalled
19.4m sq ft3 (Q2 2021: 15.6m sq ft). At the same time, some market
leaders have already made significant investments in their
warehouse networks and are therefore relatively very well
positioned to mitigate near term headwinds and win further market
share.
We believe the combination of our investment portfolio and
development business make us well placed to react to and take
advantage of the fast-evolving macroeconomic and corporate
backdrop. Our development activities give us near real-time
visibility into market conditions and our large land portfolio,
held under option agreements, provides us with flexibility and
optionality.
Availability at historically low levels
Ready to occupy space remains at historically low levels, having
ended the period at 1.2%3 (Q4 2021: 1.6%).
Strong demand, low vacancy and rental tension have encouraged
developers to bring projects forward on a speculative basis. While
the level of new development is above historic averages, buildings
across all size bands are being rapidly absorbed, often before
construction is complete.
In our view, construction of large logistics buildings will
continue to be driven primarily by occupier-led built-to-suit
opportunities. As occupiers undertake strategic supply chain
reviews, new large, built-to-suit buildings will be attractive
solutions for them. These assets meet occupiers' technical
requirements and are also capable of handling modern automation
equipment, meeting increasingly stringent environmental standards
and providing an attractive work environment.
Barriers to new development are however increasing. Land prices
have risen significantly in the last 18 months, build cost
inflation has slowed but costs are still well above 2020 levels,
and debt financing is less available and more expensive than six
months ago. The planning system remains slow and extensive
infrastructure works can be required before a building is
constructed. Control of a significant land portfolio, largely
through capital efficient option agreements, with the benefit of
planning consents and which is capable of near-term development is,
therefore, particularly attractive in the current market.
Robust rental growth
Strong demand and limited available space have pushed rents
higher across all regions of the UK in H1 2022. Since the start of
the pandemic, prime rents have reached new highs across all UK
regions.
Rental growth is expected to continue, with the IPF UK Consensus
Forecasts (May 2022) projecting average annual industrial rental
value growth of 4.0% from 2022 to 2026, up from 3.5% in November
2021.
Macro-economic backdrop slows investment activity
After a very strong Q1 2022 investment activity across all real
estate types slowed in Q2 2022, as the wider capital markets
reacted to the deteriorating economic outlook and interest rate
environment. Total UK logistics investment volumes of GBP4.2
billion in the half were down 19% on H1 2021 [4] .
Prime distribution warehouse yields ended H1 2022 at 3.50%3.
Looking to the second half, underlying real estate markets will not
be immune to the wider movements in global capital markets, as
evidenced by the decline in investor activity through the latter
part of H1. In our view, the supportive structural tailwinds and
tight occupier market will remain attractive to investors over the
medium term. We continue to closely monitor interest rates and
wider capital market conditions and believe our business is well
placed to mitigate near-term challenges and take advantage of any
emerging opportunities.
Strategy
Our strategy has three interlinked and reinforcing components
which aim to deliver sustainable income and capital growth. The
strategy aligns the Group to the market drivers described above,
ensuring it meets its wider responsibilities and carefully manages
risk, and aims to deliver attractive performance through the
economic cycle.
The three elements of the strategy are:
1) High-quality assets attracting world-leading customers -
delivering high-quality, resilient and growing income.
2) Direct and active management - protecting, adding and
realising value.
3) Insight driven development and innovation - creating value
and capturing occupier demand.
Overall, the value created from this strategy is designed to
feed through to an attractive and sustainable level of earnings
growth for the Group which in turn underpins dividend
progression.
ESG is intrinsic to each of these elements. The Group's key ESG
themes are:
-- Sustainable buildings - ensuring that all acquisitions and
standing investments align with our ESG objectives;
-- Net zero carbon - achieving our commitments;
-- Nature and wellbeing - enhancing biodiversity and wellbeing across the portfolio; and
-- Social value - creating value and positive impact for people and communities.
Information on how we implemented the strategy during the period
is set out in the following sections.
1) High-quality assets attracting world-leading customers
The high-quality of our assets and customer base has always been
fundamental to our strategy. Through our relentless focus on
quality, we have assembled what we believe to be one of the best
logistics portfolios of any quoted logistics real estate business
in Europe. The quality of the portfolio is reflected in its long
leases with embedded income growth, high-quality customers,
desirable locations, and attractive and modern buildings in a range
of sizes and format with strong ESG credentials.
The portfolio is designed to generate attractive, stable and
long-term income through the economic cycle. The security of our
income was recently reflected in 100% rent collection during the
pandemic and never having had a void on lease expiry. This
transparent, reliable and efficient rental income supports our
earnings and in turn underpins our predictable dividend payments to
shareholders.
Attractive portfolio composition
Our portfolio comprises the Investment Portfolio, which is made
up assets which either have a lease or agreement for lease in
place, and the Development Portfolio, which generates new assets
for us through pre-let and speculative developments (see insight
driven development and innovation below ) .
At the period end, the total portfolio was valued at GBP6.03
billion (31 December 2021: GBP5.48 billion), an increase of 10.0%.
The Investment Portfolio was valued at GBP5.50 billion (31 December
2021: GBP5.03 billion) and comprised 70 assets (31 December 2021:
62 assets), as eight new agreements for lease were entered into in
the period. In total, the Investment Portfolio had a Gross Lettable
Area of 36.2 million sq ft.
Investment portfolio: 91.2% Development portfolio: 8.8%
of GAV of GAV
Foundation 69.2% Developments and land: 8.8%
Value Add 22.0%
The Investment Portfolio is formed of Foundation and Value Add
assets, representing 69.2% and 22.0% respectively of the whole
portfolio. Foundation assets are intended to provide long-term and
resilient income through the economic cycle. They are typically let
on long leases to customers who exhibit excellent covenant strength
and are commonly new or modern buildings in prime locations. Value
Add assets offer additional scope to grow income and capital
values, as they present opportunities to create additional value
through active asset management or have customers with the
potential to grow and improve in covenant quality. The mix of
Foundation and Value Add assets is intended to deliver attractive
and resilient total returns.
Secure and resilient customer base underpinning income
generation
The Group has a diversified base of 47 customers. 65% of our
customers are part of groups classed as some of the biggest and
most important in the world, being listed on the DAX 30, FTSE 250,
FTSE 100 and the S&P 500. As part of constant due diligence on
our customers, we support internal analysis with third party
reporting on covenant strength from Income Analytics.
The buildings we let to our customers are often critical to
their operations, which they invest heavily in technology and
automation to form the backbone of their UK supply chains. The
importance of our buildings to our customers supply chains further
increases the income resilience of our portfolio.
The portfolio maintained its 0% vacancy rate during the period
(H1 2021: 0%).
The table below lists the Group's top ten customers:
Customer % of contracted Customer % of contracted
annual rent annual rent
Amazon 14.8% B&Q 4.1%
The Co-Operative
Morrisons 5.5% Group 3.9%
Tesco 4.8% Ocado 3.5%
Iron Mountain 4.6% Marks & Spencer 3.5%
Howdens 4.1% Argos 3.3%
Long duration, full repairing and insuring leases result in
minimal capex requirements and enhance income security
At the period end, the weighted average unexpired lease term
(WAULT) of the Investment Portfolio was 12.8 years (31 December
2021: 13.0 years). The Foundation assets had a WAULT of 15.0 years
(31 December 2021: 15.1 years).
Of total rents, 37% are generated by leases with 15 or more
years to run. Around 18% of total rent comes from leases expiring
within five years of the period end, which provide near-term active
asset management opportunities and an opportunity to capture the
growing reversion within the portfolio.
Apart from one asset, all our properties are single-let. Our
leases are full repairing and insuring (FRI) (equivalent to Triple
Net Leases in the United States). Under these leases, our customers
are responsible for property maintenance obligations and
dilapidations, which means that we have minimal maintenance capex
requirements, as demonstrated by gross to net rental income leakage
of just 0.01% in the period.
Leases provide protection from inflation and an effective floor
on levels of rental growth
All our leases provide for upward-only rent reviews, with the
portfolio balancing the certainty offered by fixed and
inflation-linked leases with the ability to capture market growth
from open market and hybrid reviews. The composition of rent review
types is presented below:
Rent review type % of rent roll at 30
June 2022
RPI/CPI linked 52.5%
---------------------
Open market 30.9%
---------------------
Fixed 8.8%
---------------------
Hybrid (Higher of inflation
/ open market) 7.8%
---------------------
18.4% of our rents are reviewed annually and 81.6% are reviewed
on a five-yearly basis. The timing of rent reviews across the
portfolio is balanced, with 35% of the portfolio subject to rent
reviews in 2022, across a blend of open market, fixed and
inflation-linked review types. Progress with rent reviews in the
period is discussed in the active management section below.
Approximately 55% of the rent roll has either a fixed or minimum
increase at rent review. Across the Investment Portfolio, this
creates an effective minimum level of annualised rental growth of
1.7% across this element of our portfolio. Our inflation linked
reviews typically have cap and collar arrangements which have an
average range of 1.5% to 3.4% respectively. While this provides
certainty on the minimum level of rental increase within the
portfolio, we aim to achieve higher rental growth through a
combination of higher real inflation rates, significant open market
rental growth and the active approach to asset management that
seeks opportunities for additional rental income. A recent example
of such an opportunity is at our asset in Nursling, near
Southampton, let to Tesco where we achieved a 23.1% rental increase
on lease renewal (see below).
Increasing estimated rental values provide future opportunities
for rental growth
At each valuation date, the valuer independently assesses the
Investment Portfolio's estimated rental value (ERV), which is the
amount of rent that the properties would be expected to secure if
an open market letting were to occur at the valuation date. At 30
June 2022, the ERV was GBP247.8 million, GBP31.7 million (14.7%)
above the contracted rent for the portfolio and reflecting a 5.8%
like-for-like increase on the ERV of GBP217.1 million at 31
December 2021. We have opportunities to capture this reversionary
potential through regular open market rent reviews, lease expiries,
new leases or lease regears.
Due to the balance between open market and inflation linked rent
reviews, and the growing rental reversion within the investment
portfolio, we remain positive on our ability to continue to deliver
attractive, long-term income growth.
A balanced range of asset sizes
Through our existing assets in the investment portfolio, and
from new buildings we are constructing through our development
activity, we are increasing our exposure to a range of building
sizes. While the investment portfolio is weighted towards larger
buildings, our development pipeline provides a high degree of
flexibility in terms of size, enabling us to match our customers'
size requirements from urban / last mile, potentially on shorter
leases and creating a pipeline of future asset management
opportunities, through to the largest "mega-boxes" on longer dated
leases. With the successful implementation of our strategy, our
overall portfolio will gradually evolve to reflect this broader mix
of building sizes and providing an attractive blend of lease
profiles.
2) Direct and active management
Understanding and supporting customers
Being close to our customers is central to the Group's business
model. Understanding their businesses maximises our ability to
identify and pursue opportunities to support their logistics needs
in a world where supply chains have become increasingly complex and
logistics operations have become more important. During the period,
we undertook further supply chain research on selected customers.
This gives us detailed insights into a customer's entire logistics
network, the role our assets play within it and their future
business needs, so we can have meaningful conversations about
supporting them through our development pipeline and active asset
management capabilities. This work also informs our decisions on
whether to hold, sell or buy investments and helps us work
collaboratively in partnership with customers to deliver ESG
objectives.
We conduct ongoing covenant analysis of our customers'
businesses, combining publicly available information and
third-party information with our own insights to understand their
respective risk profiles. Following the Russian invasion of
Ukraine, we have enhanced our monitoring of the sanctions lists as
part of these reviews. This work has not identified any areas of
concern.
Realising value and recycling capital through disposals
We constantly review and evaluate the Group's portfolio, to
identify assets where:
1) We have completed our active asset management plans and
maximised value;
2) The asset's investment characteristics no longer fit within
the portfolio profile; or
3) The asset's relative future performance may be below others
in the portfolio or where there may be more risk attached to future
performance.
When considering asset disposals, we take account of criteria
such as age, location and ESG credentials, conditions in the
investment market, and near-term opportunities to re-invest in
income-producing acquisitions and developments to maintain earnings
and dividend progression. With an acceleration in development
activity in 2022, we expect these new development assets to become
income producing from mid-2023 and will sequence our asset
disposals from the investment portfolio to minimise the overall
impact to earnings. We therefore expect that any divestments will
be undertaken towards the latter part of this financial year and
into the early part of 2023.
Growing and lengthening income
During the period, we agreed rent reviews and a lease renewal
that delivered a GBP2.7 million uplift in annual contracted passing
rent and significant capital value growth. We also agreed two
further lease extensions, including our asset in Nursling, near
Southampton which, following lease expiry in January 2021, we
agreed a new ten-year term with a five-year tenant break option and
five-yearly open market rent reviews. The new rent delivered a 23%
uplift from the previous level.
Lease extensions are currently under negotiation with three
customers whose leases expire in 2023 and 2024. Other lease
proposals currently with customers include the potential insertion
of new mezzanine floors and ESG initiatives (see below).
As noted above, 35% of the rent roll is due for review in 2022.
During the period, we settled rent reviews on 8 properties, across
15% of the rent roll. The reviews achieved a 7.2% increase on the
previous passing rent, resulting in a cumulative GBP2.1 million of
additional rent. When coupled with the one lease renewal settled in
the period, passing rent has increased by 8.4%, or GBP2.7 million,
from our asset management initiatives. The table below shows a
breakdown of these reviews by type:
Number % of Contracted Growth
rent in passing
rent
Index linked 4 8.2% 5.6%
Open market
/ hybrid 3 4.3% 12.6%
Fixed 1 2.5% 3.0%
Total 8 15.0% 7.2%
Enhancing ESG through integration, engagement & active
management
We continue to integrate ESG considerations into all aspects of
our operations. As a result, we are on track to meet or exceed the
ESG targets we have set for 2023, as detailed in our 2021 Annual
Report.
Enhancing sustainability through active asset management is a
key part of our interactions with customers. Through these
initiatives, the Group can increase income and capital values,
prolong the life of an asset, increasing its marketability and
reduce obsolescence risk. Customers can reduce their operating
costs and contribute towards their ESG targets, such as net
zero.
Availability of power is a key consideration for our customers,
particularly those who require high levels of automation or who
will want substantial electric vehicle charging capacity. Our new
Head of Strategic Power is working with our in-house active asset
management and ESG specialists on a power resilience review. Among
other things, this will take account of customers' current
consumption versus power availability, and the potential for future
automation and EV charging installation. This will identify assets
at risk of power restrictions and feed into the specifications for
new buildings being developed. As part of this work, we continue to
engage with customers to increase our collection of their
consumption data.
We are moving forward with a number of schemes to add solar PV
energy generation, including at the Avonmouth asset let to Accolade
Wines, where we have submitted a planning application and
undertaken a structural survey. In total, the projects under
consideration have the potential to generate 40,525 MWh of
renewable energy, saving 9,682 tonnes of carbon a year.
Our target is to improve all Energy Performance Certificates to
at least a C grade by the end of 2023 and at least B by the end of
2026. At the period end, 95% of the portfolio was grade C or above
(31 December 2021: 95%). Three assets representing 5% of the
portfolio are rated D and we continue to target these for solar PV
installation, which will improve their EPCs and achieve our 2023
target. In addition, we are developing a specification of other
items that can be retrofitted to improve an asset's ESG
credentials, including its EPC rating where necessary. These range
from solar walls and roofs to LED lighting and rainwater
harvesting. Overall, we believe the total capital cost to meet the
EPC B target is low at GBP4.2 million, with many of the schemes
potentially generating returns enhancing income streams, such as
solar PV.
We continue to progress our plans to implement green leases
where possible, by incorporating best practice green lease clauses
in each new lease or lease variation. When negotiating new leases,
we are also looking to include ESG incentives.
Climate-related risks are a key consideration for us. We have
begun work on creating a roadmap for the transition to net-zero
carbon, including an analysis of each of our current assets to
provide the data required to develop our plans. This will then feed
into our active asset management and development planning, to
ensure we are effectively managing associated risks and that we are
aligned with the Government's decarbonisation targets to 2050.
During the period, we also updated our property inspection
checklist to incorporate climate-related items such as the
potential for flooding or wind damage.
Other ESG activities in the period included:
-- Reviewing how we provide EV charging and liaising with
customers on future plans for powering their fleet;
-- Sending out an ESG survey to customers, to understand the
scope for collaborating on reducing emissions and achieving net
zero goals;
-- Assessing current biodiversity levels on our sites, to
provide a baseline for improvement, and engaging in regular
discussions with customers on biodiversity; and
-- Engaging with local councils to ascertain the opportunity for
collaborating on training programmes, to help our customers with
recruitment.
3) Insight driven development and innovation
We control the UK's largest land portfolio for logistics
development, capable of delivering approximately 36.8 million sq ft
of logistics space and more than doubling the size of our business.
