TIDMLXI
RNS Number : 0835G
LXI REIT PLC
23 November 2020
23 November 2020
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014. This
announcement has been authorised for release by the Board of
Directors.
LXi REIT plc
(the "Company" or the "Group")
HALF-YEAR RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2020
The Board of LXi REIT plc (ticker: LXI), the specialist
inflation-protected very long income REIT, is pleased to report its
results for the Group for the six-month period from 1 April 2020 to
30 September 2020.
Financial highlights
As at As at As at
30 September 30 September 31 March
2020 2019 2020
------------------------------------- -------------- -------------- -----------
EPRA NTA(1) and IFRS NAV per share 120.8p 119.6p 124.3 p
Portfolio valuation(1,2) GBP892.7m GBP803.3m GBP914.0m
Pro-forma LTV(1) 30% 26% 30%
Quarterly dividend target rate(3) 1.44p 1.4375p 1.30p
------------------------------------- -------------- -------------- -----------
Half-year Half-year Year ended
ended ended 31 March
30 September 30 September 2020
2020 2019
------------------------------------- -------------- -------------- -----------
Operating profit before valuation GBP17.6m GBP13.9m GBP31.9m
changes
Total NAV return(1) -0.6% 6.8% 13.4%
Average total NAV return to date(4) 9.9% pa 11.7% pa 11.7% pa
Dividend per share 2.65p 2.875p 5.75p
Adjusted EPS(1) 3.3p 2.9p 6.3p
IFRS EPS -0.8p 7.5p 15.2p
------------------------------------- -------------- -------------- -----------
-- EPRA net tangible assets ("NTA") and net asset value ("NAV")
per share under IFRS was 120.8p at 30 September 2020 (31 March
2020: 124.3p), reflecting a half-year reduction of -2.9%, but
remains 1.0% ahead of 30 September 2019 NTA of 119.6p
-- Portfolio independently valued at GBP892.7m as at 30
September 2020 (31 March 2020: GBP914.0m) including all commitments
on forward funded assets reflecting a half-year like for like
reduction of -1.8% and a valuation yield of 5.0% net of full costs
(31 March 2020: 5.0%). The like for like change was driven by the
following key sector movements:
o Industrial, which is the Group's largest sector exposure,
demonstrated like for like valuation change of +3.3%, (which
includes the positive impact of asset management initiatives
described in the Investment Advisor's report);
o Hotel and leisure assets like for like valuation change of
-7.7%; and
o Foodstores, car parks, care homes and other sector assets were
broadly flat over the six-month period
-- Pro-forma loan to value ("LTV") ratio at 30 September 2020
remained at 30% (31 March 2020: 30%), with significant headroom to
our medium-term borrowing policy cap of 35% and banking covenant of
50%
-- The Group's forward-looking quarterly dividend target rate as
at 30 September 2020 (for the quarter to 31 December 2020) is 1.44p
per share, which it expects to fully cover with rents collected in
respect of the quarter
-- Operating profit before valuation changes was GBP17.6m for
the half-year (30 September 2019: GBP13.9m) representing an
increase of 26.6% on the previous half-year
-- Total NAV return was broadly flat at -0.6% (30 September
2019: 6.8%), with dividends largely offsetting the impact of the
like for like change in portfolio valuation
-- Average annual total NAV return of 9.9% pa (30 September
2019: 11.7% pa) since IPO in February 2017
-- The two dividends paid and declared in respect of the
half-year totalled 2.65p per share (30 September 2019: 2.875p per
share) reflecting a 7.8% reduction on the previous rate, as a
result of reduced rent collection now averaging 91% in respect of
the half-year(4)
-- Dividends were 1.2x covered by the Group's Adjusted earnings
per share ("EPS") for the half-year of 3.3p (30 September 2019:
2.9p)
-- The Group's EPS under IFRS for the half-year, which includes
valuation movements, was broadly flat at -0.8p (30 September 2019:
7.5p)
Operating highlights
As at As at Change
30 September 31 March
2020 2020
------------------------------------- -------------- ---------- -------
Average NIY on acquisitions to
date(5) 5.8% 5.8% -
Average geared IRR on disposals
to date(5) 31% pa 34% pa -3%
Rents containing index-linked/fixed
uplifts 96% 96% -
Rents containing minimum uplifts 72% 61% +11%
Average minimum uplift 2% pa 2% pa -
WAULT to first break 22-years 22-years -
FRI leases 100% 100% -
Portfolio let or pre-let 100% 100% -
Property sectors 9 9 -
Separate tenants 52 5 2 -
------------------------------------- -------------- ---------- -------
-- Average net initial yield ("NIY") on acquisitions to date of
5.8% net of purchase costs (31 March 2020: 5.8%) representing an
initial 280+ bps spread to the Group's average capped cost of debt,
notwithstanding inflationary and fixed rental uplifts
-- The Group's disposals to date have generated a weighted
average geared internal rate of return ("IRR") of 31% pa (31 March
2020: 34% pa) and disposals in the half-year generated a geared IRR
of 14% pa (31 March 2020: 37% pa)
-- 96% of the Group's contracted rents contain upward only
index-linked rent reviews or fixed uplifts (31 March 2020: 96%)
-- 72% of contracted rent reviews contain either a collared or
fixed uplift (30 September 2019: 61%), averaging 2% pa (31 March
2020: 2% pa), an effective income growth hedge in a lower
inflationary environment
-- The portfolio has a weighted average unexpired lease term
("WAULT") of over 22 years (31 March 2020: 22 years) to the earlier
of lease expiry or first tenant break
-- 100% of the Group's assets are let, or pre-let on full
repairing and insuring ("FRI") leases (31 March 2020: 100%)
avoiding exposure to void periods, cost leakage and capex
requirements
-- The portfolio is diversified across nine property sub-sectors
and 52 separate tenants (31 March 2020: nine sectors, 52
tenants)
Post period end highlights
Dividends
-- On 5 October 2020, the Board announced that the quarterly
dividend per share target for the quarter ending 31 December 2020
increased 7% on the prior quarter to 1.44p(3) . The dividend is
expected to be fully covered by rents collected in respect of the
period and represents a marginally higher level than the Company's
pre-pandemic dividend return level
-- On 20 November 2020, the Board approved the quarterly
dividend for the quarter ending 30 September 2020 of 1.35p per
share, in line with the Group's previously announced target
Acquisitions and disposals
Since the half-year end the Group has executed the following
acquisitions and disposals:
-- Completed the acquisition of a GBP5m built Aldi foodstore in
Lytham St Annes, with 18-years term certain remaining on the lease,
with fixed five yearly rental uplifts of 2.5% pa compounded
-- Completed the disposal of its only office asset in
Cambuslang, Glasgow occupied by the local council, for proceeds of
GBP8m, generating an attractive geared IRR of over 16% pa
-- Exchanged on the disposal of its car storage facility in
Corby let to BCA, for proceeds of GBP67.7m, which is expected to
generate an attractive geared IRR of over 14% pa on completion. The
Group is in legals on asset acquisitions which will fully deploy in
short order the proceeds across a number of long-let, index-linked
assets secured to strong tenant covenants at a materially higher
entry yield
Debt restructure
-- On 2 November 2020, the Group blended its three term loan
facilities and reduced the fixed interest rate by 9 bps to 2.85%
pa, which is expected to provide approximately GBP2.0m of cash
saving over the extended term. The blended facility was also
extended to a thirteen-year maturity, expiring in December 2033
Stephen Hubbard, Chairman of LXi REIT plc, commented:
"Against the backdrop of the Covid-19 pandemic, and the
uncertainty and instability that it has brought on, the defensive
characteristics of our highly diversified portfolio have allowed
the Group to deliver a resilient set of financial results for the
half-year.
During this period, we worked closely with our tenants to assist
those facing the most significant operational upheaval and provide
mutually beneficial and proportionate assistance, whilst protecting
the interests of our shareholders. Throughout, we have continued to
collect the vast majority of rents and to pay quarterly dividends
to our shareholders at attractive levels, always on a fully covered
basis.
Having collected 97% of the rents due, in early October I was
pleased to announce a return to our pre-Covid-19 dividend level. We
are currently targeting a dividend of 1.44p per share for the
quarter ending 31 December 2020.
Clearly, we are in unprecedented times, and we remain cognisant
of the potential for further changes to UK Government guidance that
would impact our portfolio. However, I take comfort in the key
attributes of our properties and lease arrangements that
demonstrate defensive characteristics and I remain comforted by the
strength of the platform and its ability to maintain ongoing and
attractive returns to our shareholders."
FOR FURTHER INFORMATION, PLEASE CONTACT:
LXI REIT Advisors Limited Via Maitland/AMO
Simon Lee (Partner, Fund Manager)
John White (Partner, Fund Manager)
Peel Hunt LLP Tel: 020 7418 8900
Luke Simpson/Liz Yong
----------------------------------------
J efferies International Tel: 020 7029 8000
Ed Matthews/Tom Yeadon
----------------------------------------
Maitland/AMO (Communications Adviser) Tel: 07747 113 930
James Benjamin/Rhys Jones Email: lxireit-maitland@maitland.co.uk
----------------------------------------
The Company's LEI is: 2138008YZGXOKAXQVI45
NOTES:
LXI REIT plc invests in UK commercial property assets let, or
pre-let, on very long (typically 20 to 30 years to expiry or first
break), inflation-linked leases to a wide range of strong tenant
covenants across a diverse range of robust property sectors.
The Company may invest in fixed-price forward funded
developments, provided they are pre-let to an acceptable tenant and
full planning permission is in place. The Company will not
undertake any direct development activity nor assume direct
development risk.
The Company is targeting a quarterly dividend of 1.44 pence per
ordinary share for the quarter that commenced on 1 October 2020(3)
.
The Company, a real estate investment trust ( " REIT " )
incorporated in England and Wales, is listed on the premium listing
segment of the Official List of the UK Listing Authority and was
admitted to trading on the main market for listed securities of the
London Stock Exchange in February 2017.
The Company is a constituent of the FTSE 250, EPRA/NAREIT and
MSCI indices.
Further information on the Company is available at
www.lxireit.com
Notes
1 Further detail on Alternative Performance Measures can be
found below and definitions given in the Key performance indicators
and the EPRA performance measures sections and are otherwise
included in the Glossary on page 99 of the Group's March 2020
Annual Report
2 The valuation includes forward funded commitments outstanding.
A reconciliation to the IFRS fair value as per the consolidated
statement of financial position is included in Note 7 to the
consolidated financial statements
3 These are targets only and not a profit forecast and there can
be no assurance that they will be met
4 Following expiry of rent reprofiling agreed with tenants
5 From IPO in February 2017 to the relevant period end date
Results presentation for investors and analysts and audio
recording of results available
A Company presentation for investors and analysts will take
place via a live webcast and conference call at 9.00am today.
For those who wish to access the live webcast, please register
here:
https://www.investis-live.com/lxireit/5fa93a40248bc2120019b43b/jsda
For those who wish to access the live conference call, please
contact Maitland/AMO at lxireit-maitland@maitland.co.uk or by
telephone on +44 (0) 20 7379 5151.
The recording of the webcast/conference call and the
presentation slides will be made available later on in the day via
the Company website: www.lxireit.com/results-centre-2020
Alternative performance measures
The Group uses alternative performance measures including the
European Public Real Estate ("EPRA") Best Practice Recommendations
("BPR") to supplement IFRS as the Board considers that these
measures give users of the Annual Report and Financial Statements
the best understanding of the underlying performance of the Group's
property portfolio.
The EPRA measures are widely recognised and used by public real
estate companies and investors and seek to improve transparency,
comparability and relevance of published results in the sector.
Reconciliations between EPRA and other alternative performance
measures and the IFRS financial statements can be found in Notes 23
and 24 and in the Additional Information.
Definitions of alternative performance measures are given in the
Key performance indicators and EPRA performance measures sections
or otherwise included in the Glossary included in the Additional
Information on page 99 of the Group's March 2020 Annual Report
.
CHAIRMAN'S STATEMENT
Dear shareholder
This report follows an unprecedented six-months in which the
Covid-19 pandemic has had a profound effect on the UK economy. As
the effects of the pandemic unfold around us our understanding of
the longer-term impact continues to develop.
As a Group, I have been pleased with the way that we have
responded, operating effectively within the UK Government's
guidance throughout the half-year and working proactively to
support our tenants, whilst protecting the interests of our
shareholders.
I thank all of our people, along with the Board, for the work
that they have done and will continue to do, to protect the value
of the Company for our fellow shareholders in these uncertain
times.
