TIDMSIR
RNS Number : 1930L
Secure Income REIT PLC
09 September 2021
9 September 2021
Results for the six months to 30 June 2021
Secure Income REIT Plc (AIM: SIR) (the "Company" or the
"Group"), the specialist long term income UK REIT, today announces
its results for the six months ended 30 June 2021.
Highlights
-- Gross property valuation up 2.0% over six months driven by
rental uplifts up to the end of July of 1.9% with Topped Up Net
Initial Yield steady at 5.4%
-- EPRA NTA per share up 3.1% over six months to 391.1 pence per share
-- Rents have returned to 92% of the levels they would have been
without pandemic rent concessions and are anticipated to fully
resume the levels originally contracted by January 2022
-- 19.6% uplift in Adjusted EPRA EPS to 6.1p per share
-- Like for like earnings have increased by 8.5% as rents
continue to return to their pre pandemic course
-- Impact of temporary rent concessions of 1.6p per share for
the six months to 30 June 2021, down from 2.0p per share reflecting
some three months of concessions reported in the half year to 30
June 2020
-- Shareholder returns have rebounded:
-- Total Accounting Return of 5.0% following a negative 8.1% return for the same period in 2020
-- Total Shareholder Return of 29.1% following share price
recovery to within 97% of EPRA NTA at 30 June 2021 and above 30
June 2021 EPRA NTA by 7 September 2021
-- The Group's Weighted Average Unexpired Lease Term of 19.7
years remains one of the longest amongst UK REITs
-- Net LTV at 35.6% down from 36.4% at 31 December 2020
-- EPRA Cost Ratio of 12.6% among the lowest in the UK REIT sector
-- The Company has further formalised its ESG policies including
committing to sign up to the UN Principles for Responsible
Investment in 2022. We actively engage with our tenants to work
with them where possible on their own ESG initiatives and we
continue to monitor this evolving area of regulation, reporting and
best practice.
-- The Management Team's 12.4% interest in the Company, worth
GBP161 million at the 7 September 2021 share price, provides strong
alignment with shareholders. Every member of the Prestbury senior
Management Team is personally heavily invested in the Company and
together invested a further GBP5.3 million of cash in interests in
the Company's shares in 2020.
-- In the next six months the Company is seeking to deploy its
surplus cash above an appropriate liquidity buffer , firstly to
optimise the terms of our debt refinancing with the remainder
deployed in asset management opportunities and acquisitions. This
should materially enhance shareholder returns.
30 June 31 December 30 June
2021 2020 2020
Balance sheet and portfolio Unaudited Audited Unaudited
------------------------------------ ------------- ------------- -------------
Properties at independent valuation GBP1,985.7m GBP1,946.9m GBP1,958.7m
Net assets GBP1,260.2m GBP1,221.5m GBP1,244.1m
EPRA NTA GBP1,267.3m GBP1,229.2m GBP1,252.0m
EPRA NTA per share 391.1p 379.3p 386.4p
Uncommitted cash GBP183.6m GBP192.0m GBP219.6m
Net Loan To Value ratio 35.6% 36.4% 35.3%
Annualised passing rent before
Covid 19 concessions GBP114.7m GBP113.3m GBP111.8m
Topped Up Net Initial Yield 5.38% 5.42% 5.32%
Running Yield by January 2022
(1) 5.50% 5.58% 5.58%
Weighted Average Unexpired Lease
Term 19.7 years 20.2 years 20.8 years
------------------------------------ ------------- ------------- -------------
(1) Using independent external valuers' RPI estimates averaging
2.5%
Six months Six months
to to
30 June 30 June
2021 2020
Earnings and returns Unaudited Unaudited
--------------------------------------------- ------------ ------------
Adjusted EPRA EPS:
Like for like rent net of all costs and
tax, before rent concessions 7.7p 7.1p
Temporary rent concessions on a cash basis (1.6)p (2.0)p
------------ ------------
Adjusted EPRA EPS 6.1p 5.1p
IFRS EPS:
Like for like rent net of costs and tax,
before revaluations and rent concessions 8.9p 8.7p
IFRS impact of temporary rent concessions,
spread over lease terms (0.3)p (0.3)p
------------ ------------
IFRS rent net of costs and tax, before
revaluations 8.6p 8.4p
Property revaluations 11.0p (43.9)p
IFRS EPS 19.6p (35.5)p
------------ ------------
Total Accounting Return 5.0% (8.1)%
Total Shareholder Return 29.1% (35.9)%
Dividends per share 7.3p 8.4p
Latest dividend per share annualised:
% of EPRA NTA (1) 4.0% 3.8%
Latest dividend per share annualised:
% of 30 June share price (1) 4.2% 5.4%
Total Accounting Return over 30 June 2014
EPRA NTA 15.0% p.a.
Total Shareholder Return over issue price
at 2014 listing 15.6% p.a.
---------------------------------------------- ------------ ------------
(1) This is illustrative and does not constitute a dividend
forecast
Capitalised terms are defined in the glossary at the end of
these reports.
Martin Moore, Non-Executive Chairman of the Company,
commented:
"Following an undoubtedly turbulent 2020, we are pleased to be
able to demonstrate with these results for the six months to 30
June 2021 that the growth trajectory of the Company is recovering.
EPRA NTA per share has increased by 3.1% over the period
contributing to a 5.0% Total Accounting Return, and with a
significant share price recovery over the six months we can report
a 29.1% Total Shareholder Return. Testament to the strength of our
strategy of focussing on long term growth, in the seven years since
listing the Company has delivered a Total Shareholder Return of
15.6% p.a. which compares to the FTSE EPRA NAREIT UK Index
equivalent of 4.1% p.a.
"While we have all learned not to call an end to Covid-19
challenges too soon, rents across the entire portfolio are
contracted to return to their pre-pandemic trajectory by the start
of 2022 and we continue to believe that this Company is well
positioned to further benefit from the recovery; our Management
Team remains very ambitious and fully aligned to exploit our
exceptional portfolio and strong cash position to drive
performance, which altogether gives us strong cause for
optimism."
For further information on the Company, please contact:
Secure Income REIT Plc +44 20 7647 7647
Nick Leslau enquiries@SecureIncomeREIT.co.uk
Mike Brown
Sandy Gumm
Stifel Nicolaus Europe Limited +44 20 7710 7600
(Nominated Adviser) StifelSecureIncomeREIT@stifel.com
Mark Young
Stewart Wallace
FTI Consulting LLP +44 20 3727 1000
Dido Laurimore SecureIncomeREIT@fticonsulting.com
Claire Turvey
Eve Kirmatzis
Interim Results Presentation
Secure Income REIT will be holding a presentation for analysts
and investors today at 10.30am. If you would like to attend, please
contact FTI Consulting on 020 3727 1000, or email
SecureIncomeREIT@fticonsulting.com.
The presentation will be on the Company's website
www.SecureIncomeREIT.co.uk and a conference call facility will be
available. The dial-in details are:
Participants (Local, United
Kingdom) : +44 (0)330 336 9434
Confirmation code : 6215315
Webcast link :
https://webcasting.brrmedia.co.uk/broadcast/61139ca20ddc2b060ef529e2
About Secure Income REIT Plc
Secure Income REIT Plc ("SIR") is a diversified UK REIT,
investing in institutional real estate assets that provide long
term rental income with upwards only inflation protection.
The Company's robust balance sheet, strong liquidity and
experienced Management Team enabled us to support any tenants
suffering business disruption through the pandemic, allowing the
Company to resume its own strong growth trajectory.
The Company continued to pay quarterly dividends throughout the
pandemic without interruption and, over seven years since listing,
delivered a Total Accounting Return of 15.0% p.a. and a Total
Shareholder Return of 15.6% p.a.. Over the same period, the FTSE
EPRA NAREIT UK Index delivered 4.1% p.a..
The Company has GBP2.0 billion of gross property assets, GBP1.3
billion of net assets, GBP184 million of uncommitted and unfettered
cash, structurally secure non-recourse debt, and difficult to
replicate very long leases on Key Operating Assets in defensive
sectors. The Management Team is strongly aligned with shareholders
through its 12.4% interest in the business worth GBP161 million at
the 7 September 2021 share price.
The Company is a UK REIT which floated on the AIM market of the
London Stock Exchange in June 2014.
The Company's LEI is 213800M1VI451RU17H40
Further information on Secure Income REIT is available at
www.SecureIncomeREIT.co.uk.
Forward looking statements
This document includes forward looking statements which are
subject to risks and uncertainties. You are cautioned that forward
looking statements are not guarantees of future performance and
that if risks and uncertainties materialise, or if the assumptions
underlying any of these statements prove incorrect, the actual
results of operations and financial condition of the Group may
differ materially from those made in, or suggested by, the forward
looking statements. Other than in accordance with its legal or
regulatory obligations, the Company undertakes no obligation to
review, update or confirm expectations or estimates or to release
publicly any revisions to any forward looking statements to reflect
events that occur or circumstances that arise after the date of
this document.
Chairman's Statement
Following an undoubtedly turbulent 2020, we are pleased to be
able to demonstrate with these results for the six months to 30
June 2021 that the growth trajectory of the Company is recovering.
EPRA NTA per share has increased by 3.1% over the period
contributing to a 5.0% Total Accounting Return, and with a
significant share price recovery over the six months we can report
a 29.1% Total Shareholder Return.
Our major tenants are either in the healthcare sector which was
sheltered from the economic impact of Covid-19, or are in the
leisure and hospitality sectors, where we have started to see the
benefits of supporting them through the challenges of the pandemic.
Those businesses have begun their own recovery and appear to be
gaining momentum in building their trade back to pre-pandemic
levels. While we have all learned not to call an end to Covid-19
challenges too soon, we believe that this Company is well
positioned to further benefit from the recovery in future.
Results and financial position
The Group's net asset value per share at 30 June 2021 reported
under IFRS was 388.9 pence, up 3.2% since 31 December 2020. Using
the industry standard EPRA measures for ease of comparison with
other quoted real estate businesses, the Group's EPRA NTA per share
at 30 June 2021 was 391.1 pence, up 3.1% since 31 December
2020.
Financial position IFRS Net Assets EPRA NTA
--------------------------------- ------------------ ------------------
Pence per Pence per
GBPm share GBPm share
At 1 January 2021 1,221.5 377.0 1,229.2 379.3
--------------------------------- ------- --------- ------- ---------
Investment property revaluation 36.4 11.2 44.2 13.6
Other retained earnings 26.0 8.0 17.6 5.5
Dividends paid (23.7) (7.3) (23.7) (7.3)
--------------------------------- ------- --------- ------- ---------
38.7 11.9 38.1 11.8
At 30 June 2021 1,260.2 388.9 1,267.3 391.1
--------------------------------- ------- --------- ------- ---------
Total Accounting Return 62.4 19.2 61. 8 19.1
--------------------------------- ------- --------- ------- ---------
Total Accounting Return % 5.1 % 5.0 %
--------------------------------- ------- --------- ------- ---------
A 1.9% increase in rents up to the end of July, captured in the
30 June 2021 valuations, has resulted in a return to the positive
momentum in Total Accounting Return reported in pre-pandemic
reporting periods with the independent portfolio valuation
increasing by 2.0% in the six months to 30 June.
Earnings for the six months to
30 June IFRS EPS Adjusted EPRA EPS
-------------------------------------------- ---------------------- ----------------------
2020 2021 2020
2021 Pence Pence per Pence per Pence per
per share share share share
Like for like earnings before revaluations
and before rent concessions and
dividends 8.9 8.7 7.7 7.1
Temporary rent concessions (0.3) (0.3) (1.6) (2.0)
-------------------------------------------- ---------- ---------- ---------- ----------
Earnings before revaluations 8.6 8.4 6.1 5.1
Property revaluations net of deferred
tax 11.0 (43.9) - -
Earnings per share 19.6 (35.5) 6.1 5.1
-------------------------------------------- ---------- ---------- ---------- ----------
Since 31 December 2020, we have agreed in a small number of
cases further short term cash flow smoothing of rental payments
amounting to less than 1.5% of total portfolio rents, but there
have been no further rent concessions granted with any material
impact on the Group's reported earnings. In our 2021 earnings we
can see the positive impact from our long term inflation protected
lease structure in the increased like for like earnings under both
IFRS and Adjusted EPRA earnings measures. Rent collections
throughout the period have also remained strong.
Over two thirds of the Company's portfolio has the benefit of
annual fixed or inflation linked upwards only rent reviews and the
balance is reviewed at five yearly intervals. The reduction in the
impact of the temporary rent concessions in our Adjusted EPRA EPS
measure in comparison with the same period last year reflects our
approach to reporting on the cash impact of these concessions, with
earnings reduced by 2.0 pence per share in the first half of 2020,
where the concession period was three months, compared with 1.6
pence per share in the six months to 30 June 2021. This culminates
in a 19.6% improvement in Adjusted EPRA EPS in the period compared
to the same period last year.
We were able to deploy an element of our surplus liquidity
toward supporting the dividend through 2020. In 2021 the level of
support required is beginning to tail off as our increased earnings
and cash flows reflect the expiry of various rent concessions. We
were pleased to be able announce an increase of 8.2% in the rate of
the quarterly dividend to 3.95 pence per share in July 2021. Unless
our earnings change as a result of acquisitions, debt refinancing,
lease variations or disposals, that level of dividend is the
Board's expectation for the remaining three quarters to June
2022.
Outlook
Throughout the pandemic our hospitals, which represent some 40%
of our portfolio by value, have provided a pivotal role in the
pandemic response. Our tenant Ramsay, the GBP8.6 billion listed
group which is the largest private healthcare provider in
Australia, France and Scandinavia, supported the global Covid
response, reporting that they have treated more NHS patients than
any other UK private sector provider. With waiting lists rising to
unprecedented levels and Ramsay predominantly carrying out NHS work
even before the pandemic, our hospitals are likely to continue to
be in great demand, underpinning this excellent global tenant
covenant.
Alton Towers and Thorpe Park are two of the UK's top theme parks
and are leased to Merlin, the world's second biggest visitor
attraction operator after Disney. Both our theme parks and regional
budget hotels have been beneficiaries of the staycation effect with
Travelodge reporting revenues within 5% of 2019 levels for the four
week period including "Freedom Day" on 19 July 2021 and revenue per
available room above 2019 levels in the early weeks of August.
Whilst the general economy has also rebounded strongly, there are
obstacles in the path of a complete recovery. Labour shortages are
feeding through into supply chain interruptions, inflation is
rising and a fourth wave of infections is widely predicted in the
autumn, albeit with a predominantly vaccinated adult population and
a Government eager to avoid the reimposition of restrictions this
should temper those headwinds. These elements may hamper the speed
of recovery but we do not foresee that they will ultimately knock
it off course.
In our long lease property market the combination of low
interest rates and rising inflation creates a very supportive
environment. Yields for properties let on long inflation protected
leases are typically 7% above the gross redemption yield of long
dated index linked gilts, providing an attractive blend of income
return and inflation protection that is generating strong bidding
for these types of assets in the market. However, whilst we have
seen a revival in the trading and share prices of many leisure and
hospitality businesses and a recovery in their bond prices, the
property investment market in this sector remains subdued. We
believe that the low number of transactions is primarily due to
buyers seeking to obtain a pandemic discount whilst owners feel
little compulsion to sell unless they can receive much closer to
pre-pandemic pricing. This stand-off is generating little
comparable evidence, leaving the valuation yields for our leisure
and hospitality assets largely unchanged since the pandemic nadir
of last summer, at a time when vaccines were yet to be approved let
alone being successfully rolled out. Eventually the bid-offer
spread will narrow and whilst we can only speculate on the timing,
we strongly believe that it will be resolved in our favour and that
as trading continues to improve, our yields will start to re-rate.
In
the meantime, the rents across the entire portfolio are
contracted to return to their pre-pandemic trajectory by the start
of 2022.