Most of the land portfolio is held through long-term option
agreements, providing capital efficiency and flexibility to align
the pace and scale of development activity to market demand.
The development portfolio provides an ongoing pipeline of
high-quality investments for our core investment portfolio and is a
key driver to enhancing returns, targeting an attractive yield on
cost of 6-8% through an appropriate combination of pre-let and
speculative developments. The development portfolio is diversified
by geography and the range of unit sizes that can be constructed,
maximising the scope of customer solutions we can offer and the
quantum of development we can undertake. Our in-house team has a
long track record of successful delivery, both in terms of
obtaining planning consents and delivering new buildings.
The land portfolio has taken over 10 years to assemble, with its
scale, diversity and strategically important locations being very
difficult to replicate. This forms an effective barrier to entry
and provides us with an important competitive advantage in the
marketplace. Our consented land portfolio allows us to quickly
scale up our development activity in response to occupier demand
and provides us with an edge over our competitors who maybe be
constrained by uncertain planning timescales. We actively manage
the status of the land portfolio, to ensure that land we utilise
for development (following the receipt of a detailed planning
consent) is replenished by new sites where infrastructure and
servicing works are ongoing or by schemes being advanced through
the planning process.
Our commitment to sustainable development encompasses our
standards for construction, which include achieving a minimum of
BREEAM Very Good, an EPC A grade and net zero carbon to the point
of practical completion. We continue to look for ways to improve
our performance and reduce embodied carbon in our new buildings. As
part of this, we have enhanced our collection and verification of
data around carbon performance in our developments, to give us a
clear baseline to work from.
Significant development activity in the period
We continued to make good progress with our development
programme during the period.
-- During H1 2022 we made significant development progress, delivering:
o 2.4 million sq ft of development lettings, increasing
contracted annual rent by GBP17.8 million or 9.1%.
o 2.2 million sq ft of construction starts, formed of:
-- 1.6 million sq ft of developments pre-let or let in
construction, adding GBP11.1 million to contracted annual rent.
-- 0.6 million sq ft of developments on a speculative basis,
with the potential when let to add GBP6.1 million to contracted
annual rent, 45% of which is under offer.
o Planning consent secured for a further 0.6 million sq ft of
development, across two sites.
-- Current Development Pipeline of buildings under construction
totals 3.4 million sq ft of which 1.8m sq ft (53%) has been pre-let
or let during construction, a further 15% is under offer.
-- On-track to deliver increased target of 3-4 million sq ft of development starts in FY 2022:
o Maintaining 6-8% yield on cost target range.
o Delivery expected to have positive earnings impact through FY
2023 and FY 2024.
-- Near-term Development Pipeline has the potential to deliver
8.9 million sq ft of which 7% has been pre-let.
-- The Future Development Pipeline of 1,291 acres is capable of
potentially accommodating a further 26.3m sq ft of development.
When negotiating new leases, we are increasingly looking to
incorporate hybrid rent reviews. These allow for rental increases
that are the higher of index-linked or open market, providing the
opportunity to maximise our future income growth. If this is not
possible, we currently favour open market rent reviews, but the
approach remains under constant review subject to the merits of
each type of review relative to the characteristics being exhibited
in the economy from time to time, whilst ensuring a balance across
the portfolio.
A carefully considered and low-risk approach to development
While we believe development provides an attractive way to
significantly enhance our returns, we carefully manage the
associated risks it generates. Our Investment Policy limits land
and development exposure to 15% of GAV, including a maximum
exposure to speculative development of 5% of GAV. At the period
end, land and development exposure was 8.8% of GAV and speculative
exposure based on aggregated costs was 1.7%.
Below we outline how we manage the risks associated with
speculative development and how we are mitigating current high
levels of cost inflation within the construction industry:
a) The role of speculative development
We adopt a low-risk approach to development, primarily favouring
pre-let development. However, we will consider speculative
development where we have visibility on specific occupational
demand.
Speculative development provides a range of benefits,
including:
-- Meeting the needs of customers with more immediate
occupational requirements through a geographically diverse range of
product;
-- Opening up new sites, establishing them in the marketplace
with prospective customers and agents; and
-- Supporting the capture of larger pre-let opportunities.
We only undertake speculative development in locations where the
supply of competing buildings is low, occupational demand is high
and where we have identified at least one occupier with a
requirement in that location for the size of building we intend to
construct. In general, we will only speculatively develop buildings
below 400,000 sq ft in size, with our average size to date in the
100,000 to 170,000 sq ft range.
Our approach is considered and analytical, and we will often be
engaged in negotiations with a prospective customer at the time of
entering the construction contract for a speculative build. Our
speculative development performance track record has been strong.
In H1 2022, all our speculative lettings have been achieved ahead
of practical completion and at rental levels in excess of
appraisals generating strong returns.
b) Reducing the impact of well-flagged cost inflation
We are taking steps to mitigate as far as possible the impact of
increasing build costs. Prior to commencing construction, we enter
into fixed-price agreements with contractors, protecting us from
construction cost movements during the typical 12 month
construction phase of a building. We have excellent relationships
with key suppliers and the scale of our development programme means
we have greater buying-power than most other developers in the
logistics sector. These factors help us to secure beneficial
pricing and can mean we gain priority in reserving essential
building materials, which keeps cost increases and potential
project delays to a minimum. In some instances, we pre-order items
such as steel and cladding, to increase certainty on costs and
delivery to programme.
We are also building in "day one" rent review mechanisms with
occupiers where possible, so we can capture rental growth between
the agreement for lease being signed ahead of construction and
completion of construction. This allows us to capture any market
rental growth seen during the construction phase.
As a result, we remain confident in our guidance of delivering
an attractive 6-8% yield on cost on our overall development
programme, with nearer-term projects likely to be delivered towards
the lower end of this range.
c) Careful selection and monitoring of contractors
All significant main building contracts are placed with a panel
of contractors experienced in logistics warehousing construction,
which have robust balance sheets, and which are not over-stretched
on other projects. We closely monitor and evaluate the financial
strength of our contractors. Through controlling the UK's largest
logistics property focused land portfolio, we are an important
customer to this specialist construction sub-sector and as such we
enjoy both purchasing power and prioritisation of resources and
materials ensuring any construction delays were kept to a
minimum.
During the period, we undertook a review of the supply chains
associated with our development programme which identified many of
our materials were being sourced from overseas. Working with our
key contractors we have revised the locations from where materials
and products used in our developments are sourced, such that now
most come from within the UK. This helps lessen exchange rate
risks, has improved quality and reliability over delivery and
supports delivering buildings on time.
The Development Portfolio
The Group owns or is in the process of exercising options over
land capable of supporting up to 4.5 million sq ft directly and
controls land capable of supporting up to 32.3 million sq ft
through long-term option agreements.
We categorise our development portfolio based on the timing of
opportunities related to the planning process:
1) Current Development Pipeline- assets that are under
construction which are either pre-let, let during construction or
speculatively constructed and have received planning consent. These
sites will be owned by the Group.
2) Near-term Development Pipeline- sites with planning consent
either received or submitted and which we aim to begin construction
in the next three years. These will comprise a combination of sites
owned by the Group and those held under option pending planning
consent.
3) Future Development Pipeline - longer-term land opportunities,
which are principally held under option.
While the primary intention is to create income-producing assets
to grow and modernise the Investment Portfolio, we will
occasionally develop an asset for freehold sale, where working with
a customer on this basis will enhance our ability to gain planning,
open up a site and accelerate our profit capture.
1) Current Development Pipeline
At 30 June 2022, as detailed in the table below, the Group had
the following assets in the Current Development Pipeline. The total
estimated cost to complete is GBP191.5 million. Of the Current
Development Pipeline, 53%, representing GBP12.7 million pa has been
pre-let or let under construction. In general, the rental levels we
are achieving across the speculative development portfolio are more
than the levels at which we appraised at the start of the
construction process. All of these sites are owned by the
Group.
Estimated costs to completion
Total Contractual
sq rent /
Total Period ft ERV
---------------- ------------------- ------ --------------
H2 2022 H1 2023 H2 2023
GBPm GBPm GBPm GBPm m GBPm
------------------------------- ---- ------- -------- -------- ------------ ------ ------------
Aston Clinton,
Units 5-6 19.1 18.4 0.7 - 0.3 2.6
Middlewich 1A,
Units 11-12 0.7 0.1 - 0.6 0.2 1.4
Bicester Phase
1 Plot C 4.3 3.7 0.4 0.2 0.3 2.3
Biggleswade Phase
2 Units 2-4 16.2 15.2 0.3 0.7 0.4 4.1
As per new reporting(1)
:
Current Speculative
Development 56.0 48.4 7.6 - 0.6 6.1
Current Let / Pre-Let
Development 95.2 77.6 17.0 0.6 1.6 11.1
Total 191.5 163.4 26.0 2.1 3.4 27.6
---------------------- -------- -------- ------ --------------
(1) To avoid disclosure of commercially sensitive information,
going forwards we will disclose our Current Development Pipeline in
an aggregated form, splitting out speculative and pre-let or let
during construction. To allow for comparisons, we have continued to
disclose details on buildings in construction at the time of our FY
2021 results.
2) Near-term Development Pipeline
The Group's Near-term Development Pipeline largely comprises
land on which we have either received planning consent or submitted
planning applications, excluding assets which are under
construction and are therefore included in the Current Development
Pipeline. Sites in the Near-term Development Pipeline are likely to
start development within the next three years. They will comprise a
combination of sites owned by the Group and those held under option
pending planning consent.
At the period end, the Near-term Development Pipeline consisted
of land capable of accommodating 8.9 million sq ft capable of
delivering GBP63.4 million of annual rent. Of this, 4.6 million sq
ft relates to land with planning consent and 1.8 million sq ft to
sites where we have submitted a planning application.
As at 30 June 2022, the Group was awaiting decisions on planning
applications for new space totalling 4.4 million sq ft.
The table below presents the Near-term Development Pipeline at
the period end. This pipeline is dynamic and movements in the
figures will be driven by construction starting (which will move
space to the Current Development Pipeline), or changes in our view
on likely timing starts resulting in potential movements between
the two categories below:
Total Current Estimated ERV Estimated
sq ft book value cost to completion gross yield
on cost
GBPm GBPm GBPm %
Near-term
starts in
H2 2022 1.2m 13.2 136.4 9.3 6-8%
Near-term
starts within
the following
12-24 months 7.7m 37.4 788.4 54.1 6-8%
8.9m 50.6 924.8 63.4 6-8%
3) Future Development Pipeline
The Future Development Pipeline contains sites where
construction starts are expected to occur beyond three years. This
pipeline has sites at various stages of the planning process, with
multiple sites being currently promoted through local plans. We
have continued to successfully refresh the pipeline, as we have
drawn down land to utilise in our development programme. At 30 June
2022, the Future Development Pipeline comprised 1,291 acres with
the potential to support up to 26.3 million sq ft of logistics
development (31 December 2021: 1,370 acres and 28.5 million sq
ft).
The Future Development Pipeline is predominantly controlled
under longer-term option agreements. Most option agreements contain
an extension clause, allowing the option expiry date to be extended
where necessary.
Development Management Agreements (DMAs)
Under a DMA, the Group typically manages the development of an
asset for a third-party funder, in return for a fee and/or profit
share. The Group will not own the asset once construction has
commenced and DMAs are therefore not included within the Group's
asset portfolio. DMAs can provide the Group with an attractive but
variable source of additional income for shareholders, with no
capital funding requirements.
Income from DMAs can vary over time. The treatment and impact of
DMA income is discussed in the Financial Review.
FINANCIAL REVIEW
The Group delivered another good financial performance, with
further growth in net rental income, earnings (when, as previously
guided, adjusting for the reduction in the variable excess
Development Management Agreement (DMA) income) and EPRA net
tangible assets per share.
The total dividend for the period was 3.35 pence per share (H1
2021: 3.20 pence), representing growth of 4.7%. This contributed to
a Total Accounting Return of 10.7% (H1 2021: 12.5%), with the
portfolio valuation continuing to benefit from yield compression
and income growth generated from active asset management and our
development programme.
The Group's balance sheet remains strong, with an LTV at the
period end of 23.7% (31 December 2021: 23.5%) and the Group
continues to benefit from significant liquidity, leaving us well
placed to invest in the development programme and to appraise
further acquisition opportunities. We are rigorously focused on
financial discipline and careful allocation of the Group's
capital.
Presentation of financial information
The financial information is prepared under IFRS. The Group's
subsidiaries are consolidated at 100% and its interests in joint
ventures are equity accounted for.
The Board continues to see Adjusted EPS [5] as the most relevant
measure when assessing dividend distributions. Adjusted EPS(5) is
based on EPRA's Best Practices Recommendations and excludes items
considered to be exceptional, not in the ordinary course of
business or not supported by cash flows, and includes the
developer's licence fees that the Group receives on forward funded
developments.
Financial results
Net rental income
Net rental income for the period increased by 16.1% to GBP101.5
million (H1 2021: GBP87.4 million). The growth was primarily the
result of development completions in the second half of 2021 and
uplifts from rent reviews, as well as a full period of the
Avonmouth asset acquired in April 2021.
At the period end, the contracted annual rent roll was GBP216.1
million across 70 assets (31 December 2021: GBP195.6 million across
62 assets). This includes GBP17.8 million from new development
lettings in the period.
The passing rent at the period end was GBP198.3 million, we
therefore have GBP17.8 million of new rent attached to our Current
and Near-term Development Pipeline which is not yet featuring in
our net rental income and will support future earnings growth.
Administrative and other expenses
Administrative and other expenses, which includes all the
operational costs of running the Group, totalled GBP15.3 million
for the six months (H1 2021: GBP12.2 million). Growth in the
average NAV across the corresponding periods resulted in the
Investment Management fee for the six month period increasing by
GBP2.9 million to GBP12.6 million.
The Group's operating cost base remains low and transparent. The
EPRA Cost Ratio (including and excluding vacancy cost) for the
period was temporarily higher at 15.2% (H1 2021: 14.1%). As
previously mentioned, the higher administrative costs in the period
are yet to be offset from the GBP17.8 million of contracted rental
income attached to our Current Development Pipeline, resulting in a
temporary increase in our cost ratio. When including the net rental
income referenced above, we would expect the EPRA cost ratio to
return to previous levels.
Investment Management Agreement
During the period, certain key changes to the Investment
Management Agreement (IMA) were approved by shareholders. These
include a reduction in the overall investment management fee
payable, which is expected to have a beneficial effect on the
Company's EPRA cost ratio, and an extension to the term of the IMA.
The term extension, along with an expansion of key person
principles, provides additional security to the Company in terms of
its main service provider as well as supporting the recruitment and
retention of key personnel in the Manager.
The new investment fee scale is as follows with effect from 1
July 2022:
EPRA NTA Value Relevant Percentage
------------------------- --------------------
Up to and including 0.7 per cent
GBP2 billion
------------------------- --------------------
Above GBP2 billion 0.6 per cent
and up to and including
GBP3 billion
------------------------- --------------------
Above GBP3 billion 0.5 per cent
and up to and including
GBP3.5 billion
------------------------- --------------------
Above GBP3.5 billion 0.4 per cent
------------------------- --------------------
Details of the main amendments to the IMA are set out in the AGM
Notice, which is available on the Group's website.
Operating profit
Operating profit before changes in fair value and other
adjustments was GBP88.8 million (H1 2021: GBP84.1 million).
As noted in the discussion of the Group's development programme,
the Group earns DMA income from managing developments for third
parties. This other operating income is more variable than property
rental income, and it is included within Adjusted earnings as it is
supported by cash flows. The Group recognised GBP2.6 million of
other operating income from these agreements in the period (H1
2021: GBP8.9 million). Reflecting the DMA income on a like-for-like
basis, operating profit before changes in fair value and other
adjustments has increased by GBP11.0 million, or 14.1%.
The amount of DMA income recognised in H1 2022 is more typical
of the level we would expect, whereas DMA income in the prior
period was in excess of the anticipated run-rate. Given this, we
have highlighted the impact of DMA income on earnings within the
profit and earnings section below.
Share-based payment charge and contingent consideration
The acquisition of DB Symmetry (rebranded to Tritax Symmetry)
resulted in senior members of the Symmetry team becoming B and C
shareholders. Under IFRS, the structure of this transaction has led
to the B and C shareholders' value being split between:
i) contingent consideration, which is determined by certain
provisions under the shareholder agreement between Tritax Symmetry
HoldCo and the Tritax Symmetry Management Shareholders; and
ii) a share-based payment charge, which is the compensation the
B and C shareholders will receive as a result of their economic
right to a share of the future performance of Tritax Symmetry
Development Assets.
During H1 2022, GBP4.5 million (H1 2021: GBP1.5 million) was
charged to the Group Statement of Comprehensive Income in respect
of share-based payment charges.