The defensive characteristics of the portfolio, including the
length and rent review profile of our leases, the quality of our
tenant operators and the broad diversification of our sub-sector
exposures, delivered robust performance from the Group's portfolio
during the half-year.
We remain cognisant of the risk and potential impact of the
current and potential future lockdowns and other short-term changes
in UK Government guidance. The Board and management continue to act
prudently and work closely with our tenants and other business
partners to protect and enhance the value of the portfolio, to
deliver secure, inflation protected income returns and capital
growth to shareholders.
Dividends and results
The UK Government's continuing moratorium on landlord forfeiture
rights for non-payment of rent impacted rent collections across the
UK property investment market. The Group's portfolio was not immune
to this, in particular in respect of our exposure to tenants in the
leisure and hospitality sectors that suffered significant
operational challenges.
The Investment Advisor was swift to respond to requests from our
tenants who were experiencing real challenges and worked alongside
them to arrange a reprofiling of their rents that would provide
proportionate assistance. The Group's rent collection in respect of
the two quarters covered by this half-year report now stands at
91%, inclusive of reprofiled rent payments (85% excluding rent
reprofiling).
In response to the lower level of income, the Board reduced the
dividend rate in respect of the quarter to 30 June 2020 to 1.30p
per share (a 9% reduction on the prior year rate). The rate was
then increased to 1.35p per share for the quarter to 30 September
2020 (a 6% reduction on the prior year rate).
In view of uncertainty over future UK Government measures to
protect tenants (such as the moratorium on forfeiture), the Group
also moved from annual to quarterly dividend guidance to allow a
quicker response to the fast-moving landscape of UK Government
guidance and provide more accurate targets.
After the half-year end, the Board was pleased to announce 97%
rent collection in respect of the quarter ending 31 December 2020,
rising to 98% when inclusive of reprofiled payments beyond the end
of the quarter. The level of rent collection supported the
announcement of a 7% increase in the dividend target to a quarterly
rate of 1.44p per share for this quarter.
I am particularly pleased that the target dividend level now
exceeds the pre-lockdown quarterly dividend target rate.
Dividends paid and declared during the period remain at a
prudent level that we expect to be fully covered by rents collected
in the relevant quarters to avoid capital erosion. The dividends
paid and declared in respect of the half-year are covered by the
Group's adjusted earnings and adjusted cash earnings. We will
continue to provide quarterly dividend guidance.
The portfolio valuation delivered a like for like reduction of
2.9% for the six-months. At 30 September 2020 the portfolio was
valued at of GBP892.7m reflecting a valuation net initial yield of
5.0%. The performance demonstrates the resilience of a long-let and
index-linked portfolio of diversified assets in structurally
supported sectors, let to market leading operators in good
commercial locations.
The Group's EPRA NTA per share was 120.8p at 30 September 2020,
which still exceeds the Group's NTA 12 - months earlier and
represents a 12-month total return of 5.7%, when coupled with
dividends paid . The Group's total return for the six-months was
broadly flat at -0.6%, in a period of significant upheaval.
O utlook and post balance sheet update
There is now greater optimism that there will be a workable
vaccine by the end of 2020, that will have a significant benefit to
the economy, and in particular the leisure and hospitality sectors.
However, it is clear that with the impact of the crisis the UK will
continue to suffer from challenging economic conditions in
2021.
The Board continues to monitor and review the additional risk in
our portfolio. Many of our tenants are feeling the impact of
changing customer behaviour and the increased overhead cost of new
operational requirements. That being said, rent recoveries across
the portfolio have trended upward since the first national
lock-down in the UK ended in July, with 97% rent collection in
respect of the quarter to December 2020.
As of 7 November 2020, a number of our tenants, particularly in
the budget hotel and leisure sectors, are facing further
operational disruption as a result of the one-month national
lock-down, but we note some important changes to the previous
national lock-down:
-- Budget hotels can remain open, to service workers in key
industries including construction, which drives a significant
portion of occupancy for both Travelodge and Premier Inn.
-- Within our leisure exposure, Dobbies Garden Centres have been
given essential status and will remain open, as will our Starbucks
and Costa drive-thrus. Our Greene King pubs will close but the
majority will continue to sell food and alcohol on a takeaway
basis.
As in the previous lock-down, our key exposures to industrial,
healthcare and foodstores, will not be directly impacted, although
clearly all sectors will suffer the indirect economic implications
of the new measures.
Since the half-year end, we have continued to recycle capital in
a way that enhances the portfolio's defensive characteristics and
crystallises value where we believe it has been maximised, and we
note continued interest in our portfolio.
We have carefully analysed the existing risks within our
portfolio, in particular through our sector and tenant covenant
exposures. Redeployment of capital provides us with the opportunity
to enhance diversification and manage those exposures.
The advantage of a multi-sector investment strategy allows us to
secure assets with an appropriate risk profile to withstand the
economic turbulence that will undoubtedly exist as a result of the
Covid-19 crisis.
We will continue to focus on forward funded assets and 'off
market' transactions that we believe will provide value to our
shareholders.
Clearly, we are in unprecedented times, and we remain cognisant
of the potential for further changes to UK Government guidance that
would impact our portfolio. However, I take comfort in the key
attributes of our properties and lease arrangements that
demonstrate defensive characteristics, which are:
-- 96% of our leases, by passing rent, contain indexed-linked or fixed uplifts;
-- The Group's portfolio contains an inflation hedge with 72% of
the portfolio containing either collared or fixed uplifts averaging
2% pa;
-- 88% of leases having over 15-years to first break and an
average unexpired lease term across the portfolio of 22-years to
first break; and
-- An income stream underpinned by a diverse group of assets
across nine sectors, let to market leading operators of
institutional quality.
I thank the Investment Advisor, the wider Board and all of our
other advisers for their continued work in these challenging times.
We remain focused on managing the risks that have arisen as a
result of the crisis, along with the opportunities which it has
created for us. I remain comforted by the strength of the platform
and its ability to maintain ongoing and attractive returns to our
shareholders.
Stephen Hubbard
Chairman
20 November 2020
INVESTMENT ADVISOR'S REPORT
This report covers the half-year from 1 April 2020 to 30
September 2020, beginning during the UK's national lock-down in
response to the Covid-19 crisis, which remained in place for most
of the six-month period.
The crisis continues to bring uncertainty for most areas of
economic and social life, but the Group's portfolio remains
well-positioned, demonstrating defensive characteristics that we
expect to outperform in such times, as reflected in the financial
performance for the half-year.
The resilience of our valuation is a reflection of our
diversified portfolio of secure, long-let and index-linked property
assets, across sub-sectors and tenants, and the significant
discount that we have achieved and continue to achieve by deploying
new and recycled capital into forward fundings and focussing on
accretive value adding asset management initiatives.
Unsurprisingly, the disruption to the operation of many of the
Group's assets has dampened investor sentiment and the impact on
tenant financial strength and perception has seen a softening of
valuations across some of the Group's hotel and leisure assets.
This has been offset by strong performance in those sectors that
have been relatively less impacted by Covid-19, that continue to
demonstrate stronger sentiment, in particular industrial,
healthcare, car parks and foodstores.
The impact of Covid-19 has had a material effect on the Group's
returns, and in particular dividends paid in respect of the
half-year, as a result of lower rent collections for both quarters.
Our proactive approach and relationships with our tenants and the
strategic importance of our assets has meant that both quarters saw
rent collection rates above 90%, following expiry of rent
reprofiling. The details of concessions given to tenants are
included in detail below.
Since the period end we were delighted to report a 97% rent
collection for the September to December 2020 quarter which allowed
us to recommend to the Board a 7% increase in the dividend target
rate to 1.44p per share per quarter (5.76p annualised), which is
higher than our pre-Covid-19 rate.
Portfolio overview
The Group's portfolio at 30 September 2020 consisted of 124
properties diversified across nine sub-sectors and let to 52
separate tenant groups.
The Group's lease arrangements provide contracted rent of
GBP49.3m pa (including assets exchanged and not completed) and
average over 22-years to first break, with 96% containing
index-linked or fixed rental uplifts.
All leases are full repairing and insuring by the tenants,
protecting the Group from property cost leakage and capex
requirements.
The Group's property portfolio was valued at the half-year end
at GBP892.7m, representing a like for like change of -1.8% over the
six-month period. The valuation reflects a blended net initial
yield of 5.0% (31 March 2020: 5.0%) and an average valuation of
GBP7.2m across the individual assets.
The sectors contributing the most negative like for like
valuation movements were the Group's hotel assets (-10.6%) and
leisure assets (-1.6%). Industrial assets produced a positive like
for like valuation change (+3.3%), which included the accretive
impact of asset management initiatives described in detail
below.
Despite the negative impact of Covid-19 on the valuations, the
value of each of the Group's assets remains, on average, 11% ahead
of purchase price. This demonstrates the benefit of our strategies
of forward funding at a discount to built values, sourcing deals
'off market' and the positive value achieved through our ongoing
asset management initiatives.
During the half-year, the Group completed the disposal of
fourteen assisted living assets for total proceeds of GBP11.9m, 1%
ahead of book value and 13% ahead of purchase price. The disposals
generated a geared IRR of 15% pa for the Company.
To date, the Group's average geared IRR generated on disposals
is 31% pa, across 37 separate assets, totalling disposal proceeds
of GBP93.4m.
The Group completed on the acquisition of land at Porthmadog
that is pre-let to Premier Inn at a NIY of 5.2% on a total purchase
price of GBP6.5m. The property is expected to take 10 months to
build and will subsequently be let on a 25-year lease with
five-yearly rental uplifts in line with CPI, capped at 4% pa and
collared at 1% pa. The Group also exchanged on three foodstore
anchored assets let to Aldi or Lidl that completed after the period
end and are detailed below in the post balance sheet events
section.
The four acquisitions in the half-year, including those
exchanged but not completed, reflected an average NIY of 5.5% and
the average NIY across all acquisitions to date is 5.8%, net of
actual purchase costs.
During the half-year the Group completed 41 contracted rent
reviews. The rent reviews averaged 2.1% pa, outperforming both RPI
and CPI and demonstrating the benefits of the Group's fixed and
collared uplifts.
The Group's acquisitions (contracted rents of GBP1.6m pa) and
disposals (contracted rents of GBP0.3m pa) resulted in an uplift in
the period of the Group's total contracted rent of GBP1.3m pa, to
GBP49.3m pa, including pre-lets and assets that had exchanged but
not completed at the year end.
A summary of the Group's assets and exposures at 30 September
2020 is provided in the Property Portfolio section of this
report.
Asset management
The Group's significant uplift in valuation within the
industrial sector was in part driven by the accretive re-gear of
the BCA car storage facility in Corby, which represents one of the
largest assets in the portfolio.
The asset was originally acquired in 2018, with just under
18-years remaining on the lease, for GBP60m reflecting a NIY on
acquisition of 5.25%.
The Investment Advisor negotiated an extension to the lease term
from 16-years to 25-years, with no tenant break right.
The rent review was also converted from uncapped RPI with no
collar, to RPI, capped at 2.5% pa and collared at 1.5% pa,
providing a valuable minimum rental uplift in a low inflationary
environment.
The restructure of the lease brought the terms within the core
institutional requirements and after the half-year, following
significant unsolicited interest, the Company has exchanged
contracts unconditionally to sell the asset at an exit yield of
4.45%.
The disposal proceeds represent a 13% uplift on purchase price
and the sale is expected to generate a geared IRR for the Company
of 14% pa when the deal completes on 30 November 2020.
Forward funding strategy
Throughout the half-year the Group continued to progress on its
forward funding sites with limited disruption caused by Covid-19.
The strategy provides the Group with brand new assets in locations
that tenants want to be in at a significant discount to built
values, whilst avoiding any material development risk.
The Group's forward funding projects experienced limited
disruption and the majority of sites continued to operate
throughout lock down, with the remainder reopening within a month.
The following assets reached practical completion in the
period:
-- The forward funded Travelodge budget hotel pre-let on an
unbroken 25-year lease with ancillary Costa Coffee drive-thru
pre-let on an unbroken 20-year lease, in Workington.
-- 10 of the 13 forward funded Starbucks/Costa drive-thru
portfolio forward funded on Morrisons foodstore car parks pre-let
on unbroken 15-year leases, in diverse locations across the UK.
Tenant support provided
Throughout the period, no support or concessions were requested
from the vast majority of the Group's tenants, who continued to pay
rents as they fell due.