We are pleased to have seen a resumption of our performance
track record with a Total Shareholder Return of over 15% per annum
since float in 2014. We are excited about the opportunity to
further drive future returns not only as valuations recover but
with a reduction in our cost of our debt. Our biggest loan of
GBP376 million, maturing in October 2022, represents over 40% of
our total debt and is our most expensive facility, carrying a
coupon of 5.7%. We have the flexibility of our considerable
uncommitted cash buffer of GBP184 million, some of which may play a
part in optimising financial terms of new loans. Our aim is to
maintain all the structural safety and covenant headroom that we
have always sought while delivering savings on the interest cost to
the benefit of shareholders through increased dividends. We also
look beyond the Merlin refinancing date to our wider asset pool and
will continue to seek opportunities to further drive shareholder
returns within a well-managed capital structure. We are also
actively seeking opportunities to deploy cash for acquisitions or
for asset management within our existing portfolio. We are,
therefore, seeking to deploy all of our surplus cash within the
next six months in opportunities that we consider will be
materially accretive to shareholder returns.
Over the course of last year our share price discount to net
assets has closed but with most of our long income peers currently
trading at a material NAV premium, we and our Management Team
remain very ambitious and fully aligned to exploit our exceptional
portfolio and strong cash position to drive performance over the
long term as our strategy is designed to deliver.
Martin Moore
Chairman
8 September 2021
Investment Adviser's Report
Prestbury Investment Partners Limited, the investment adviser to
Secure Income REIT Plc, presents its report on the operations of
the Group for the six months to 30 June 2021.
The Supplementary Information which follows the condensed
financial statements includes calculations of the various EPRA and
Adjusted EPRA performance measures referred to in this report.
Capitalised terms are explained in the Glossary at the end of the
Supplementary Information.
Tenant support provided
No rent reductions have been granted since 31 December 2020.
Largely as a consequence of the later than originally expected
relaxation of all Covid-19 restrictions, delayed from June to July
this year, we have agreed one further rent deferral since the 2020
year end on less than 1.5% of total Group rents as further
explained below.
The support measures granted in 2020 with an impact on the 2021
financial year are:
-- June 2020 and September 2020 rents due from Merlin
Entertainments Limited, amounting to GBP17.6 million at the 30 June
2021 exchange rate, were deferred to September 2021. The deferred
rent was recorded in the income statement for the year to 31
December 2020 but in order to more clearly and logically
demonstrate the impact on the Group's results in the period over
which the concession was granted, these rents were excluded from
Adjusted EPRA EPS for the 2020 financial year and will be recorded
in Adjusted EPRA EPS in the period in which they are received,
which, under the terms of the agreement made with the tenant, is
contracted to be in the second half of the 2021 financial year.
-- A CVA approved by Travelodge Hotels Limited creditors in 2020
has resulted in GBP8.8 million of rent foregone in 2021, of which
GBP4.4 million relates to the six months to 30 June 2021. Rents
return to the levels originally contracted in January 2022. As a
further result of the CVA, receipt of any rental uplifts arising in
2020 and 2021 is deferred until the rents have returned to their
contractual levels. Cash flows from a further GBP0.6 million of
rent that would otherwise have been receivable in 2021 have
therefore been deferred to January 2022, of which GBP0.2 million
relates to the six months to 30 June 2021. Consistent with the
treatment of the Merlin rent deferral, the deferred uplifts will be
recorded in Adjusted EPRA EPS in the period in which they are
received. The majority of the Travelodge rent reductions took
effect in the 2020 financial year and for the purposes of
comparison, the rent reduction in 2020 was GBP14.5 million relating
to the nine months from April to December 2020.
Further support provided in the year to date:
-- Monthly rents totalling GBP0.6 million originally due in May
and June 2021 from the tenant of the Brewery have been deferred so
they are payable in twelve monthly instalments from September 2021.
The deferred rent has been recorded in the income statement for the
period to 30 June 2021 but will be recorded in Adjusted EPRA EPS in
the period in which it is received.
The impact of these concessions on the Group's rental cash flows
and on Adjusted EPRA EPS for the six months to 30 June 2021 and the
contractually scheduled impact on the second half of the 2021
financial year is set out below.
Actual Contracted
Six months Six months Contracted
to to Year to
30 June 31 December 31 December
2021 2021 (1) 2021 (1)
GBPm GBPm GBPm
----------------------------------------- ----------- ------------ ------------
Hotels rent reduction (4.4) (4.4) (8.8)
Hotels rent deferral (0.2) (0.4) (0.6)
Brewery rent deferral (0.6) 0.2 (0.4)
Merlin rent deferral - 17.6 17.6
----------------------------------------- ----------- ------------ ------------
Impact on rental cash flow and Adjusted
EPRA EPS (5.2) 13.0 7.8
----------------------------------------- ----------- ------------ ------------
(1) This is a contractual position and does not constitute a
profit forecast
There are no concessions in place which reduce rents receivable
in 2022 or future financial years.
The accounting policy for rent concessions is explained in the
Financial Review section of this Investment Adviser's Report and
remains unchanged since the 31 December 2020 annual report.
Rent collections
Over the period to 7 July 2021, the Group reported only minimal
rent arrears in each quarterly collection cycle.
8 January
to
7 April 8 April to
2021 7 July 2021
Rent collections GBPm GBPm
Originally contracted
rents 28.3 28.7
Rent concessions:
Reduced rents (2.2) (2.2)
Deferred rents (0.1) (0.8)
Due in the period 26.0 25.7
Collected on or before
the due date (25.9) (25.4)
Rent arrears at the date
of this report 0.1 0.3
---------------------------- ---------- -------------
Collected by due date
(%) 99.9% 98.7%
---------------------------- ---------- -------------
Amounts collected by the due date in the prior year, calculated
on the same basis, were:
8 January to 7 April 83.1% }Lower collections in April to
2020 July 2020 reflect rent
8 April to 7 July 2020 89.7% }receipts delayed during Travelodge
CVA
8 July to 7 October 2020 99.9%
8 October 2020 to 7 January
2021 97.7%
There were no material impairments of receivables in the period
or the prior year.
The portfolio
The Group held 160 properties at 30 June 2021 with passing rent
before temporary concessions of GBP114.7 million, up from GBP113.3
million at 31 December 2020.
Passing
rent before
temporary
Number of Valuation concessions
properties GBPm GBPm
------------------------------------------ ----------- --------- ------------
At the start of the period 161 1,946.9 113.3
Change in valuation at constant currency - 44.3 1.7
Exchange rate movements - (5.4) (0.3)
Non-core pub disposal (1) (0.1) -
At the end of the period 160 1,985.7 114.7
------------------------------------------ ----------- --------- ------------
Portfolio valuation and rents by sector
The portfolio is valued by qualified independent external
valuers every six months. There was a 2.3% increase in valuation at
constant currency over the six month period, resulting in a net
movement of 2.0% after exchange rate movements on the German
assets.
Leisure * Healthcare Budget Hotels Total
------------- ------------- --------------- ---------------
Passing
rent before Change Change Change Change
concessions GBPm % GBPm % GBPm % GBPm %
---------------- ----- ------ ----- ------ ------ ------- ------- ------
31 Dec 2020 47.5 36.6 29.2 113.3
Change in
rent 0.7 1.6% 1.0 2.8% - - 1.7 1.5%
Exchange
rate movement (0.3) (0.7)% - - - - (0.3) (0.2)%
30 June
2021 47.9 0.9% 37.6 2.8% 29.2 - 114.7 1.3%
---------------- ----- ------ ----- ------ ------ ------- ------- ------
Leisure * Healthcare Budget Hotels Total
------------- ------------- --------------- ---------------
Change Change Change Change
Valuation GBPm % GBPm % GBPm % GBPm %
---------------- ----- ------ ----- ------ ------ ------- ------- ------
31 Dec 2020 793.0 769.1 384.8 1,946.9
Revaluation 19.4 2.4% 21.3 2.8% 3.6 0.9% 44.3 2.3%
Exchange
rate movement (5.4) (0.6)% - - - - (5.4) (0.3)%
Disposal (0.1) - - - - - (0.1) -
30 June
2021 806.9 1.8% 790.4 2.8% 388.4 0.9% 1,985.7 2.0%
---------------- ----- ------ ----- ------ ------ ------- ------- ------
* GBP6.8 million of the passing rent at 30 June 2021 and GBP
113.7 million of the valuations at that date relate to the German
Leisure properties which are denominated in Euros, translated at
the period end exchange rate of EUR1:GBP 0.86
In reaching their assessment of market values, the independent
external valuers had all details of agreed rent concessions. The
valuations therefore take into account the full effect of the
concessions agreed to date and also recognise that under the terms
of all of the concessions, rental income returns to its previously
contracted levels by January 2022. While the 30 June 2020 and 31
December 2020 valuations of the Leisure and Budget Hotels assets
were required under the RICS rules to be expressed as subject to
"material valuation uncertainty", there is no such caveat applied
to the 30 June 2021 valuations. Further details of valuations are
given in note 10 to the condensed financial statements.
Yields by sector
Leisure Healthcare ^ Budget Hotels Total
--------------- --------------- --------------- ---------------
30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2021 2020 2021 2020 2021 2020 2021 2020
---------------- ------- ------ ------- ------ ------- ------ ------- ------
Topped Up Net
Initial Yield
* 5.49% 5.54% 4.46% 4.46% 7.03% 7.10% 5.38% 5.42%
Running Yield
by
January 2022 5.67% 5.76% 4.46% 4.58% 7.24% 7.21% 5.50% 5.58%
---------------- ------- ------ ------- ------ ------- ------ ------- ------
* Topped Up Net Initial Yield ignores the temporary rent
concessions. The Leisure Topped Up Net Initial Yield increased to
5.57% and the total Topped Up Initial Yield to 5.41% by the end of
July 2021.
^ The healthcare valuations and yields take no account of any
uplift from an outstanding May 2018 open market review on the
Ramsay hospitals; the Ramsay rents account for 94% of the
healthcare rents at 30 June 2021.
the Leisure and Budget Hotels Running Yields are calculated
using the independent external valuers' estimates of RPI averaging
2.5% per annum (31 December 2020: 2.5%)
The growth in like for like passing rent before concessions was
1.3% over the period. Rent reviews were completed on 62% of
portfolio rents in the period. Very shortly after the period end,
rents on the German leisure assets increased by their fixed annual
uplift of 3.34% and the rents receivable from The Brewery on
Chiswell Street also increased from GBP3.4 million to GBP3.8
million per annum following the five yearly fixed uplift on that
property. These increases amount to a further 0.6% uplift, bringing
the total growth to 1.9% by the end of July 2021.
Portfolio total rents before temporary concessions
The Group's principal lease counterparties, analysed by
contracted rent before temporary concessions, are as follows:
30 June 31 December
2021 2020
Tenant/guarantor GBPm GBPm
----------------------------------------- --------- -------------
Merlin Entertainments Limited * 36.1 35.6
Ramsay Health Care Limited 35.4 34.4
Travelodge Hotels Limited 29.2 29.2
SMG Europe Holdings Limited & SMG 4.2 4.0
The Brewery on Chiswell Street Limited ^ 3.4 3.4
Orpea SA 2.2 2.2
Stonegate Pub Company Limited 2.2 2.2
Others 2.0 2.3
114.7 113.3
----------------------------------------- --------- -------------
* GBP6.8 million (31 December 2020: GBP7.1 million) of the
Merlin annualised rents are Euro denominated. The total Merlin
contracted rent increased to GBP36.3 million in July 2021,
following the fixed annual uplift on the German assets.
^ contracted rent increased to GBP3.8 million in July 2021
including GBP0.3 million (31 December 2020: GBP0.5 million) of
estimated variable net income for the car park at Manchester
Arena
Further information on the principal portfolio tenants and
guarantors is given within the portfolio analyses that follow.
Basis of rent reviews
The income arising on the portfolio benefits from fixed
contractual rental uplifts averaging 2.8 % per annum on 41% of
total rents. There are upwards only RPI-linked rent reviews on 58%
of the income with 1% subject to upwards only open market rent
reviews. 68% of the rent is subject to annual review and the
balance to five yearly review cycles.
31 December
30 June 2021 2020
---------------------------------- ----------------------------------- -----------
Percentage of contracted rents Reviewed Reviewed Total Total
before temporary concessions annually five yearly portfolio portfolio
---------------------------------- --------- ------------ ---------- -----------
Upwards only RPI:
Uncapped 26% 26% 52% 52%
Collared * 4% 2% 6% 6%
---------------------------------- --------- ------------ ---------- -----------
Total upwards only RPI-linked
reviews 30% 28% 58% 58%
---------------------------------- --------- ------------ ---------- -----------
Fixed uplifts:
Annual reviews 38% - 38% 38%
Five-yearly reviews ^ - 3% 3% 3%
---------------------------------- --------- ------------ ---------- -----------
Total fixed uplifts 38% 3% 41% 41%
---------------------------------- --------- ------------ ---------- -----------
Upwards only open market reviews - 1% 1% 1%
---------------------------------- --------- ------------ ---------- -----------
Total portfolio 68% 32% 100% 100%
---------------------------------- --------- ------------ ---------- -----------
* annual reviews with a 2% collar and 5% cap; five yearly
reviews with collars between 1% and 1.5% and caps between 3.5% and
4.0%
weighted average increase of 2.9% per annum
^ weighted average increase of 2.5% per annum
Change in RPI calculation methodology from 2030
In November 2020, the UK Government and UK Statistics Authority
announced changes to its calculation of RPI to align it with the
Consumer Prices Index ("CPIH") from February 2030. CPIH has been on
average 0.8 percentage points lower than RPI over the past ten
years. The exact impact on the Group will depend on precisely how
the UK Statistics Agency implements the change because that will
have a bearing on how any change interacts with the specific terms
of the leases. On a downside basis, if CPIH continues to run below
RPI the rental uplifts from 2030 onwards would be lower than they
would otherwise have been. However, depending on how the change is
implemented, lease provisions may provide protection resulting in
there being no change in some or all cases. In the event that
rental uplifts do change from 2030, any valuation impact in such
circumstances is expected to be insignificant as the market tends
not to differentiate materially between RPI and CPIH lease
structures, with the other property characteristics carrying
greater weight in establishing pricing.
Lease lengths
The leases on the Group's portfolio are very long, with a
Weighted Average Unexpired Lease Term of 19.7 years from 30 June
2021 without tenant break, which is significantly longer than the
vast majority of the other major UK REITs (defined as those with a
market capitalisation in excess of GBP1 billion).
Leisure Healthcare Budget Hotels Total
--------------- --------------- --------------- ---------------
30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec
2021 2020 2021 2020 2021 2020 2021 2020
------------------ ------- ------ ------- ------ ------- ------ ------- ------
Weighted Average
Unexpired Lease
Term (years) 21.7 22.1 16.3 16.8 20.9 21.4 19.7 20.2
------------------ ------- ------ ------- ------ ------- ------ ------- ------
98% of contractual passing rents have an unexpired term without
break of more than 15.5 years.
No material vacancies or landlord costs
The portfolio is fully let, other than a small restaurant unit
at Manchester Arena. All occupational leases are on full repairing
and insuring ("FRI") terms, meaning that property running costs are
low and there is no material capital expenditure requirement. There
is one small income stream that arises from an operating agreement
rather than an FRI lease, which currently accounts for a negligible
percentage of the Group's income.
Leisure assets ( 41 % of portfolio value)
30 June 31 December
2021 2020
Contracted rents before temporary rent concessions GBPm GBPm
--------------------------------------------------- --------- -------------
UK assets 41.1 40.4
German assets (at constant Euro exchange rate) 6.8 6.8
47.9 47.2
--------------------------------------------------- --------- -------------
The Company's leisure assets are:
-- four well established, large scale visitor attractions with
accommodation operated by Merlin Entertainments Limited;
-- Manchester Arena, the UK's largest indoor arena by capacity;
-- The Brewery, one of London's largest catered events venues,
on Chiswell Street in the City of London; and
-- a portfolio of 17 freehold high street pubs located in England and Scotland.