Financing costs
Net financing costs for the six months were GBP18.4 million (H1
2021: GBP20.0 million), excluding the improvement in the fair value
of interest rate derivatives of GBP7.4 million (H1 2021: GBP0.8
million improvement). The average cost of debt at the period end,
based on total commitments, was higher at 2.52% (H1 2021: 2.18%),
noting the increase in Sonia over the period (c. +100bps from
Dec-21 through to June-22), payable on our variable rate debt. The
movement in net financing costs therefore primarily reflects an
increase in interest expense capitalised due to a greater level of
development activity being undertaken of GBP1.3 million (H1 2021
GBPnil). The average debt drawn throughout the period was
relatively unchanged compared to the same period last year.
Tax
The Group has continued to comply with its obligations as a UK
REIT and is exempt from corporation tax on its property rental
business.
No tax charge arose in the period. In H1 2021, the Group
incurred a tax charge of GBP2.3 million on income received on DMA
contracts and received an exceptional tax credit of GBP3.9 million
relating to appropriation tax on the Tritax Symmetry acquisition,
resulting in a net tax credit of GBP1.6 million in that period.
Profit and earnings
Profit before tax was significantly influenced by the movement
in property valuations (see below) and was GBP458.7 million for the
first half (H1 2021: GBP376.0 million). The calculation of earnings
per share (EPS) in the period was also affected by the issue of
147.1 million new ordinary shares in September 2021, which
increased the Company's weighted average number of shares in issue
by 8.7% between the two periods. Despite this increase in ordinary
shares, we saw an improvement in basic EPS of 24.55 pence (H1 2021:
21.96 pence). Due to the reduction in DMA income as noted above,
basic EPRA EPS was lower in the period at 3.32 pence (H1 2021: 3.61
pence).
Adjusted EPS for the period was 3.73 pence (H1 2021: 4.03
pence). The calculation of Adjusted EPS can be found in note 6.
When removing DMA income in excess of the anticipated run-rate (of
which there was none for H1 2022), which we see as our KPI most
aligned to recurring earnings, Adjusted EPS grew 1.1% to 3.73 pence
(H1 2021: 3.69 pence).
Dividends
Our dividend policy is described in the Chairman's statement. In
line with this policy, the Board has declared the following interim
dividends in respect of the period:
Declared Amount per share In respect of Paid/to be paid
three months
to
------------- ----------------- -------------- ----------------
4 May 2022 1.675p 31 March 2022 1 June 2022
29 July 2022 1.675p 30 June 2022 25 August 2022
------------- ----------------- -------------- ----------------
The total dividend for the period was therefore 3.35 pence per
share, an increase of 4.7% on the 3.20 pence paid in respect of H1
2021. The pay-out ratio for the first half was 90% of Adjusted EPS
[6] .
Portfolio valuation
CBRE independently values the Group's assets that are leased,
pre-leased or are under construction. These assets are recognised
in the Group Statement of Financial Position at fair value.
Colliers independently values all optioned land and owned land.
Land options and any other property assets are recognised at cost,
less amortisation or impairment charges under IFRS.
The share of joint ventures relates to 50% interests in two
sites at Middlewich and Northampton, relating to land and land
options. These two sites are equity accounted for and appear as a
single line item in the Statement of Comprehensive Income and
Statement of Financial Position.
The total portfolio value at 30 June 2022 was GBP6.03 billion,
including the Group's share of joint ventures:
30 June 2022 31 December
GBPm 2021
GBPm
-------------------------------------- ------------- ------------
Investment properties 5,847.1 5,249.1
Other property assets 3.1 4.0
Land options (at cost) 150.7 201.5
Share of joint ventures 27.1 25.6
Remaining forward funded development - -
commitments
-------------------------------------- ------------- ------------
Portfolio value 6,028.0 5,480.2
The gain recognised on revaluation of the Group's Investment
properties was GBP390.5 million (H1 2021: GBP314.3 million). This
portfolio valuation surplus was therefore 7.0% across the Group's
investment and development assets, net of capital expenditure. The
main drivers of this increase include:
-- the continued strength of the market with an unchanged True
Equivalent Yield across the portfolio of 4.1% (Dec 21: 4.1%),
driven by:
o the contribution from capitalising the passing rental growth
achieved across the investment portfolio; and
o further like-for-like ERV growth of 5.8%
-- strong performance across the Group's assets under construction.
Capital expenditure
In line with our increased target for 2022 of 3-4 million sq ft
of construction starts, we set guidance for capital expenditure
into development of GBP350-400 million in 2022. In H1 2022, capital
expenditure into development was GBP145.7 million. We expect this
level to accelerate in H2 2022 and therefore we are on-track to
meet our full year guidance].
Embedded value within land options
Under IFRS, land options are recognised at cost and subject to
impairment review. As at 30 June 2022, the Group's investment in
land options totalled GBP150.7 million (31 December 2021: GBP201.5
million). The resultant reduction relates to elements of land
holding drawn down and owned on a freehold basis, some of which now
has construction activity ongoing from the Current Development
Pipeline.
As the land under option approaches the point of receiving
planning consent, any associated risk should reduce and the fair
value should increase. When calculating its EPRA NTA, the Group
therefore makes a fair value mark-to-market adjustment for land
options. At the period end, the fair value of land options was
GBP60.5 million greater (31 December 2021: GBP66.0 million greater)
than costs expended to date.
Net assets
The EPRA NTA per share at 30 June 2022 was 242.88 pence (31
December 2021: 222.60 pence), up 9.1%. The primary driver of this
increase was the growth in value of the property portfolio, as
described above.
The Total Accounting Return for the period, which is the growth
in EPRA NTA plus dividends paid, was 10.7% (H1 2021: 12.5%).
Debt capital
At 30 June 2022, the Group had the following borrowings:
Lender Maturity Loan commitment Amount drawn
GBPm at 30 June
2022
GBPm
------------------------------ ---------- ---------------- -------------
Loan notes
2.625% Bonds 2026 Dec 2026 250.0 249.5
2.86% Loan notes 2028 Feb 2028 250.0 250.0
2.98% Loan notes 2030 Feb 2030 150.0 150.0
3.125% Bonds 2031 Dec 2031 250.0 247.7
1.5% Green Bonds 2033 Nov 2033 250.0 246.6
Bank borrowings
RCF (syndicate of seven
banks) Dec 2024 350.0 50.0
RCF (syndicate of six banks) Jun 2026 200.0 57.0
Helaba Jul 2028 50.9 50.9
PGIM Real Estate Finance Mar 2027 90.0 90.0
Canada Life Apr 2029 72.0 72.0
------------------------------ ---------- ---------------- -------------
Total 1,912.9 1,463.7
During the period, the Group extended the facility with Helaba
by three years to a July 2028 maturity. In addition, JP Morgan
replaced HSBC in the Group's RCF syndicates and aligned the
maturities of their respective holdings with the maturity of the
remainder of the facilities. The full commitments under our RCF's
now mature in December 2024 and June 2026 respectively.
Interest rates and hedging
Of the Group's debt commitments, 69% is at fixed interest rates.
For its variable rate debt, the Group's hedging strategy is to use
interest rate caps which run coterminous with the respective loan.
These allow the Group to benefit from current low interest rates,
while minimising the effect of a significant increase in interest
rates in the future.
Combined with the fixed rate debt, the Group's derivative
instruments hedged 100% of its drawn debt as at the period end. The
cost of borrowing at 30 June 2022, based on total commitments was
2.52% (31 December 2021: 2.26%).
Debt maturity
At 30 June 2022, the Group's debt had an average maturity of 6.2
years (31 December 2021: 6.5 years), with the next maturity
requiring refinancing due in approximately 2.5 years and the
farthest maturity falling due in more in 11 years.
Loan to value (LTV)
The Group has a conservative leverage policy, with a medium-term
LTV target of 30-35%. At the period end, the LTV was 23.7% (31
December 2021: 23.5%), reflecting the increase in debt drawn during
the period to finance development activity, offset by the higher
valuation of the Group's assets.
Net debt and operating cash flow
Net debt at the period end was GBP1,428.9 million, comprising
GBP1,463.7 million of gross debt less GBP34.8 million of cash (31
December 2021: GBP1,356.3 million gross debt, GBP71.1 million
cash).
Net operating cash flow plus licence fees received was GBP86.1
million for the period (H1 2021: GBP98.5 million).
Going concern
We continue to have a healthy liquidity position, with strong
levels of rent collection, a favourable debt maturity profile and
substantial headroom against our financial covenants.
The Directors have reviewed our current and projected financial
position over a five-year period, making reasonable assumptions
about our future trading performance. Various forms of sensitivity
analysis have been performed, in particular regarding the financial
performance of our customers and expectations over lease renewals.
As at 30 June 2022, our property values would have to fall by
approximately 50% before our loan covenants are breached at the
corporate level.
At the period end, we had an aggregate of GBP443 million of
undrawn commitments under our senior debt facilities and GBP34
million of cash, of which GBP191.5 million (see note 18) was
committed under various development contracts. Our loan to value
ratio stood at 23.7%, with the debt portfolio having an average
maturity term of approximately 6.2 years.
As at the date of approval of this report, we had substantial
headroom within our financial loan covenants. Our financial
covenants have been complied with for all loans throughout the year
and up to the date of approval of these financial statements. As a
result, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future, which is
considered to be to 4 August 2023.
Credit rating
The Group has a Baa1 long-term credit rating and positive
outlook from Moody's Investor Services, which was unchanged during
the period.
Alternative Investment Fund Manager (AIFM)
The Manager is authorised and regulated by the Financial Conduct
Authority as a full-scope AIFM. The Manager is therefore authorised
to provide services to the Group and the Group benefits from the
rigorous reporting and ongoing compliance applicable to AIFMs in
the UK.
As part of this regulatory process, Langham Hall UK Depositary
LLP (Langham Hall) is responsible for cash monitoring, asset
verification and oversight of the Company and the Manager. In
performing its function, Langham Hall conducts a quarterly review
during which it monitors and verifies all new acquisitions, share
issues, loan facilities and other key events, together with
shareholder distributions, the quarterly management accounts, bank
reconciliations and the Company's general controls and processes.
Langham Hall provides a written report of its findings to the
Company and to the Manager, and to date it has not identified any
issues. The Company therefore benefits from a continuous real-time
audit check on its processes and controls.
KEY PERFORMANCE INDICATORS
Our objective is to deliver attractive, low-risk returns to
Shareholders, by executing the Group's Investment Policy and
operational strategy. Set out below are the key performance
indicators we use to track our progress. For a more detailed
explanation of performance, please refer to the Manager's
Report.
KPI Relevance to strategy Performance
1. Total accounting TAR calculates the change 10.7% for the period to
return (TAR) in the EPRA net tangible 30 June 2022
assets (EPRA NTA) over (H1 2021: 12.5%, FY 2021:
the period plus dividends 30.5%)
paid. It measures the
ultimate outcome of our
strategy, which is to
deliver value to our shareholders
through our portfolio
and to deliver a secure
and growing income stream.
----------------------------------- -----------------------------
2. Dividend The dividend reflects 3.35p per share for the
our ability to deliver period to 30 June 2022
a low-risk but growing (H1 2021: 3.20p, FY 2021:
income stream from our 6.70p)
portfolio and is a key
element of our TAR.
----------------------------------- -----------------------------
3. EPRA NTA The EPRA NTA reflects 242.88p at 30 June 2022
per share(1) our ability to grow the (30 June 2021: 194.22p,
portfolio and to add value 31 December 2021: 222.60p).
to it throughout the lifecycle
of our assets.
----------------------------------- -----------------------------
4. Loan to value The LTV measures the prudence 23.7% at 30 June 2022
ratio (LTV) of our financing strategy, (30 June 2021: 30.3%,
balancing the potential 31 December 2021: 23.5%).
amplification of returns
and portfolio diversification
that come with using debt
against the need to successfully
manage risk.
----------------------------------- -----------------------------
5. Adjusted The Adjusted EPS reflects 3.73p per share for the
earnings per our ability to generate period to 30 June 2022
share earnings from our portfolio, (HY 2021: 4.03p, FY 2021:
which ultimately underpins 8.23p)
our dividend payments. Excluding exceptional
development management
income, Adjusted EPS was
3.73p (HY 2021: 3.69p,
FY 2021: 7.38p) See note
6.
----------------------------------- -----------------------------
6. Weighted The WAULT is a key measure 12.8 years at 30 June
average unexpired of the quality of our 2022
lease term (WAULT) portfolio. Long lease (30 June 2021: 13.4 years,
terms underpin the security 31 December 2021: 13.0
of our income stream. years).
----------------------------------- -----------------------------
7. Global Real The GRESB score reflects 81/100, 4 Green Star rating
Estate Sustainability the sustainability of for 2021.
Benchmark (GRESB) our assets and how well (2020: 72/100, 3 Green
score we are managing ESG risks Star rating).
and opportunities. Sustainable
assets protect us against
climate change and help
our customers to operate
efficiently.
----------------------------------- -----------------------------
(1) EPRA NTA is calculated in accordance with the Best Practices
Recommendations of the European Public Real Estate Association
(EPRA). We use these alternative metrics as they provide a
transparent and consistent basis to enable comparison between
European property companies.
EPRA PERFORMANCE INDICATORS
The table below shows additional performance measures,
calculated in accordance with the Best Practices Recommendations of
the European Public Real Estate Association (EPRA). We provide
these measures to aid comparison with other European real estate
businesses.
For a full reconciliation of all EPRA performance indicators,
please see Notes to the EPRA and other key performance
indicators.
Measure and Purpose Performance
Definition
1. EPRA Earnings A key measure of a company's GBP62.0m / 3.32p per share
(Diluted) underlying operating (HY 2021: GBP61.6m / 3.58p
See note 6 results and an indication per share, FY 2021: GBP131.2m
of the extent to which / 7.47p per share).
current dividend payments
are supported by earnings.
------------------------------- -------------------------------
2. EPRA Net Tangible Assumes that entities GBP4,539.1m / 242.88p
Assets buy and sell assets, per share as at 30 June
See note 16 thereby crystallising 2022
certain levels of unavoidable (30 June 2021: GBP3,340.3m
deferred tax. / 194.22p per share, 31
December 2021: GBP4,157.7m
/ 222.60p per share).
------------------------------- -------------------------------
3. EPRA Net Reinstatement Assumes that entities GBP4,953.0m / 265.03p
Value (NRV) never sell assets and per share as at 30 June
aims to represent the 2022
value required to rebuild (30 June 2021: GBP3,679.1m
the entity. / 213.93p per share, 31
December 2021: GBP4,535.7m
/ 242.84p per share).
------------------------------- -------------------------------
4. EPRA Net Disposal Represents the shareholders' GBP4,640.5m / 248.31p
Value (NDV) value under a disposal per share as at 30 June
scenario, where deferred 2022
tax, financial instruments (30 June 2021: GBP3,245.5m
and certain other adjustments / 188.71p per share, 31
are calculated to the December 2021: GBP4,095.5m
full extent of their / 219.27p per share).
liability, net of any
resulting tax.
------------------------------- -------------------------------
5 EPRA Net Initial This measure should make 3.36% as at 30 June 2022
Yield (NIY) it easier for investors (30 June 2021: 4.06%,
to judge for themselves 31 December 2021: 3.56%).
how the valuations of
two portfolios compare.
------------------------------- -------------------------------
6 EPRA 'Topped-Up' This measure should make 3.60% as at 30 June 2022
NIY it easier for investors (30 June 2021: 4.17%,
to judge for themselves 31 December 2021: 3.75%).
how the valuations of
two portfolios compare.
------------------------------- -------------------------------
7. EPRA Vacancy A "pure" (%) measure 0% as at 30 June 2022
of investment property (30 June 2021: 0%, 31
space that is vacant, December 2021: 0%).
based on ERV.
------------------------------- -------------------------------
8. EPRA Cost A key measure to enable 15.2%
Ratio meaningful measurement (HY 2021: 14.1%, FY 2021:
of the changes in a company's 13.9%). Both the 2022
operating costs. and 2021 ratios are the
same, inclusive or exclusive
of vacancy costs.
------------------------------- -------------------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Audit & Risk Committee, which assists the Board with its
responsibilities for managing risk, considers that whilst some
risks may have increased and some risks reduced in the period, all
principal risks and uncertainties presented on pages 59-64 of our
2021 Annual Report, dated 2 March 2022, remained valid during the
period and we believe will continue to remain valid for the
remainder of the year. This is with the exception of risk 9 within
the 2021 Annual Report, Disruptive Brexit, which has been removed
as a principal risk in the period as it was at least partially
mitigated by the trade agreement between the UK and EU and
subsequently no material impacts on the Group have arisen.