However, the sudden and forced closure of certain assets and
significant operational disruption to others, forced cash flow
pressures on certain of our tenant operators.
The following summarises the concessions and support provided to
the Group's tenants:
Travelodge CVA
During the half-year, following the temporary forced closure of
almost all of its hotels, Travelodge Hotels Limited underwent a
CVA. The arrangement was approved in June 2020 and provided
significant rent concessions from landlords along with further debt
and equity funding from Travelodge's shareholders to support
short-term liquidity.
Travelodge categorised its leased assets as category A, B, C1 or
C2, which would be treated under the CVA as follows:
-- Category A hotels would receive full rent and interest paid
on overdue rent in line with the leases. Pre-let assets were
classified separately under the CVA but are treated in line with
Category A assets
-- Category B hotels would receive 30% of rent for the rest of
2020 and 70% throughout 2021. A landlord only break option (at no
cost) before 20 November 2020
-- Category C1 hotels would receive no rent for 2020 and 2021
with a landlord only break option (at no cost) before December
2021
-- Category C2 hotels would contain a tenant break option as
well as receiving no rent for the remainder of 2020 and 2021.
Given the trading performance and strategic importance of the
Group's Travelodge assets, six of its 12 hotels were classified or
treated in line with Category A (including the two pre-let assets),
with four in Category B, two in Category C1 and none of the Group's
assets were classified as Category C2.
The Group has since restructured both of its Category C1 leases,
extending the lease terms significantly and reducing the rent to a
materially more profitable level for Travelodge. As part of these
restructures the group triggered the lease extensions on its
Category B assets and agreed a material improvement on the rent
payments under the CVA. This demonstrates the quality of both the
relationship and the assets, that have been developed as a direct
consequence of our forward funding strategy.
Other concessions granted
The Group also provided other, less material forms of support
for tenants that resulted in waivers being granted totalling
GBP0.8m in respect of the half-year. The Group also offered
reprofiling of payments resulting in total long-term rental debtors
from tenants (due in more than one year) at 30 September 2020
totalling GBP1.2m, that are subject to side letters, of which
GBP0.7m were rents due in respect of the half-year and GBP0.5m due
in respect of the following quarter to December 2020.
Financial results
The portfolio has produced strong financial results over the
three and a half years since IPO, and the Group has consistently
outperformed our targets. The Group's performance over the last six
months has been impacted by Covid-19, but our performance has
remained robust relative to most of our peers.
Total NAV return
30 Sep 30 Sep
2020 2019
Total NAV return -0.6% 6.8%
================== ======= =======
The Group's total NAV return comprises both income returns,
through dividends paid to shareholders, and portfolio capital
returns, through changes in EPRA NTA during the half-year. A
detailed description of the dividend per share and EPRA NTA growth
is given below.
The Group provided a broadly flat total NAV return in a period
of unprecedented disruption as a result of the onset of Covid-19,
which reflects the benefits of the broad diversification of the
portfolio and accretive asset management initiatives that we
implemented.
EPRA NTA
30 Sep 31 Mar
2020 2020
EPRA NTA per share 120.8p 124.3p
==================== ======= =======
During the six-months, the Group's EPRA NTA reduced by 2.9%. The
reduction reflects the net impact of those movements described in
the portfolio section above as a result of Covid-19.
The growth provided in the three years prior to the onset of the
global pandemic, through forward funding, buying assets 'off
market' and accretive recycling of capital, has provided a wide
capital buffer to investor capital and our net asset value remains
23% ahead of the 98p at IPO, and also remains 1% ahead of the
Group's EPRA NTA per share at 30 September 2019 of 119.6p.
Dividend per share
30 Sep 30 Sep
2020 2019
Dividend per share 2.65p 2.875p
==================== ======= =======
In respect of the half-year, the Company has paid and approved
dividends totalling 2.65p per share. The dividend per share
reflects a reduction of 8% on the previous half-year, reflecting
the impact of Covid-19 on the Group's rent collection and the
tenant support provided, described above.
Our quarterly dividend levels in the midst of the pandemic have
been prudent, and as a result our dividends have been 1.2x covered
by Adjusted EPS of 3.3p (30 September 2019: 2.9p), and 1.0x covered
by Adjusted cash EPS of 2.6p (30 September 2019: 2.4p).
Total expense ratio
30 Sep 31 Mar
2020 2020
Total expense ratio (annualised) 1.0% 1.1%
================================== ======= =======
Through successful equity raises and conservative leverage, the
Group has achieved significant scale, meaning that incremental
management fees (above GBP500m of market cap.) are charged at a low
65 bps of market cap.
We operate stringent capital discipline on all of the Group's
costs, whilst focussing on the best quality counterparties, to
ensure that income is passed on to our shareholders.
As we continue to grow our capital base and passing rents, we
expect further efficiencies to be gained that will be reflected in
a reducing total expense ratio and a growing dividend rate.
Loan to value
30 Se9 31 Mar
2020 2020
Pro-forma LTV 30% 30%
=============== ======= ======= ===
During the half-year, the Group's debt pool comprised three
separate long-term loans and an RCF, each of which is
self-contained to a specific pool of assets with no cross
collateralisation.
Conservative leverage is expected to be maintained at a
pro-forma LTV of 30% following full drawing of the Group's RCF,
with headroom to the Group's medium-term target maximum loan to
value ratio of 35% as well as the loan to value financial covenant
that is 50%.
Facility Lender Size Interest Expiry
rate
Term loan Scottish Widows GBP55m 2.93% fixed Jul 2029
------------------ ---------- --------------- --------------
Term loan Scottish Widows GBP40m 2.85% fixed Jul 2029
------------------ ---------- --------------- --------------
Term loan Scottish Widows GBP75m 2.99% fixed Dec 2033
------------------ ---------- --------------- --------------
RCF Lloyds Bank GBP100m 1.55% margin Aug 2024(1)
------------------ ---------- --------------- --------------
The three term loan facilities were strategically chosen because
of their long-dated maturity, to take advantage of the very low
interest rate environment. The term loans have a weighted average
fixed interest cost of 2.94% pa(2) and an average maturity of
10-years(2) .
Fixing the rate of interest on these facilities gives the Group
long-term certainty over its ability to generate significant growth
in the generation of free cash flows as a result of largely
collared index-linked and fixed rental uplifts, and the positive
effects of conservative leverage.
The RCF with Lloyds Bank plc attracts interest at 1.55% above
three-month LIBOR and provides the Group with operational
flexibility and reduced finance costs, allowing for :
-- the immediate repayment of the facility when new equity is
issued or with capital generated from the Group's strategy of
selectively disposing of assets and prior to the reinvestment of
capital; and
-- the matching of debt drawdowns to reflect developers' cash
requirements on forward funding projects, ensuring that interest is
only suffered to the extent that a greater return is being
generated on those drawdowns through licence fee arrangements.
The RCF gives the Group a new source of debt finance, in Lloyds
Bank plc. Its shorter dated maturity provides the Group with
flexibility to refinance, should this represent value, to a more
mature debt structure in the medium-term as the Group grows in
scale and builds further track record.
In order to hedge uncertainty over the exposure to the floating
rate of interest under the RCF, whilst retaining the upside of low
interest rates over the medium-term, the Group traded an interest
rate cap in 2019 at the notional value of the maximum facility of
the RCF of GBP100m. This gives the Company certainty over its
maximum cost of debt for the entire term of the RCF at 2.95%
pa.
On 2 November 2020, the Group restructured its three term loans,
reducing the blended interest rate by 9 bps to a fixed 2.85% pa
all-in rate, and extended the maturity of all loans to December
2033. The restructuring is expected to provide a cost saving over
the next 13-years of GBP2.0m to the Group.
1 Assumes extension options are exercised
2 Weighted by drawn value as at 30 September 2020
Inflation performance
The half-year has seen inflation drop to low annual levels, but
remains significantly ahead of open market rental growth. From
April to September 2020, CPI annual growth averaged 0.6% pa and RPI
averaged 1.1% pa. The Group's 41 contracted rental uplifts in the
period reflected average growth of 2.1% pa.
Market forecasts expect RPI and CPI to continue to significantly
outperform open market rental growth and the Group's fixed and
collared rent reviews, totalling 72% of the portfolio and averaging
2% pa, provide further certainty to income growth.
Post balance sheet
Dividends
On 5 October 2020, the Board announced that the quarterly
dividend per share target for the quarter ending 31 December 2020
would increase 7% on the prior quarter to 1.44p. The dividend is
expected to be fully covered by rents collected in respect of the
period and represents a marginally higher level than the Company's
pre-pandemic dividend return level.
On 20 November 2020, the Board approved the quarterly dividend
for the quarter ending 30 September 2020 of 1.35p per share, in
line with the Group's previously announced target.
Acquisitions and disposals
Since the half-year end the Group has executed the following
acquisitions and disposals:
-- Completed the acquisition of a GBP5m built Aldi foodstore in
Lytham St Annes, with 18-years term certain remaining on the lease,
with fixed five yearly rental uplifts of 2.5% pa compounded
-- Completed the disposal of its only office asset in
Cambuslang, Glasgow occupied by the local council, for proceeds of
GBP8m, generating an attractive geared IRR of over 16% pa
-- Exchanged unconditionally on the disposal of its car storage
facility in Corby let to BCA, for proceeds of GBP67.7m, which is
expected to generate an attractive geared IRR of over 14% pa on
completion. The Group is in legals on asset acquisitions which will
fully deploy in short order the sale proceeds across a number of
long-let, index-linked assets secured to strong tenant covenants at
a materially higher entry yield
-- Exchanged on the disposal of a non-operational plot adjacent
to its Travelodge hotel in Llanelli (held at zero book value) to a
petrol filling station operator for GBP0.5m. The land was not used
by the hotel and the sale has not reduced its rental level or
investment value.
O utlook
The first half of 2020 saw an unprecedented drop in global stock
markets as an immediate reaction to the impact of Covid-19, but
markets have since rallied, despite the full extent of economic
impact still being uncertain.
During economic downturns, the properties that tend to
demonstrate the most robust performance and lower levels of
volatility are those with characteristics that include:
-- Leases that generate a fixed level of rent, not contractually
linked to underlying property performance, with regular
inflationary uplifts;
-- Institutional-quality tenants that are market leaders in
their respective sub-sectors, that are well placed to navigate
periods of uncertainty;
-- Competitive tenant markets with low levels of property
specification, meaning that alternative users exist and a lower
level of capex is required to replace existing tenants;
-- Low and sustainable rental levels; and
-- Long unexpired lease terms that alleviate exposure to re-letting risk.
The portfolio pro-forma LTV remains prudent with significant
headroom to internal disciplines (35% cap) and covenants (50% cap)
and the Investment Advisor and Board remain committed to
maintaining our LTV at the current level.
As with any downturn, the sharpening of pricing for secure
inflation-protected income brings with it an increased interest in
the Group's high quality portfolio and we remain abreast of
unsolicited interest and will look to crystallise gains through
disposals ahead of book value where opportunities exist to recycle
capital into accretive acquisitions that defensively manage the
Group's exposures.
The Investment Advisor will seek to utilise this interest and
our 'off market' deal pipeline, to reposition the portfolio and
continue to enhance our exposures to those sectors with the most
positive outlook and structural support.
We are pleased to have increased the Group's dividend target to
1.44p per quarter, shortly after the half-year end, a rate that
reflects growth on the pre-Covid-19 divided level, that we expect
to be fully covered by Adjusted cash earnings in the quarter.
UK inflation expectations continue to compare favourably to
those for open market rental growth over the medium-term, despite
significantly reducing over the last six months. With 96% of our
leases by passing rent containing index-linked or fixed uplifts we
are positioned well to benefit from this going forward.
The Group also is yet to benefit from many five yearly rent
reviews in the portfolio that will capture inflation performance
over the past five years as they take place.
The Group's portfolio contains an attractive inflation hedge
through embedded rental growth regardless of inflation performance
with 72% of the portfolio containing either collared or fixed
rental uplifts, averaging 2% pa, regardless of the slowdown in UK
inflation.
For and on behalf of the Investment Advisor
Simon Lee Frederick Brooks
Director Director
LXi REIT Advisors LXi REIT Advisors
20 November 2020 20 November 2020
KEY PERFORMANCE INDICATORS
Our objective is to deliver attractive, low risk returns to
shareholders, by executing our investment policy. Set out below are
the key performance indicators ("KPIs") we use to track our
performance.