Merlin attractions and hotels
The Merlin assets include two of the UK's top three resort theme
parks by visitor numbers, Alton Towers and Thorpe Park, as well as
Warwick Castle, including all of the on-site accommodation at the
three attractions. The German assets operated by Merlin are the
Heide Park resort theme park and hotel in Soltau, Saxony, which is
the largest in Northern Germany. These assets are all held freehold
and are let to subsidiaries of Merlin Entertainments Limited, which
owns all of Merlin's operating businesses worldwide and which is
the guarantor of all lease obligations for these assets. Measured
by the number of visitors, Merlin is Europe's largest and the
world's second largest operator of leisure attractions, second only
to Disney.
Merlin was taken private in 2019 at a price representing an
enterprise value of some GBP6 billion. It is owned by a consortium
of substantial, established, long term investors: Kirkbi, the owner
of the Lego business which has been invested in Merlin since 2005
and which owns 47.5% of Merlin, together with Blackstone Core
Equity, a long term fund comprising part of Blackstone's latest
reported assets under management of c. GBP495 billion, Canada
Pension Plan Investment Board, one of the world's largest pension
fund investors with latest reported assets under management of over
GBP300 billion and the Wellcome Trust which invested in a 10%
interest in 2020 and which has assets under management of c. GBP29
billion. During the pandemic, Merlin was able to access capital
from public bond markets as part of their liquidity management
strategies. The quoted pricing for Merlin's publicly traded 5.75%
bonds maturing in 2026, which have been in issue since before the
onset of the pandemic, has recovered to within 95% of the pre
pandemic price (taking the quoted price at 1 January 2020) and
trading above par at a yield to maturity on 3 September 2021 of
4.9%.
Total contracted rents receivable from Merlin were GBP36.1
million per annum at 30 June 2021 and increased to GBP36.3 million
per annum in July 2021 following the fixed annual rental increase
on the German assets. This is an increase of 3.0% over GBP35.3
million at 31 December 2020 (on a constant currency basis). The
weighted average term to expiry of the Merlin leases is 21.0 years
without break from 30 June 2021 and the tenants have two successive
rights to renew for 35 years at the end of each term. There are
upwards only uncapped RPI-linked rent reviews on the UK properties
every June throughout the term, which in the six months to 30 June
2021 resulted in a rental increase of 2.9%. The German properties
are subject to fixed annual increases of 3.34% every July
throughout the term. The leases are on full repairing and insuring
terms.
Manchester Arena and ancillary assets
Manchester Arena is a long leasehold strategic site of eight
acres which is located on top of Manchester Victoria Railway and
Metrolink station. It comprises a 21,000 seat arena, the UK's
largest indoor arena by capacity, some additional 160,000 sq ft of
office and leisure space, a multi-storey car park with
approximately 1,000 spaces, and other income sources.
The Arena is let to SMG and SMG Europe Holdings Limited, part of
ASM Global, with 24.0 years unexpired without break from 30 June
2021. The annual rent is GBP4.1 million (before head rent) and is
reviewed annually every June in line with RPI, collared between 2%
and 5%, which in 2021 resulted in a rental increase of 3.3%.
ASM Global was created by a merger of AEG Facilities and SMG in
October 2019 and is the world's largest venue management company,
operating over 300 venues in 21 countries and with pro forma
annualised 2019 revenues of $500 million estimated at the time of
the merger. The Arena was closed throughout the pandemic period but
it was able to reopen in August 2021 and the current expectation is
that it is likely to be fully operational from September 2021.
Despite not trading as a result of the pandemic restrictions, all
Arena rents have been received when due, reflecting the strength of
this large and well capitalised global operator as tenant. The
office and ancillary leisure space at Manchester Arena is let to
tenants including Serco, Unison, JCDecaux and go-karting operator
TeamSport. The leases on the Manchester site as a whole have a
weighted average term to expiry of 17.3 years from 30 June 2021 and
produce net passing rent of GBP5.6 million per annum at that
date.
The Brewery on Chiswell Street
The Brewery is a predominantly freehold investment let to an
established specialist venue operator on a full repairing and
insuring lease. The largest catered event space in the City of
London, it is located within five minutes' walk of the new
Crossrail Station at Liverpool Street. As with Manchester Arena,
the Brewery has been closed throughout the pandemic period but has
been permitted to reopen from July 2021. It is now staging events
again and is expected to be fully operational from September
2021.
The lease term to expiry is 35.0 years without break from 30
June 2021 and the lease provides for five-yearly fixed uplifts of
2.5% per annum compounded. The passing rent was GBP3.4 million per
annum as at 30 June 2021 and increased to GBP3.8 million in July
2021.
Pubs portfolio
At 30 June 2021 the portfolio of 17 high street pubs produced
passing rent of GBP2.2 million per annum and the leases have an
average term to expiry of 24.0 years without break. The pubs had
all reopened for indoor trading , subject to Covid restrictions, by
May 2021 and with final social distancing restrictions lifted in
July 2021. During the period, one pub with negligible rent was sold
with vacant possession for GBP150,000, slightly ahead of its 31
December 2020 book value.
16 of the pubs are let on individual leases either to, or
guaranteed by, Stonegate Pub Company Limited. Stonegate acquired
the Ei Group for GBP1.27 billion in March 2020, creating the
largest pub company in the UK with over 4,500 pubs. Stonegate was
able to access public debt markets during the pandemic period in
support of the group's liquidity needs. Stonegate's Sterling bonds
maturing in 2025, issued in July 2020, were trading above par at a
yield to maturity of 6.9% at close on 3 September 2021. The lease
of the remaining pub in Palmers Green, London , which was assigned
to another operator in the period, represents 1.5% of the pub rents
and a negligible proportion of total Group rents.
Pub rents are subject to five-yearly RPI-linked increases
collared between 1% and 4% per annum compounded. The next review
falls in February 2025.
Healthcare assets ( 39% of portfolio value)
30 June 31 December
2021 2020
Contracted rents GBPm GBPm
---------------------------- --------- -------------
Ramsay hospitals 35.4 34.4
London psychiatric hospital 2.2 2.2
37.6 36.6
---------------------------- --------- -------------
The Group's healthcare assets, 11 freehold private acute
hospitals and a central London freehold private psychiatric
hospital, have continued to trade throughout the pandemic with no
rent concessions required. The private hospitals are located
throughout England and are let to a subsidiary of Ramsay Health
Care Limited, the ASX50 listed Australian healthcare company. The
psychiatric hospital, the only private facility of its kind in
Central London, is let to a subsidiary of Orpea SA, a very
substantial European operator of retirement homes, rehabilitation
clinics and psychiatric care.
The Ramsay hospitals are let on full repairing and insuring
leases with a term to expiry at 30 June 2021 of 15.9 years without
break. The rents increase in May each year by a fixed minimum of
2.75% per annum throughout the lease term. Following the May 2021
fixed uplifts, the rents on the Ramsay portfolio increased from
GBP34.4 million to GBP35.4 million per annum. In addition, there is
an upwards only open market rent review within each lease as at 3
May 2018 and then in May 2022 and every five years thereafter. The
May 2018 open market review remains outstanding. It is subject to a
formal arbitration process which was put on hold by agreement
between the parties during 2020 to allow Ramsay management to fully
focus on its pandemic response and because the arbitrator would
have been unable to inspect the hospitals during the lockdowns.
Given the uncertainty over the time taken to resolve the
arbitration and the nature of that process, there is currently no
indication of the likely review outcome and t hese financial
statements take no account of any potential increase in rental
income that may arise from it.
The leases on the Ramsay hospitals are all guaranteed by Ramsay
Health Care Limited, one of the top five private hospital operators
in the world and the largest operator of private hospitals in
Australia, France and Scandinavia. Ramsay is a constituent of the
ASX 50 index of Australia's largest companies, with a market
capitalisation at 7 September 2021 (and using the exchange rate on
that date) of GBP8.6 billion (GBP8.1 billion at 9 March 2021).
The Ramsay hospitals continued to trade without pause throughout
the pandemic and, through their contracts with NHS England,
provided guaranteed capacity to the NHS to tackle the Covid crisis
at cost (including the cost of their rents) for approximately a
year from late March 2020. Ramsay reported in February 2021 that
they had treated more than 500,000 NHS patients over this period,
more than any other provider in the independent sector. In their
results for the year to 30 June 2021 Ramsay announced 11.9%
earnings growth for their worldwide group and 9.9% growth in
EBITDAR in the UK segment. The Ramsay balance sheet is strong with
low leverage and significant cash flows supporting material capital
expenditure over the year in the existing estate and also earmarked
for further investment in future. Ramsay noted that private
admissions returned strongly after lockdown restrictions eased in
April, demonstrating the strength of their business model which
allows them to mix private treatment with NHS cases. Ramsay's
management highlights the opportunities in the UK and elsewhere
from the backlog in demand for both public and private healthcare
services alongside the existing demographic and other growth
drivers for their business.
The London psychiatric hospital is let on a full repairing and
insuring lease with a term to expiry at 30 June 2021 of 23.1 years
without break. The rent increases in May each year by a fixed 3.0%
per annum throughout the lease term and as a result increased from
GBP2.17 million to GBP2.23 million on 3 May 2021. The lease is
guaranteed by Orpea SA, a leading European operator of retirement
homes, rehabilitation clinics and psychiatric care, listed on
Euronext Paris with a market capitalisation at 7 September 2021
(and using the exchange rate on that date) of GBP6.1 billion
(GBP5.7 billion at 9 March 2021).
Budget Hotels assets (20% of portfolio value)
30 June 31 December
2021 2020
GBPm GBPm
--------------------------------------------------- --------- -------------
Contracted rents before temporary rent concessions 29.2 29.2
--------------------------------------------------- --------- -------------
At 30 June 2021 the Group owned 123 Travelodge hotels in
England, Wales and Scotland, let to Travelodge Hotels Limited which
is the main operating company within the Travelodge group trading
in the UK, Ireland and Spain. Travelodge is the UK's second largest
budget hotel brand, with 592 hotels and over 45,100 rooms as at 30
June 2021.
As a response to liquidity issues created by the forced closure
of nearly all of their hotels, Travelodge concluded a Company
Voluntary Arrangement (CVA) in June 2020. As a consequence of the
CVA, GBP14.5 million of rent was foregone by the Group in the 2020
financial year but the extent of the rent reduction has reduced
significantly in the current financial year. The contractually
scheduled rent reduction for the 2021 financial year is GBP8.8
million, of which GBP4.4 million is attributable to the six months
to 30 June 2021. Rents are due to return to the levels originally
contracted from January 2022. Travelodge rents are currently
receivable monthly in advance as part of the concession granted and
all rent demanded under the terms of the CVA has been received when
due.
Travelodge is a major, established brand with very high levels
of brand recognition and a strong pre-pandemic five year
performance track record. In addition to the rent reductions
secured by Travelodge through their CVA, the company raised GBP40
million of equity from its shareholders and completed a GBP65
million private debt placement in December 2020 to further support
liquidity. Travelodge's publicly traded bonds which have been in
issue throughout the pandemic period are trading at within 5% of
their pre-pandemic levels at the start of 2020, with a yield to
maturity of 6.8% on 3 September 2021.
One of the attractions of investment specifically in budget
hotels rather than the wider hotel market is their relative
resilience in recessionary times, and our expectation of a stronger
recovery in this sector of the hotels market has been borne out by
industry data showing a widening outperformance by budget hotels
over the rest of the sector since UK hotels were permitted to fully
reopen in July 2021. The most recent financial statements published
by Travelodge cover the six months to 30 June 2021, which is before
the date in which the Covid-19 operating restrictions for hotels
were fully lifted. However, they also reported strong recovery in
trading since restrictions were fully lifted, as the most recent
month for which trading has been reported, the four week period in
which 19 July's "Freedom Day" fell, saw revenues return to within
5% of the same period in 2019. Trading is also improving at the
EBITDA level, with each of the three most recent weeks reported by
them seeing revenue per available room retuning to levels above
those for the same period in 2019. While uncertainties remain for
budget hotel businesses in the UK, including Travelodge, a clear
trend towards improvement is shown in their most recent public
reports.
The average term to expiry of the Travelodge leases is 20.9
years from 30 June 2021 with no break clauses. The leases are on
full repairing and insuring terms and Travelodge is also
responsible for the cost of any headlease payments and other
amounts owing to the freeholders of the 52 leasehold properties.
There are upwards only uncapped RPI-linked rent reviews every five
years throughout the term of each lease, with reviews falling due
over a staggered pattern across the portfolio. 23% of the passing
rent is subject to review in 2021, all of which falls in the second
half of the year, 38% in 2022, 10% in 2023, 5% in 2024 and 24% in
2025. Reviews arising during the CVA concession period, which runs
to January 2022, continue to be calculated and documented but are
temporarily reduced in line with the terms of the CVA and any
remaining uplifted rent becomes receivable at the end of the
concession period.
Financing
The Group's operations are financed by a combination of cash
resources and non-recourse debt finance, where the equity at risk
is limited to the net assets within six ring-fenced subgroups. Each
subgroup is self-contained, with no cross-default provisions or
cross collateralisation between the six of them. In all cases,
substantial financial covenant headroom was negotiated into loan
terms at their inception, together with appropriate remedial cure
rights where cash can be diverted to a security group in order to
maintain covenant compliance if and when necessary.
Any rent concessions agreed have been implemented with the
consent of the relevant lenders. In certain cases this included
covenant waivers during the concession period which are no longer
necessary given the significant recovery in rents payable.
The Group's total gross debt decreased by GBP6.6 million in the
period: GBP3.6 million from scheduled loan repayments and GBP3.0
million from foreign currency translation movements on the Group's
Euro denominated debt. Net debt decreased by GBP1.3 million,
including the impact of the application of GBP4.3 million to
topping up dividends paid above Adjusted EPRA EPS in the
period.
The Group's Net Loan To Value ratio decreased from 36.4% to
35.6% over the period.
Unsecured Group
Secured amounts amounts total
GBPm GBPm GBPm
-------------------- ----------------- ----------- ---------
Gross debt 921.7 - 921.7
Secured cash (25.4) - (25.4)
Free cash * (2.8) (186.3) (189.1)
-------------------- ----------------- ----------- ---------
Net debt 893.5 (186.3) 707.2
-------------------- ----------------- ----------- ---------
Property valuation 1,985.7
-------------------- ----------------- ----------- ---------
Net LTV 35.6%
-------------------- ----------------- ----------- ---------
* free cash within secured facilities is released to the parent
company after each quarterly interest payment date for as long as
all loan covenants are complied with, increasing the balance of
unfettered cash within the Group.
The terms of the facilities have not changed in the period.
Number of Maximum
properties annual
Principal securing interest Interest Annual cash
GBPm loan rate rate protection amortisation Maturity
----------------- --------- ----------- --------- ---------------- ------------- ----------
Merlin Leisure 375.6 * 6 5.7% Fixed GBP3.8m Oct 2022
80% fixed
Budget Hotels 2 65.4 70 3.3% 20% capped None April 2023
Arena, Brewery, 83% fixed
Pubs 60.0 19 3.2% 17% capped None June 2023
Budget Hotels 1 59.0 53 2.7% Fixed None Oct 2023
Healthcare 1 63.7 2 4.3% Fixed GBP0.3m Sept 2025
Healthcare 2 298.0 10 5.3% Fixed GBP3.2m Oct 2025
Total 921.7 160 4.9%
----------------- --------- ----------- --------- ---------------- ------------- ----------
* GBP 314.4 million of senior and mezzanine Sterling loans
secured on UK assets and EUR 71.2 million of senior and mezzanine
Euro denominated loans secured on German assets (translated at the
period end exchange rate of EUR1:GBP 0.86 ) with all loan tranches
cross-collateralised.
amortisation in each of the years ending October 2021 and
October 2022 comprises GBP3.2 million on the Sterling facility and
EUR0.6 million on the Euro facility.