Implications of the Brexit event itself are now being managed
within other relevant risks. We are also conscious of the current
level of inflation and impact this is having on the UK economy, we
do not see this as a separate risk in isolation, but something
which is embedded within multiple other risks noted below. The
principal risks are summarised below.
Property risks
-- The default of one or more of our customers would reduce
revenue and may affect our ability to pay dividends or meet our
debt servicing covenants, while reducing our net asset value and
increasing our LTV.
-- An adverse change in the performance of our property
portfolio may lead to lower returns to Shareholders or a breach of
our banking covenants.
-- Our ability to grow the Portfolio may be affected by
competition for investment properties in the logistics property
sector.
-- Our property performance will depend on the performance of
the UK retail sector and online retail.
-- Development activities may involve more risk than is
associated with standing assets. This could include general
construction risks, delays in the development or the development
not being completed, cost overruns or developer/contractor default
and general financing risk.
Financial risks
-- Without sufficient debt funding, or funding available at
appropriate rates, we may be unable to pursue suitable investment
opportunities in line with our investment objectives.
Corporate risk
-- As an externally managed company, we rely on the Manager's
services and its reputation in the property market.
Taxation risk
-- We are a UK REIT and have a tax-efficient corporate
structure, with advantageous consequences for UK Shareholders. Any
change to our tax status or in UK tax legislation could affect our
ability to achieve our investment objectives and provide favourable
returns to Shareholders.
Other risks
-- A severe downturn in the economy could impact a number of the
Groups tenants, contractors, and service providers, which could
mean a loss of rent income and disruption to operations.
-- There is a risk of physical damage to the property portfolio
as a result environmental related factors such as flood risk and
rising temperatures. Less energy efficient buildings might not
perform as well as those with the highest ESG credentials. ESG
requirements are likely to increase over time as could the cost of
meeting ESG requirements. The costs of carbon pricing could
increase, increasing the future construction costs associated with
our development pipeline.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with the Disclosure Guidance and Transparency Rules
of the Financial Services Authority, IAS 34 'Interim Financial
Reporting',
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
Shareholder information is as disclosed on the Tritax Big Box
REIT plc website.
For and on behalf of the Board
Aubrey Adams OBE (Chairman)
3 August 2022
INDEPENT REVIEW REPORT TO TRITAX BIG BOX REIT PLC
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the Condensed Group
Statement of Comprehensive Income, the Condensed Group Statement of
Financial Position, the Condensed Group Statement of Changes in
Equity, the Condensed Group Cash Flow Statement and related
notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, United Kingdom
3 August 2022
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Six months Six months ended
ended 30 June 2021 (unaudited) Year ended
30 June 2022 GBPm 31 December 2021
(unaudited) (audited)
Note GBPm GBPm
------------------------------------------------- ---- -------------- -------------------------- -----------------
Gross rental income 101.5 87.6 184.7
Service charge income 2.6 2.4 5.1
Service charge expense (2.6) (2.6) (5.2)
------------------------------------------------- ---- -------------- -------------------------- -----------------
Net rental income 101.5 87.4 184.6
------------------------------------------------- ---- -------------- -------------------------- -----------------
Gross operating income 8.3 12.2 24.7
Other operating costs (5.7) (3.3) (5.8)
------------------------------------------------- ---- -------------- -------------------------- -----------------
Other operating income 2.6 8.9 18.9
Administrative and other expenses (15.3) (12.2) (25.5)
------------------------------------------------- ---- -------------- -------------------------- -----------------
Operating profit before changes in fair value and
other adjustments(1) 88.8 84.1 178.0
Changes in fair value of investment properties 8 390.5 314.3 840.9
Gain on disposal of investment properties - - 2.0
Share of profit/(loss) from joint ventures - - 0.1
Impairment of intangible and other property
assets (0.3) (0.2) (2.9)
Share-based payment charge 14 (4.5) (1.5) (5.5)
Changes in fair value of contingent consideration
payable 14 (4.8) (1.5) (4.2)
------------------------------------------------- ---- -------------- -------------------------- -----------------
Operating profit 469.7 395.2 1,008.5
Finance expense 4 (18.4) (20.0) (40.1)
Changes in fair value of interest rate
derivatives 10 7.4 0.8 2.8
------------------------------------------------- ---- -------------- -------------------------- -----------------
Profit before taxation 458.7 376.0 971.1
Taxation 5 - 1.6 1.5
------------------------------------------------- ---- -------------- -------------------------- -----------------
Profit and total comprehensive income 458.7 377.6 972.6
Earnings per share - basic 6 24.55p 21.96p 55.39p
Earnings per share - diluted(2) 6 24.55p 21.91p 55.31p
------------------------------------------------- ---- -------------- -------------------------- -----------------
(1) Operating profit before changes in fair value of investment
properties and contingent consideration, gain on disposal of
investment properties, share of loss from joint ventures,
impairment of intangible and other property assets and share-based
payment charges.
(2) There is no dilution in the period to 30 June 2022
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Six months
ended Year ended
30 June 2022 Six months ended 31 December 2021
(unaudited) 30 June 2021 (unaudited) (audited)
Note GBPm GBPm GBPm
-------------------------------------------- ---- -------------- -------------------------- -----------------
Non-current assets
Intangible assets 1.6 1.9 1.7
Investment property 8 5,847.1 4,632.9 5,249.1
Investment in land options 9 150.7 195.3 201.5
Investment in joint ventures 27.1 28.8 25.6
Other property assets 3.1 6.2 4.0
Trade and other receivables 11 2.0 2.0 2.0
Interest rate derivatives 10 12.4 0.4 1.8
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total non-current assets 6,044.0 4,867.5 5,485.7
Current assets
Rent and other receivables 11 28.9 22.8 37.1
Cash at bank 12 34.8 30.3 71.1
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total current assets 63.7 53.1 108.2
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total assets 6,107.7 4,920.6 5,593.9
-------------------------------------------- ---- -------------- -------------------------- -----------------
Current liabilities
Deferred rental income (34.9) (33.9) (38.6)
Trade and other payables (92.5) (112.1) (85.9)
Tax liabilities (4.3) (4.2) (4.3)
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total current liabilities (131.7) (150.2) (128.8)
-------------------------------------------- ---- -------------- -------------------------- -----------------
Non-current liabilities
Trade and other payables (2.0) (2.0) (2.0)
Interest rate derivatives 10 - (0.7) -
Bank borrowings 13 (314.2) (352.9) (207.6)
Loan notes 13 (1,138.4) (1,137.0) (1,137.6)
Amounts due to B and C shareholders 14 (50.7) (34.7) (41.4)
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total non-current liabilities (1,505.3) (1,527.3) (1,388.6)
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total liabilities (1,637.0) (1,677.5) (1,517.4)
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total net assets 4,470.7 3,243.1 4,076.5
-------------------------------------------- ---- -------------- -------------------------- -----------------
Equity
Share capital 15 18.7 17.2 18.7
Share premium reserve 15 764.3 467.7 762.0
Capital reduction reserve 15 897.7 1,021.9 964.5
Retained earnings 15 2,790.0 1,736.3 2,331.3
-------------------------------------------- ---- -------------- -------------------------- -----------------
Total equity 4,470.7 3,243.1 4,076.5
-------------------------------------------- ---- -------------- -------------------------- -----------------
Net asset value per share - basic 16 239.23p 188.57p 218.26p
Net asset value per share - diluted 16 239.23p 188.57p 218.18p
EPRA net tangible asset per share - basic 16 242.88p 194.22p 222.60p
EPRA net tangible asset per share - diluted 16 242.88p 194.22p 222.52p
-------------------------------------------- ---- -------------- -------------------------- -----------------
These financial statements were approved by the Board of
Directors on 3 August 2022 and signed on its behalf by:
Aubrey Adams OBE (Chairman)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022
Capital reduction
Six months ended 30 Share capital Share premium reserve Retained earnings Total
June 2022 (unaudited) Note GBPm GBPm GBPm GBPm GBPm
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
At 1 January 2022 18.7 762.0 964.5 2,331.3 4,076.5
Profit and total
comprehensive income - - - 458.7 458.7
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
18.7 762.0 964.5 2,790.0 4,535.2
Contributions and
distributions
Shares issued in
relation to management
contract - 2.3 - - 2.3
Share-based payments - - - 2.6 2.6
Transfer of share-based
payments to
liabilities to reflect
settlement - - - (2.6) (2.6)
Dividends paid 7 - - (66.8) - (66.8)
At 30 June 2022 18.7 764.3 897.7 2,790.0 4,470.7
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
Capital reduction
Six months ended 30 Share capital Share premium reserve Retained earnings Total
June 2021 (unaudited) Note GBPm GBPm GBPm GBPm GBPm
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
At 1 January 2021 17.2 466.5 1,078.9 1,358.7 2,921.3
Profit and total
comprehensive income - - - 377.6 377.6
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
17.2 466.5 1,078.9 1,736.3 3,298.9
Contributions and
distributions
Shares issued in
relation to equity
consideration - 1.2 - - 1.2
Share-based payments - - - 1.3 1.3
Transfer of share-based
payments to
liabilities to reflect
settlement - - - (1.3) (1.3)
Dividends paid 7 - - (57.0) - (57.0)
At 30 June 2021 17.2 467.7 1,021.9 1,736.3 3,243.1
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
Capital reduction
Year ended 31 December Share capital Share premium reserve Retained earnings Total
2021 (audited) Note GBPm GBPm GBPm GBPm GBPm
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
1 January 2021 17.2 466.5 1,078.9 1,358.7 2,921.3
Profit and total
comprehensive income - - - 972.6 972.6
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
17.2 466.5 1,078.9 2,331.3 3,893.9
Contributions and
distributions
Shares issued in
relation to equity
issue 1.4 298.5 - - 299.9
Share issue costs - (5.8) - - (5.8)
Shares issued in
relation to management
contract 0.1 2.8 - - 2.9
Share-based payments - - - 2.7 2.7
Transfer of share-based
payments to
liabilities to reflect
settlement - - - (2.7) (2.7)
Dividends paid 7 - - (114.4) - (114.4)
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
At 31 December 2021 18.7 762.0 964.5 2,331.3 4,076.5
------------------------ ----- -------------- -------------- ----------------------- ------------------ --------
CONDENSED GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2022
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December
(unaudited) (unaudited) 2021 (audited)
Note GBPm GBPm GBPm
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Cash flows from operating activities
Profits for the period (attributable to the shareholders) 458.7 377.6 972.6
Add: tax charge - (1.6) (1.5)
Add: changes in fair value of contingent consideration
payable 4.8 1.5 4.2
Add: finance expense 18.4 20.0 40.1
Add: changes in fair value of interest rate derivatives (7.4) (0.8) (2.8)
Add: share-based payment charges 4.5 1.5 5.5
Add: impairment of intangible and other property assets 0.2 0.2 2.9
Add: amortisation of other property assets 0.9 3.2 5.4
Add: share of loss from joint ventures - - (0.1)
Less: changes in fair value of investment properties (390.5) (314.3) (840.9)
Less: gain on disposal of investment properties - - (2.0)
Accretion of tenant lease incentive (5.2) (3.5) (7.2)
(Increase)/decrease in rent and other receivables 8.0 2.3 (12.0)
(Decrease)/increase in deferred income (3.7) (3.0) 1.7
Increase/(decrease) in trade and other payables (2.6) 11.4 26.2
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Cash generated from operations 86.1 94.5 192.1
Taxation paid - 4.0 4.0
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Net cash flow generated from operating activities 86.1 98.5 196.1
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Investing activities
Additions to investment properties (136.1) (191.6) (279.0)
Additions to land options (6.4) (5.1) (7.6)
Additions to joint ventures (1.9) (0.3) (0.7)
Net proceeds from disposal of investment properties - - 132.3
Licence fees received - - 2.5
Interest received - - 0.1
Dividends received from joint ventures 0.4 - 2.2
Net cash flow used in investing activities (144.0) (197.0) (150.2)
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Financing activities
Proceeds from issue of Ordinary Share Capital 2.3 1.3 302.8
Cost of share issues - - (5.8)
Bank borrowings drawn 133.0 174.5 245.5
Bank and other borrowings repaid (26.0) (28.5) (245.5)
Loan arrangement fees paid (0.5) (0.6) (0.7)
Bank interest paid (17.5) (18.8) (37.5)
Interest rate cap premium paid (3.2) - -
Dividends paid to equity holders (66.5) (56.9) (114.3)
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Net cash flow generated from financing activities 21.6 71.0 144.5
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Net increase/(decrease) in cash and cash equivalents for
the period (36.3) (27.5) 13.3
Cash and cash equivalents at start of period 12 70.9 57.6 57.6
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
Cash and cash equivalents at end of period 12 34.6 30.1 70.9
--------------------------------------------------------- ---- ----------------- ---------------- ----------------
NOTES TO THE CONSOLIDATED ACCOUNTS
1. Basis of preparation
These condensed consolidated interim financial statements for
the 6 months to 30 June 2022 have been prepared in accordance with
the Disclosure Guidance and Transparency Rules of the Financial
Services Authority, IAS 34 'Interim financial reporting' and also
in accordance with the measurement and recognition principles of UK
adopted international accounting standards. They do not include all
of the information required for full annual financial statements
and should be read in conjunction with the 2021 Annual Report and
Accounts, which were prepared in accordance with UK-adopted
International Accounting Standards (IFRS).
The condensed consolidated financial statements for the six
months ended 30 June 2022 have been reviewed by the Company's
Auditor, BDO LLP, in accordance with International Standard on
Review Engagements 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity and were
approved for issue on 3 August 2022. The condensed consolidated
financial statements are unaudited and do not constitute statutory
accounts for the purposes of the Companies Act 2006.
The comparative financial information presented herein for the
year to 31 December 2021 does not constitute full statutory
accounts within the meaning of Section 434 of the Companies Act
2006. The Group's Annual Report and accounts for the year to 31
December 2021 have been delivered to the Registrar of Companies.
The Group's independent auditor's report on those accounts was
unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006.
1.1. Going concern
The Board has paid attention to the appropriateness of the going
concern basis in preparing these financial statements. Any going
concern assessment considers the Group's financial position, cash
flows and liquidity, including its continued access to its debt
facilities and its headroom under financial loan covenants.
The Directors have considered the cash flow forecasts for the
Group for a period of at least twelve months from the date of
approval of these condensed consolidated financial statements.
These forecasts include the Directors' assessment of plausible
downside scenarios. The Directors have reviewed the current and
projected financial position of the Group, making reasonable
assumptions about its future trading performance. Various forms of
sensitivity analysis have been performed having a particular regard
to the financial performance of its Customers, taking into account
any discussions held with the Customer surrounding their rental
obligations. The analysis also included sensitising the impact of
portfolio valuation movements through market volatility, rent
collection and customer default. These scenarios all paid regard to
the current economic environment.
The Group has a strong track record around rent collection,
particularly during Covid-19 when 100% of rent was collected. The
Group has no history of bad debts and there have been no agreements
to grant rent free periods or rent holidays across the whole
portfolio as a result of customer credit issues. The Directors have
also considered the arrears position in light of IFRS 9, expected
credit loss model, see Note 11 for further details.
As at 30 June 2022, the Group had an aggregate GBP443 million of
undrawn commitments under its senior debt facilities, of which
GBP191.5 million was committed under various development
contracts.
At 30 June 2022 the Group's loan to value ratio stood at 23.7%,
with the debt portfolio having an average maturity term of
approximately 6.2 years. As at the date of approval of this report,
the Group has substantial headroom within its financial loan
covenants. As at 30 June 2022 property values would have to fall by
approximately 50% before loan covenants are breached.
The Group's financial covenants have been complied with for all
loans throughout the period and up to the date of approval of these
financial statements.
The Directors are therefore satisfied that the Group is in a
position to continue in operation for at least twelve months from
the date of approval of these condensed consolidated financial
statements and consider it appropriate to adopt the going concern
basis of accounting in preparing them. There is no material
uncertainty relating to going concern.
2. Significant accounting judgements, estimates and assumptions
The condensed consolidated financial statements have been
prepared on the basis of the accounting policies, significant
judgements, estimates and key assumptions as set out in the notes
to the Group's annual financial statements for the year ended 31
December 2021. No changes have been made to the Group's accounting
policies as a result of the amendments and interpretations which
became effective in the period as they do not have a material
impact on the Group. Full details can be found in the Group's
annual financial statements for the year ended 31 December 2021,
apart from the below:
2.1 Judgements
Other operating income
Other operating income is receivable from development management
agreements in place with third parties. Development management
income is recognised in the accounting period in which the services
are rendered and a significant reversal is not expected in future
periods.
Judgement is exercised in identifying performance obligations
including achieving a pre-let, managing the building of an asset
and arranging for lease completion. Certain performance obligations
are recognised at a point in time and others are recognised over
time based on the actual service provided to the end of the
reporting period as a proportion of the total services. A judgement
is formed over the level of other operating income to be recognised
in any accounting period, which also takes into account any
associated costs attached to the development management
agreements.