KPI and definition Relevance to strategy Performance
1. Total NAV return Total NAV return measures the ultimate outcome of our strategy, which is -0.6%
Total NAV return measures the change in the EPRA NAV and dividends during the period as a to deliver value to our shareholders through our portfolio and to deliver (30 September 2019: 6.8%; 31 March 2020:
percentage a secure and growing income stream. A reconciliation of total NAV return 13.4%)
of EPRA NAV at the start of the period. We are targeting a minimum of 8% per annum over the is provided in the Additional Information section.
medium term.
2. Dividend per share The dividend reflects our ability to deliver a low risk but growing income 2.65p
Dividends paid to shareholders and proposed in relation to a period. stream from our portfolio and is a key element of our total NAV return. (30 September 2019: 2.875p; 31 March 2020:
5.75p)
------------------------------------------------------------------------------ ---------------------------------------------
3. Adjusted earnings per share The Adjusted earnings per share reflects our ability to generate income from 3.3p
Post-tax Adjusted earnings per share attributable to shareholders, which includes the licence our portfolio, which ultimately underpins our dividend payments. A (30 September 2019: 2.9p; 31 March 2020:
fee receivable on our forward funded development assets treated under IFRS as discounts to reconciliation 6.3p)
investment property acquisitions. of Adjusted earnings is included in Note 23 to the consolidated financial
statements.
------------------------------------------------------------------------------ ---------------------------------------------
4. Total expense ratio The total expense ratio is a key measure of our operational excellence. 1. 0% (annualised)
The ratio of total operating expenses, including management fees expressed as a percentage Maintaining (30 September 2019: 1.0%; 31 March 2020:
of the average net asset value. a low-cost base supports our ability to pay dividends. 1.1%)
------------------------------------------------------------------------------ ---------------------------------------------
5. EPRA NTA The NTA reflects our ability to grow the portfolio and to add value to it 120.8p
The value of our assets (based on an independent valuation) less the book value of our throughout the life cycle of our assets. (30 September 2019: 119.6p; 31 March 2020:
liabilities, 124.3p)
attributable to shareholders and calculated in accordance with EPRA guidelines. At the
current
and comparative period end there were no differences between EPRA NTA and IFRS NAV.
------------------------------------------------------------------------------ ---------------------------------------------
6. Pro-forma LTV The LTV measures the prudence of our financing strategy, balancing the additio 30%
nal
returns and portfolio diversification that come with using debt against the
need to successfully manage risk.
The proportion of our total assets that is funded by borrowings. Our target maximum LTV is (30 September 2019: 30%; 31 March 2020: 30%)
35%.
------------------------------------------------------------------------------ ---------------------------------------------
7. Weighted average unexpired lease term The WAULT is a key measure of the quality of our portfolio. Long lease terms 22-years
The average unexpired lease term of the property portfolio weighted by annual passing rents. underpin the security and predictability of our income stream. (30 September 2019: 22-years; 31 March 2020:
Our target WAULT is a minimum of 20-years. 22-years)
------------------------------------------------------------------------------ ---------------------------------------------
8. Percentage of contracted rents index-linked or fixed This measures the extent to which we are investing in line with our investment 96%
objective, to provide inflation-linked returns.
This takes the total value of contracted rents that contain rent reviews linked to inflation (30 September 2019: 96%; 31 March 2020: 96%)
or fixed uplifts.
------------------------------------------------------------------------------ ---------------------------------------------
EPRA PERFORMANCE MEASURES
The table below shows additional performance measures,
calculated in accordance with the Best Practices Recommendations of
EPRA. We provide these measures to aid comparison with other
European real estate businesses.
Reconciliations of EPRA Earnings and NAV measures are included
in Notes 23 and 24 to the consolidated financial statements
respectively. Reconciliations of other EPRA performance measures in
the Notes to the EPRA and alternative performance measures further
below.
Measure and Purpose Performance
Definition
1. EPRA A key measure of a company's underlying operating results and an 2.9p
Earnings indication (30 September 2019: 2.6p; 31 March 2020:
of the extent to which current dividend payments are supported by 5.6p)
earnings.
----------------------------------------------------------------- -------------------------------------------
2. EPRA Net Assumes that entities buy and sell assets, thereby crystallising 120.8p
Tangible Assets certain (30 September 2019: 119.6p; 31 March 2020:
("NTA") levels of unavoidable deferred tax. 124.3p)
----------------------------------------------------------------- -------------------------------------------
3. EPRA Net Assumes that entities never sell assets and aims to represent the 131.3p
Reinstatement value required (30 September 2019: 130.8p; 31 March 2020:
Value ("NRV") to rebuild the entity. 135.7p)
----------------------------------------------------------------- -------------------------------------------
4. EPRA Net Represents the shareholders' value under a disposal scenario, 116.9p
Disposal Value where deferred (30 September 2019: 115.7p; 31 March 2020:
( " NDV " ) tax, financial instruments and certain other adjustments are 121.2p)
calculated to
the full extent of their liability, net of any resulting tax.
----------------------------------------------------------------- -------------------------------------------
5. EPRA Net EPRA NIY is annualised net rents on investment properties as a 5.2%
Initial Yield percentage (30 September 2019: 5.1%; 31 March 2020:
("NIY") of the investment property valuation, less purchaser's costs. 5.1%)
----------------------------------------------------------------- -------------------------------------------
6. EPRA The 'topped-up' measure incorporates an adjustment to the EPRA 6.8%
'Topped-Up' NIY NIY in respect (30 September 2019: 6.3%; 31 March 2020:
of the expiration of rent-free periods (or other unexpired lease 6.3%)
incentives
such as discounted rent periods and step rents).
----------------------------------------------------------------- -------------------------------------------
7. EPRA Vacancy A 'pure' (%) measure of investment property space that is vacant, 0%
based on
ERV.
(30 September 2019: 0%; 31 March 2020: 0%)
----------------------------------------------------------------- -------------------------------------------
8. EPRA Cost A key measure to enable meaningful measurement of the changes in 14.2%
Ratio a company's (30 September 2019: 16.9%; 31 March 2020:
operating costs. 17.1%)
----------------------------------------------------------------- -------------------------------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Audit Committee, which assists the Board with its
responsibilities for managing risk, considers that the principal
risks and uncertainties as presented on page 30 of the 31 March
2020 Annual Report were unchanged during the period and for the
remaining six months of the financial year.
From the beginning of the current financial year, the Covid-19
pandemic has become a principal risk to the business. We expect
this to continue into 2021. Much of the uncertainty and challenge
that the pandemic has had on the business has been outlined in this
report. The Board, alongside management has been and will continue
to work diligently to anticipate and contain its impact.
The condensed consolidated financial statements have been
prepared on a going concern basis (Note 1).
DIRECTORS RESPONSIBILITIES STATEMENT
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the operating and financial review includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority namely:
-- an indication of important events that have occurred during
the period and their impact on the condensed consolidated financial
statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- disclosure of any material related party transactions in the
period are included in Note 18 to the condensed consolidated
financial statements.
A list of the Directors is shown in the Company Information
section of the Interim Report. Shareholder information is as
disclosed on the LXi REIT plc website at www.lxireit.com.
For and on behalf of the Board
Stephen Hubbard
Chairman
20 November 2020
INDEPENT REVIEW REPORT TO LXI REIT PLC
Introduction
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 September 2020 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Financial Position, the Condensed
Consolidated Cash Flow Statement, the Condensed Consolidated
Statement of Changes in Equity and related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the 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.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards ("IFRSs") as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. 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.
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
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, as adopted by
the European Union, and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with 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
20 November 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
Note GBPm GBPm GBPm
--------------------------------------- ----- ------------- ------------- -------------
Rental income 2 20.3 16.7 38.5
Administrative and other expenses 3 (2.7) (2.8) (6.6)
Operating profit before change
in fair value and gain on disposal
of investment property 17.6 13.9 31.9
Change in fair value of investment
property 7 (18.9) 22.3 45.4
(Loss)/gain on disposal of investment
property 7 (0.1) - 1.2
Change in fair value of financial
instruments - (0.1) (0.1)
--------------------------------------- ----- ------------- ------------- -------------
Operating profit/(loss) (1.4) 36.1 78.4
Finance income 4 - 0.2 0.2
Finance costs 5 (2.6) (2.5) (5.0)
--------------------------------------- ----- ------------- ------------- -------------
(Loss)/profit before tax (4.0) 33.8 73.6
Taxation 6 - - -
(Loss)/profit and total comprehensive
income attributable to shareholders (4.0) 33.8 73.6
======================================= ===== ============= ============= =============
(Loss)/earnings per share -
basic and diluted 23 (0.8)p 7.5p 15.2p
======================================= ===== ============= ============= =============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
Note GBPm GBPm GBPm
----------------------------------- ----- ------------- ------------- -------------
Non-current assets
Investment property 7 822.3 743.9 809.7
Trade and other receivables 9 1.2 - -
----------------------------------- ----- ------------- ------------- -------------
Total non-current assets 823.5 743.9 809.7
----------------------------------- ----- ------------- ------------- -------------
Current assets
Trade and other receivables 9 10.9 6.9 10.1
Deferred acquisition costs 0.3 0.7 0.5
Restricted cash 10 9.7 11.5 -
Cash and cash equivalents 10 20.7 57.2 13.4
----------------------------------- ----- ------------- ------------- -------------
Total current assets 41.6 76.3 24.0
----------------------------------- ----- ------------- ------------- -------------
Total assets 865.1 820.2 833.7
=================================== ===== ============= ============= =============
Current liabilities
Trade and other payables 11 23.4 25.1 16.1
----------------------------------- ----- ------------- ------------- -------------
Total current liabilities 23.4 25.1 16.1
----------------------------------- ----- ------------- ------------- -------------
Non-current liabilities
Bank borrowings 12 208.4 166.2 166.1
Trade and other payables 11 3.5 5.6 3.5
----------------------------------- ----- ------------- ------------- -------------
Total non-current liabilities 211.9 171.8 169.6
----------------------------------- ----- ------------- ------------- -------------
Total liabilities 235.3 196.9 185.7
=================================== ===== ============= ============= =============
Net assets 629.8 623.3 648.0
=================================== ===== ============= ============= =============
Equity
Share capital 13 5.2 5.2 5.2
Share premium reserve 14 423.2 423.2 423.2
Capital reduction reserve 76.7 106.0 90.9
Retained earnings 124.7 88.9 128.7
----------------------------------- ----- ------------- ------------- -------------
Total equity 629.8 623.3 648.0
=================================== ===== ============= ============= =============
NAV per share - basic and diluted 24 120.8p 119.6p 124.3p
=================================== ===== ============= ============= =============
EPRA NTA per share 24 120.8p 119.6p 124.3p
=================================== ===== ============= ============= =============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Year ended 30 September Share Share premium reduction Retained
2020 capital reserve reserve earnings Total equity
Note GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----- --------- -------------- ----------- ---------- -------------
Balance at 1 April
2020 5.2 423.2 90.9 128.7 648.0
Profit and total comprehensive
income attributable
to shareholders - - - (4.0) (4.0)
Dividends paid in
the half-year 15 - - (14.2) - (14.2)
Balance at 30 September
2020 5.2 423.2 76.7 124.7 629.8
================================ ===== ========= ============== =========== ========== =============
Capital
Year ended 30 September Share Share premium reduction Retained
2019 capital reserve reserve earnings Total equity
Note GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------ --------- -------------- ----------- ---------- -------------
Balance at 1 April
2019 3.5 229.3 115.9 55.1 403.8
Profit and total comprehensive
income attributable
to shareholders - - - 33.8 33.8
Transactions with
owners
Issue of ordinary
shares in the half-year 13,14 1.7 197.9 - - 199.6
Share issue costs 14 - (4.0) - - (4.0)
Dividends paid in
the half-year 15 - - (9.9) - (9.9)
Balance at 30 September
2019 5.2 423.2 106.0 88.9 623.3
================================ ====== ========= ============== =========== ========== =============
Capital
Year ended 31 March Share Share premium reduction Retained
2020 capital reserve reserve earnings Total equity
Note GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------ --------- -------------- ----------- ---------- -------------
Balance at 1 April
2019 3.5 229.3 115.9 55.1 403.8
Profit and total comprehensive
income attributable
to shareholders - - - 73.6 73.6
Transactions with
owners
Issue of ordinary
shares in the year 13,14 1.7 197.9 - - 199.6
Share issue costs 14 - (4.0) - - (4.0)
Dividends paid in
the year 15 - - (25.0) - (25.0)
Balance at 31 March
2020 5.2 423.2 90.9 128.7 648.0
================================ ====== ========= ============== =========== ========== =============
CONSOLIDATED CASH FLOW STATEMENT
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
Note GBPm GBPm GBPm
--------------------------------------- ----- ------------- ------------- -------------
Cash flows from operating activities
(Loss)/profit before tax (4.0) 33.8 73.6
Adjustments for:
Finance income 4 - (0.2) (0.2)
Finance costs 5 2.6 2.5 5.0
Change in fair value of investment
property 7 18.9 (22.3) (45.4)
Loss/(gain) on disposal of investment
property 7 0.1 - (1.2)
Change in fair value of derivative - 0.1 0.1
Accretion of tenant lease incentives 2 (3.5) (2.3) (5.4)
--------------------------------------- -----
Operating results before working
capital changes 14.1 11.6 26.3
Increase in trade and other
receivables (0.6) (2.1) (4.9)
(Decrease)/Increase in trade
and other payables (1.6) 3.4 4.4
--------------------------------------- ----- ------------- ------------- -------------
Net cash flow generated from
operating activities 11.9 12.9 25.8
--------------------------------------- ----- ------------- ------------- -------------
Cash flows from investing activities
Purchase of derivative - (0.2) (0.2)
Purchase of investment properties (38.2) (202.8) (260.1)
Proceeds from sale of investment
property 2.1 14.1 20.9
Interest received - 0.2 0.2
--------------------------------------- -----
Net cash flow used in investing
activities (36.1) (188.7) (238.8)
--------------------------------------- ----- ------------- ------------- -------------
Cash flows from financing activities
Proceeds from shares issued
in the period - 199.6 199.6
Share issue costs paid - (3.9) (3.9)
Dividend paid (7.5) (9.9) (25.0)
Interest paid (2.9) (2.7) (4.7)
Drawdown of borrowings 42.0 31.7 43.2
Loan arrangement fees paid (0.1) (1.2) (2.2)
--------------------------------------- -----
Net cash flow generated from
financing activities 31.5 213.6 207.0
--------------------------------------- ----- ------------- ------------- -------------
Net decrease in cash and cash
equivalents 7.3 37.8 (6.0)
Opening cash and cash equivalents 13.4 19.4 19.4
--------------------------------------- ----- ------------- ------------- -------------
Closing cash and cash equivalents 10 20.7 57.2 13.4
======================================= ===== ============= ============= =============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
This consolidated set of condensed financial statements has been
prepared in accordance with the Disclosure Guidance and
Transparency Rules of the UK Financial Conduct Authority and IAS 34
Interim Financial Reporting, as adopted by the European Union.