The Board manages interest rate risk by either fixing or capping
rates over the term of each loan. As at 30 June 2021, 97.5 % of the
Group's borrowings were at fixed rates. The weighted average
interest rate payable in the period remained the same as in 2020 at
4.9% per annum.
There have been no defaults in any facility during the period or
since the balance sheet date. The headroom on financial covenants
at the balance sheet date remains substantial and is analysed in
the Financial Review on the following pages.
The Board has launched the detailed work on the refinancing of
the Merlin leisure facility with the objective of closing that
refinancing before the results for the year to 31 December 2021 are
released next year and ahead of the October 2022 maturity date.
While it remains too early to state with certainty what terms will
be achieved on refinancing, our ambition remains to deliver a
robust structure with good covenant protection and to deliver
earnings accretion to shareholders by way of lower interest costs
to increase dividends payable. The Board keeps under review the
prospects for a wider refinancing of the Group's assets with a view
to delivering earnings accretion where possible, alongside careful
risk management in structuring debt security and covenant
headroom.
Financial review
Key Performance Indicators
The Board monitors the following key performance indicators,
which are further commented on in this report.
Six months
Six months Year to to
to 31 Dec 30 June
30 June 2021 2020 2020
------------------------------------------- ------------- --------- ----------
Financial measures:
Total Accounting Return 5.0% (8.0)% (8.1)%
Total Shareholder Return 29.1% (27.3)% (35.9)%
Adjusted EPRA EPS 6.1p 3.5p 5.1p
Net LTV Ratio 35.6% 36.4% 35.3%
Uncommitted Cash GBP183.6m GBP192.0m GBP219.6m
Other measures:
Headroom on debt covenants before any
preventative cash cure or other remedial
action:
Valuation decline before tightest LTV
default test is triggered 32 % 32% 33%
Rent decline before tightest interest
cover default test is triggered 31 % 29% 26%
------------------------------------------- ------------- --------- ----------
Total impact of existing Rent Smoothing Adjustments and rent
concessions
From the time of its listing seven years ago, the Group has had
the benefit of a high proportion of income with fixed rental
increases over very long lease terms, therefore the requirement to
spread rents over the whole of any lease has always created a
mismatch between cash rents receivable and rental income reported
under IFRS. That mismatch was a major contributing factor to the
adoption by the company of its Adjusted EPRA earnings measure.
Adjusted EPRA earnings is designed to give a clearer calculation of
Dividend Cover, on a basis that more closely reflects the Group's
actual cash flows, than would be achieved by using EPRA earnings,
as that measure would materially overstate Dividend Cover while
cash rents are lower than rents required to be recognised in the
income statement. As explained at the start of this Investment
Adviser's Report we also adjust EPRA Earnings to reflect the cash
flow impact of any Covid-19 rent concessions, rather than spreading
them over the very long lease terms as required by IFRS reporting
standards. This measure is further explained under the "Adjusted
EPRA Earnings Per Share" heading later in this report and in the
Supplementary Information which follows the condensed financial
statements.
The overall composition of Adjusted EPRA earnings is explained
later in this report. The impact of the Rent Smoothing Adjustments
and the rent concessions on Adjusted EPRA Earnings is as
follows:
Six months to 30 June Six months to 30 June
2021 2020
------------------------ ------------------------
Pence per Pence per
GBPm share GBPm share
---------------------------------- --------- ------------- --------- -------------
EPRA earnings 27.8 8.6 26.9 8.3
Rent Smoothing Adjustments:
on pre-concession rental
income (4.0) (1.2) (4.6) (1.4)
from Travelodge rent reductions (3.6) (1.1) (4.6) (1.4)
from Stonegate rent free
period - - (0.6) (0.2)
Rent deferrals (0.8) (0.2) (0.6) (0.2)
Adjusted EPRA earnings 19.4 6.1 16.5 5.1
---------------------------------- --------- ------------- --------- -------------
Dividend policy
The Company's dividend policy established at the time of listing
was to distribute Adjusted EPRA earnings by way of a fully covered
cash dividend, paid quarterly. This enabled it to distribute
increasing dividends in line with the geared increases in net
rental income, driven by the combination of annual fixed and RPI
rental uplifts together with largely fixed debt costs and stable
and predictable administrative expenses.
The dividend policy was varied in August 2019 to reflect the
impact of the sale of a portfolio of eight Ramsay hospitals, which
reduced Adjusted EPRA EPS and significantly increased the surplus
cash balance. This resulted in a decision to use the cash surplus
in part to top up dividends to a level that would otherwise have
been payable had the hospitals not been sold until such time as the
surplus cash was invested, used for debt management or otherwise
redeployed for the benefit of shareholders.
The impact of the pandemic on the Group's rental income and on
the Board's assessment of risks and uncertainties arising from it
resulted in a further review of the dividend policy in early 2020.
With the Company's liquidity surplus directed to supporting tenants
and ensuring the robustness of the balance sheet during such
uncertain times, the Board concluded that the element of the
dividend relating to topping up income on the sold hospitals should
be discontinued. However, the Board also concluded that it would be
appropriate to continue to pay dividends at a level that recognised
that the Covid-19 rent concessions granted were temporary, and as a
result some of the surplus liquidity was used to fund the dividend
in excess of the Group's Adjusted EPRA Earnings.
Consistent with the guidance provided in the 2020 annual report,
the basis of dividend payment therefore reverted to the 'core'
dividend without the previously applicable hospitals top-up. This
equated to a quarterly dividend of 3.65 pence per share payable in
each of the last two quarters of 2020 and the first two quarters of
2021, increasing to 3.95 pence per share declared in the third
quarter of 2021.
Year to Year to Year to Year to Year to Six months
GBPm paid in the 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec to 30 June
period 2016 2017 2018 2019 2020 2021
------------------- -------- -------- -------- -------- -------- -----------
Core dividend GBP12.0m GBP16.1m GBP41.4m GBP49.0m GBP46.4m GBP23.7m
Hospitals top-up
dividend - - - GBP3.5m GBP4.4m -
Total dividend
paid GBP12.0m GBP16.1m GBP41.4m GBP52.5m GBP50.8m GBP23.7m
------------------- -------- -------- -------- -------- -------- -----------
Pence per share
paid
Core dividend 5.9p 13.6p 13.9p 15.2p 14.4p 7.3p
Hospitals top-up
dividend - - - 1.1p 1.3p -
Total dividend
paid 5.9p 13.6p 13.9p 16.3p 15.7p 7.3p
------------------- -------- -------- -------- -------- -------- -----------
The dividend for the third quarter of 2021 was declared on 22
July 2021 at 3.95p per share, an increase of 8.2% over the rate
payable for the prior quarter. While the actual earnings outturn
may vary from expectations if there are any acquisitions,
disposals, debt refinancing or lease variations, the availability
of substantial surplus cash and the near term contracted resumption
of rents to their pre pandemic trajectory means that the Board's
current expectation is that dividends will continue to be paid at
this level for the fourth quarter of 2021 and the first two
quarters of 2022.
While the UK's vaccination programme and the reopening of most
of the economy has resulted in an easing of the risk environment,
uncertainty arising from the pandemic remains elevated. For as long
as it does, and in the event of any other material unexpected
events arising, the dividend policy remains under review. The
importance of the dividend to many investors is acknowledged and is
carefully considered in any evaluation of the appropriateness of
declaring a dividend in the context of the conditions prevailing at
that time and in setting dividend policy.
Key performance indicator - Total Accounting Return
In measuring progress towards the Board's objective to deliver
attractive and sustainable shareholder returns, both Total
Accounting Return (the movement in EPRA NTA per share plus
dividends) and Total Shareholder Return (the share price movement
plus dividends) are monitored. The principal focus for the Board is
on Total Accounting Return as the Total Shareholder Return, while
important, is also subject to wider market fluctuations not
necessarily related to the Group itself.
Six months to 30 June Six months to 30 June
2021 2020
------------------------ ------------------------
Pence per Pence per
Movements in Net Asset Value GBPm share GBPm share
------------------------------------- ---------- ------------ ---------- ------------
NAV at the start of the period 1,221.5 377.0 1,384.5 428.8
Investment property revaluation* 36.4 11.2 (142.0) (43.9)
Rental income * less administrative
expenses, finance costs and
tax 27.3 8.4 27.1 8.4
Dividends paid (23.7) (7.3) (27.2) (8.4)
Currency translation movements
and derivative revaluation (1.3) (0.4) 1.7 0.5
Dilution from shares issued
in settlement of previous
year's incentive fee - - - (1.5)
NAV at the end of the period 1,260.2 388.9 1,244.1 383.9
------------------------------------- ---------- ------------ ---------- ------------
Change in NAV 38.7 11.9 (140.4) (44.9)
Dividends paid 23.7 7.3 27.2 8.4
------------------------------------- ---------- ------------ ---------- ------------
IFRS Total Accounting Return 62.4 19.2 (113.2) (36.5)
------------------------------------- ---------- ------------ ---------- ------------
IFRS Total Accounting Return:
percentage 5.1% (8.5)%
------------------------------------- ---------- ------------ ---------- ------------
* including GBP7.6 million or 2.3 pence (2020: GBP9.8 million or
3.0 pence) of Rent Smoothing Adjustments
The industry standard EPRA NTA measure takes IFRS net asset
value and excludes items that are considered to have no relevance
to the assessment of long term performance. Consistent with the
EPRA Guidance, which requires an assessment of the likelihood of
investment properties being sold, the Group's reported IFRS NAV is
adjusted to exclude 50% of the deferred tax on investment property
revaluations (in this case relating to the German assets) and all
of the fair value movements on derivatives. EPRA NTA and EPRA NTA
per share are reconciled to net asset value measured in accordance
with IFRS in note 19 to the condensed financial statements.
Six months to 30 June Six months to 30 June
2021 2020
----------------------- -----------------------
Pence per Pence per
Movements in EPRA NTA GBPm share GBPm share
------------------------------------ --------- ------------ ------- --------------
EPRA NTA at the start of the
period 1,229.2 379.3 1,391.3 429.4
Investment property revaluation* 44.2 13.6 (132.1) (40.8)
Rental income* less administrative
expenses, finance costs and
current tax 19.9 6.1 17.1 5.3
Dividends paid (23.7) (7.3) (27.2) (8.4)
Currency translation movements (2.3) (0.6) 2.9 0.9
EPRA NTA at the end of the
period 1,267.3 391.1 1,252.0 386.4
------------------------------------ --------- ------------ ------- --------------
Change in EPRA NTA 38.1 11.8 (139.3) (43.0)
Dividends paid 23.7 7.3 27.2 8.4
------------------------------------ --------- ------------ ------- --------------
EPRA NTA Total Accounting
Return 61.8 19.1 (112.1) (34.6)
------------------------------------ --------- ------------ ------- --------------
EPRA NTA Total Accounting
Return: percentage 5.0% (8.1)%
------------------------------------ --------- ------------ ------- --------------
* adjusted by GBP7.6 million or 2.3 pence per share (2020:
GBP9.8 million or 3.0 pence per share) of Rent Smoothing
Adjustments
The analysis of the investment property revaluation in the
period is presented in the Portfolio section of this report.
Six months Six months
to to
30 June 2021 30 June 2020
-------------- --------------
Pence per Pence per
Total Shareholder Return share share
----------------------------- -------------- --------------
Share price at the end of
the period 380.0 270.0
Share price at the start of
the period (300.0) (434.0)
Increase / (decrease) 80.0 (164.0)
Dividends paid 7.3 8.4
------------------------------- -------------- --------------
Total Shareholder Return 87.3 (155.6)
------------------------------- -------------- --------------
Total Shareholder Return:
percentage 29.1% (35.9)%
------------------------------- -------------- --------------
Key performance indicator - Adjusted EPRA earnings
The calculation of basic EPS under IFRS, as reported in the
condensed financial statements, is shown below.
Six months to 30 June Six months to 30 June
2021 2020
----------------------- -----------------------
Basic and diluted EPS (IFRS Pence per Pence per
basis) GBPm share GBPm share
Rental income net of property
outgoings 60.2 18.6 59.8 18.5
Net finance costs (24.6) (7.6) (24.7) (7.6)
Administrative expenses (7.5) (2.3) (8.1) (2.5)
Tax charge (0.2) (0.1) (0.1) -
---------------------------------- ------- -------------- ------- --------------
Earnings before revaluations 27.9 8.6 26.9 8.4
Investment property revaluations
net of tax 35.7 11.0 (141.9) (43.9)
Basic and diluted earnings 63.6 19.6 (115.0) (35.5)
---------------------------------- ------- -------------- ------- --------------
IFRS earnings include unrealised property revaluation movements,
gains and losses on any property disposals and certain other
elements such as unrealised valuation movements in interest rate
derivatives, which are considered to distort an assessment of
underlying long term performance of real estate companies and which
are therefore required to be excluded from EPRA earnings. The
calculation of EPRA earnings and EPRA Earnings Per Share is
presented in note 9 to the condensed financial statements.
There are certain items within EPRA earnings which create a
material disconnect between those earnings and the Group's funds
from operations available for the payment of dividends: principally
the Rent Smoothing Adjustments, including those arising as a result
of the Covid-19 related rent concessions, and incentive fees which
are payable in shares. A further measure, Adjusted EPRA Earnings,
is therefore presented, both for comparison of the performance of
the Group from year to year and with its peer group, and to avoid
distortions in the per share figures which in turn would result in
unreliable measures of Dividend Cover.
Adjusted EPRA EPS is derived from EPRA EPS by:
-- removing the Rent Smoothing Adjustments, including those
arising from Covid-related rent concessions, from rental income to
include rents on a basis that is much closer to cash rents
receivable;
-- excluding the charge for any incentive fee, on the basis that
it is a non-cash payment and considered to be linked to revaluation
movements, and therefore best treated consistently with
revaluations which are excluded from EPRA EPS (last paid in respect
of the year to 31 December 2019);
-- excluding any significant non-recurring costs or income
(there have been no such adjustments since 2016); and
-- calculating the weighted average number of shares to reflect
the actual dates on which shares were issued.
Six months to 30 June Six months to 30 June
2021 2020
----------------------- -----------------------
Pence per Pence per
GBPm share GBPm share
--------------------------------------- --------- ------------ --------- ------------
Rental income net of property
outgoings 59.3 18.4 59.0 18.2
Net finance costs (23.8) (7.4) (23.9) (7.4)
Administrative expenses (7.5) (2.3) (8.1) (2.5)
Tax charge (0.2) (0.1) (0.1) -
EPRA earnings 27.8 8.6 26.9 8.3
Rent Smoothing Adjustments:
Before any Covid-related
rent concessions (4.0) (1.2) (4.6) (1.4)
Impact of Covid-related concessions:
difference between IFRS and
Adjusted EPRA EPS smoothing
methodology (3.6) (1.1) (5.2) (1.6)
R ent deferrals (0.8) (0.2) (0.6) (0.2)
Adjusted EPRA earnings 19.4 6.1 16.5 5.1
--------------------------------------- --------- ------------ --------- ------------
Adjusted EPRA EPS is reconciled to basic EPS in note 9 to the
condensed financial statements. The table below shows the analysis
of the Adjusted EPRA earnings in the period in order to demonstrate
where the adjusting items take effect.
Six months to 30 June Six months to 30 June
2021 2020
----------------------- -----------------------
Pence per Pence per
GBPm share GBPm share
-------------------------------- ------- -------------- ------- --------------
Like for like earnings:
Rental income net of outgoings
before concessions 56.1 17.5 55.2 17.0
Net finance costs (23.8) (7.4) (23.9) (7.4)
Administrative expenses (7.5) (2.3) (8.1) (2.5)
Tax charge (0.2) (0.1) (0.1) -
-------------------------------- ------- -------------- ------- --------------
Like for like before rent
concessions 24.6 7.7 23.1 7.1
Rent concessions (5.2) (1.6) (6.6) (2.0)
-------------------------------- ------- -------------- ------- --------------
Adjusted EPRA earnings 19.4 6.1 16.5 5.1
-------------------------------- ------- -------------- ------- --------------
An analysis of the Group's rental income is included in the
portfolio review earlier in this report and the other components of
earnings are analysed below.