2.2 Estimates
Fair valuation of Investment property
The market value of Investment property is determined by an
independent property valuation expert (see note 8) to be the
estimated amount for which a property should exchange on the date
of the valuation in an arm's-length transaction. Properties have
been valued on an individual basis. The valuation expert uses
recognised valuation techniques and the principles of both IAS 40
and IFRS 13.
The valuations have been prepared in accordance with the RICS
Valuation - Global Standards July 2017 ("the Red Book"). Factors
reflected comprise current market conditions including net initial
yield applied, annual rentals, lease lengths and location. The net
initial yield, being the most significant estimate, is subject to
changes depending on the market conditions which are assessed on a
periodic basis. The significant methods and assumptions used by the
valuers in estimating the fair value of Investment property,
together with the sensitivity analysis on the most subjective
inputs, are set out in note 8.
3. Summary of significant accounting policies
The accounting policies adopted in this report are consistent
with those applied in the Group's consolidated financial statements
for the year ended 31 December 2021 and are expected to be applied
consistently during the year ending 31 December 2022.
3.1 New standard issued and effective from 1 January 2022
The following standard and amendment to existing standards has
been applied in preparing the condensed financial statements.
IFRS Phase 2 amendments for interest rate benchmark (IBOR)
reform provide a practical expedient to account for changes in the
basis for determining contractual cash flows of financial assets
and financial liabilities as a result of IBOR reform. Under the
practical expedient, entities will account for these changes by
updating the effective interest rate without the recognition of an
immediate gain or loss. This practical expedient applies only to
such a change and only to the extent that it is necessary as a
direct consequence of interest rate benchmark reform, and the new
basis is economically equivalent to the previous basis.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
There was no material effect from the adoption of the
above-mentioned amendments to IFRS effective in the period. They
have no significant impact to the Group as they are either not
relevant to the Group's activities or require accounting which is
already consistent with the Group's current accounting
policies.
3.2. New standards issued but not yet effective
Amendments to IAS 1 on Classification of liabilities as Current
or Non-Current are effective for the financial years commencing on
or after 1 January 2023 and are to be applied retrospectively. It
is not expected that the amendments will have an impact on the
presentation and classification of liabilities in the Group
Statement of Financial Position based on rights that are in
existence at the end of the reporting period.
There are no other standards that are not yet effective that
would be expected to have a material impact on the Group in the
current or future reporting periods and on the foreseeable future
transactions.
4. Finance expense
Year ended
Six months ended Six months ended 31 December
30 June 2022 30 June 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------------------------- ----------------- ---------------- ------------
Interest payable on bank borrowings 3.0 2.9 6.1
Interest payable on loan notes 14.8 14.8 29.8
Commitment fees payable on bank borrowings 1.0 1.0 2.0
Swap interest payable 0.1 0.2 0.4
Borrowing costs capitalised against development properties (1.3) - (0.7)
Amortisation of loan arrangement fees 0.8 1.1 2.5
----------------------------------------------------------- ----------------- ---------------- ------------
18.4 20.0 40.1
----------------------------------------------------------- ----------------- ---------------- ------------
5. Taxation
Year ended
Six months ended Six months ended 31 December
30 June 2022 30 June 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------- ------------------ ---------------- ------------
UK corporation tax charge - (2.3) (2.4)
Appropriation tax refund - 3.9 3.9
Tax credit/(charge) - 1.6 1.5
-------------------------- ------------------ ---------------- ------------
The UK corporation tax rate for the financial year is 19%.
Accordingly, this rate has been applied in the measurement of the
Group's tax liability at 30 June 2022.
Non -- taxable items include income and gains that are derived
from the property rental business and are therefore exempt from UK
corporation tax in accordance with Part 12 of CTA 2010.
REIT exempt income includes property rental income that is
exempt from UK corporation tax in accordance with Part 12 of CTA
2010.
The Group received an exceptional tax credit of GBP3.9 million
in the year ended 31 December 2021 for deferred tax that was
over-provided from the acquisition of Tritax Symmetry following the
submission of tax computations for 2019.
6. Earnings per share
Earnings per share (EPS) are calculated by dividing profit for
the period attributable to ordinary equity holders of the Company
by the weighted average number of Ordinary Shares in issue during
the period. As there are dilutive instruments outstanding, basic
and diluted earnings per share are shown below.
In relation to the dilutive shares to be issued in respect of
the B and C Shares, the Directors have indicated a current
intention to settle these 100% in cash. The calculation of basic
and diluted earnings per share is based on the following:
Net profit attributable to Weighted average number of
For the six months ended 30 Ordinary Shareholders Ordinary Shares(1) Earnings per share
June 2022 (unaudited) GBPm '000 pence
------------------------------- ------------------------------ ------------------------------ ------------------
Basic EPS and diluted EPS(2) 458.7 1,868,446 24.55
Adjustments to remove:
Changes in fair value of
Investment property (390.5)
Changes in fair value of
interest rate derivatives (7.4)
Amortisation of other property
assets 0.9
Impairment of intangible
contract 0.3
EPRA EPS and EPRA diluted EPS(2) 62.0 1,868,446 3.32
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjustments to include:
Fixed rental uplift adjustments (2.3)
Share-based payments charges 4.5
Changes in fair value of
contingent consideration
payable 4.8
Amortisation of loan arrangement
fees and intangibles (see note
4) 0.7
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjusted EPS and Adjusted
diluted EPS(2) 69.7 1,868,446 3.73
-------------------------------- ------------------------------ ------------------------------ ------------------
1. Based on the weighted average number of Ordinary Shares in
issue throughout the period.
2. Based on the weighted average number of Ordinary Shares in
issue throughout the period, plus potentially issuable dilutive
shares (see below).
3. Relates to dilutive shares in respect of contingent
consideration. This being the 75% of the amounts due to the B and C
Shareholders that could potentially be settled as equity. The
share-based payments charges are not dilutive at period end.
Net profit attributable to Weighted average number of
For the six months ended 30 Ordinary Shareholders Ordinary Shares(1) Earnings per share
June 2021 (unaudited) GBPm '000 pence
------------------------------- ------------------------------ ------------------------------ ------------------
Basic EPS 377.6 1,719,585 21.96
Adjustment for dilutive shares:
Changes in fair value of
contingent consideration
payable (0.4)
Dilutive shares in respect of B
and C Shareholders 2,029
-------------------------------- ------------------------------ ------------------------------ ------------------
Diluted EPS(2) 377.2 1,721,614 21.91
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjustments to remove:
Changes in fair value of
contingent consideration
payable 0.4
Changes in fair value of
Investment property (314.3)
Changes in fair value of
interest rate derivatives (0.8)
Amortisation of other property
assets 3.2
Impairment of intangible
contract 0.2
Deferred tax credit (3.9)
-------------------------------- ------------------------------ ------------------------------ ------------------
EPRA EPS 62.0 1,719,585 3.61
-------------------------------- ------------------------------ ------------------------------ ------------------
Add back: Changes in fair value
of contingent consideration
payable (0.4) 2,029
-------------------------------- ------------------------------ ------------------------------ ------------------
EPRA diluted EPS(2) 61.6 1,721,614 3.58
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjustments to include:
Changes in fair value of
contingent consideration
payable 0.4
Licence fee receivable on
Forward Funded Developments 6.1
Fixed rental uplift adjustments (2.5)
Share-based payments charges 1.5
Changes in fair value of
contingent consideration
payable 1.5
Amortisation of loan arrangement
fees and intangibles (see note
4) 0.8
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjusted EPS 69.4 1,719,585 4.03
-------------------------------- ------------------------------ ------------------------------ ------------------
Add back: Changes in fair value
of contingent consideration
payable (0.4) 2,029
-------------------------------- ------------------------------ ------------------------------ ------------------
Adjusted diluted EPS(2) 69.0 1,721,614 4.01
-------------------------------- ------------------------------ ------------------------------ ------------------
1. Based on the weighted average number of Ordinary Shares in
issue throughout the period.
2. Based on the weighted average number of Ordinary Shares in
issue throughout the period, plus potentially issuable dilutive
shares (see below).
3. Relates to dilutive shares in respect of contingent
consideration. This being the 75% of the amounts due to the B and C
Shareholders that could potentially be settled as equity. The
share-based payments charges are dilutive at period end.
Net profit attributable to Weighted average number of
For the year ended 31 December Ordinary Shareholders Ordinary Shares(1) Earnings per share
2021 GBPm '000 pence
================================ =============================== =============================== ==================
Basic EPS 972.6 1,755,927 55.39
================================ =============================== =============================== ==================
Add: Shares to be issued on
outstanding investment
manager's fees 668
Add back: Dilutive share based
payment charge 1.7
Add back: Fair value movement in
contingent consideration 4.2 8,017
Add back: Dilutive shares in
respect of B and C shareholders 4,462
-------------------------------- ------------------------------- ------------------------------- ------------------
Diluted EPS(2) 978.5 1,769,074 55.31
-------------------------------- ------------------------------- ------------------------------- ------------------
Adjustments to remove:
Dilutive share based payment
charge (1.7)
Changes in fair value of
contingent consideration
payable (4.2)
Changes in fair value of
investment property (840.9)
Changes in fair value of
interest rate derivatives (2.8)
Gain on disposal of investment
properties (2.0)
Amortisation of other property
assets 5.4
Refund of corporation tax (3.9)
Share of profit from joint
ventures (0.1)
Impairment of intangible
contract and other property
assets 2.9
================================ =============================== =============================== ==================
EPRA EPS 131.2 1,755,927 7.47
Add: Shares to be issued on
outstanding investment
manager's fees(4) 668
EPRA diluted EPS 131.2 1,756,595 7.47
================================ =============================== =============================== ==================
Adjustments to include:
Licence fee receivable on
Forward Funded Developments 7.3
Fixed rental uplift adjustments (6.2)
Share-based payments charges 5.5
Changes in fair value of
contingent consideration
payable 4.2
Amortisation of loan arrangement
fees and intangibles (see note
4) 2.5
================================ =============================== =============================== ==================
Adjusted EPS 144.5 1,755,927 8.23
================================ =============================== =============================== ==================
Add back: Shares to be issued on
outstanding investment
manager's fees(4) 668
-------------------------------- ------------------------------- ------------------------------- ------------------
Adjusted diluted EPS 144.5 1,756,595 8.22
-------------------------------- ------------------------------- ------------------------------- ------------------
1. Based on the weighted average number of Ordinary Shares in
issue throughout the year.
2. Based on the weighted average number of Ordinary Shares in
issue throughout the year, plus potentially issuable dilutive
shares (see below).
3. Relates to dilutive shares in respect of contingent
consideration. This being the 75% of the amounts due to the B and C
shareholders that could potentially be settled as equity. The
share-based payments charges are dilutive to basic EPS only at year
end.
4. Relates to dilutive effect of shares to be issued on
outstanding investment manager's fees.
Adjusted earnings is a performance measure used by the Board to
assess the Group's financial performance and dividend payments. The
metric adjusts EPRA earnings by other non-cash items credited or
charged to the Group Statement of Comprehensive Income, such as
fixed rental uplift adjustments and amortisation of loan
arrangement fees. Licence fees received during the period are added
to EPRA earnings on the basis noted below as the Board sees these
cash flows as supportive of dividend payments. The Board compares
the Adjusted earnings to the available distributable reserves when
considering the level of dividend to pay.
The adjustment for licence fees receivable is calculated by
reference to the proportion of the total period of completed
construction during the period, multiplied by the total licence fee
receivable on a given forward funded asset. Licence fees will
convert into rental income once practical completion has occurred
and therefore rental income will flow into EPRA and Adjusted
earnings from this point.
Fixed rental uplift adjustments relate to adjustments to net
rental income on leases with fixed or minimum uplifts embedded
within their review profiles. The total minimum income recognised
over the lease term is recognised on a straight-line basis and
therefore not supported by cash flows during the early term of the
lease, but this reverses towards the end of the lease.
Share-based payment charges relate to the B and C Shareholders.
Whilst impacting on earnings, this value is considered capital in
nature from the perspective it relates to an equity holding in
Tritax Symmetry Holdings Limited. It is therefore removed from
Adjusted earnings.
7. Dividends paid
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------------- ------------------ ----------------- ------------------
Fourth interim dividend in respect of year ended 31
December 2020 at 1.7125 pence per Ordinary
Share - 29.5 29.5
First interim dividend in respect of year ended 31
December 2021 at 1.6000 pence per Ordinary
Share - 27.5 27.5
Second interim dividend in respect of year ended 31
December 2021 at 1.6000 pence per Ordinary
Share - - 27.5
Third interim dividend in respect of year ended 31
December 2021 at 1.6000 pence per Ordinary
Share - - 29.9
Fourth interim dividend for the year ended 31 December 35.5 - -
2021 at 1.9000 pence per Ordinary Share
First interim dividend for the year ended 31 December 31.3 - -
2022 at 1.6750 pence per Ordinary Share
-------------------------------------------------------- ------------------ ----------------- ------------------
Total dividends paid 66.8 57.0 114.4
-------------------------------------------------------- ------------------ ----------------- ------------------
Total dividends paid in respect of the period/year 1.675p 1.60p 4.80p
-------------------------------------------------------- ------------------ ----------------- ------------------
Total dividends unpaid but declared in respect of the
period/year 1.675p 1.60p 1.90p
-------------------------------------------------------- ------------------ ----------------- ------------------
Total dividends declared - per share 3.35p 3.20p 6.70p
-------------------------------------------------------- ------------------ ----------------- ------------------
On 28 July 2022, the Company announced the declaration of the
second interim dividend in respect of the year ended 31 December
2022 of 1.6750 pence per share payable on 25 August 2022. In
relation to the total dividends declared for the period of 3.35
pence, 3.35 pence is a property income distribution (PID).
8. Investment property
In accordance with IAS 40: Investment property, the Investment
property has been independently valued at fair value by CBRE
Limited ("CBRE") and Colliers International Valuation UK LLP
("Colliers"), both accredited independent valuers with recognised
and relevant professional qualifications and with recent experience
in the locations and categories of the investment properties being
valued. CBRE value all properties with leases or agreements for
lease attached or assets that are under construction.
Colliers value all land holdings either owned or held under
option. The valuations have been prepared in accordance with the
RICS Valuation - Global Standards November 2021 ("the Red Book")
and incorporate the recommendations of the International Valuation
Standards which are consistent with the principles set out in IFRS
13.
The Valuer in forming its opinion make a series of assumptions,
which are typically market related, such as net initial yields and
expected rental values and are based on the Valuer's professional
judgement. The Valuer has sufficient current local and national
knowledge of the particular property markets involved and has the
skills and understanding to undertake the valuations competently.
There has been no changes to the assumptions made in the period as
a result of Covid-19 or other factors.
The valuations are ultimately the responsibility of the
Directors. Accordingly, the critical assumptions used in
establishing the independent valuation are reviewed by the
Board.
Investment Investment
Property Investment property property under
freehold long leasehold construction Total
(unaudited) GBPm GBPm GBPm GBPm
---------------------------------- ------- -------------------------- ---------------------- ----------------- -------
As at 1 January 2022 4,208.7 812.5 227.9 5,249.1
Property additions(1) 4.4 - 197.9 202.3
Fixed rental uplift and tenant lease
incentives(2) 5.1 0.1 - 5.2
Transfer of completed property to
Investment property 16.5 - (16.5) -
Change in fair value during the period 274.9 16.4 99.2 390.5
------------------------------------------- -------------------------- ---------------------- ----------------- -------
As at 30 June 2022 4,509.6 829.0 508.5 5,847.1
------------------------------------------- -------------------------- ---------------------- ----------------- -------
Investment Investment Investment
Property property property under
freehold long leasehold construction Total
(unaudited) GBPm GBPm GBPm GBPm
------------------------------------------ ---------------- -------------- ----------------- ----------------- -------
As at 1 January 2021 2,885.3 696.1 472.1 4,053.5
Property additions(1) 91.1 - 170.5 261.6
Fixed rental uplift and tenant lease
incentives(2) 3.0 0.5 - 3.5
Transfer of Investment property to
Investment property under construction (33.2) - 33.2 -
Transfer of completed property to
Investment property 135.2 - (135.2) -
Change in fair value during the period 210.2 37.0 67.1 314.3
------------------------------------------ ---------------- -------------- ----------------- ----------------- -------
As at 30 June 2021 3,291.6 733.6 607.7 4,632.9
------------------------------------------ ---------------- -------------- ----------------- ----------------- -------
Investment
property Investment property Investment
freehold long leasehold property under construction Total
GBPm GBPm GBPm GBPm
============================================== ========== =================== ============================ =======
As at 1 January 2021 2,885.3 696.1 472.1 4,053.5
Property additions(1) 89.6 - 260.0 349.6
Property disposed in the year - - (2.1) (2.1)
Fixed rental uplift and tenant lease
incentives(2) 6.5 0.7 - 7.2
Transfer of completed property to investment
property 681.1 - (681.1) -
Change in fair value during the year 546.2 115.7 179.0 840.9
============================================== ========== =================== ============================ =======
As at 31 December 2021 4,208.7 812.5 227.9 5,249.1
============================================== ========== =================== ============================ =======
1. Licence fees deducted from the cost of Investment property
under construction totaled GBPNil in the period (31 December 2021:
GBP1.2 million).