The condensed consolidated financial statements for the
half-year ended 30 September 2020 have been reviewed by the
Company's Independent Auditor, BDO LLP, in accordance with the
International Standard on Review Engagements 240 Review of Interim
Financial Information Performed by the Independent Auditor of thee
Entity and were approved for issue on 20 November 2020. 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 ended 31 March 2020 does not constitute full statutory
accounts within the meaning of Section 435 of the Companies Act
2006. The Group's Annual Report for the year ended 31 March 2020
has been delivered to the Registrar of Companies. The Group's
Independent Auditor's report on those accounts was unqualified. It
did include reference to material uncertainty in the valuation, to
which the auditors drew attention by way of emphasis without
qualifying their report.
The condensed consolidated financial statements for the
half-year ended 30 September 2020 have been prepared on a
historical cost basis, as modified for the Group's investment
properties and derivative financial instruments which are carried
at fair value with changes presented in the statement of
comprehensive income.
The condensed consolidated financial statements are presented in
Sterling, which is the Company's presentation and functional
currency, and values are rounded to the nearest million pounds,
except where indicated otherwise.
Going concern
The condensed consolidated financial statements have been
prepared on a going concern basis.
The Group has a healthy liquidity position, a favourable debt
maturity profile and substantial headroom against financial
covenant levels.
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about its
future trading performance including the impact of Covid-19.
Various forms of sensitivity analysis have been performed having a
particular regard to the financial performance of its tenants,
taking into account any discussions held with tenants surrounding
operating performance and the current and ongoing rent collection
levels achieved by the Group.
As at 30 September 2020, the Group had GBP26.8m of cash and
working capital and GBP58.0m of undrawn commitments under its
revolving credit facility. At 30 September 2020, the Group had also
unconditionally exchanged on disposals for proceeds of GBP8.5m,
with a completion date in December 2020. The Group's total or
available capital was therefore GBP93.3m.
Of this available capital, GBP67.6m was committed under pre-let
forward fundings (Note 21) and a further GBP17.3m was committed
under contracts for the acquisition of properties that had
exchanged but not completed (Note 22), resulting in GBP8.4m of
uncommitted capital.
The Group has also completed the disposal of two further assets
since the half-year end with disposal proceeds totalling
GBP8.5m.
The Group's pro-forma loan to value at 30 September 2020 was
30%, with the debt the Group's term loans (GBP170.0m) averaging
10-year maturities (which has been extended to 13-years after the
half-year end) and the RCF (GBP100.0m total and GBP42.0m drawn)
falling due in August 2024. As at the date of approval of this
report, the Group has substantial headroom within its financial
loan covenants.
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.
As a result, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future (which is considered to be a
period of at least 12 months from the date of approval of the
financial statements).
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 March 2020 and are expected to be applied
consistently during the year ending 31 March 2021.
Summary of significant judgments and estimates
The judgments and estimates adopted in this report are
consistent with those applied in the Group's consolidated financial
statements for the year ended 31 March 2020 and are expected to be
applied consistently during the year ending 31 March 2021.
New standard issued and effective from 1 January 2020
The following new accounting amendments have been applied in
preparing these condensed consolidated financial statements:
-- Amendments to IFRS 3 "Business Combinations", definition of a business
-- Amendments to IAS 1 "Presentation of Financial Statements"
and IAS 8 "Accounting Policies, Changes in Accounting Estimates and
Errors", definition of material
-- Revised Conceptual Framework for Financial Reporting
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
They are not expected to impact the Group significantly as they
are either not relevant to the Group's activities or require
accounting which is consistent with the Group's current accounting
policies.
New standards issued but not yet effective
Amendment to IFRS 16 regarding Covid-19-related rent concessions
was issued in May 2020, for annual reporting periods beginning on
or after 1 June 2020 (earlier application is permitted). It permits
lessees, as a practical expedient, not to assess whether particular
rent concessions occurring as a direct consequence of the Covid-19
pandemic are lease modifications and instead to account for those
rent concessions as if they are not lease modifications. The
amendment does not affect lessors. The impact of this amendment is
considered immaterial as the Group does not hold any material
operating or leasehold agreements as lessee.
There are other new standards and amendments to standards and
interpretations which have been issued that are effective in future
accounting periods, and which the Group has decided not to adopt
early. None of these are expected to have a material impact on the
condensed consolidated financial statements of the Group.
2. Rental income
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
--------------------------------------- ------------- ------------- -------------
Rental income before rent concessions 17.6 14.4 33.1
Less: rent concessions granted (0.8) - -
--------------------------------------- ------------- ------------- -------------
Rental income from investment
property 16.8 14.4 33.1
Accretion of tenant lease incentives
(Note 7, 23) 3.5 2.3 5.4
---------------------------------------
20.3 16.7 38.5
======================================= ============= ============= =============
3. Administrative and other expenses
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
---------------------------------------- ------------- ------------- -------------
Investment advisory fees (Note
18) 2.1 2.1 4.5
Legal and professional fees 0.2 0.2 0.6
Other administrative costs 0.1 0.1 0.4
Corporate administration fees 0.1 0.1 0.3
Fees paid to the Company's Independent
Auditor 0.1 0.1 0.2
Directors' fees (Note 18) 0.1 0.1 0.2
Advertising & Marketing - 0.1 0.1
Expected credit loss - - 0.3
2.7 2.8 6.6
======================================== ============= ============= =============
Fees paid to the Company's Independent Auditor comprise the
review of the Interim Report, the audit of the Annual Report and
the audit of the financial statements of the Company's
subsidiaries.
The Company paid GBPnil of additional fees to the Company's
Independent Auditor in respect of reporting accountant services in
the half-year which have been recognised directly in equity as
share issue costs (30 September 2019: GBP0.1m, 31 March 2020:
GBP0.1m).
4. Finance income
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
------------------------------- -------------- ------------- -------------
Interest on cash held at bank - 0.2 0.2
-------------------------------
- 0.2 0.2
============================================== ============= =============
5. Finance costs
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
------------------------------------- ------------- ------------- -------------
Interest payable on bank borrowings 2.2 2.3 4.4
Amortisation of loan arrangement
fees 0.4 0.2 0.6
2.6 2.5 5.0
===================================== ============= ============= =============
Capitalised finance costs are included within property
acquisitions in Note 7. The total interest payable on financial
liabilities carried at amortised cost comprised:
(i) the interest payable on bank borrowings totalling GBP2.8m of
which GBP0.6m was capitalised (30 September 2019: GBP2.6m of which
GBP0.3m was capitalised, 31 March 2020: GBP5.4m of which GBP1.0m
was capitalised); and
(ii) the amortisation of loan arrangement fees totalling GBP0.4m
of which GBPnil was capitalised (30 September 2019: GBP0.2m of
which GBPnil was capitalised, 31 March 2020: GBP0.6m of which
GBPnil was capitalised).
The capitalisation rate used to determine the amount of
borrowing costs eligible for capitalisation during the half-year
was 2.94% pa.
6. Taxation
The Group is a REIT and as a result the profit and gains arising
from the Group's property rental business are exempt from UK
corporation tax provided the Group meets certain conditions as set
out in the UK REIT regulations. Profits arising from any residual
activities (e.g. trading activities and interest income), after the
utilisation of any available residual tax losses, are subject to
corporation tax at the main rate of 19% for the year.
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
---------------------------- ------------- ------------- -------------
Current tax - - -
---------------------------- ------------- ------------- -------------
Total current tax - - -
Origination and reversal of
temporary differences - - -
---------------------------- ------------- ------------- -------------
Total deferred tax - - -
Tax charge - - -
============================ ============= ============= =============
Reconciliation of the total tax charge
The reconciliation of profit before tax multiplied by the
standard rate of corporation tax for the half-year of 19% to the
total tax charge in the consolidated statement of comprehensive
income is as follows:
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
-------------------------------------- ------------- ------------- -------------
(Loss)/profit before tax (4.0) 33.8 73.6
-------------------------------------- ------------- ------------- -------------
Tax at the standard rate of
UK corporation tax of 19% (0.8) 6.4 14.0
Effects of:
REIT exempt income and gains (3.6) (2.2) (5.4)
Revaluation of investment properties 4.4 (4.2) (8.6)
Tax charge - - -
====================================== ============= ============= =============
UK REIT exempt income includes property rental income that is
exempt from UK Corporation Tax in accordance with Part 12 of CTA
2010.
7. Investment property
Investment
Investment Investment property
property property in course
long leasehold freehold of construction Total
GBPm GBPm GBPm GBPm
--------------------------------- ---------------- ----------- ----------------- -------
Half-year ended 30 September
2020
Balance at 1 April 2020 107.3 592.3 110.1 809.7
Property acquisitions - 0.4 40.9 41.3
Licence fee receivable (Note
23) - - (1.6) (1.6)
Tenant lease incentives
(Note 2) 0.5 2.6 0.4 3.5
Property disposals (0.2) (11.5) - (11.7)
Change in fair value (5.6) (9.3) (4.0) (18.9)
Transfers of completed property 4.6 12.0 (16.6) -
--------------------------------- ---------------- ----------- ----------------- -------
Balance at 30 September
2020 106.6 586.5 129.2 822.3
================================= ================ =========== ================= =======
Half-year ended 30 September
2019
Balance at 1 April 2018 33.2 451.2 27.1 511.5
Property acquisitions 78.3 97.7 46.8 222.8
Licence fee receivable (Note
23) - - (0.9) (0.9)
Tenant lease incentives
(Note 2) 0.2 2.0 0.1 2.3
Property disposals - (14.1) - (14.1)
Change in fair value 1.1 11.4 9.8 22.3
Transfers of completed property - 35.5 (35.5) -
Balance at 30 September
2019 112.8 583.7 47.4 743.9
--------------------------------- ---------------- ----------- ----------------- -------
Year ended 31 March 2020
Balance at 1 April 2019 33.2 451.2 27.1 511.5
Property acquisitions 71.8 105.2 92.2 269.2
Licence fee receivable (Note
23) - - (2.1) (2.1)
Tenant lease incentives
(Note 2) 0.5 4.9 - 5.4
Property disposals - (19.7) - (19.7)
Change in fair value 1.8 9.2 34.4 45.4
Transfers of completed property - 41.5 (41.5) -
--------------------------------- ---------------- ----------- ----------------- -------
Balance at 31 March 2020 107.3 592.3 110.1 809.7
================================= ================ =========== ================= =======
The investment property has been independently valued at fair
value by Knight Frank LLP, the Independent Valuer, an accredited
external valuer with recognised and relevant professional
qualifications and recent experience of the location and category
of the investment property being valued. The valuations are the
ultimate responsibility of the Board.