Adjusted EPRA earnings per share - property outgoings
Six months to 30 June Six months to 30 June
2021 2020
----------------------- -----------------------
Pence per Pence per
Property outgoings GBPm share GBPm share
-------------------------------------- ------ --------------- ------ ---------------
Irrecoverable property costs 0.2 0.1 0.1 -
Head rents on leasehold properties 0.1 - 0.3 0.1
Other net property outgoings - - 0.2 -
Costs of negotiating and documenting
rent concessions - - 0.5 0.2
Property outgoings in the
IFRS income statement and
EPRA earnings 0.3 0.1 1.1 0.3
Financing element of head
rent costs reclassified from
finance costs and investment
property revaluations 0.9 0.3 0.9 0.3
Recovery of head rent and
other costs reclassified from
revenue (0.8) (0.2) (0.9) (0.3)
Costs of negotiating and documenting
rent concessions reclassified
from finance costs - - 0.1 0.1
Property outgoings in Adjusted
EPRA earnings 0.4 0.2 1.2 0.4
-------------------------------------- ------ --------------- ------ ---------------
On an Adjusted EPRA earnings basis, various items are
reclassified within the income statement to more accurately reflect
the net cost of the Group's property outgoings. The adjusted figure
is used in the calculation of the industry standard EPRA Cost Ratio
shown in the Supplementary information. This includes the recovery
of certain head rent and other costs from the occupational
tenants.
Adjusted EPRA Earnings Per Share - administrative expenses
The Group's administrative expenses for the period are the same
under IFRS and the EPRA measures.
Six months to 30 June Six months to 30 June
2021 2020
----------------------- -----------------------
Pence per Pence per
Administrative expenses GBPm share GBPm share
------------------------------- ----- ---------------- ----- ----------------
Advisory fees 6.5 2.0 7.1 2.2
Other administrative expenses 0.8 0.2 0.7 0.2
Corporate costs 0.2 0.1 0.3 0.1
------------------------------- ----- ---------------- ----- ----------------
Total administrative expenses 7.5 2.3 8.1 2.5
------------------------------- ----- ---------------- ----- ----------------
Because VAT cannot be applied to the rents on the Healthcare
assets, there is an element of irrecoverable VAT incurred on the
Group's running costs which is included within each line item in
the table above. The proportion of disallowed VAT on administrative
expenses averaged 19% during the period (six months to 30 June
2020: 21%).
As an externally managed business, the majority of the Group's
overheads are covered by the advisory fees paid to the Investment
Adviser, which meets office running costs, administrative expenses
and remuneration for the whole management and support team out of
those fees. The advisory fee for the period amounted to GBP6.0
million plus irrecoverable VAT of GBP0.5 million (six months to 30
June 2020: GBP6.7 million plus irrecoverable VAT of GBP0.4
million).
The basis of calculating the advisory fees is explained in note
20 to the condensed financial statements. In summary, the fees are
calculated on a reducing scale based on the Group's EPRA NAV (as
defined in the EPRA recommendations in place at the time of
inception of the management contract), at:
-- 1.25% per annum on EPRA NAV up to GBP500 million; plus
-- 1.0% on EPRA NAV from GBP500 million to GBP1 billion; plus
-- 0.75% on EPRA NAV from GBP1 billion to GBP1.5 billion; plus
-- 0.5% thereafter.
In this way, the Investment Adviser is directly exposed to any
reduction in the Group's EPRA NAV by way of a reduction in its fee
income.
In February 2020, the Independent Directors approved a proposal
made by the Investment Adviser to exclude the surplus cash on the
hospitals portfolio disposal in August 2019 from the EPRA NAV on
which the advisory fee is calculated. With effect from 1 April
2020, for the purposes of calculating the advisory fee, EPRA NAV
excludes the balance of that surplus cash to the extent that those
funds have not been:
-- deployed in topping up dividends or otherwise returned to shareholders;
-- invested in acquisitions; or
-- used for liability management.
The saving for the six months to 30 June 2021 as a result of
this amendment is GBP0.3 million (year to 31 December 2020: GBP0.8
million). The surplus cash realised on the disposal was GBP164.0
million and the balance of the surplus at 30 June 2021 was GBP109.9
million (31 December 2020: GBP113.9 million).
The management contract between the Company and the Investment
Adviser has a term through to December 2025 and will be subject to
its next review in the ordinary course by the Remuneration
Committee in December 2022. There are no renewal rights or payments
at the time of expiry. Any payments triggered by a change of
control of the Company are limited to four times the most recent
quarterly fee at the time any such change occurs, which is the
maximum amount payable on any form of termination of the
contract.
The other recurring administrative expenses are principally
professional fees, including the costs of independent external
property valuations, external trustee and administration costs, tax
compliance fees and the fees of the external auditor, which are
largely billed directly to subsidiary undertakings.
Corporate costs are those costs necessarily incurred as a result
of the Company being listed and comprise:
-- fees payable to the four Independent Directors amounting to
GBP0.1 million in the period ( six months to 30 June 2020: GBP0.1
million ), with the other three Directors being shareholders in the
Investment Adviser who receive no directors' fees from the Company;
and
-- other costs of being listed, such as the fees of the
nominated adviser required under the AIM Rules, registrars' fees
and AIM fees, whi ch together total GBP0.1 million (six months to
30 June 2020: GBP0.2 million) in the period.
If the Total Accounting Return to investors over a financial
year as set out in the audited accounts exceeds a compound growth
rate of 10% per annum above the 2016 basis EPRA NAV per share the
last time any incentive fee was paid, the Investment Adviser earns
an incentive fee amounting to 20% of any surplus above that
priority return to shareholders, subject to a cap of 5% of 2016
basis EPRA NAV (other than in the event of a sale of the business,
where an incentive fee would not be capped). Any such fee is
payable in shares which are not permitted to be sold, save in
certain limited circumstances, for a period of between 18 and 42
months following the end of the year for which they were
earned.
In order to make a reasonable assessment of whether or not such
a fee is likely to be payable in respect of the 2021 financial
year, the Board has estimated the EPRA NAV of the Group at 31
December 2021 on the basis of the assumptions set out in note 20 to
the condensed financial statements . On the basis of that
assessment, no fee would be payable for the 2021 financial year and
as a result no fee is accrued at 30 June 2021 (30 June 2020:
GBPnil). In order for an incentive fee to be earned in respect of
the 2021 financial year, the aggregate of the Group's EPRA NAV
growth and dividends paid in the year would need to exceed 124.4
pence per share which is estimated, based on dividends paid and
currently expected to be paid in 2021, to be equivalent to an EPRA
NTA of 489.3 pence per share at the year end.
Adjusted EPRA EPS: net finance costs
Six months to 30 June Six months to 30 June
2021 2020
Pence per Pence per
GBPm share GBPm share
Interest on secured debt facilities: 22.6 7.1 22.9 7.0
Amortisation of costs of arranging
facilities
(non-cash) 1.1 0.3 1.2 0.4
Interest charge on headlease
liabilities 0.8 0.2 0.8 0.2
Loan agency fees and other
lender costs 0.1 - 0.2 0.1
Interest income - - (0.4) (0.1)
Net finance costs for the
period
(IFRS and EPRA basis) 24.6 7.6 24.7 7.6
Reclassification of interest
charge on headlease liabilities
against revenue * (0.8) (0.2) (0.8) (0.2)
Net finance costs for the
period
(Adjusted EPRA basis) 23.8 7.4 23.9 7.4
-------------------------------------- ------ --------------- ------ ---------------
* headlease interest is reclassified against property outgoings
in Adjusted EPRA EPS to better reflect the nature of these
costs.
The nature and principal terms of the Group's loan facilities
are explained in the Financing section earlier in this report.
Adjusted EPRA EPS - tax
The Group is a UK Group REIT, so its rental operations which
make up the majority of the Group's earnings are exempt from UK
corporation tax, subject to the Group's continuing compliance with
the UK REIT rules. The Group is otherwise subject to UK corporation
tax on any net income not arising from its rental operations.
German corporation tax is payable on the Group's German rental
operations at an effective tax rate in the period of 13% (six
months to 30 June 2020: 11%), resulting in a current tax charge of
GBP0.2 million (six months to 30 June 2020: GBP0.2 million). The
balance sheet includes a deferred tax liability of GBP12.0 million
(31 December 2020: GBP11.9 million) relating to unrealised German
capital gains tax on the German properties, which would only be
crystallised on a sale of those assets. There are no plans at
present to sell these assets, so the deferred tax is not currently
expected to be crystallised.
On an IFRS basis, there is a current tax charge of GBP0.2
million (six months to 30 June 2020: GBP0.1 million) and a GBP0.7
million deferred tax charge (six months to 30 June 2020: GBP0.1
million credit), which results in a total tax charge of GBP0.9
million (six months to 30 June 2020: GBPnil). Deferred tax is
excluded from Adjusted EPRA EPS as shown in note 9 to the condensed
financial statements.
In the EPRA NTA calculation, in accordance with the EPRA
Guidance, half of the deferred tax is excluded. This is on the
basis that the Company has neither (i) decided never to sell the
German assets, as the Board manages its assets in an opportunistic
way and would sell the assets if that presented the best option for
shareholders; nor (ii) identified a consistent track record of
disposal of assets and related capital gains within the strict
criteria set out within the EPRA guidance.
Adjusted EPRA EPS - currency translation
94% by value of the Group's property assets are located in the
UK (94% at 31 December 2020) and the condensed financial statements
are therefore presented in Sterling. 3.9% (31 December 2020: 3.9%)
of the Group's EPRA NTA comprises assets and liabilities relating
to properties located in Germany, valued in and generating net
earnings in Euros. Exposure to currency fluctuations is partially
hedged through assets, liabilities, rental income and interest
costs being Euro denominated. The Group remains exposed to currency
translation differences on the net results and net assets of these
unhedged operations. Foreign currency movements are recognised in
the statement of other comprehensive income.
The German properties are valued at EUR132.5 million as at 30
June 2021 (31 December 2020: EUR128.2 million) and the Euro
denominated secured debt amounts to EUR71.2 million (31 December
2020: EUR71.8 million). The Euro weakened against Sterling over the
period by 4.6% and as a result there was a net currency translation
loss of GBP2.0 million (six months to 30 June 2020: GBP2.6 million
gain) on an IFRS basis. Half of the deferred tax liability is
excluded from EPRA NTA and as a result of this adjustment a further
currency translation loss of GBP0.3 million arises in the movement
in EPRA NTA in relation to the German operations (six months to 30
June 2020: gain of GBP0.3 million).
Key performance indicator - Net Loan To Value ratio
The Board structures the Group's debt facilities with a view to
maintaining a capital structure that will enhance shareholder
returns while withstanding a range of market conditions.
During the period, the Group's Net LTV decreased from 36.4% to
35.6%, which largely reflects the rise in property valuations in
the period.
While Net LTV is one indicator of borrowing risk, it does not
present a complete picture of risk facing the Company. The Board
considers Net LTV in conjunction with a wider assessment of
headroom on financial covenants within debt facilities and, as part
of that assessment, the security of portfolio rental income in
order to evaluate risks that the Company and the Group may be
facing.
Key performance indicator - headroom on debt covenants
The Board's management of the Group's capital structure includes
assessing the risk of any breach of covenants within secured debt
facilities and considering the extent to which these risks can be
managed. Covenant calculations are regularly monitored on various
scenarios within a realistic range of outcomes, including stress
tested and reverse stress tested scenarios. At the inception of new
loans, facilities have been structured to ring-fence the extent to
which the Group's assets are at risk, ensuring that levels of
headroom over financial covenants are appropriate. Subsequently,
the Board keeps the Group's liquidity needs under review and aims
to maintain a level of Uncommitted Cash which could be applied in
avoiding or curing debt defaults in the event that it is
needed.
When evaluating the appropriateness of the level of secured
debt, the Board has regard to the unusual nature of the Group's
income streams, specifically that all of the occupational leases
are significantly longer than conventional UK real estate leases
and that the Group's rental income can be expected to increase
annually as a result of the annual minimum fixed rental uplifts on
38% of portfolio income, with a further 3% subject to five yearly
uplifts and the additional prospect of increases from the upwards
only principally RPI-linked reviews on the rest of the portfolio.
Overall, just over two thirds of portfolio rents before any Covid
related rent concessions are subject to annual review, with the
remainder subject to five yearly reviews. This structure gives rise
to predictable improvements in interest cover across the Group in
aggregate on the basis of contractual income flows and a naturally
deleveraging debt profile on the assumption of constant valuation
yields. The Board also has regard to other factors including tenant
credit risks.
The Board reviews the headroom on all financial covenants at
least quarterly, including stress tested and reverse stress tested
scenarios. The headroom on key financial covenants at the first
test date following the balance sheet date (which in all cases fell
before the end of July 2021) is summarised below, including the
fall in valuation (and related Net Initial Yield) or the fall in
rent that would trigger a breach of the relevant covenant before
any preventative or remedial actions are taken. Defensive actions
could include utilising some of the Group's significant Uncommitted
Cash of GBP183.6 million as at 30 June 2021 and which is further
explained under the heading 'Key performance indicator -
Uncommitted Cash'.
Scenarios before any remedial
action
--------
Rent
Valuation fall before
Net Initial fall before interest
30 June Yield triggering LTV test cover test
2021 Covenant LTV test triggered triggered
---------------------------------- ------- -------- ----------------- ------------ ------------
Merlin facility
Property security at independent
valuation (GBPm) 629.2
Gross loan outstanding (GBPm) (375.6)
Other subgroup net assets
(GBPm) 10.2
-------
Ring fenced equity (GBPm) 263.8
-------
Ring fenced equity (pence
per share) 81.4
-------
LTV default test n/a none n/a n/a
Cash trap LTV test: 1% per
annum loan amortisation 60% <80% 7.2% 25%
Cash trap LTV test: full cash
sweep 60% <85% 7.6% 30%
Rental fall before interest
covered 1:1 31%
The valuation fall required to trigger the LTV cash sweeps has increased
since 31 December 2020 (from 23% to 25% for 1% amortisation and
from 27% to 30% for the full cash sweep) as a result of the valuation
increase in the period and the modest reduction in finance costs
by way of GBP1.9 million of scheduled loan amortisation. Over the
six month period to 30 June 2021, the Net Initial Yield required
to trigger 1% per annum of additional amortisation has increased
from 7.0% to 7.2%, the full cash sweep trigger point has increased
from 7.4% to 7.6%, and the headroom on the 1:1 interest cover requirement
has increased from 29% to 31%.
Scenarios before any remedial
action
--------
Rent
Valuation fall before
Net Initial fall before interest
30 June Yield triggering LTV test cover test
2021 Covenant LTV test triggered triggered
---------------------------------- ------- -------- ----------------- ------------ ------------
Healthcare facility 1
Property security at independent
valuation (GBPm) 640.2
Gross loan outstanding (GBPm) (298.0)
Other subgroup net assets
(GBPm) (0.2)
-------
Ring fenced equity (GBPm) 342.0
-------
Ring fenced equity (pence
per share) 105.5
-------
Cash trap LTV test: full cash
sweep 47% <74% 6.9% 37%
LTV test 47% <80% 7.3% 41%
Cash trap projected interest
cover: full cash sweep 196% >140% 29%
Projected interest cover test 196% >120% 39%
Headroom on the LTV tests has increased since 31 December 2020,
from 35% (at a 6.8% valuation yield) to 37% (at a 6.9% valuation
yield) for the LTV cash sweep test and from 39% (at a 7.1% valuation
yield) to 41% (at a 7.3% valuation yield) for the LTV default test.
Headroom on the interest cover test has improved from 38% to 39%
and on the cash sweep interest cover test from 27% to 29%, as a
result of a combination of the fixed 2.8% weighted average rental
increase in the period and the modest reduction in finance costs
because of GBP1.6 million of scheduled loan amortisation.