2. Included within the carrying value of Investment property is
GBP 64.7 million (31 December 2021: GBP59.5 million) in respect of
accrued contracted rental uplift income. This balance arises as a
result of the IFRS treatment of leases with fixed or minimum rental
uplifts and rent -- free periods, which requires the recognition of
rental income on a straight -- line basis over the lease term. The
difference between this and cash receipts change the carrying value
of the property against which revaluations are measured.
30 June 2022 30 June 2021 31 December
(unaudited) (unaudited) 2021 (audited)
GBPm GBPm GBPm
------------------------------------------------------------------------ ------------- ------------ ---------------
Investment property at fair value per Group Statement of Financial
Position 5,847.1 4,632.9 5,249.1
Capital commitments - 24.3 9.2
------------------------------------------------------------------------ ------------- ------------ ---------------
Total Investment property valuation* 5,847.1 4,657.2 5,258.3
------------------------------------------------------------------------ ------------- ------------ ---------------
* Including costs to complete on forward funded development
assets.
Capital commitments represent costs to bring the asset to
completion under the developer's funding agreements which include
the developer's margin. These commitments could also represent
commitments made in respect of active asset management initiatives
and development land. These costs are not provided for in the Group
Statement of Financial Position (refer to note 18).
Licence fees that have been billed but not received from the
developer in relation to the property are included within rent and
other receivables. The valuation assumes the property to be income
generating and therefore includes this receivable in the value.
Fees payable under the DMA totalling GBP0.6 million (31 December
2021: GBP1.0 million) have been capitalised in the period being
directly attributable to the ongoing development projects.
Valuation risk
There is risk to the fair value of real estate assets that are
part of the portfolio of the Group, comprising variation in the
yields that the market attributes to the real estate investments
and the market income that may be earned.
Real estate investments can be impacted adversely by external
factors such as the general economic climate, supply and demand
dynamics in the market, competition for buildings and environmental
factors which could lead to an increase in operating costs.
Besides asset specific characteristics, general market
circumstances affect the value and income from investment
properties such as the cost of regulatory requirements related to
investment properties, interest rate levels, the availability of
financing and ESG scores.
The Manager of the Group has implemented a portfolio strategy
with the aim to mitigate the above stated real estate risk. By
diversifying in regions, risk categories and tenants, it is
expected to lower the risk profile of the portfolio.
Fair value hierarchy
The Group considers that all of its investment properties fall
within Level 3 of the fair value hierarchy as defined by IFRS 13.
There have been no transfers between Level 1 and Level 2 during any
of the periods, nor have there been any transfers between Level 2
and Level 3 during any of the periods.
The valuations have been prepared on the basis of Market Value
(MV), which is defined in the RICS Valuation Standards, as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's -- length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently and without
compulsion."
MV as defined in the RICS Valuation Standards is the equivalent
of fair value under IFRS.
The following descriptions and definitions relating to valuation
techniques and key unobservable inputs made in determining fair
values are as follows:
The key unobservable inputs made in determining fair values are
as follows:
Unobservable input: estimated rental value (ERV)
The rent per square foot at which space could be let in the
market conditions prevailing at the date of valuation (range:
GBP3.91 - GBP14.70 per annum, December 2021: GBP3.91 - GBP13.75 per
annum and June 2021: GBP3.91 - GBP12.85 per annum).
Passing rents are dependent upon a number of variables in
relation to the Group's property. These include: size, location,
tenant covenant strength and terms of the lease.
Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as
a percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase (range: 2.66% - 6.31%, December
2021: 2.67%- 6.31% and June 2021: 3.25% - 6.59%).
Sensitivities of measurement of significant unobservable
inputs
As set out within significant accounting estimates and
judgements above, the Group's property portfolio valuation is open
to judgements and is inherently subjective by nature.
As a result, the following sensitivity analysis has been
prepared:
-0.25% net -5.0% in +5.0% in
initial yield +0.25% net initial yield passing rent passing rent
GBPm GBPm GBPm GBPm
---------------------------------------- -------------- ------------------------ ------------- -------------
(Decrease)/increase in the fair value of
investment properties as at 30 June 2022
(unaudited) 410.8 (356.0) (266.9) 266.9
------------------------------------------ -------------- ------------------------ ------------- -------------
(Decrease)/increase in the fair value of
investment properties as at 30 June 2021
(unaudited) 255.8 (227.6) (206.7) 206.7
------------------------------------------ -------------- ------------------------ ------------- -------------
(Decrease)/increase in the fair value of
investment properties as at 31 December
2021 (audited) 368.5 (321.3) (251.1) 251.1
------------------------------------------ -------------- ------------------------ ------------- -------------
9. Investment in land options
Six months ended Six months ended Year ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------- ----------------- ---------------- ------------
Opening balance 201.5 228.1 228.1
Costs capitalised in the period 6.4 5.1 15.0
Transferred to Investment property (57.2) (37.9) (41.6)
Closing balance 150.7 195.3 201.5
----------------------------------- ----------------- ---------------- ------------
10. Interest rate derivatives
To mitigate the interest rate risk that arises as a result of
entering into variable rate loans, the Group has entered into a
number of interest rate derivatives. The fair value of Group's
interest rate derivatives is recorded in the Group Statement of
Financial Position and is determined by forming an expectation that
interest rates will exceed strike rates and discounting these
future cash flows at the prevailing market rates as at the year
end. This valuation technique falls within Level 2 of the fair
value hierarchy as defined by IFRS 13. There have been no transfers
between Level 1 and Level 2 during any of the years, nor have there
been any transfers between Level 2 and Level 3 during any of the
years.
11. Trade and other receivables
31 December
30 June 2021
30 June 2022 (unaudited) 2021 (unaudited) (audited)
Non-current trade and other receivables GBPm GBPm GBPm
---------------------------------------- ------------------------- ----------------- -----------
Cash in public institutions 2.0 2.0 2.0
---------------------------------------- ------------------------- ----------------- -----------
The cash in public institutions is a deposit of GBP2.0 million
(June 2021: GBP2.0 million and December 2021: GBP2.0 million) paid
by certain tenants to the Company, as part of their lease
agreements.
31 December
30 June 2021
30 June 2022 (unaudited) 2021 (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------- ------------------------- ----------------- -----------
Trade receivables 13.8 3.7 7.1
Prepayments, accrued income and other receivables 7.8 13.7 25.7
VAT 7.4 5.4 4.3
-------------------------------------------------- ------------------------- ----------------- ---------------
29.0 22.8 37.1
-------------------------------------------------- ------------------------- ----------------- ---------------
The carrying value of trade and other receivables classified at
amortised cost approximates fair value. Included within accrued
income is other operating income recognised during the period which
is receivable under development management agreements for GBP1.7
million (June 2021: GBP11.9 million and December 2021: GBP24.0
million).
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables. To measure expected credit losses
on a collective basis, trade receivables are grouped based on
similar credit risk and ageing.
The expected loss rates are based on the Group's historical
credit losses experienced over the three -- year period prior to
the period end. The historical loss rates are then adjusted for
current and forward-looking information on macroeconomic factors
affecting the Group's Customers. The expected credit loss provision
for June 2022 was GBP0.1 million (June 2021: GBP0.2 million and
December 2021: GBP0.1 million). The incurred loss provision in the
current and prior year are immaterial. No reasonably possible
changes in the assumptions underpinning the expected credit loss
provision would give rise to a material expected credit loss.
12. Cash held at bank
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------- -------------- ------------ -----------
Cash and cash equivalents to agree with cash flow 34.6 30.1 70.9
Restricted cash 0.2 0.2 0.2
-------------------------------------------------- -------------- ------------ -----------
34.8 30.3 71.1
-------------------------------------------------- -------------- ------------ -----------
Restricted cash is cash where there is a legal restriction to
specify its type of use, i.e. this may be where there is a joint
arrangement with a tenant under an active asset management
initiative.
13. Borrowings
The Group has a GBP200 million unsecured revolving credit
facility (RCF) with a syndicate of relationship lenders comprising
Banco Santander S.A. London Branch, Barclays Bank plc, BNP Paribas
London Branch, J.P.Morgan Chase Bank N.A., London Branch (replaced
HSBC Bank plc in April 2022), The Royal Bank of Scotland
International Limited London Branch and Wells Fargo Bank N.A.
London Branch. In June 2022, the termination date in respect of
GBP10 million of the GBP200 million RCF was extended from 14 June
2025 to 14 June 2026 so all GBP200 million terminates on 14 June
2026.
The Group also has a second RCF of GBP350 million which provides
the Group with a significant level of operational flexibility. The
syndicate for the GBP350 million unsecured RCF comprises Barclays
Bank plc, BNP Paribas London Branch, Sumitomo Mitsui Banking
Corporation, J.P.Morgan Chase Bank N.A., London Branch (replaced
HSBC Bank plc in April 2022), The Royal Bank of Scotland plc,
Santander UK plc and Wells Fargo Bank N.A. London Branch. In May
2022, the termination date in respect of GBP50 million of the
GBP350 million RCF was extended from 10 December 2023 to 10
December 2024 so all GBP350 million terminates on 10 December
2024.
As at 30 June 2022, 31 December 2021 and 30 June 2021, 69% of
the Group's debt facility commitments are fixed term, with 31%
floating term. When including interest rate hedging the Group has
fixed term or hedged facilities totaling 100% of drawn debt for 30
June 2022, December 2021 and June 2021 (see note 10).
As at 30 June 2022, the weighted average running cost of debt
was 2.52% (December 2021: 2.26% and June 2021: 2.18%) and the
Group's average capped cost of debt was 2.54% as at 30 June 2022
(December 2021: 2.50% and June 2021: 2.50%. As at 30 June 2022, the
Group had undrawn debt commitments of GBP443.0 million (and 31
December 2021: GBP550.0 million and 30 June 2021: GBP404.0
million).
The Group has been in compliance with all of the financial
covenants of the Group's bank facilities as applicable throughout
the period covered by these financial statements.
A large part of the Group's borrowings are unsecured financing
arrangements. A summary of the drawn and undrawn bank borrowings in
the period is shown below:
Bank borrowings drawn
31 December
2021
30 June 30 June 2021
2022 (unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------- ----------------- ------------ -----------
At the beginning of the period 212.9 212.9 212.9
Bank borrowings drawn in the period under
existing facilities 133.0 174.5 245.5
Bank borrowings repaid in the period under
existing facilities (26.0) (28.5) (245.5)
------------------------------------------- ----------------- ------------ -----------
Total bank borrowings drawn 319.9 358.9 212.9
------------------------------------------- ----------------- ------------ -----------
Any associated fees in arranging the bank borrowings and loan
notes that are unamortised as at the year end are offset against
amounts drawn on the facilities as shown in the table below:
Bank borrowings drawn
30 June 31 December
2022 30 June 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------- ------------- ------------- -----------
Bank borrowings drawn: due in more than one year 319.9 358.9 212.9
Less: unamortised costs on bank borrowings (5.7) (6.0) (5.3)
------------------------------------------------- ------------- ------------- -----------
314.2 352.9 207.6
------------------------------------------------- ------------- ------------- -----------
Loan notes
31 December
30 June 2022 30 June 2021 2021
(unaudited) (unaudited) (audited)
Bonds GBPm GBPm GBPm
-------------------------------------- -------------- ------------- -----------
2.625% Bonds 2026 249.5 249.4 249.5
3.125% Bonds 2031 247.7 247.4 247.5
2.860% USPP 2028 250.0 250.0 250.0
2.980% USPP 2030 150.0 150.0 150.0
1.500% Green Bonds 2033 246.6 246.3 246.4
Less: unamortised costs on loan notes (5.4) (6.1) (5.8)
-------------------------------------- -------------- ------------- -----------
1,138.4 1,137.0 1,137.6
-------------------------------------- -------------- ------------- -----------
The weighted average term to maturity of the Group's debt as at
the period end is 6.2 years (June 2021: 7.0 years and December
2021: 6.5 years).
Maturity of borrowings
31 December
30 June 2022 30 June 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------- -------------- ------------ -----------
Repayable between one and two years - - -
Repayable between two and five years 446.5 196.9 300.3
Repayable in over five years 1,017.2 1,305.1 1,056.0
------------------------------------- -------------- ------------ -----------
1,463.7 1,502.0 1,356.3
------------------------------------- -------------- ------------ -----------
Set out below is a comparison by class of the carrying amounts
and the fair value of the Group's financial instruments that are
carried in the financial statements:
Book value Fair value
Book value Fair value Book value Fair value 31 December 2021 31 December 2021
30 June 2022 (unaudited) 30 June 2022 (unaudited) 30 June 2021 (unaudited) 30 June 2021 (unaudited) (audited) (audited)
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------------------------- -------------------------- ------------------------- ------------------------- ----------------- -----------------
Financial
assets
Interest rate
derivatives 12.4 12.4 0.4 0.4 1.8 1.8
Trade and other
receivables(1) 18.5 18.5 3.7 3.7 31.3 31.3
Cash held at
bank 34.8 34.8 30.3 30.3 71.1 71.1
--------------- -------------------------- -------------------------- ------------------------- ------------------------- ----------------- -----------------
Financial
liabilities
Interest rate
derivatives - - 0.7 0.7 - -
Trade and other
payables(2) 92.5 92.5 112.1 112.1 85.9 85.9
Amounts due to
B and C
shareholders 46.2 46.2 34.7 34.7 41.4 41.4
Borrowings 1,463.7 1,354.3 1,502.0 1,579.7 1,356.3 1,405.3
--------------- -------------------------- -------------------------- ------------------------- ------------------------- ----------------- -----------------
1. Excludes certain VAT, prepayments and other debtors.
2. Excludes tax and VAT liabilities.
Interest rate derivatives and amounts due to B and C
shareholders are the only financial instruments measured at fair
value through profit and loss. All other financial assets and all
financial liabilities are measured at amortised cost. All financial
instruments were designated in their current categories upon
initial recognition.
The Group has two fixed rate loans totalling GBP162 million,
provided by PGIM (GBP90 million) and Canada Life (GBP72 million).
The fair value is determined by comparing the discounted future
cash flows using the contracted yields with the reference gilts
plus the margin implied. The reference gilts used were the Treasury
0.375% 2026 Gilt and Treasury 0.25% 2031 Gilt respectively, with an
implied margin that is unchanged since the date of fixing. The
loans are considered to be a Level 2 fair value measurement. For
all other bank loans there is considered no other difference
between fair value and carrying value.
The fair value of financial liabilities traded on active liquid
markets, including the 2.625% Bonds 2026, 3.125% Bonds 2031, 1.5%
Bonds 2033, 2.860% USPP 2028 and 2.980% USPP 2030, is determined
with reference to the quoted market prices. These financial
liabilities are considered to be a Level 1 fair value measure.
The fair value of the financial liabilities at Level 1 fair
value measure were GBP1,041.3 million (Dec 2021: GBP1,187.3 million
and June 2021: GBP1,214.3 million) and the financial liabilities at
Level 2 fair value measure were GBP155.1 million (Dec 2021:
GBP165.2 million and June 2021: GBP168.5 million).
The London Interbank Offered Rate (LIBOR) was phased out from
the end of 2021 and replaced by various alternative risk-free-rates
(RFRs) across the Global Financial Markets. As a result and during
the year, the Company transitioned all of its borrowings subject to
a variable rate of interest from LIBOR to SONIA (Sterling Overnight
Index Average). SONIA is an overnight rate, whereas LIBOR was a
term rate. SONIA is close to a risk free measure of borrowing
costs. It is compounded over a lending period to produce a
backward-looking term interest rate.
From 1 January 2022, all borrowings under these agreements
attract an interest rate of the borrowing margin, plus SONIA, plus
a credit adjustment spread equal to 11.93 bps. This change in risk
free rate has not lead to a material change in overall borrowing
costs.
14. Amounts due to B and C Shareholders
Amounts due to B and C Shareholders comprise the fair value of
the contingent consideration element of B and C Shares along with
the fair value of the obligation under the cash settled share-based
payment element of B and C Shares.