The Independent Valuer valued the entire property portfolio at
GBP892.7m at 31 March 2020 (30 September 2019: GBP803.3m, 31 March
2020: GBP914.0m) including capital commitments on forward funded
assets.
Reconciliation of fair value to portfolio valuation
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
------------------------------------- ------------- ------------- -------------
Investment property at fair value 822.3 743.9 809.7
Capital commitments on forward
funded assets (Note 21) 67.6 58.6 101.2
Vendor discount in respect of
rent-free periods and top-ups 3.8 5.3 4.7
Licence fee receivable 2.5 1.1 1.9
Leasehold liability (Note 11) (3.5) (5.6) (3.5)
-------------------------------------
Total completed portfolio valuation 892.7 803.3 914.0
------------------------------------- ------------- ------------- -------------
Capital commitments represent the costs to bring the asset to
completion under the funding agreements with the developers which
includes a developer's margin. These costs are not provided for in
the statement of financial position.
Vendor discounts in respect of rent-free periods and top-ups
represent amounts by which a purchase price was reduced by the
vendor on acquisitions to cover future rent-free periods or periods
to the next rent review under the lease. The total portfolio
valuation assumes the property to be income generating during the
unexpired rent-free periods and passing rent to be the topped-up
rent during the unexpired period to next rent review and therefore
includes this income in the valuation.
Licence fee receivable represent amounts due from developers
under funding agreements that have not been settled at the period
end. The valuation assumes the property to be income generating
throughout the period of development and therefore includes this
income in the valuation.
The valuation of investment property that is long leasehold
where headlease rents are material is grossed up to include the
carrying value of the leasehold liability.
Investment property at fair value
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Valuation (Level 1) (Level 2) (Level 3) Total
GBPm GBPm GBPm GBPm
------------------- --------------- ------------- -------------- ------
30 September 2020 - - 822.3 822.3
=================== =============== ============= ============== ======
30 September 2019 - - 743.9 743.9
=================== =============== ============= ============== ======
31 March 2020 - - 809.7 809.7
=================== =============== ============= ============== ======
There have been no transfers between levels during the
half-year.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards (incorporating the International
Valuation Standards).
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(such as lettings, tenants' profiles, future revenue streams,
capital values of fixtures and fittings, plant and machinery, any
environmental matters and the overall repair and condition of the
property) and discount rates applicable to those assets.
The descriptions and definitions relating to valuation
techniques and key inputs made in determining fair values are as
follows:
Valuation techniques
-- Standing assets
Standing assets are valued using the investment valuation
method. Using the investment valuation method, the passing rent is
divided by an appropriate yield with a deduction of standard
purchaser's costs. The method uses analysis of appropriate
comparable investments, rental and sale transactions, together with
evidence of demand within the vicinity of the subject property and
of properties of a similar nature. The yield applied takes into
account the size, location, terms, covenant strength and other
material factors.
-- Investment property in the course of construction
For property in the course of construction the fair value is
calculated by estimating the fair value of the completed property
using the income capitalisation technique less estimated costs to
completion under fixed price developer funding agreements which
include an appropriate developer's margin.
Observable input: passing rent
The prevailing rent at which space is let at the date of
valuation. Passing rents are dependent upon a number of variables
in relation to the Group's property. These include property use,
size, location, tenant covenant strength and terms of the
lease.
Unobservable input: rental growth
The estimated average increase in rent based on both market
estimations and contractual arrangements. A reduction of the
estimated future rental growth in the valuation model would lead to
a decrease in the fair value of the investment property and an
inflation of the estimated future rental growth would lead to an
increase in the fair value. No quantitative sensitivity analysis
has been provided for estimated rental growth as a reasonable range
would not result in a significant movement in fair value.
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.
Sensitivities of measurement of significant inputs
As set out within significant accounting estimates and judgments
above, the Group's property portfolio valuation is open to
judgments and is inherently subjective by nature. The table below
shows the sensitivities of measurement of the Group's investment
property to certain inputs:
+25bps in -25bps in
-5% in passing +5% in passing net initial net initial
Valuation rent rent yield yield
GBPm GBPm GBPm GBPm
------------------- --------------- --------------- ------------- -------------
30 September 2020 (44.6) 53.6 (42.2) 46.6
=================== =============== =============== ============= =============
30 September 2019 (38.2) 40.1 (37.8) 41.7
=================== =============== =============== ============= =============
31 March 2020 (45.7) 45.7 (43.5) 48.1
=================== =============== =============== ============= =============
Realised gain on disposal of investment property
During the half-year, the Group disposed of certain of its
investment property. The table below shows a reconciliation of the
gain recognised on disposal through the consolidated statement of
comprehensive income and the realised gain on disposals in the
half-year which includes changes in fair value of the investment
property recognised in previous periods.
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
--------------------------------------- ------------- ------------- -------------
Consideration received 11.8 14.1 20.9
Less:
Carrying value (11.7) (14.1) (19.7)
Selling costs (0.2) - -
--------------------------------------- ------------- ------------- -------------
(Loss)/gain on disposal of investment
property (0.1) - 1.2
Add:
Change in fair value recognised
in previous periods 1.2 2.8 2.9
--------------------------------------- ------------- ------------- -------------
Realised gain on disposal of
investment property 1.1 2.8 4.1
======================================= ============= ============= =============
8. Financial instruments
Set out below is a comparison of the book value and fair value
of the Group's financial instruments where a difference exists. The
fair value of financial instruments not included in the comparison
is equal to book value.
Bank borrowings Book value Fair value
GBPm GBPm
------------------- ----------- -----------
30 September 2020 208.4 228.8
=================== =========== ===========
30 September 2019 166.2 186.2
=================== =========== ===========
31 March 2020 166.1 186.3
=================== =========== ===========
9. Trade and other receivables
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
----------------------------------- ------------- ------------- -------------
Recoverable VAT 1.4 2.0 1.2
Licence fee receivable 2.6 0.7 1.1
Rent receivable 6.6 3.8 7.5
Prepayments and other receivables 0.3 0.4 0.3
Amounts due within one year 10.9 6.9 10.1
----------------------------------- ------------- ------------- -------------
Rent receivable 1.2 - -
=================================== ============= ============= =============
Amounts due in more than one
year 1.2 - -
=================================== ============= ============= =============
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
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 period from incorporation to 31
March 2020. The historical loss rates are then adjusted for current
and forward-looking information on macroeconomic factors affecting
the Group's tenants. The expected credit loss provision and the
incurred loss provision as at 30 September 2020 is GBP0.3m (30
September 2019: GBPnil, 31 March 2020 is GBP0.3m).
Rents receivable that fall due in more than one year relate to
deferrals granted to our tenants that suffered the most significant
operational disruptions as a result of the UK's national lock-down
during the half-year.
Trade and other receivables that are financial assets amount to
GBP10.4m (30 September 2019: GBP4.5m, 31 March 2020: GBP8.6m) which
comprises licence fee receivable and rent receivable.
The following table sets out the ageing of trade and other
receivables that are financial assets:
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
------------------ ------------- ------------- -------------
30 days or fewer 7.6 4.5 8.6
31 to 60 days 0.5 - -
61 to 90 days 0.5 - -
91 to 365 days 0.4 - -
Over one year 1.2
------------------
10.2 4.5 8.6
================== ============= ============= =============
10. Cash reserves
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
--------------------------- ------------- ------------- -------------
Cash at bank 19.5 46.0 13.2
Cash held by lawyers 1.2 11.2 0.2
--------------------------- ------------- ------------- -------------
Cash and cash equivalents 20.7 57.2 13.4
Restricted cash 9.7 11.5 -
--------------------------- ------------- ------------- -------------
Total cash at bank 30.4 68.7 13.4
=========================== ============= ============= =============
Cash held by lawyers is money held in escrow for expenses
expected to be incurred in relation to investment properties
pending completion. These funds are available immediately on
demand.
Restricted cash is money held in accounts to which the Group
does not have immediate access and as such do not form part of the
Group's short-term cash management. These amounts arise both when
initially drawing on term-loans prior to the bank taking adequate
security and where a securitised asset is disposed prior to the
bank replacing the asset with adequate security.
11. Trade and other payables
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
------------------------------ ------------- ------------- -------------
Accrued investment property
costs 4.1 6.4 2.2
Deferred rental income 7.7 6.7 7.3
Accruals 0.7 0.6 0.7
Trade and other payables 10.0 10.5 5.0
Corporation tax payable(*) 0.9 0.9 0.9
------------------------------
Amounts due within one year 23.4 25.1 16.1
------------------------------ ------------- ------------- -------------
Leasehold liability (Note 7) 3.5 5.6 3.5
------------------------------ ------------- ------------- -------------
Amounts due in more than one
year 3.5 5.6 3.5
============================== ============= ============= =============
Trade and other payables that are financial liabilities amount
to GBP18.3m (30 September 2019: GBP23.1m, 31 March 2020: GBP11.4m)
which comprises accrued investment property costs, accruals, trade
and other payables and the leasehold liability.
* Corporation tax payable are liabilities of the Company's
subsidiaries that accrued prior to acquisition and entry to the
REIT regime. No tax liabilities have arisen within the Group and
the tax charge for the half-year disclosed in Note 6 is GBPnil (30
September 2019: GBPnil, 31 March 2020: GBPnil).
12. Bank borrowings
Drawn Undrawn Total
GBPm GBPm GBPm
------------------------------------ ------ -------- ------
Half-year ended 30 September
2020
At beginning of the half-year 170.0 100.0 270.0
New facilities - - -
Drawdowns 42.0 (42.0) -
At end of the half-year 212.0 58.0 270.0
Less: unamortised loan arrangement
fees (3.6) - (3.6)
------------------------------------ ------ -------- ------
208.4 58.0 266.4
==================================== ====== ======== ======
Half-year ended 30 September
2019
At beginning of the half-year 170.0 - 170.0
New facilities - 100.0 100.0
Drawdowns - - -
------------------------------------ ------ -------- ------
At end of the half-year 170.0 100.0 270.0
Less: unamortised loan arrangement
fees (3.8) - (3.8)
------------------------------------ ------ -------- ------
166.2 100.0 266.2
==================================== ====== ======== ======
Year ended 31 March 2020
At beginning of the year 170.0 - 170.0
New facilities - 100.0 100.0
Drawdowns - - -
------------------------------------ ------ -------- ------
At end of the year 170.0 100.0 270.0
Less: unamortised loan arrangement
fees (3.9) - (3.9)
------------------------------------ ------ -------- ------
166.1 100.0 266.1
==================================== ====== ======== ======
Maturity of bank borrowings
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
--------------------------------- ------------- ------------- -------------
Repayable between 1 and 2 years - - -
Repayable between 2 and 5 years 42.0 - -
Repayable after 5 years 166.4 166.2 167.3
---------------------------------
208.4 166.2 167.3
================================= ============= ============= =============
The Group's borrowings comprise the following three term loan
facilities with Scottish Widows Limited and one revolving credit
facility with Lloyds Bank plc:
Term loans facilities
-- A fixed rate, interest only loan facility of GBP55.0m. The
facility has an all-in rate of 2.93% pa, for the duration of the
loan term and is due for repayment in July 2029;
-- A fixed rate, interest only loan facility of GBP40.0m. The
facility has an all-in rate of 2.85% pa, for the duration of the
loan term and is due for repayment in July 2029; and
-- A fixed rate, interest only loan facility of GBP75.0m. The
facility has a fixed all-in rate payable of 2.99% pa, for the
duration of the loan term and is due for repayment in December
2033.
Revolving credit facility
-- A revolving credit facility of GBP100.0m (of which GBP42.0m
was drawn as at 30 September 2020) with Lloyds at a 1.55% margin
over Libor on a three-year term ending August 2022, with two
one-year extension options. The Group has traded an interest rate
derivative to cap the interest on the GBP100.0m at a total of
2.95%.