Scenarios before any remedial
action
--------
Rent
Valuation fall before
Net Initial fall before interest
30 June Yield triggering LTV test cover test
2021 Covenant LTV test triggered triggered
---------------------------------- ------- -------- ----------------- ------------ ------------
Healthcare facility 2
Property security at independent
valuation (GBPm) 150.1
Gross loan outstanding (GBPm) (63.7)
Other subgroup net assets
(GBPm) 0.2
-------
Ring fenced equity (GBPm) 86.6
-------
Ring fenced equity (pence
per share) 26.7
-------
LTV test 42% <80% 8.5% 47%
Cash trap projected debt service
cover test (full cash sweep
if triggered) 229% >150% 34%
Projected debt service cover
test 229% >125% 45%
Headroom on the LTV test has increased since 31 December 2020, from
45% (at an 8.2% valuation yield) to 47% (at an 8.5% valuation yield).
Headroom on the interest cover test has improved from 33% to 34%
for the cash sweep test and from 44% to 45% on the default test
largely from the fixed 2.75% rental increase in the period.
Scenarios before any remedial
action
--------
Rent
Valuation fall before
Net Initial fall before interest
30 June Yield triggering LTV test cover test
2021 Covenant LTV test triggered triggered
---------------------------------- ------- -------- ----------------- ------------ ------------
Budget Hotels facility 2
Property security at independent
valuation (GBPm) 198.0
Gross loan outstanding (GBPm) (65.4)
Other subgroup net assets
(GBPm) 1.4
-------
Ring fenced equity (GBPm) 134.0
-------
Ring fenced equity (pence
per share) 41.4
-------
Partial cash trap LTV test
(50% of surplus cash swept
to lender if triggered) 33% <40% 8.5% 17%
Cash trap LTV test (full cash
sweep if triggered) 33% <45% 9.6% 27%
LTV test 33% <50% 10.6% 34%
Cash trap projected interest
cover test (full cash sweep
if triggered) 721% >300% 58%
Projected interest cover test 721% >250% 65%
Budget Hotels facility 1
Property security at independent
valuation (GBPm) 190.4
Gross loan outstanding (GBPm) (59.0)
Other subgroup net assets
(GBPm) 3.2
-------
Ring fenced equity (GBPm) 134.6
-------
Ring fenced equity (pence
per share) 41.6
-------
Partial cash trap LTV test
(50% of surplus cash swept
to lender if triggered) 31% <40% 9.1% 23%
Cash trap LTV test (full cash
sweep if triggered) 31% <45% 10.2% 31%
LTV test 31% <50% 11.4% 38%
Cash trap projected interest
cover test (full cash sweep
if triggered) 967% >300% 69%
Projected interest cover test 967% >250% 74%
The two Budget Hotels facilities are ring fenced from one another
as while they have the same arranger, they each have a different
lender group. However, the comments below relate to both facilities
as they are structured in much the same way and the factors affecting
the covenants in the period were the same for each facility.
Headroom on the LTV covenants is broadly unchanged since 31 December
2020 as there have been no significant valuation movements in either
portfolio. Headroom on the income covenants has improved from 610%
to 721% and from 792% to 967% in the two facilities as the rents
receivable in 2021 are significantly higher than in 2020, which
was the period of the deepest CVA reductions, and the projected
rent now includes periods after the end of the CVA reductions in
January 2022.
Covenant waivers were granted on one of the facilities to accommodate
the rent reductions in the CVA, but these have now expired, being
no longer required following the rental increases during the period.
All covenant tests have reverted to their previous levels.
Scenarios before any remedial
action
--------
Rent
Topped Up Valuation fall before
Net Initial fall before interest
30 June Yield triggering LTV test cover test
2021 Covenant LTV test triggered triggered
---------------------------------- ------- -------- ----------------- ------------ ------------
Leisure facility: Arena, Brewery,
Pubs
Property security at independent
valuation (GBPm) 177.7
Gross loan outstanding (GBPm) (60.0)
Other subgroup net assets
(GBPm) 2.6
-------
Ring fenced equity (GBPm) 120.3
-------
Ring fenced equity (pence
per share) 37.1
-------
Partial cash trap LTV cash
(50% cash sweep) 34% <40% 7.0% 16%
Cash trap LTV test (full cash
sweep if triggered) 34% <45% 7.9% 25%
LTV test 34% <50% 8.8% 32%
Projected interest cover test 342% >150% 56%
The LTV headroom on this facility is broadly unchanged since 31
December 2020 as there has been no significant net portfolio valuation
movement. The headroom on the income test has tightened slightly
from 57% to 56% following exclusion from the income forecast at
the test date of rents from a tenant with rent arrears outstanding
at that date.
Significant headroom was built into each facility at the outset,
to act as a "shock absorber" in the event that tenant difficulty or
property investment market disruption puts pressure on those debt
covenants. In the cases of the Leisure and Budget Hotels facilities
where the financial effects of the pandemic have manifested
themselves, in the case of all but one test in one facility the
headroom over covenant levels has now increased since those
reported for 31 December 2020 as the rent concessions gradually
expire and income and valuations start to revert to their pre
pandemic levels. While the credit facilities include various cash
cure rights in the event needed to avoid covenants being breached,
no cash cures have been implemented to date.
In each case where concessions have been granted, lender consent
was required and was granted by the lenders without penalty or
cost, other than the modest costs of their legal fees. Any covenant
waivers that were required to accommodate the concessions are no
longer needed and so are no longer in effect.
Key performance indicator - Uncommitted Cash
Uncommitted Cash is cash freely available to the Group, after
allowing for any amounts payable out of free cash.
30 June 31 December
2021 2020 30 June 2020
GBPm GBPm GBPm
------------------------------------ ------- ----------- ------------
Free cash 189.1 196.6 226.4
Tax and social security (3.9) (1.7) (0.5)
Accruals, trade and other payables
and corporation tax (1.6) (2.9) (2.6)
Interest payable * - - (3.7)
Uncommitted Cash 183.6 192.0 219.6
------------------------------------- ------- ----------- ------------
* interest payable is only excluded from Uncommitted Cash to the
extent that secured cash within the specific facility is not
available to cover the liability, which was the case at 30 June
2020 as a result of the deferral of the Merlin rent immediately
prior to that date.
The ability to prevent or mitigate debt covenant breaches is an
important part of the Board's leverage strategy. Headroom
considered appropriate to the business and to each underlying
portfolio individually has been negotiated on all financial
covenants together with certain contractual cure rights, including
the ability to inject cash (subject to some limitations as to the
frequency and duration of cash cures) into ring-fenced financing
structures in the event of actual or prospective breaches of
financial covenants. The level of Uncommitted Cash retained is
assessed regularly in light of property market and wider economic
conditions and outlook together with an assessment of specific
covenant headroom levels in individual debt facilities. The Board's
assessment is that while pandemic risks have eased since the last
reporting period, uncertainty is still at higher than historic
levels therefore the retention of a significant liquidity buffer as
at 30 June 2021 continued to be appropriate.
Movements in Uncommitted Cash GBPm
------------------------------------------------ ------
At 31 December 2020 192.0
Dividend support while rent concessions unwind (4.3)
Scheduled loan amortisation (3.6)
Other (0.5)
------------------------------------------------ ------
At 30 June 2021 183.6
------------------------------------------------ ------
Cash flow
The business is structured to provide an efficient flow through
of net income to the payment of dividends. Rents are in the
ordinary course predictable, financing costs are in the main fixed
and the majority of operating costs are represented by the advisory
fees, which are transparently calculated relative to the Group's
net assets.
Rent reductions and deferrals granted in the period have reduced
the cash flow from operating activities by GBP4.4 million and
GBP0.8 million respectively (six months to 30 June 2020: GBP5.3
million of rent reductions and GBP8.9 million of rent deferrals).
No material concession costs arose in the period (six months to 30
June 2020: GBP0.5 million).
Six months to 30 June Six months to 30 June
2021 2020
----------------------- -----------------------
Pence per Pence per
GBPm share GBPm share
-------------------------------- --------- ------------ --------- ------------
Cash from operating activities 45.9 14.2 25.8 8.0
Net interest and finance costs
paid (23.6) (7.3) (23.6) (7.3)
Tax paid (0.2) (0.1) (0.3) (0.1)
-------------------------------- --------- ------------ --------- ------------
22.1 6.8 1.9 0.6
Dividends paid (23.7) (7.3) (27.2) (8.4)
-------------------------------- --------- ------------ --------- ------------
(1.6) (0.5) (25.3) (7.8)
Scheduled repayments of secured
debt (3.6) (1.1) (1.7) (0.5)
Disposal of non-core pub 0.1 - - -
Disposals of non-core budget
hotels net of debt repayment - - 1.2 0.4
Acquisition of fixed assets - - (0.2) (0.1)
Cash flow in the period (5.1) (1.6) (26.0) (8.0)
Cash at the start of the period 219.7 67.8 267.1 82.7
Currency translation movements (0.1) - - -
Dilution from incentive fee
share issue - - - (0.3)
Cash at the end of the period 214.5 66.2 241.1 74.4
-------------------------------- --------- ------------ --------- ------------
The Group's investment properties are in the vast majority of
cases let on full repairing and insuring terms, with each tenant
obliged to keep the premises in good and substantial repair and
condition, including rebuilding, reinstating, renewing or replacing
premises where necessary. Consequently, no material unrecovered
capital expenditure, property maintenance or insurance costs have
been incurred in the period and it is not currently expected that
material costs of that nature will be incurred on the portfolio as
it stands at 30 June 2021.
Nick Leslau
Chairman, Prestbury Investment Partners Limited
8 September 2021
Principal Risks and Uncertainties
The Board's responsibilities for risk management include
assessing the principal risks faced by the Group and how they may
be mitigated, including considering matters that may threaten the
performance of the Group, its business model or its viability.
The Audit Committee and the Board review the Group's risk
register at least annually and more often as necessary. Given the
elevated risks following the onset of the Covid-19 pandemic, the
risk register, which was most recently reviewed in March 2021 in
connection with the publication of the 2020 annual report, has been
reviewed again in conjunction with the approval of this interim
report.
Material changes to the Group risk register
Pandemic disruption was added to the overarching risks (which
comprised Brexit risk and Climate risk) at the first review after
the pandemic was declared, and the risk rating of each of the
principal risks was increased at that time because all are impacted
by the consequences of the pandemic and the response of governments
and public health bodies to it. This remains the case in the
current schedule of risks. While the risk appears to be easing
materially with high vaccination rates and full permission for UK
businesses to reopen from July 2021, risks and uncertainties
arising from the pandemic, while lower than six months ago, are
still elevated.
Consultation on further developments in environmental
regulations for landlords has been launched since the risk register
was last reviewed. While the consultation remains open and the
ultimate outcome is therefore uncertain, we consider that this risk
is elevated and have raised its rating. We have also elevated the
refinancing risk, not because debt market conditions have worsened
- if anything they are better than at the time of the previous
review - but because the date of the next debt maturity in October
2022 is now within some 13 months of the date of issue of this
report. The risk assessments are otherwise unchanged.
Overarching risks
There are overarching risks which the Board considers to be
relevant to most of the individual risk areas identified in the
Group risk register. These are not classified as separate risks in
their own right but as general risks affecting many of the specific
risk factors faced by the Group, which are kept under review.
i) Global economic and social disruption including pandemic risk
The Board and Management Team of the Company and those of the
Group's major tenants have operated through a number of cycles of
economic boom and bust, through varying degrees of political
stability, and have dealt with deep recessions and periods of great
disruption. However, the global reach, sudden onset and extensive
impact of the spread of Covid-19 is in a class of its own in its
scale and unpredictability. While the full force of the lockdowns
and other pandemic related restrictions has been felt by our
tenants in the Leisure and Budget Hotels sectors, this has been
mitigated from the Company's perspective through its significant
weighting in healthcare assets which account for 33% of the Group's
passing rents before Covid-related concessions and through
flexibility in the capital structure which allowed the Company to
provide support in the way of rent concessions to assist the
tenants in managing the impact of the pandemic. The Company's
Uncommitted Cash balance remains available to deploy in response to
further threats arising. While the path of the virus, of consumer
and government or regulatory responses in the face of it and of any
further economic impacts cannot be known, the experience of the
Board and Management Team members is being brought to bear on every
aspect of the risks faced by the Company as a result of the current
pandemic. The Covid-19 experience also serves to remind us that
pandemic risk is not limited to this one virus so despite the
easing of the impact of Covid-19 at the time of
this report, this risk remains one of our overarching risks.
ii) Climate risk, including the risks and costs of decarbonisation
We assess the overarching climate risk as a distinct risk from
the regulatory risks posed by specific environmental standards
applicable to the Company, dealt with separately in the risk
register. The Company is externally managed with no offices run by
it and so has no directly produced emissions to report. The general
risk of disruption from climate change is not one where the Company
can take steps to make a material impact on its own behalf.
However, in assessing the strength of the credit quality of our
tenants and of potential tenants, we take climate risk into
account. Climate risk assessments also form an integral part of the
way that we consider how any assets being assessed for acquisition
meet the criteria set out in the Company's business model and the
Board has committed to sign up to the UN Principles of Responsible
Investment to guide this process. We report on our own policies and
those of our major tenants in the ESG section of the Strategic
Review in our annual report and in the ESG Centre on the Company's
website.
iii) Brexit risk
Towards the end of 2020 a trade deal was agreed with the EU,
just prior to the end of the Brexit transition period, reducing
Brexit risk by removing the risk of a disorderly exit on World
Trade Organisation terms. As a result, Brexit risk was removed from
the overarching risk list presented in the 2020 annual report.
However, as we noted at the time, the change in trading conditions
is relatively recent and continues to evolve, therefore the Board
continues to monitor Brexit risk to ensure that the assessment
remains appropriate, particularly as it may impact on our tenants,
and it remains on our "watchlist".
The Board considers that the principal risks and uncertainties
facing the Group over the medium to long term are as follows:
Risk and change in
assessment since prior
year Impact on the Group Mitigation
------------------------------- -------------------------------- --------------------------------------
Tenant risk
During the period A default of lease 33% (31 December 2020: 32%)
and the prior year, obligations by a of passing rent before concessions
the Group derived material tenant and at the balance sheet date
its income from ten its guarantor (if is contractually backed
tenant groups, two any) would have an by large listed companies
of which have the impact on the Group's and a further 35% (31 December
benefit of guarantees revenue, earnings 2020: 35%) by global businesses
from substantial parent and cash flows and with multi billion pound
companies. The three could have an impact valuations, all with capital
largest tenant groups on debt covenant structures considered by
account for 88% of compliance. The specialised the Board to have been strong
passing rent before use of the properties and with impressive long
concessions as at may mean that, in term earnings growth and
the balance sheet the event of an unexpected (where relevant) share price
date (31 December vacancy, re-letting track records up until the
2020: 88%). takes time. start of the pandemic. The
balance of the income is
Although the Board Investment property payable by substantial businesses
considers the tenant valuations reflect also considered by the Board
and guarantor groups an independent external to be sufficiently financially
to be financially valuer's assessment strong in the context of
strong in ordinary of the future security their lease obligations.
circumstances, certain of income. A loss
tenants experienced of income would therefore The properties are Key Operating
liquidity stresses impact net asset Assets, which should have
during the pandemic value as well as the effect of enhancing
and there can be no earnings. It could rental income security.
guarantee that they also lead to a breach
will remain able to of interest cover The Board reviews the financial
comply with their or debt service cover position of the tenants
obligations throughout covenants, resulting and guarantors at least
the term of the relevant in increased interest every quarter and more often
leases. rate margins payable when relevant, based on
to lenders, restricted publicly available financial
The severe impact cash flows out of information and any other
of Covid-19 on the secured debt groups trading information which
Group's Leisure and or ultimately default may be obtained either under
Budget Hotels tenants, under secured debt the terms of the leases
which suffered an agreements. The availability or informally. The Group's
abrupt and almost of distributable key performance indicators
complete closure of reserves could also include the levels of covenant
their operations as be restricted. headroom and of Uncommitted
a result of the pandemic, Cash, both of which are
created heightened relevant to monitoring and
tenant risk in 2020. if necessary mitigating
The reopening of their this risk.
businesses over the
course of 2021 has The Board reserves unsecured
brought some easing and Uncommitted Cash outside
of risk and this trend ring-fenced debt structures
is expected to continue. which would be available
The risk remains elevated to be used to cure certain
while the pandemic covenant defaults to the
continues and there extent of the cash available.
is still the possibility
of a reintroduction
of restrictions in
the UK, and for as
long as the UK Government
moratorium on the
enforcement of rent
collection remains
in place.