Amounts due to B and C Shareholders are detailed in the table
below:
Contingent consideration Share-based payment Fair value
30 June 2022 (unaudited) GBPm GBPm GBPm
-------------------------------------------- ------------------------ --------------------- ----------
Opening balance 26.7 14.7 41.4
Fair value movement recognised 4.8 - 4.8
Share-based payment charge - 4.5 4.5
-------------------------------------------- ------------------------ --------------------- ----------
Closing balance 31.5 19.2 50.7
-------------------------------------------- ------------------------ --------------------- ----------
Contingent consideration Share-based payment Fair value
30 June 2021 (unaudited) GBPm GBPm GBPm
-------------------------------------------- ------------------------ --------------------- ------------
Opening balance 22.5 9.2 31.7
Fair value movement recognised 1.5 - 1.5
Share-based payment charge - 1.5 1.5
-------------------------------------------- ------------------------ --------------------- ------------
Closing balance 24.0 10.7 34.7
-------------------------------------------- ------------------------ --------------------- ------------
Contingent consideration Share-based payment Fair value
31 December 2021 (audited) GBPm GBPm GBPm
------------------------------- ------------------------ ------------------- ----------
Opening balance 22.5 9.2 31.7
Fair value movement recognised 4.2 - 4.2
Share-based payment charge - 5.5 5.5
------------------------------- ------------------------ ------------------- ----------
Closing balance 26.7 14.7 41.4
------------------------------- ------------------------ ------------------- ----------
The Group considers that the amounts due to the B and C
Shareholders fall within Level 3 of the fair value hierarchy as
defined by IFRS 13. There have been no transfers between Level 1
and Level 2 during any of the periods, nor have there been any
transfers between Level 2 and Level 3 during any of the
periods.
1. Contingent consideration
The B and C Shares vest over a five-year period and require the
Symmetry Management Shareholders to, amongst other things, remain
in the employment of the Symmetry ManCo for the vesting period. The
value of the amount due (subject to certain vesting conditions) is
the lower of 60% of the Adjusted NAV of Tritax Symmetry at the
relevant future point in time and the value of the B and C Shares
at the original completion date. In accordance with IFRS 3
"Business Combinations" the unconditional amount due under
Shareholders agreement is accounted for as contingent
consideration.
The Adjusted NAV of Tritax Symmetry is the NAV of Tritax
Symmetry at the reporting date, adjusted for various matters
impacting on the fair value of those land options where planning
permission has been obtained but the land has not been acquired
along with the elimination of profits created from the Tritax
Symmetry investment assets.
2. Share-based payment
In accordance with IFRS 3 "Business Combinations" the
requirement to remain in continued employment in order to realise
the full value of the B and C Shares has resulted in the excess
value (over and above the amount recognised as contingent
consideration) being accounted for as payments for post combination
services which reflect the 13% economic right held to their share
of future performance of the Tritax Symmetry Development assets
over and above the completion NAV. The amount due to Symmetry
Management Shareholders is based on the Adjusted NAV of Tritax
Symmetry and is settled in cash to the value of 25% with the
balance settled in either cash and/or shares in the Company, at the
sole discretion of the Company.
The fair value of the B and C Shares has been calculated using a
Monte Carlo simulation model, for the cash settled element of the
liability. This approach has the benefits of being flexible, not
reliant on a single case scenario and removes the inherent
difficulties with determining discount rate to assign to a
particular class of share as the risk would change every time the
NAV moved. The change in volatility assumptions does not lead to a
significant change in the resulting fair values of the B and C
Shares because there are limited hurdles attached to them and it is
assumed that all will be exercised at some point over the
eight-year horizon. The key unobservable inputs for the Monte-Carlo
simulation purposes are the net initial yield of completed
developments, future costs of debt and the timing of the completion
of the developments.
The Company has the legal option of settling the share-based
payment either via cash or equity, with a minimum of 25% being
settled in cash. The Directors have a current intention to maximise
the cash element of the settlement as they believe this would
minimise dilution to existing shareholders. The Directors will
endeavour to settle all of the B and C Shares in cash, subject to
sufficient funds being available to the Group at the time of
settlement without adversely impacting the operations of the
Group.
Amounts due to B and C Shareholders are shown as a liability at
fair value in the Group Statement of Financial Position. The
liability is fair valued at each reporting date with a
corresponding charge recognised in the Group profit or loss over
the vesting period. For the period ended 30 June 2022, GBP4.5
million (December 2021: GBP5.5 million and June 2021: GBP1.5
million) was charged in the Group profit or loss for the
share-based payment.
15. Equity reserves
Share capital
The share capital relates to amounts subscribed for share
capital at its nominal value. The Company had 1,868,826,992 shares
of nominal value of 1 pence each in issue at the end of the period
30 June 2022 (30 June 2021: 1,719,883,762 shares and 31 December
2021: 1,867,781,310 shares).
Issued and fully paid at 1 pence 30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
each GBPm GBPm GBPm
----------------------------------- ------------------------ ------------------------ --------------------------
Balance at beginning of period -
GBP0.01 Ordinary Shares 18.7 17.2 17.2
Shares issued in relation to further
Equity issuance - - 1.4
Shares issued in relation to
management contract - - 0.1
Shares issued in relation to the - - -
consideration for a corporate
acquisition
----------------------------------- ------------------------ ------------------------ --------------------------
Balance at end of period 18.7 17.2 18.7
------------------------------------ ------------------------ ------------------------ --------------------------
Share premium
The share premium relates to amounts subscribed for share
capital in excess of its nominal value.
Capital reduction reserve
The capital reduction reserve account is classed as a
distributable reserve. Movements in the current period relate to
dividends paid.
Retained earnings
Retained earnings relates to all net gains and losses not
recognised elsewhere.
16. Net asset value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the
Group Statement of Financial Position attributable to ordinary
equity holders of the Parent by the number of Ordinary Shares
outstanding at the end of the period. As there are no dilutive
instruments outstanding, both basic and diluted NAV per share are
shown below.
31 December
30 June 2022 30 June 2021 2021
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------------------------- -------------- ------------- -------------
Net assets per Condensed Group Statement of Financial Position 4,470.7 3,243.1 4,076.5
EPRA NTA (see table below) 4,539.1 3,340.3 4,157.6
Ordinary Shares:
Issued share capital (number) 1,868,826,992 1,719,883,762 1,867,781,310
--------------------------------------------------------------- -------------- ------------- -------------
Basic net asset value per share 239.23p 188.57p 218.26p
Dilutive shares in issue (number) - - 668,309
--------------------------------------------------------------- -------------- ------------- -------------
Diluted NAV per share 239.23p 188.57p 218.18p
--------------------------------------------------------------- -------------- ------------- -------------
The Group considered EPRA NTA to be the most relevant NAV
measure for the Group and we are now reporting this as our primary
NAV measure.
30 June 2022 (unaudited) 30 June 2021 (unaudited) 31 December 2021 (audited)
----------------- ----------------------------- ------------------------------- -------------------------------
EPRA EPRA EPRA EPRA EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NTA NRV NDV NTA NRV NDV
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- --------- -------- -------- ---------- -------- --------- ---------- -------- ---------
NAV attributable
to shareholders 4,470.7 4,470.7 4,470.7 3,243.1 3,243.1 3,243.1 4,076.5 4,076.5 4,076.5
Revaluation
of land options 60.5 60.5 60.5 80.2 80.2 80.2 66.0 66.0 66.0
Mark-to-market
adjustments
of derivatives 9.5 9.5 - 18.9 18.9 - 16.9 16.9 -
Intangibles (1.6) - - (1.9) - - (1.7) - -
Fair value
of debt - - 109.3 - - (77.8) - - (47.0)
Real estate
transfer tax
(1) - 412.3 - - 336.9 - - 376.3 -
----------------- --------- -------- -------- ---------- -------- --------- ---------- -------- ---------
NAV 4,539.1 4,953.0 4,640.5 3,340.3 3,679.1 3,245.5 4,157.7 4,535.7 4,095.5
----------------- --------- -------- -------- ---------- -------- --------- ---------- -------- ---------
NAV per share 242.88p 265.03p 248.31p 194.22p 213.92p 188.71p 222.60p 242.84p 219.27p
----------------- --------- -------- -------- ---------- -------- --------- ---------- -------- ---------
Dilutive NAV
per share 242.88p 265.03p 248.31p 194.22p 213.92p 188.71p 222.52p 242.75p 219.19p
----------------- --------- -------- -------- ---------- -------- --------- ---------- -------- ---------
(1) EPRA NTA and EPRA NDV reflect IFRS values which are net of
RETT (real estate transfer tax). RETT are added back when
calculating EPRA NRV .
17. Transactions with related parties
For the half year 30 June 2022, all Directors and some of the
Members of the Manager are considered key management personnel. The
terms and conditions of the Investment Management Agreement are
described in the Management Engagement Committee Report within the
2021 Annual Report.
The total amount outstanding at the period end relating to the
Investment Management Agreement was GBP6.3 million (30 June 2021:
GBP4.9 million and 31 December 2021: GBP5.7 million).
The amounts paid to Directors for their services for the period
to 30 June 2022 was GBP0.2 million (30 June 3021: GBP0.2 million
and 31 December 2021: GBP0.4 million).
The total expense recognised in the Group profit or loss
relating to share-based payments under the Investment Management
Agreement was GBP2.6 million (30 June 2021: GBP1.3 million and 31
December 2021: GBP2.7 million), of which GBP2.6 million (30 June
2021: GBP1.3 million and 31 December 2021: GBP1.5 million) was
outstanding at the period end.
The Members of the Manager who are considered as key management
personnel are Colin Godfrey, James Dunlop, Henry Franklin, Petrina
Austin, Bjorn Hobart, Frankie Whitehead and Philip Redding. The
other Members of the Manager are Alasdair Evans, James Watson, Nick
Preston, and Aberdeen Asset Management Plc.
During the period the Directors who served during the period
received the following dividends: Aubrey Adams: GBP8,200 (June
2021: GBP6,625 and December 2021: GBP13,345), Alastair Hughes:
GBP1,444 (June 2021: GBP1,159 and December 2021: GBP2,279), Richard
Laing: GBP1,788 (June 2021: GBP518 and December 2021: GBP3,051),
Karen Whitworth: GBP1,098 (June 2021: GBP530, December 2021:
GBP1,277), Wu Gang GBPnil (June 2021: GBPnil, December 2021:
GBPnil) and Elizabeth Brown GBP156 (June 2021: GBPnil, December
2021: GBPnil).
During the period the Members of the Manager, who are considered
key management personnel, received the following dividends: Colin
Godfrey: GBP88,359 (June 2021: GBP75,162 and December 2021:
GBP149,570), James Dunlop: GBP86,129 (June 2021: GBP73,097 and
December 2021: GBP145,509), Henry Franklin: GBP64,477 (June 2021:
GBP54,871 and December 2021: GBP107,003), Petrina Austin: GBP10,927
(June 2021: GBP9,002 and December 2021: GBP18,004), Bjorn Hobart:
GBP12,347 (June 2021: GBP10,149 and December 2021: GBP20,349) and
Frankie Whitehead GBP5,135 (June 2021: GBP3,905 and December 2021:
GBP7,888) and Philip Redding GBP618 ( June 2021: GBPnil and
December 2021: GBP118 ) .
18. Capital commitments
The Group had capital commitments of GBP191.5 million in
relation to its development assets, active asset management
initiatives and commitments under development land, outstanding as
at 30 June 2022 (30 June 2021: GBP55.6 million 31 December 2021:
GBP65.4 million). All commitments fall due within eighteen months
from the date of this report.
19. Subsequent events
There were no significant events occurring after the reporting
period, but before the financial statements were authorised for
issue.
NOTES TO THE EPRA AND OTHER KEY PERFORMANCE INDICATORS
(UNAUDITED)
1. EPRA earnings per share
Six months Year ended
Six months ended ended 31 December
30 June 2022 30 June 2021 2021
GBPm GBPm GBPm
-------------------------------------------------------------------- ---------------- ------------- -------------
Total comprehensive income (attributable to shareholders) 458.7 377.6 972.6
Adjustments to remove:
Changes in fair value of investment properties (390.5) (314.3) (840.9)
Changes in fair value of interest rate derivatives (7.4) (0.8) (2.8)
Share of loss from joint ventures - - (0.1)
Gain on disposal of investment properties - - (2.0)
Amortisation of other property assets 0.9 3.2 5.4
Impairment of intangible contract and other property assets 0.3 0.2 2.9
Tax refund - (3.9) (3.9)
-------------------------------------------------------------------- ---------------- ------------- -------------
Profits to calculate EPRA earnings per share 62.0 62.0 131.2
Add back: Changes in fair value of contingent consideration payable - (0.4) -
-------------------------------------------------------------------- ---------------- ------------- -------------
Profits to calculate EPRA diluted earnings per share 62.0 61.6 131.2
-------------------------------------------------------------------- ---------------- ------------- -------------
Weighted average number of Ordinary Shares 1,868,445,694 1,719,584,549 1,755,926,756
EPRA earnings per share - basic 3.32p 3.61p 7.47p
Dilutive shares to be issued - 2,029,483 668,309
-------------------------------------------------------------------- ---------------- ------------- -------------
EPRA earnings per share - diluted 3.32p 3.58p 7.47p
-------------------------------------------------------------------- ---------------- ------------- -------------
2. EPRA NAV per share
The Group considered EPRA Net Tangible Assets (NTA) to be the
most relevant NAV measure for the Group. EPRA NTA excludes the
intangible assets and the cumulative fair value adjustments for
debt-related derivatives which are unlikely to be realised.
30 June 2022
------------------------------------------- ------- --------------------------------------
EPRA NTA EPRA NRV EPRA NDV
Note GBPm GBPm GBPm
------------------------------------------- ------------ --------- --------- -----------
NAV attributable to shareholders 4,470.7 4,470.7 4,470.7
Revaluation of land options 60.5 60.5 60.5
Mark-to-market adjustments of derivatives 9.5 9.5 -
Intangibles (1.6) - -
Fair value of debt - - 109.3
Real estate transfer tax (1) - 412.3 -
At 30 June 2022 16 4,539.1 4,953.0 4,640.5
------------------------------------------- ------------ --------- --------- -----------
NAV per share 242.88p 265.03p 248.31p
------------------------------------------- ------------ --------- --------- -----------
Dilutive NAV per share 242.88p 265.03p 248.31p
------------------------------------------- ------------ --------- --------- -----------
30 June 2021
------------------------------------------- ----- -------------------------------
EPRA NTA EPRA NRV EPRA NDV
Note GBPm GBPm GBPm
------------------------------------------- ----- --------- --------- ---------
NAV attributable to shareholders 3,243.1 3,243.1 3,243.1
Revaluation of land options 80.2 80.2 80.2
Mark-to-market adjustments of derivatives 18.9 18.9 -
Intangibles (1.9) - -
Fair value of debt - - (77.8)
Real estate transfer tax (1) - 336.9 -
At 30 June 2021 16 3,340.3 3,679.1 3,245.5
------------------------------------------- ----- --------- --------- ---------
NAV per share 194.22p 213.92p 188.71p
------------------------------------------- ----- --------- --------- ---------
Dilutive NAV per share 194.22p 213.92p 188.71p
------------------------------------------- ----- --------- ---------
31 December 2021
------------------------------------------- -----
EPRA NTA EPRA NRV EPRA NDV
Note GBPm GBPm GBPm
------------------------------------------- -----
NAV attributable to shareholders 4,076.5 4,076.5 4,076.5
Revaluation of land options 66.0 66.0 66.0
Mark-to-market adjustments of derivatives 16.9 16.9 -
Intangibles (1.7) - -
Fair value of debt - - (47.0)
Real estate transfer tax(1) - 376.3 -
At 31 December 2021 16 4,157.7 4,535.7 4,095.5
NAV per share 222.60p 242.84p 219.27p
Dilutive NAV per share 222.52p 242.75p 219.19p
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of
RETT. RETT are added back when calculating EPRA NRV.