The Group has remained compliant with the covenants throughout
the period up to the date of this report. The facilities are
secured against respective pools of the Group's investment
property.
Reconciliation of liabilities to cash flows from financing
activities
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
-------------------------------------- ------------- ------------- -------------
Bank borrowings at start of
the period 166.2 167.3 167.3
Cash flows from financing activities
Bank borrowings drawn* 42.0 31.7 43.2
Loan arrangement fees paid (0.1) (1.2) (2.2)
Non-cash movements
Amortisation of loan arrangement
fees 0.3 0.2 1.0
(Decrease)/increase in restricted
cash - (31.8) (43.2)
Bank borrowings at end of the
period 208.4 166.2 166.1
====================================== ============= ============= =============
* includes amounts paid out of restricted cash which are not
classified as cash and cash equivalents. These drawdowns are not
included in the drawdowns disclosed in the first table included in
this note.
13. Share capital
Number Share capital
(million) GBPm
------------------------------- ---------- --------------
Half-year ended 30 September
2020
At beginning of the half-year 521.4 5.2
At the end of the half-year 521.4 5.2
=============================== ========== ==============
Issued and fully paid 521.4 5.2
=============================== ========== ==============
Half-year ended 30 September
2019
At beginning of the half-year 352.3 3.5
Issued during the half-year 169.1 1.7
At the end of the half-year 521.4 5.2
=============================== ========== ==============
Issued and fully paid 521.4 5.2
=============================== ========== ==============
Year ended 31 March 2020
At beginning of the year 352.3 3.5
Issued during the year 169.1 1.7
At the end of the year 521.4 5.2
------------------------------- ---------- --------------
Issued and fully paid 521.4 5.2
=============================== ========== ==============
On 17 June 2019, the Company issued 169.1 ordinary shares at
118.0p per share (1p nominal value and a premium of 117p) for total
consideration of GBP200 million.
14. Share premium reserve
The share premium relates to amounts subscribed for share
capital in excess of nominal value net of directly attributable
share issue costs.
Share premium reserve Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
-------------------------------- ------------- ------------- -------------
At the beginning of the period 423.2 229.3 229.3
Premium on issue of ordinary
shares - 197.9 197.9
Share issue costs - (4.0) (4.0)
-------------------------------- ------------- ------------- -------------
At the end of the period 423.2 423.2 423.2
================================ ============= ============= =============
15. Dividends
Dividends paid and declared in the half-year ended GBPm
30 September 2020
---------------------------------------------------- --------
Final dividend in respect of year ended 31 March
2020
at 1.4375p per share 7.5
First quarterly dividend in respect of year ending
31 March 2021
at 1.30p per share 6.7
Total dividends paid 14.2
==================================================== ========
Total dividend per share paid in the half-year 2.7375p
---------------------------------------------------- --------
Total dividend per share paid and proposed in
respect of the half-year 2.65p
---------------------------------------------------- --------
Dividends per share paid and proposed in respect of the
half-year comprises:
-- The first interim dividend in respect of the year ending 31
March 2021 of 1.3p per share, declared in September and paid in
October 2020
-- The second interim dividend in respect of the year ending 31
March 2021 of 1.35p per share, declared in November and due to be
paid in December 2020
Dividends paid and declared in the half-year ended GBPm
30 September 2019
---------------------------------------------------- --------
Final dividend in respect of year ended 31 March
2019
at 1.375p per share 4.8
First quarterly dividend in respect of year ended
31 March 2020
at 1.4375p per share 5.1
Total dividends paid 9.9
==================================================== ========
Total dividend per share paid in the half- year 2.8125p
---------------------------------------------------- --------
Total dividend per share paid and proposed in
respect of the half-year 2.875p
---------------------------------------------------- --------
Dividends per share paid and proposed in respect of the
half-year comprises:
-- The first interim dividend in respect of the year ended 31
March 2020 of 1.4375p per share, declared in September and paid in
October 2019
-- The second interim dividend in respect of the year ended 31
March 2021 of 1.4375p per share, declared in November and paid in
December 2019
Dividends paid and declared in the year ended GBPm
31 March 2020
---------------------------------------------------- --------
Final dividend in respect of year ended 31 March
2019
at 1.375p per share 4.8
First quarterly dividend in respect of year ended
31 March 2020
at 1.4375p per share 5.2
Second quarterly dividend in respect of year ended
31 March 2020
at 1.4375p per share 7.5
Third quarterly dividend in respect of year ended
31 March 2020
at 1.4375p per share 7.5
---------------------------------------------------- --------
Total dividends paid 25.0
==================================================== ========
Total dividend per share paid in the year 5.6875p
---------------------------------------------------- --------
Total dividend per share paid and proposed in
respect of the year 5.75p
---------------------------------------------------- --------
Dividends per share paid and proposed in respect of the year
comprises:
-- The first interim dividend in respect of the year ended 31
March 2020 of 1.4375p per share, declared in September and paid in
October 2019
-- The second interim dividend in respect of the year ended 31
March 2020 of 1.4375p per share, declared in November and paid in
December 2019
-- The third interim dividend in respect of the year ended 31
March 2020 of 1.4375p per share, declared in February and paid in
March 2020
-- The fourth interim dividend in respect of the year ended 31
March 2020 of 1.4375p per share, declared in May and paid in July
2020
16. Leases
The Group as lessor
The future minimum lease receivable by the Group under
non-cancellable operating leases are as follows:
Lease receivables < 1 year 2-5 years > 5 years Total
GBPm GBPm GBPm GBPm
------------------- --------- ---------- ---------- ------
30 September 2020 37.1 159.3 661.5 857.9
=================== ========= ========== ========== ======
30 September 2019 36.7 149.4 672.1 858.2
=================== ========= ========== ========== ======
31 March 2020 38.7 159.7 694.4 892.8
=================== ========= ========== ========== ======
An overview of the Group's leasing activities is given in the
Investment Advisors Report which includes detail of concessions
granted to tenants during the half-year.
The Group as lessee
The following table sets out a maturity analysis of lease
payments, showing the undiscounted lease payments to be paid after
the reporting date:
Lease payables < 1 year 2-5 years > 5 years Total
GBPm GBPm GBPm GBPm
------------------- --------- ---------- ---------- ------
30 September 2020 0.1 0.3 11.1 11.5
=================== ========= ========== ========== ======
30 September 2019 0.3 0.8 27.7 28.8
=================== ========= ========== ========== ======
31 March 2020 0.1 0.3 13.3 13.7
=================== ========= ========== ========== ======
The above is in respect of leasehold properties held by the
Group. There are 29 properties (30 September 2019 30, 31 March
2020: 30) held under leasehold with lease ranges from 99 years to
999 years.
The Group's leasing arrangements with lessors are headlease
arrangements on land and buildings that have been sub-let under the
Group's normal leasing arrangements (see above) to tenants. The
Group carries its interest in these headlease arrangements as long
leasehold investment property (Note 7).
17. Segmental information
Operating segments are identified on the basis of internal
financial reports about components of the Group that are regularly
reviewed by the chief operating decision maker (which in the
Group's case is the Board, comprising the non-executive Directors,
and the Investment Advisor) in order to allocate resources to the
segments and to assess their performance.
The internal financial reports contain financial information at
a Group level as a whole and there are no reconciling items between
the results contained in these reports and the amounts reported in
the consolidated financial statements. These internal financial
reports include the IFRS figures but also report the non-IFRS
figures for the EPRA and alternative performance measures as
disclosed in Notes 23 and 24 and the Additional Information.
The Group's property portfolio comprises investment property,
diversified across nine different property sub-sectors. The Board
considers that all the properties have similar economic
characteristics. Therefore, in the view of the Board, there is one
reportable segment.
All of the Group's properties are based in the UK and as such no
geographical grouping is considered appropriate for segmental
analysis.
During the half-year the Group had no tenant (30 September 2019:
two, 31 March 2020: none) that is considered a major customer,
contributing more than 10% of the Group's turnover. The Group's
turnover is allocated to major customers as follows:
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
---------------------------------------- ------- ------ ------- ------ ------- ------
Major customers (each more than
10%) 0% - 21% 3.1 0% -
Other tenants (each less than 10%) 100% 16.8 79% 11.3 100% 33.1
Rental income from investment property
(Note 2) 100% 16.8 100% 14.4 100% 33.1
======================================== ======= ====== ======= ====== ======= ======
18. Related party transactions
Transactions with the Board of Directors
In respect of the half-year ended 30 September 2020 fees of
GBP0.1m were payable to the Directors (30 September 2019: GBP0.1m,
31 March 2020: GBP0.2m). Since 1 January 2020 the Directors' fees
have been settled in cash.
The following table summarises the number of ordinary shares
purchased during the half-year by Directors and the number of
ordinary shares held at 30 September 2020:
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
---------------------------------
Number Number Number
-------------------- ----------- ------------- ------------- -------------
Stephen Hubbard Purchased - 8,864 49,233
====================
Held 169,389 129,020 169,389
================================ ============= ============= =============
Colin Smith OBE Purchased - 6,093 49,097
====================
Held 222,909 179,905 222,909
================================ ============= ============= =============
John Cartwright(*) Purchased - 7,856 11,729
====================
Held 66,687 62,814 66,687
================================ ============= ============= =============
Jan Etherden Purchased - 6,610 13,032
====================
Held 57,274 50,852 57,274
================================ ============= ============= =============
Patricia Dimond Purchased 8,714 - -
====================
Held 8,714 - -
================================ ============= ============= =============
* Includes a company wholly owned by John Cartwright and persons
closely associated (as defined by the EU Market Abuse Regulation)
with him.
None of the Directors sold any shares in the Company during the
half-year.
Transactions with the Investment Advisor
A fee of GBP2.1m was payable to the Investment Advisor in
respect of the half-year (30 September 2019: GBP2.1m, 31 March
2020: GBP4.5m). At 30 September 2020, GBP0.5 was due to the
Investment Advisor (30 September 2019: GBP0.4m, 31 March 2020:
GBP0.4m).
The investment advisory fee is calculated in arrears in respect
of each month, in each case based upon the average market
capitalisation of the Company on the following basis:
(a) One-twelfth of 0.75% per calendar month of market
capitalisation up to or equal to GBP500 million; and
(b) One-twelfth of 0.65% per calendar month of market capitalisation above GBP500 million.
No performance fee is payable to the Investment Advisor.
19. Consolidated entities
The Company owns 100% of the equity shares of all subsidiaries
listed below and has the power to appoint and remove the majority
of the Board of Directors of those subsidiaries. The relevant
activities of the below subsidiaries are determined by the
respective Directors based on simple majority votes. Therefore, the
Board of the Company has concluded that the Company has control
over all these entities and all these entities have been
consolidated within this set of financial statements.
Country of
Name of entity Principal activity incorporation Ownership
------------------------------ --------------------- ---------------- ----------
LXi Property Holdings
1 Limited Property Investment UK 100%
LXi Property Holdings
2 Limited* Property Investment UK 100%
LXi Property Holdings
3 Limited Property Investment UK 100%
LXi Property Holdings
4 Limited Property Investment UK 100%
LXi Property Holdings
4a Limited* Property Investment UK 100%
Alco 1 Limited* Property Investment UK 100%
FPI Co 219 Limited* Property Investment UK 100%
FPI Co 222 Limited* Property Investment UK 100%
FPI Co 223 Limited* Property Investment UK 100%
LXi Cowdenbeath Limited* Property Investment UK 100%
SM Plymouth Hotel Limited* Property Investment UK 100%
Corby (General Partner)
Limited* Property Investment UK 100%
Corby Rail Services Limited* Property Investment UK 100%
Corby Limited Partnership* Property Investment UK 100%
Corby (No.2) Unit Trust* Property Investment Jersey 100%
Grove Asset 8 S.A R.L.* Property Investment Luxembourg 100%
LXi Spirit Limited Property investment Isle of Man 100%
------------------------------ --------------------- ---------------- ----------
* Subsidiaries indirectly owned.
The registered office for UK subsidiaries is 1(st) Floor Senator
House 85 Queen Victoria Street London EC4V 4AB.
The registered office of Jersey subsidiaries is 26 New Street St
Helier Jersey JE2 3RA.
The registered office of Luxembourg subsidiaries is 2 rue du
Fosse, L-1536, Luxembourg.
The registered office of Isle of Man subsidiaries is First Names
House, Victoria Road, Douglas, IM2 4DF
20. Financial risk management
The Group is exposed to interest rate risk, credit risk and
liquidity risk in the current and future periods. The Board of
Directors oversees the management of these risks. The policies of
the Directors for managing each of these risks are summarised
below.
-- Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Group has reduced the interest rate risk on its external
borrowing by fixing the rate of interest payable.
-- Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group will be exposed to credit
risk on both its leasing activities and financing activities,
including deposits with banks and financial institutions.
Credit risk related to financial instruments and cash
deposits
One of the principal credit risks of the Group arises with the
banks and financial institutions. The Board of Directors believes
that the credit risk on short term deposits and current account
cash balances is limited because of low counterparty risk, the
counterparties being banks with high credit ratings.
All financial assets are regularly monitored. The maximum
exposure to credit risk at the reporting date is the carrying value
of financial assets disclosed in Note 9.
Credit risk related to leasing activities
In respect of occupational leasing arrangements, in the event of
a default by a tenant, the Group may suffer a period a void period
where no rents are received and additional re-letting costs. The
quality of the tenant is assessed based on an extensive tenant
covenant review scorecard prior to acquisition of the property. The
assessment of the tenant credit worthiness is also monitored on an
ongoing basis. Credit risk is assisted by the vast majority of
occupational leases requiring that tenants pay rentals in advance.
The Investment Advisor monitors the rent collection in order to
anticipate and minimise the impact of defaults by tenants.
Outstanding rent receivables are regularly monitored.
-- Liquidity risk
The Group manages its liquidity and funding risks by considering
cash flow forecasts and ensuring sufficient cash balances are held
within the Group to meet future needs. Prudent liquidity risk
management implies maintaining sufficient cash and marketable
securities, the availability of financing through appropriate and
adequate credit lines, and the ability of customers to settle
obligations within normal terms of credit. The Group ensures,
through forecasting of capital requirements, that adequate cash is
available.
The following table details the Group's liquidity analysis in
respect of its financial liabilities on contractual undiscounted
payments:
3-12 1-5 > 5
< 3 months months years years Total
GBPm GBPm GBPm GBPm GBPm
--------------------------- ----------- -------- ------- ------- ------
30 September 2020
Bank borrowings (Note 12) - - 42.0 170.0 212.0
Interest payable on bank
borrowings 1.5 4.6 23.2 28.6 57.9
Trade and other payables 14.8 0.1 0.3 11.1 26.3
---------------------------
16.3 4.7 65.5 209.7 296.2
=========================== =========== ======== ======= ======= ======
30 September 2019
Bank borrowings (Note 12) - - - 170.0 170.0
Interest payable on bank
borrowings 1.3 3.7 20.0 33.7 58.7
Trade and other payables 17.5 - 0.9 4.7 23.1
--------------------------- ----------- -------- ------- ------- ------
18.8 3.7 20.9 208.4 251.8
=========================== =========== ======== ======= ======= ======
31 March 2020
Bank borrowings (Note 12) - - - 170.0 170.0
Interest payable on bank
borrowings 1.2 3.7 20.0 31.2 56.1
Trade and other payables 8.6 - 0.9 1.9 11.4
=========================== =========== ======== ======= ======= ======
9.8 3.7 20.9 203.1 237.5
=========================== =========== ======== ======= ======= ======
-- Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital.
The Group considers proceeds from share issuance, bank
borrowings and retained earnings as capital. The Group's policy on
borrowing is as set out below:
-- The level of borrowing will be on a prudent basis for the
asset class and will seek to achieve a low cost of funds, whilst
maintaining flexibility in the underlying security requirements and
structure of the Group.
-- The Board intends to maintain a conservative level of
aggregate borrowings with a medium-term maximum target of 35% of
the Group's total assets.
The Group has remained compliant with all of its banking
covenants during and since the half-year ended.
21. Capital commitments
At 30 September 2020 the Group had capital commitments of
GBP67.6m (30 September 2019: GBP58.6m, 31 March 2020: GBP101.2m) in
relation to the cost to complete its forward funded pre-let
development assets. All commitments are expected to fall due for
settlement within one year from the date of this report.
22. Contingent liabilities
At 30 September 2020 the Group had contingent liabilities in
respect of acquisitions for which contracts had exchanged but
material conditions to completion remained outstanding as at that
date of GBP17.3m (30 September 2019: GBP35.2m, 31 March 2020:
GBPnil) in relation to the cost to complete its forward funded
pre-let development assets. All contingent liabilities are expected
to fall due for settlement within one year from the date of this
report.
23. Earnings per share
Earnings per share is 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. Amounts shown below are both basic and diluted measures as
there were no dilutive instruments in issue throughout the current
or comparative periods.
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
--------------------------------------- ------------- ------------- -------------
(Loss)/earnings (4.0) 33.8 73.6
======================================= ============= ============= =============
Weighted average number of ordinary
shares (million) 521.4 449.3 485.4
--------------------------------------- ------------- ------------- -------------
EPS (0.8) p 7.5p 15.2p
======================================= ============= ============= =============
Adjustments to remove:
Change in fair value of investment
property 18.9 (22.3) (45.4)
(Loss)/gain on disposal of investment
property 0.1 - (1.2)
Change in fair value of interest
rate derivative - 0.1 0.1
--------------------------------------- ------------- ------------- -------------
EPRA earnings 15.0 11.6 27.1
======================================= ============= ============= =============
Weighted average number of ordinary
shares (million) 521.4 449.3 485.4
--------------------------------------- ------------- ------------- -------------
EPRA EPS 2.9 p 2.6p 5.6p
======================================= ============= ============= =============
Adjustments to include:
Licence fees receivable 1.6 0.9 2.1
Amortisation of cash backed
rental top ups and rent-free
periods 0.6 0.7 1.3
--------------------------------------- ------------- ------------- -------------
Adjusted earnings 17.2 13.2 30.5
======================================= ============= ============= =============
Weighted average number of ordinary
shares (million) 521.4 449.3 485.4
--------------------------------------- ------------- ------------- -------------
Adjusted EPS 3.3 p 2.9p 6.3p
======================================= ============= ============= =============
Adjustments to remove:
Accretion of tenant lease incentives (3.5) (2.3) (5.4)
--------------------------------------- ------------- ------------- -------------
Adjusted cash earnings 13.7 10.9 25.1
======================================= ============= ============= =============
Weighted average number of ordinary
shares (million) 521.4 449.3 485.4
--------------------------------------- ------------- ------------- -------------
Adjusted cash EPS 2.6 p 2.4p 5.2p
======================================= ============= ============= =============
Adjusted EPS is a performance measure used by the Board to
assess the Company's dividend payments. The metric adjusts EPRA
earnings to include licence fees receivable from developers.
The Group's accounting policy for licence fees, cash backed
rental top ups received from vendors and rent-free periods that are
cash covered by developers receivable is to recognise them as a
discount to the cost of the investment property, however the Board
considers these returns an important component of the Group's
performance and key to underpinning the Company's dividend targets
and payment.
24. Net asset value per share
Net asset value per share is calculated by dividing the
consolidated net assets attributable to ordinary equity holders of
the Company by the number of ordinary shares outstanding at the
reporting date. Amounts shown below are both basic and diluted
measures as there were no dilutive instruments in issue throughout
the current or comparative periods.
Half-year Half-year
ended ended Year ended
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBPm GBPm GBPm
------------------------------------- ------------- ------------- -------------
NAV 629.8 623.3 648.0
===================================== ============= ============= =============
Number of ordinary shares (million) 521.4 521.4 521.4
------------------------------------- ------------- ------------- -------------
NAV per share 120.8 p 119.6p 124.3p
===================================== ============= ============= =============
A reconciliation of IFRS NAV per share to the three EPRA NAV
measures under the new BPR (NTA, NRV and NDV) and the two measures
under old BPR (NAV and NNNAV) is included in the section Notes to
EPRA NAV calculations.
25. Post balance sheet events
Dividends
-- On 5 October 2020, the Board announced that the quarterly
dividend per share target for the quarter ending 31 December 2020
increased 7% on the prior quarter to 1.44p. The dividend is
expected to be fully covered by rents collected in respect of the
period and represents a marginally higher level than the Company's
pre-pandemic dividend return level
-- On 20 November 2020, the Board approved the quarterly
dividend for the quarter ending 30 September 2020 of 1.35p per
share, in line with the Group's previously announced target
Acquisitions and disposals
Since the half-year end the Group has executed the following
acquisitions and disposals:
-- Completed the acquisition of a GBP5m built Aldi foodstore in
Lytham St Annes, with 18-years term certain remaining on the lease,
with fixed five yearly rental uplifts of 2.5% pa compounded
-- Completed the disposal of its only office asset in
Cambuslang, Glasgow occupied by the local council, for proceeds of
GBP8m, generating an attractive geared IRR of over 16% pa
-- Exchanged on the disposal of its car storage facility in
Corby let to BCA, for proceeds of GBP67.7m, which is expected to
generate an attractive geared IRR of over 14% pa on completion
-- Exchanged on the disposal of a non-operational plot adjacent
to its Travelodge hotel in Llanelli to a petrol filling station
operator for GBP0.5m. The land was not used by the hotel and the
sale has not reduced its rental level
Debt restructure
-- On 2 November 2020 the Group blended its three term loan
facilities and reduced the fixed interest rate by 9 bps to 2.85%,
which is expected to provide approximately GBP2.0m of cash saving
over the extended term. The blended facility was also extended to a
thirteen-year maturity, expiring in December 2033
26. Controlling parties
There is no ultimate controlling party of the Group.
NOTES TO EPRA NAV CALCULATIONS
In October 2019, EPRA issued new BPR for financial guidelines on
its definitions of NAV measures: EPRA NTA, EPRA NRV and EPRA NDV.
The Group has adopted these new guidelines and applies them in the
Interim Report for the half-year ended 30 September 2020.
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, replacing our previously reported EPRA NAV and EPRA
NAV per share metrics. EPRA NTA excludes the cumulative fair value
adjustments for debt-related derivatives which are unlikely to be
realised.
As at 30 September 2020 Current measures Previous measures
------------------------------------------- ----------------------
EPRA NTA EPRA NRV EPRA NDV EPRA NAV EPRA NNNAV
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- --------- --------- --------- --------- -----------
Net asset value 629.8 629.8 629.8 629.8 629.8
Mark-to-market adjustments of derivatives 0.2 0.2 - 0.2 -
Fair value of debt - - (20.4) - (20.4)
Real estate transfer tax - 54.7 - - -
------------------------------------------- --------- --------- --------- --------- -----------
At 30 September 2020 630.0 684.7 609.4 630.0 609.4
------------------------------------------- --------- --------- --------- --------- -----------
Number of ordinary shares (million) 521.4 521.4 521.4 521.4 521.4
------------------------------------------- --------- --------- --------- --------- -----------
Per share 120.8p 131.3p 116.9p 120.8p 116.9p
=========================================== ========= ========= ========= ========= ===========
As at 30 September 2019 Current measures Previous measures
------------------------------------------- ----------------------
EPRA NTA EPRA NRV EPRA NDV EPRA NAV EPRA NNNAV
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- --------- --------- --------- --------- -----------
Net asset value 623.3 623.3 623.3 623.3 623.3
Mark-to-market adjustments of derivatives 0.1 0.1 - 0.1 -
Fair value of debt - - (19.9) - (19.9)
Real estate transfer tax - 58.5 - - -
------------------------------------------- --------- --------- --------- --------- -----------
At 30 September 2019 623.4 681.9 603.4 623.4 603.4
------------------------------------------- --------- --------- --------- --------- -----------
Number of ordinary shares (million) 521.4 521.4 521.4 521.4 521.4
Per share 119.6p 130.8p 115.7p 119.6p 115.7p
=========================================== ========= ========= ========= ========= ===========
As at 31 March 2020 Current measures Previous measures
------------------------------------------- ----------------------
EPRA NTA EPRA NRV EPRA NDV EPRA NAV EPRA NNNAV
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- --------- --------- --------- --------- -----------
Net asset value 648.0 648.0 648.0 648.0 648.0
Mark-to-market adjustments of derivatives 0.1 0.1 - 0.1 -
Fair value of debt - - (15.9) - (15.9)
Real estate transfer tax - 59.8 - - -
------------------------------------------- --------- --------- --------- --------- -----------
At 31 March 2020 648.1 707.9 632.1 648.1 632.1
------------------------------------------- --------- --------- --------- --------- -----------
Number of ordinary shares (million) 521.4 521.4 521.4 521.4 521.4
------------------------------------------- --------- --------- --------- --------- -----------
Per share 124.3p 135.7p 121.2p 124.3p 121.2p
=========================================== ========= ========= ========= ========= ===========
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