------------------------------- -------------------------------- --------------------------------------
Property valuation
movements Investment properties The Group uses experienced
The Group invests make up the majority independent external valuers
in commercial property of the Group's assets, whose work is reviewed by
which is held on the so material changes suitably qualified members
balance sheet at its in their value will of the Management Team and,
fair value at each have a significant separately, the Audit Committee
balance sheet date. impact on EPRA NTA, before being considered
The Company is therefore with any effect of by the Board in the context
exposed to movements the valuation changes of the financial statements
in property valuations, on net assets magnified as a whole.
which are subjective by the impact of
and may vary as a borrowings. The Board seeks to structure
result of a number the Group's capital such
of factors, many of Falls in the value that the level of borrowing
which are outside of investment properties and the protections available
the control of the could lead to a breach to cure a covenant default
Board. These factors of financial covenants are appropriate having regard
include (but are not in secured debt facilities, to market conditions and
limited to) economic resulting in increased financial covenant levels.
conditions, specific interest margins
property sub-market payable to lenders, The Group's key performance
conditions and potentially restricted cash flows indicators include the levels
climate risk. out of secured debt of covenant headroom and
groups, restrictions Uncommitted Cash, both of
This risk increased of distributable which are relevant to monitoring
in 2020 because of reserves available and if necessary mitigating
a relative lack of for dividend payments this risk.
liquidity in the Leisure or default under
and Budget Hotels secured debt agreements. The Board reserves Uncommitted
sectors which was Cash outside ring-fenced
reflected in a 'material debt structures which would
valuation uncertainty' be available to cure certain
in the independent covenant breaches.
external valuations
of those properties
as at 30 June and
31 December 2020.
The risk has reduced
in 2021 as those valuations
are no longer subject
to material uncertainty.
------------------------------- -------------------------------- --------------------------------------
Borrowing
Certain Group companies In the event of a The Group's borrowing arrangements
have granted security breach of a debt comprise six ring-fenced
to lenders in the covenant, the Group subgroups with no cross-guarantees
form of mortgages may be required to between them and no recourse
over each of the Group's pay higher interest to other assets outside
investment properties costs or increase each secured subgroup. A
and fixed and floating debt amortisation, financial covenant issue
charges over other affecting Group earnings in one portfolio should
assets. and cash flows. If therefore be limited to
a financial covenant that portfolio, save for
The Group had the breach is the result tenant related events (such
support of its lenders of the financial as a tenant insolvency)
in agreeing those weakness of a tenant where the two healthcare
consents or waivers or a guarantor, the subgroups would both be
that were required property valuations affected by any issue relating
to accommodate the and therefore net to Ramsay and the two Budget
support provided to asset value may also Hotels facilities would
its tenants throughout be adversely affected. be affected by any issue
the pandemic and holds In certain circumstances relating to Travelodge.
a significant Uncommitted the Company's ability
Cash balance which to make cash distributions Five of the facilities have
is intended to give to shareholders may LTV default covenants (the
it the ability to be reduced. Merlin Leisure facility
cure breaches of financial has no LTV default covenant)
covenants should they Where a loan repayment and all facilities have
occur. cannot be made the interest cover or debt service
Group may be forced cover covenants. The Board
The risk has reduced to sell assets to reviews compliance with
in 2021 as covenant repay part or all all financial covenants
headroom is returning of the Group's debt. at least every quarter,
to pre-pandemic levels, It may be necessary including forward-looking
but for as long as to sell assets at tests for at least twelve
tenant risk is elevated, below book value, months, and considers whether
borrowing risk is which would adversely there is sufficient headroom
also considered to impact net assets on relevant loan covenants
be elevated. and future earnings. to withstand stress test
Early debt repayments and reverse stress test
would in most cases scenarios.
crystallise repayment
penalties, which The Board seeks to structure
would also adversely the Group's capital such
impact cash balances that gearing is appropriate
and net assets and having regard to market
reduce distributable conditions and financial
reserves. covenant levels, with appropriate
cure rights within debt
facilities.
The Board reserves Uncommitted
Cash outside ring-fenced
debt structures which would
be available to cure certain
covenant breaches.
The Group's key performance
indicators include the levels
of Net Loan to Value, covenant
headroom and Uncommitted
Cash, all of which are relevant
to monitoring and if necessary
mitigating this risk.
------------------------------- -------------------------------- --------------------------------------
Refinancing
One of the Group's Debt finance might The financing market for
debt facilities, with not be available alternative assets such
principal outstanding on acceptable terms as this leisure portfolio
of GBP375.6 million or might not be available is considered to have deepened
at 30 June 2021, is to the full extent since the current facility
due for repayment of the amounts due was entered into in 2015
in October 2022. The for repayment. An and, generally speaking,
refinancing of that inability to repay the cost of funds and market
debt will depend on the debt in full financing rates have reduced
the Group's access could mean a reduction over that time.
to financing prior in the value of shareholders'
to maturity, and on equity through a At the current independent
conditions at that forced sale of assets, portfolio valuation, there
time both in the debt a reduction in the is significant LTV headroom
market and, in order Group's balance of over loan principal and
to support valuations, Uncommitted Cash, the Group also holds, at
in the investment or could result in 30 June 2021, very significant
property market. default interest Uncommitted Cash which could
rates being applied, be applied in part repayment
This risk ranking increasing the cost of the facility.
has been raised in of debt service to
2021 as the maturity the Group. The Board has commenced
date of the existing work on the process of refinancing
loan approaches. Debt finance might this facility and has a
only be available reasonable expectation of
at a higher interest concluding those negotiations
cost than the current before the maturity date.
rate, adversely,
impacting Adjusted
EPRA EPS and reducing
distributable reserves,
or on more restrictive
terms which might
reduce free cash
flow available for
dividends.
------------------------------- -------------------------------- --------------------------------------
Environmental regulations
The Group is subject Regulations could The vast majority of the
to environmental laws be onerous to comply Group's assets are let on
and regulations relating with, or could adversely long FRI leases where the
to its properties. affect the Group's tenants are responsible
ability to sell, for compliance with statutory
Although our environmental lease, finance or requirements, including
strategy continues redevelop its property environmental laws and regulations.
to be actively developed assets. Violations As such any costs associated
, this risk ranking could result in reputational with environmental compliance
has increased, given damage and/or regulatory are borne by the tenant.
that there is currently compliance penalties. Ultimately, therefore, this
a Government consultation risk is currently a tenant
on proposed new environmental credit risk.
requirements relating
to properties. While The Board is assessing the
the allocation of potential impact that the
risk between landlords emerging regulations, currently
and tenants requires under consultation, would
greater clarity, it have. Proposals to address
is possible that the any such risks arising form
consultation could part of the ESG policy that
result in obligations has been adopted by the
on landlords. Company and which will be
further developed with input
from specialist external
advisers. We note that this
is an area of evolving regulation
and practice so the Board
keeps an active watch on
developments, including
through the ESG Committee
which has been established
for this purpose.
------------------------------- -------------------------------- --------------------------------------
Independent Review Report
Introduction
We have been engaged by the Company to review the condensed
financial statements included within this interim report for the
six months to 30 June 2021 which comprise the Group Income
Statement, the Group Statement of Other Comprehensive Income, the
Group Statement of Changes in Equity, the Group Balance Sheet, the
Group Cash Flow Statement and the related notes.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the Directors. The Directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on the Alternative
Investment Market ("AIM"). Those rules require that the interim
report be presented and prepared in a form consistent with that
which will be adopted in the Company's annual accounts having
regard to the accounting standards applicable to such annual
accounts.
As disclosed in note 2, the annual financial statements of the
Group will be prepared in accordance with UK adopted International
Accounting Standards ("UK IFRS"). The condensed financial
statements included in this interim report have been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting" as adopted by the UK.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed financial statements in the interim 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 financial statements in the
interim report for the six months to 30 June 2021 are not prepared,
in all material respects, in accordance with International
Accounting Standard 34, as adopted by the European Union, and the
rules of the London Stock Exchange for companies trading securities
on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM 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 and Registered Auditors
London, United Kingdom
8 September 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Group Income Statement
Unaudited Unaudited
Six months Audited Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
Notes GBPm GBPm GBPm
-------------------------------- ----- ----------- ------------ -----------
Revenue 3 , 4 60.5 121.7 60.9
Property outgoings 5 (0.3) (1.5) (1.1)
-------------------------------- ----- ----------- ------------ -----------
Gross profit 60.2 120.2 59.8
Administrative expenses 6 (7.5) (17.0) (8.1)
Investment property revaluation 10 36.4 (166.7) (142.0)
Operating profit / (loss) 89.1 (63.5) (90.3)
Finance income - 0.4 0.4
Finance costs 7 (24.6) (50.3) (25.0)
-------------------------------- ----- ----------- ------------ -----------
Profit / (loss) before tax 64.5 (113.4) (114.9)
Tax charge 8 (0.9) (0.3) (0.1)
-------------------------------- ----- ----------- ------------ -----------
Profit / (loss) for the period 9 63.6 (113.7) (115.0)
-------------------------------- ----- ----------- ------------ -----------
Pence per Pence per Pence per
share share share
-------------------------------- ----- ----------- ------------ -----------
Earnings per share
Basic and diluted 9 19.6 (35.1) (35.5)
-------------------------------- ----- ----------- ------------ -----------
All amounts relate to continuing activities.
Group Statement of Other Comprehensive Income
Unaudited Unaudited
Six months Audited Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
Notes GBPm GBPm GBPm
----------------------------------- ----- ----------- ------------ -----------
Profit / (loss) for the period 63.6 (113.7) (115.0)
Items that may subsequently
be reclassified to profit
or loss:
Currency translation movements (1.8) 2.1 2.5
Fair value movements in interest
rate derivatives 7 0.6 (0.6) (0.8)
Other comprehensive (loss)
/ income (1.2) 1.5 1.7
Total comprehensive income
/ (loss) 62.4 (112.2) (113.3)
----------------------------------- ----- ----------- ------------ -----------
The notes form part of this interim report.
Group Statement of Changes in Equity
Share
Share premium Other Retained Total
capital reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- --------- --------- -------
Six months to 30 June 2021 (unaudited)
At 1 January 2021 32.4 523.2 3.7 662.2 1,221.5
-------------------------------- -------- -------- --------- --------- -------
Profit for the period - - - 63.6 63.6
Other comprehensive loss - - (1.2) - (1.2)
Total comprehensive income - - (1.2) 63.6 62.4
Interim dividends of 7.3 pence
per share - - - (23.7) (23.7)
-------------------------------- -------- -------- --------- --------- -------
At 30 June 2021 32.4 523.2 2.5 702.1 1,260.2
-------------------------------- -------- -------- --------- --------- -------
Year to 31 December 2020 (audited)
At 1 January 2020 32.3 518.4 7.1 826.7 1,384.5
-------------------------------- -------- -------- --------- --------- -------
Loss for the year - - - (113.7) (113.7)
Other comprehensive income - - 1.5 - 1.5
Total comprehensive loss - - 1.5 (113.7) (112.2)
Issue of shares 0.1 4.8 (4.9) - -
Interim dividends of 15.7 pence
per share - - - (50.8) (50.8)
-------------------------------- -------- -------- --------- --------- -------
At 31 December 2020 32.4 523.2 3.7 662.2 1,221.5
-------------------------------- -------- -------- --------- --------- -------
Six months to 30 June 2020 (unaudited)
At 1 January 2020 32.3 518.4 7.1 826.7 1,384.5
-------------------------------- -------- -------- --------- --------- -------
Loss for the period - - - (115.0) (115.0)
Other comprehensive income - - 1.7 - 1.7
Total comprehensive loss - - 1.7 (115.0) (113.3)
Issue of shares 0.1 4.8 (4.9) - -
Interim dividends of 8.4 pence
per share - - - (27.1) (27.1)
-------------------------------- -------- -------- --------- --------- -------
At 30 June 2020 32.4 523.2 3.9 684.6 1,244.1
-------------------------------- -------- -------- --------- --------- -------
The notes form part of this interim report.
Group Balance Sheet
Unaudited Audited Unaudited
30 June 31 December 30 June
2021 2020 2020
Notes GBPm GBPm GBPm
------------------------------ ------ --------- ------------ ---------
Non-current assets
Investment properties 3 , 10 2,014.3 1,975.6 1, 986 .8
Headlease rent deposits 2.8 2.8 2.8
Property, plant and equipment 0.2 0.2 0.2
2,017.3 1,978.6 1,989.8
------------------------------ ------ --------- ------------ ---------
Current assets
Cash and cash equivalents 0 214.5 219.7 241.1
Trade and other receivables 12 20.0 20.0 10.0
234.5 239.7 251.1
Total assets 2,251.8 2,218.3 2,240.9
------------------------------ ------ --------- ------------ ---------
Current liabilities
Trade and other payables 13 (33.6) (32.9) (31.1)
Secured debt 14 (5.0) (5.0) (4.1)
Interest rate derivatives 15 (0.5) (0.5) (0.5)
Current tax liability (0.1) (0.1) (0.1)
------------------------------ ------ --------- ------------ ---------
(39.2) (38.5) (35.8)
------------------------------ ------ --------- ------------ ---------
Non-current liabilities
Secured debt 14 (911.2) (916.6) (919.6)
Head rent obligations under
finance leases 10 (28.6) (28.7) (28.1)
Deferred tax liability 16 (12.0) (11.9) (11.9)
Interest rate derivatives 15 (0.6) (1.1) (1.4)
(952.4) (958.3) (961.0)
Total liabilities (991.6) (996.8) (996.8)
------------------------------ ------ --------- ------------ ---------
Net assets 1,260.2 1,221.5 1,244.1
------------------------------ ------ --------- ------------ ---------
Share capital 17 32.4 32.4 32.4
Share premium reserve 18 523.2 523.2 523.2
Other reserves 18 2.5 3.7 3.9
Retained earnings 18 702.1 662.2 684.6
Total equity 1,260.2 1,221.5 1,244.1
------------------------------ ------ --------- ------------ ---------
Pence per Pence per Pence per
share share share
------------------------------ ------ --------- ------------ ---------
Basic and diluted NAV per
share 19 388.9 377.0 383.9
EPRA NTA per share 19 391.1 379.3 386.4
------------------------------ ------ --------- ------------ ---------
The notes form part of this interim report.