3. EPRA net initial yield (NIY) and EPRA "topped up" NIY
Six months Year ended
Six months ended ended 31 December
30 June 2022 30 June 2021 2021
GBPm GBPm GBPm
Investment property - wholly owned 5,844.4 4,414.4 5,123.7
Investment property - share of joint venture 4.3 2.0 2.5
Less: development properties (512.8) (389.4) (105.0)
Completed property portfolio 5,335.9 4,027.0 5,021.2
Allowance for estimated purchasers' costs 361.7 273.0 340.4
Gross up completed property portfolio valuation (B) 5,697.6 4,300.0 5,361.6
Annualised passing rental income 216.6 189.4 195.9
Less: contracted rental income in respect of development properties (16.9) (13.7) -
Property outgoings (0.1) (0.1) (0.2)
Less: contracted rent under rent-free period (8.4) (0.8) (4.8)
Annualised net rents (A) 191.2 174.8 190.9
Contractual increases for fixed uplifts and rent free periods 14.0 4.8 10.2
Topped up annualised net rents (C) 205.2 179.6 201.1
EPRA net initial yield (A/B) 3.36% 4.06% 3.56%
EPRA topped up net initial yield (C/B) 3.60% 4.17% 3.75%
4. EPRA vacancy rate
Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
GBPm GBPm GBPm
------------
Annualised estimated rental value of vacant premises - - -
Portfolio estimated rental value(1) 229.7 187.7 216.2
EPRA vacancy rate 0% 0% 0%
1 Excludes land held for development.
5. EPRA cost ratio
Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
GBPm GBPm GBPm
-------------
Property operating costs 0.1 0.1 0.2
Administration expenses 15.3 12.2 25.5
Service charge costs recovered through rents but not separately invoiced - - -
Total costs including and excluding vacant property costs (A) 15.4 12.3 25.7
Vacant property cost - - -
Total costs excluding vacant property costs (B) 15.4 12.3 25.7
Gross rental income - per IFRS 101.5 87.6 184.7
Less: Service charge cost components of gross rental income - - -
Gross rental income (C) 101.5 87.6 184.7
Total EPRA cost ratio (including vacant property costs) (A/C) 15.2% 14.1% 13.9%
Total EPRA cost ratio (excluding vacant property costs) (B/C) 15.2% 14.1% 13.9%
6. EPRA like-for-like rental income
Six months Six months Change Change
ended ended GBPm %
30 June 2022 30 June 2021
GBPm GBPm
Like-for-like rental income 84.4 81.7
Other rental income - -
Like-for-like Gross rental income 84.4 81.7 2.7 3.3
Irrecoverable property expenditure (0.1) (0.1)
Like-for-like Net rental income 84.3 81.6 2.7 3.3
Reconciliation to Net rental income
per Statement of Comprehensive Income:
Development properties 9.6 2.2
Properties acquired 2.4 1.3
Properties disposed - -
Properties under rent free periods - (0.9)
Spreading of tenant incentives and
guaranteed rental uplifts 5.2 3.4
Total per statement of comprehensive
income 101.5 87.6
7. EPRA property-related capital expenditure
Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
GBPm GBPm GBPm
Acquisition(1) 4.4 91.1 89.6
Development(2) 203.0 175.6 274.3
Investment properties:
Tenant incentives(3) 5.2 3.4 7.2
Capitalised interest 1.3 - 0.7
Total 213.9 270.1 371.8
8. Total Accounting Return (TAR)
Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
GBPm GBPm GBPm
Opening EPRA NTA 222.60p 175.61p 175.61p
Closing EPRA NTA 242.88p 194.22p 222.60p
Change in EPRA NTA 20.28p 18.61p 46.99p
Dividends paid 3.575p 3.31p 6.51p
Total growth in EPRA NTA plus dividends paid 23.86p 21.92p 53.50p
Total return 10.7% 12.5% 30.5%
The financial information contained in this results announcement
has been prepared in accordance with the measurement and
recognition principles of UK adopted international accounting
standards. Whilst the financial information included in this
announcement has been computed in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006, this announcement does not itself contain
sufficient disclosures to comply with IFRS. The financial
information does not constitute the Group's statutory financial
statements for the years ended 31 December 2021 or 31 December
2020, but is derived from those financial statements. Financial
statements for the year ended 31 December 2021 have been delivered
to the Registrar of Companies and those for the year ended 31
December 2022 will be delivered following the Company's Annual
General Meeting. The auditors' reports on both the 31 December 2021
and 31 December 2020 financial statements were unqualified; did not
draw attention to any matters by way of emphasis; and did not
contain statements under section 498 (2) or (3) of the Companies
Act 2006.
GLOSSARY OF TERMS
"Adjusted Earnings" Post-tax earnings attributable to
shareholders, adjusted to include licence fees receivable on
forward funded development assets and adjusts for other earnings
not supported by cash flows. "Adjusted Earnings per share" or
"Adjusted EPS" on a per share basis.
"B and C Shares" The B and C Shares in Tritax Symmetry issued to
the Symmetry Management shareholders.
"Big Box" A "Big Box" property or asset refers to a specific
subsegment of the logistics sector of the real estate market,
relating to very large logistics warehouses (each with typically
over 500,000 sq ft of floor area) with the primary function of
holding and distributing finished goods, either downstream in the
supply chain or direct to consumers, and typically having the
following characteristics: generally a modern constructed building
with eaves height exceeding 12 metres; let on long leases with
institutional-grade tenants; with regular, upward-only rental
reviews; having a prime geographical position to allow both
efficient stocking (generally with close links to sea ports or rail
freight hubs) and efficient downstream distribution; and
increasingly with sophisticated automation systems or a highly
bespoke fit out.
"Board" The Directors of the Company.
"BREEAM" The Building Research Establishment Environmental
Assessment Method certification of an asset's environmental, social
and economic sustainability performance, using globally recognised
standards.
"Company" Tritax Big Box REIT plc (company number 08215888).
"CPI" Consumer Price Index, a measure that examines the weighted
average of prices of a basket of consumer goods and services, such
as transportation, food and medical care as calculated on a monthly
basis by the Office of National Statistics.
"Current Development Pipeline" Assets that are in the course of
construction or assets for which we have made a construction
commitment.
"CVA" A company voluntary liquidation, a legally binding
agreement between a business and its creditors which sets out a
debt repayment plan and enables a viable business to avoid
insolvency.
"db Symmetry" db Symmetry Group Ltd and db symmetry BVI Limited,
together with their subsidiary undertakings and joint venture
interests, which were acquired by the Group in February 2019.
"Directors" The Directors of the Company as of the date of this
report being Aubrey Adams, Elizabeth Brown, Wu Gang, Alastair
Hughes, Richard Laing and Karen Whitworth.
"Development Management Agreement" or "DMA" An agreement between
the Group and a developer setting out the terms in respect of the
development of an asset. In particular, the development of the
Symmetry Portfolio is the subject of a DMA between Tritax Symmetry
and Symmetry ManCo.
"Development portfolio" or "Development assets" The Group's
Development portfolio comprises its property assets which are not
Investment assets, including land, options over land as well as any
assets under construction on a speculative basis.
"EPC rating" A review of a property's energy efficiency.
"EPRA" European Public Real Estate Association.
"EPRA Earnings" Earnings from operational activities (which
excludes the licence fees receivable on our Forward Funded
Development assets).
"EPRA NAV" or "EPRA Net Asset Value" The Basic Net Asset Value
adjusted to meet EPRA Best Practices Recommendations Guidelines
(2016) requirements by excluding the impact of any fair value
adjustments to debt and related derivatives and other adjustments
and reflecting the diluted number of Ordinary Shares in issue.
"EPRA Triple Net Asset Value (NNNAV)" EPRA NAV adjusted to
include the fair values of financial instruments, debt and deferred
taxes.
"EPRA Net Tangible Asset (NTA)" The Basic Net Asset Value
adjusted to meet EPRA Best Practices Recommendations Guidelines
(2019) requirements by excluding intangibles and the impact of any
fair value adjustments to related derivatives. This includes the
revaluation of land options.
"EPRA Net Reinstatement Value (NRV)" IFRS NAV adjusted to
exclude the impact of any fair value adjustments to related
derivatives. This includes the revaluation of land options and the
Real estate transfer tax (RETT).
"EPRA Net Disposal Value (NDV)" IFRS NAV adjusted to include the
fair values of debt and the revaluation of land options.
"EPRA Net Initial Yield (NIY)" Annualised rental income based on
the cash rents passing at the balance sheet date, less
non-recoverable property operating expenses, divided by the market
value of the property, increased with (estimated) purchaser's
costs.
"EPRA 'Topped-Up' NIY" This measure incorporates an adjustment
to the EPRA NIY in respect of the expiration of rent-free periods
(or other unexpired lease incentives, such as discounted rent
periods and step rents).
"EPRA Vacancy" Estimated market rental value (ERV) of vacant
space divided by the ERV of the whole portfolio.
"EPRA Cost Ratio" Administrative and operating costs (including
and excluding costs of direct vacancy) divided by gross rental
income.
"Estimated cost to completion" Costs still to be expended on a
development or redevelopment to practical completion, including
attributable interest.
"Estimated rental value" or "ERV" The estimated annual market
rental value of lettable space as determined biannually by the
Group's valuers. This will normally be different from the rent
being paid.
"FCA" The United Kingdom Financial Conduct Authority (or any
successor entity or entities).
"Forward Funded Development" Where the Company invests in an
asset which is either ready for, or in the course of, construction,
pre-let to an acceptable counterparty. In such circumstances, the
Company seeks to negotiate the receipt of immediate income from the
asset, such that the developer is paying the Company a return on
its investment during the construction phase and prior to the
tenant commencing rental payments under the terms of the lease.
Expert developers are appointed to run the development process.
"Foundation asset" Foundation assets provide the core, low-risk
income that underpins our business. They are usually let on long
leases to customers with excellent covenant strength. These
buildings are commonly new or modern and in prime locations, and
the leases have regular upward only rent reviews, often either
fixed or linked to Inflation Indices.
"FRI Lease" Full Repairing and Insuring Lease. During the lease
term, the tenant is responsible for all repairs and decoration to
the property, inside and out, and the building insurance premium is
recoverable from the tenant.
"Future Development Pipeline" The Group's land portfolio for
future development typically controlled under option agreements
which do not form part of the Current or Near Term development
pipelines.
"Gearing" Net borrowings divided by total shareholders' equity
excluding intangible assets and deferred tax provision.
"GIA" Under the RICS Code of Measuring Practice (6th Edition)
the Gross Internal Area (GIA) is the basis of measurement for
valuation of industrial buildings (including ancillary offices) and
warehouses. The area of a building measured to the internal face of
the perimeter walls at each floor level (including the thickness of
any internal walls). All references to building sizes in this
document are to the GIA.
"GAV" The Group's gross asset value.
"Global Real Estate Sustainability Benchmark (GRESB) Assessment"
GRESB assesses the ESG performance of real estate and
infrastructure portfolios and assets worldwide, providing
standardised and validated data to the capital markets.
"Gross rental income" Contracted rental income recognised in the
period, in the income statement, including surrender premiums and
interest receivable on finance leases. Lease incentives, initial
costs and any contracted future rental increases are amortised on a
straight-line basis over the lease term.
"Group" or "REIT Group" The Company and all of its subsidiary
undertakings.
"Growth Covenant asset" Growth Covenant assets are fundamentally
sound assets in good locations, let to customers we perceive to be
undervalued at the point of purchase and who have the potential to
improve their financial strength, such as young e-retailers or
other companies with growth prospects. These assets offer value
enhancement through yield compression.
"IMA" The Investment Management Agreement between the Manager
and the Company.
"Investment portfolio" or "Investment assets" The Group's
Investment Portfolio comprises let or pre-let (in the case of
Forward Funded Developments) assets which are income generating, as
well as any speculative development assets which have reached
practical completion but remain unlet.
"Investment property" Completed land and buildings held for
rental income return and/or capital appreciation.
"Land asset" Opportunities identified in land which the Manager
believes will enable the Company to secure, typically, pre-let
Forward Funded Developments in locations which might otherwise
attract lower yields than the Company would want to pay, delivering
enhanced returns but controlling risk.
"LIBOR" London Interbank Offered Rate.
"Link" or "Link Asset Services" A trading name of Link Market
Services Limited (company number 2605568).
"Listing Rules" The listing rules made by the Financial Conduct
Authority under section 73A of FSMA.
"Loan Notes" The loan notes issued by the Company on 4 December
2018.
"Loan to Value (LTV)" The proportion of our gross asset value
that is funded by net borrowings.
"London Stock Exchange" London Stock Exchange plc.
"Manager" Tritax Management LLP (partnership number
0C326500).
"Minimum Energy Efficiency Standards (MEES )" The legal standard
for minimum energy efficiency which applies to rented commercial
buildings as regulated by the Energy Efficiency (Private Rented
Property) (England and Wales) Regulations 2015.
"Near-term Development Pipeline" Sites which have either
received planning consent or sites where planning applications have
been submitted prior to the year end.
"Net Initial Yield (NIY)" The annual rent from a property
divided by the combined total of its acquisition price and
expenses.
"Net rental income" Gross rental income less ground rents paid,
net service charge expenses and property operating expenses.
"Net zero carbon" Highly energy efficient and powered from
on-site and/or off-site renewable energy sources, with any
remaining carbon balance offset.
"Non-PID Dividend" A dividend received by a shareholder of the
principal company that is not a PID.
"Ordinary Shares" Ordinary Shares of GBP0.01 each in the capital
of the Company.
"Passing rent" The annual rental income currently receivable on
a property as at the balance sheet date (which may be more or less
than the ERV). Excludes rental income where a rent-free period is
in operation. Excludes service charge income (which is netted off
against service charge expenses).
"PID" or "Property income distribution" A dividend received by a
shareholder of the principal company in respect of profits and
gains of the Property Rental Business of the UK resident members of
the REIT group or in respect of the profits or gains of a non-UK
resident member of the REIT group insofar as they derive from their
UK Property Rental Business.
"Portfolio" The overall portfolio of the Company including both
the Investment and Development portfolios.
"Portfolio Value" The value of the Portfolio which, as well as
the Group's standing assets, includes capital commitments on
Forward Funded Developments, Land Assets held at cost, the Group's
share of joint venture assets and other property assets.
"Pre-let" A lease signed with a customer prior to commencement
of a development.
"REIT" A qualifying entity which has elected to be treated as a
Real Estate Investment Trust for tax purposes. In the UK, such
entities must be listed on a recognised stock exchange, must be
predominantly engaged in property investment activities and must
meet certain ongoing qualifications.
"Rent roll" See "Passing rent".
"RPI" Retail price index, an inflationary indicator that
measures the change in the cost of a fixed basket of retail goods
as calculated on a monthly basis by the Office of National
Statistics.
"SDLT" Stamp Duty Land Tax - the tax imposed by the UK
Government on the purchase of land and properties with values over
a certain threshold. "Shareholders" The holders of Ordinary
Shares.
"Speculative development" Where a development has commenced
prior to a lease agreement being signed in relation to that
development.
"sq ft" Square foot or square feet, as the context may
require.
"Symmetry Management shareholders" The holders of B and C Shares
in Tritax Symmetry.
"Symmetry ManCo" Tritax Symmetry Management Limited, a private
limited company incorporated in England and Wales (registered
number 11685402) which has an exclusive development management
agreement with Tritax Symmetry to manage the development of the
Tritax Symmetry Portfolio.
"Topped up net initial yield" Net initial yield adjusted to
include notional rent in respect of let properties which are
subject to a rent-free period at the valuation date thereby
providing the Group with income during the rent-free period. This
is in accordance with EPRA's Best Practices Recommendations.
"Total Expense Ratio" or "TER" The ratio of total administration
and property operating costs expressed as a percentage of average
net asset value throughout the period.
"Total Accounting Return" Net total return, being the percentage
change in EPRA NTA over the relevant period plus dividends
paid.
"Total Shareholder Return" A measure of the return based upon
share price movement over the period and assuming reinvestment of
dividends.
"Tritax Symmetry" Tritax Symmetry Holdings Limited, a limited
company incorporated in Jersey (registered number 127784).
"Tritax Symmetry Portfolio" The portfolio of assets held through
Tritax Symmetry following the acquisition of db Symmetry in
February 2019, including land, options over land and a number of
assets under development.
"True Equivalent Yield (TEY)" The internal rate of return from
an Investment property, based on the value of the property assuming
the current passing rent reverts to ERV on the basis of quarterly
in advance rent receipts and assuming the property becomes fully
occupied over time.
"UK AIFMD Rules" The laws, rules and regulations implementing
AIFMD in the UK, including without limitation, the Alternative
Investment Fund Managers Regulations 2013 and the Investment Funds
sourcebook of the FCA.
"Value Add asset" These assets are typically let to customers
with good covenants and offer the chance to grow the assets'
capital value or rental income, through lease engineering or
physical improvements to the property. We do this using our asset
management capabilities and understanding of customer requirements.
These are usually highly re-lettable. It also includes assets
developed on a speculative basis which have reached practical
completion but remain unlet at the period end.
"WAULT" or "Weighted Average Unexpired Lease Term" The income
for each property applied to the remaining life for an individual
property or the lease and expressed as a portfolio average in
years. In respect of Forward Funded Developments, the unexpired
term from lease start date.
"Yield on cost" The expected gross yield based on the estimated
current market rental value (ERV) of the developments when fully
let or actual rental value for completed developments or those
pre-let, as appropriate, divided by the estimated or actual total
costs of the development.
[1] ONS
[2] Knight Frank and UKWA
[3] CBRE
[4] Property data
[5] Excluding exceptional development income
[6] Excluding exceptional development income
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END
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