Group Cash Flow Statement
Unaudited Unaudited
Six months Audited Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
Notes GBPm GBPm GBPm
---------------------------------- ----- ----------- ------------ -----------
Operating activities
Profit / (loss) before tax 64.5 (113.4) (115.0)
Investment property revaluation 10 (44.3) 142.5 132.0
Finance income - (0.4) (0.4)
Finance costs 7 24.6 50.3 25.1
---------------------------------- ----- ----------- ------------ -----------
Cash flows from operating
activities before changes
in working capital 44.8 79.0 41.7
Changes in working capital:
Trade and other receivables 0.1 (18.8) (8.7)
Trade and other payables 1.0 (5.5) (7.2)
Cash generated from operations 45.9 54.7 25.8
Tax paid (0.2) (0.4) (0.3)
---------------------------------- ----- ----------- ------------ -----------
Cash flows from operating
activities 45.7 54.3 25.5
---------------------------------- ----- ----------- ------------ -----------
Investing activities
Disposal of investment properties 0.1 2.6 2.6
Interest received - 0.4 0.4
Acquisition of property,
plant and equipment - (0.2) (0.2)
Cash flows from investing
activities 0.1 2.8 2.8
---------------------------------- ----- ----------- ------------ -----------
Financing activities
Dividends paid (23.7) (50.8) (27.2)
Interest and finance costs
paid (23.6) (47.9) (24.0)
Scheduled repayments of secured
debt (3.6) (4.4) (1.7)
Repayment of secured debt
from proceeds of disposal
of investment properties - (1.5) (1.5)
Cash flows from financing
activities (50.9) (104.6) (54.4)
---------------------------------- ----- ----------- ------------ -----------
Decrease in cash and cash
equivalents (5.1) (47.5) (26.1)
Cash and cash equivalents
at the beginning of the period 219.7 267.1 267.1
Currency translation movements (0.1) 0.1 0.1
---------------------------------- ----- ----------- ------------ -----------
Cash and cash equivalents
at the end of the period 0 214.5 219.7 241.1
---------------------------------- ----- ----------- ------------ -----------
The notes form part of this interim report.
Notes to the Interim Report
1. General information about the Group
The financial information set out in this report covers the six
months to 30 June 2021, with comparative figures relating to the
year to 31 December 2020 and the six months to 30 June 2020. It
includes the results and net assets of the Company and its
subsidiaries, together referred to as the Group.
The Company is incorporated in the United Kingdom and listed on
the AIM Market of the London Stock Exchange. The address of the
registered office and principal place of business is Cavendish
House, 18 Cavendish Square, London W1G 0PJ.
Further information about the Group can be found on its website,
www.SecureIncomeREIT.co.uk. Contact details for the Company and key
advisors are included in the Company Information at the end of this
report.
2. Basis of preparation and accounting policies
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1 January 2021. There was
no impact on or change in accounting policies from the
transition.
At the time of approving the condensed financial statements, the
Directors have a reasonable expectation that the Company and Group
have adequate resources to continue in operational existence for
the foreseeable future, being a period of at least twelve months
from the date of approval of the condensed financial statements,
and therefore continue to adopt the going concern basis of
accounting. In conducting their review of the appropriateness of
the going concern basis, the Directors had regard to a range of
realistic base case and stress tested scenarios for the Group's
cash flows for the period under review and the principal risks and
uncertainties identified in their review of the Group's risk
register, together with their assessments of the prospects of
significant tenants, the headroom available on debt covenants and
the liquidity available to the Group to deal with income or
valuation debt covenant issues.
The financial information contained in this report has been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the UK. The accounting policies adopted in this report
are consistent with those applied in the Group's statutory accounts
for the year to 31 December 2020 and are expected to be
consistently applied in the financial statements for the year to 31
December 2021.
No new or revised standard as at the date of this report is
expected to be relevant to the Group for the year ending 31
December 2021 or to have a material effect the Group's financial
statements in the future.
Euro denominated results for the Group's German operations have
been converted to Sterling at an average exchange rate for the
period of EUR1:GBP0.87 (year to 31 December 2020: EUR1:GBP0.89; six
months to 30 June 2020: EUR1:GBP0.87) and period end balances
converted to Sterling at the 30 June 2021 exchange rate of
EUR1:GBP0.86 (31 December 2020: EUR1:GBP0.90; 30 June 2020:
EUR1:GBP0.91).
The condensed financial statements for the period are unaudited
and the financial information for the year to 31 December 2020
contained therein does not constitute statutory accounts for the
purposes of the Companies Act 2006. The annual report and financial
statements for 2020 have been filed at Companies House. The
Independent Auditor's report on the annual report and financial
statements for 2020 was unqualified, and did not contain a
statement under sections 498 (2) or 498 (3) of the Companies Act
2006. It included an emphasis of matter in relation to a material
valuation uncertainty over the independent valuation of certain of
the Group's investment properties as at 31 December 2020 (as
explained in note 10 to the annual report). No such material
valuation uncertainty applies to the independent valuation of any
of the Group's investment properties as at 30 June 2021.
The Group's financial performance is not subject to material
seasonal fluctuations.
The principal area of estimation uncertainty is the investment
property valuation where, as described in note 10 , the opinion of
independent external valuers has been obtained at each reporting
date using recognised valuation techniques and the principles of
IFRS 13 "Fair Value Measurement".
The principal areas of judgement are revenue recognition and the
assessment of any incentive fee likely to be payable for the
year.
-- Consistent with the prior year, the recognition of any
additional revenue in the period as a result of an outstanding May
2018 open market rent review on the Ramsay hospitals has been
considered. The review is under arbitration and the nature of the
assets mean that there is little comparative information on which
to base an assessment. The Directors consider that it is not
possible at present to make a reasonably certain estimate of any
uplift that might result, and the financial statements therefore do
not reflect any additional revenue arising as a result of this rent
review. This position has not changed from that disclosed in the
2020 financial statements.
-- The Board has assessed whether it is appropriate to make a
provision at the balance sheet date for the relevant proportion of
any incentive fee expected to be payable for the whole of the
current financial year. In making their assessment that no such
provision is required in the period, the Directors estimate the net
assets per share of the Group at the end of the financial year
using methodology consistent with that applied in prior periods. As
described in note 20 , this does not constitute a forecast but
represents an estimated illustrative case only, and is considered
to provide a reasonable basis for assessing whether an incentive
fee will be payable while recognising the limitations inherent in
any estimate of future values.
3. Operating segments
IFRS 8 "Operating Segments" requires operating segments to be
identified on a basis consistent with internal reports about
components of the Group that are reviewed by the chief operating
decision maker to make decisions about resources to be allocated
between segments and assess their performance. The Company's chief
operating decision maker is its Board.
At 30 June 2021, the Group owned 160 properties (31 December
2020 and 30 June 2020: 161), originally acquired in five separate
portfolios. Although certain information about these properties is
described on a portfolio basis within the Investment Adviser's
report or grouped by property type (Healthcare, Leisure and Budget
Hotels), when considering resource allocation and performance the
Board reviews quarterly management accounts and budgets prepared on
a basis which aggregates the performance of the portfolios and
focuses on the Group's Total Accounting Return and the other key
performance indicators, all of which are reported on a Group basis.
The Board has therefore concluded that the Group has operated in,
and was managed as, one operating segment of property investment in
both the current period and prior year.
The geographical split of revenue and applicable non-current
assets was as follows:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------- ------------ ------------- ------------
Revenue
UK 56.4 113.2 56.7
Germany 4.1 8.5 4.2
----------------------- ------------ ------------- ------------
60.5 121.7 60.9
----------------------- ------------ ------------- ------------
Investment properties
UK 1,900.6 1,860.3 1,870.3
Germany 113.7 115.3 116.5
----------------------- ------------ ------------- ------------
2,014.3 1,975.6 1,986.8
----------------------- ------------ ------------- ------------
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
Revenue including Rent Smoothing 2021 2020 2020
Adjustments GBPm GBPm GBPm
------------------------------------ ------------ ------------- ------------
Ramsay Healthcare UK Operations
Limited, guaranteed by Ramsay
Health Care Limited 18.5 37.2 18.5
Travelodge Hotels Limited 14.6 29.4 14.9
Merlin Attractions Operations
Limited, guaranteed by Merlin
Entertainments Limited 14.2 28.3 14.0
Other tenants (each less than
10% of revenue) 13.2 26.8 13.5
------------------------------------ ------------ ------------- ------------
Reported revenue (note 4 ) 60.5 121.7 60.9
------------------------------------ ------------ ------------- ------------
Revenue excluding Rent Smoothing
Adjustments
------------------------------------ ------------ ------------- ------------
Ramsay Healthcare UK Operations
Limited, guaranteed by Ramsay
Health Care Limited 17.3 34.1 17.0
Merlin Attractions Operations
Limited, guaranteed by Merlin
Entertainments Limited 14.2 14.0 13.4
Travelodge Hotels Limited 10.0 14.1 10.3
Other tenants (each less than
10% of revenue) 9.6 16.1 8.7
------------------------------------ ------------ ------------- ------------
Revenue on Adjusted EPRA Earnings
basis 51.1 78.3 49.4
------------------------------------ ------------ ------------- ------------
4. Revenue
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------------------------- ------------ ------------- ------------
Rent receivable 52.1 96.4 50.2
Rent Smoothing Adjustments:
Smoothing of original contractual
uplifts 4.0 8.9 4.7
Smoothing of Covid-19 rent concessions 3.6 14.8 5.1
Recovery of head rent and service
charge costs from occupational
tenants (note 5 ) 0.8 1.6 0.9
----------------------------------------- ------------ ------------- ------------
60.5 121.7 60.9
----------------------------------------- ------------ ------------- ------------
The Rent Smoothing Adjustments arise through the Group's
accounting policy in respect of leases, which requires the
recognition of rental income on a straight line basis over the
lease term, including rent uplifts throughout the term in certain
circumstances. Uplifts that must be smoothed over the lease term
are those for the 41% of contracted rent as at 30 June 2021 (31
December 2020: 41%; 30 June 2020: 42%) that increases by a fixed
percentage at each review date and the 6% of contracted rent as at
30 June 2021 (31 December 2020 and 30 June 2020: 6%) that is
subject to minimum RPI-linked uplifts.
The temporary rent reductions agreed to assist tenants as a
result of the Covid-19 pandemic also impact on this calculation,
with rental income being recognised in the income statement ahead
of cash flows but which, after the end of each relevant concession
period, reverse so that rental income recognised in the income
statement will be lower than cash rents received on those leases.
In addition, GBP0.8 million of rent on the Leisure and Budget
Hotels portfolio has been excluded from revenue in the period on an
Adjusted EPRA earnings because, although it had been recognised in
the income statement, it had not yet been received in cash as it
has been deferred to fall due in instalments commencing in
September 2021. In the prior year, GBP17.7 million of rent on the
Leisure portfolio was also treated in this way, as receipt of the
cash was deferred from June and September 2020 to September
2021.
Further detail on the Rent Smoothing Adjustments is provided in
note 10 and the Supplementary Information which follows the
condensed financial statements.
Revenue on an Adjusted EPRA earnings basis also excludes back
rent received in 2018 from a rent review on the healthcare
portfolio, which is being recognised in revenue over the remaining
lease term, and the amounts recovered from occupational tenants for
head rent and service charge costs, which are reclassified against
the equivalent costs in property outgoings. As a result of these
adjustments, revenue reconciles between the IFRS basis and Adjusted
EPRA Earnings basis as follows:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
---------------------------------------- ------------ ------------- ------------
IFRS revenue 60.5 121.7 60.9
Rent Smoothing Adjustments:
Relating to original contractual
uplifts (4.0) (8.9) (4.7)
Relating to Covid-19 rent concessions (3.6) (14.8) (5.1)
Rent deferrals (0.8) (17.7) (0.6)
Recovery of head rent and service
charge costs reclassified to
property outgoings (note 5 ) (0.8) (1.6) (0.9)
Adjustment for back rent (0.2) (0.4) (0.2)
---------------------------------------- ------------ ------------- ------------
Revenue on Adjusted EPRA Earnings
basis 51.1 78.3 49.4
---------------------------------------- ------------ ------------- ------------
5. Property outgoings
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
Property outgoings GBPm GBPm GBPm
------------------------------------ ------------ ------------- ------------
Property outgoings in the income
statement 0.3 1.5 1.1
Financing element of head rent
included in finance costs (note
7 ) 0.8 1.7 0.8
Movement in headlease liabilities
included in property revaluations
(note 10 ) 0.1 0.1 0.1
------------------------------------ ------------ ------------- ------------
Total property outgoings 1.2 3.3 2.0
Recovery of head rents and other
costs from occupational tenants,
included in revenue (note 4
) (0.8) (1.6) (0.9)
Net property outgoings 0.4 1.7 1.1
------------------------------------ ------------ ------------- ------------
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
Property outgoings net of tenant 2021 2020 2020
recoveries GBPm GBPm GBPm
-------------------------------------- ------------ ------------- ------------
Head rents net of amounts recovered
from occupational tenants 0.2 0.6 0.3
Irrecoverable property costs 0.1 0.3 0.2
Managing agent costs and other
net property outgoings 0.1 0.2 0.1
Cost of documenting rent concessions - 0.6 0.5
0.4 1.7 1.1
-------------------------------------- ------------ ------------- ------------
Amounts shown above include any irrecoverable VAT.
6. Administrative expenses
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------- ------------ ------------- ------------
Advisory fee (note 20 ) 6.4 13.7 7.1
Other administrative expenses 0.9 2.8 0.7
Corporate costs 0.2 0.5 0.3
7.5 17.0 8.1
------------------------------- ------------ ------------- ------------
Amounts shown above include any irrecoverable VAT.
7. Finance costs
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------------- ------------ ------------- ------------
Cash costs:
Interest on secured debt 22.1 45.6 22.7
Interest charge on headlease
liabilities (note 5 ) 0.8 1.7 0.8
Loan agency fees and other lender
costs 0.1 0.3 0.3
Non-cash movements:
Amortisation of loan arrangement
costs 1.1 2.3 1.1
Amortisation of interest rate
derivatives, transferred from
other reserves 0.5 0.3 0.1
Fair value adjustment of interest
rate derivatives - 0.1 -
Finance costs recognised in
the income statement 24.6 50.3 25.0
------------------------------------- ------------ ------------- ------------
Fair value adjustment of interest
rate derivatives (0.1) 0.9 0.9
Amortisation of interest rate
derivatives, transferred to
the income statement (0.5) (0.3) (0.1)
Finance (income) / costs recognised
in other comprehensive (loss)
/ income (0.6) 0.6 0.8
------------------------------------- ------------ ------------- ------------
8. Tax
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
Tax charge in the period GBPm GBPm GBPm
---------------------------------- ------------ ------------- ------------
Current tax - Germany
Corporation tax charge 0.2 0.4 0.2
Adjustments in respect of prior
periods - (0.1) (0.1)
Deferred tax - Germany
Deferred tax charge / (credit) 0.7 - (0.1)
---------------------------------- ------------ ------------- ------------
0.9 0.3 -
---------------------------------- ------------ ------------- ------------
The tax assessed for the period varies from the standard rate of
corporation tax in the UK applied to the profit / (loss) before
tax. The differences are explained below:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------------- ------------ ------------- ------------
Profit / (loss) before tax 64.5 (113.3) (115.0)
------------------------------------- ------------ ------------- ------------
Tax charge / (credit) at the
standard rate of corporation
tax in the UK of 19% 12.3 (21.5) (21.8)
Effects of :
Investment property revaluation
not taxable (7.0) 29.9 26.0
Qualifying property rental business
not taxable under UK REIT rules (4.9) (8.9) (5.4)
Unutilised losses carried forward 0.2 0.2 0.8
German current tax charge 0.2 0.4 0.2
Finance costs disallowed under
corporate interest restriction
rules 0.1 0.3 0.2
Adjustments in respect of prior
periods - (0.1) -
Tax charge for the period 0.9 0.3 -
------------------------------------- ------------ ------------- ------------
The Company and its subsidiaries operate as a UK Group REIT.
Subject to continuing compliance with certain rules, the UK REIT
rules exempt the profits of the Group's UK and German property
rental business from UK corporation tax. Gains on the Group's UK
and German properties are also generally exempt from UK corporation
tax, provided they are not held for trading or in certain
circumstances sold in the three years after completion of a
development. None of the Group's properties was developed in the
last three years. To remain a UK REIT, a number of conditions must
be met in respect of the Company, the Group's qualifying activity
and the Group's balance of business. Since entering the UK REIT
regime the Group has met all applicable conditions.
The Group is subject to German corporation tax on its German
property rental business at an effective rate of 13% (year to 31
December 2020 and six months to 30 June 2020: 11%), resulting in a
tax charge of GBP0.2 million (year to 31 December 2020: GBP0.3
million; six months to 30 June 2020: GBP0.2 million). A deferred
tax liability of GBP12.0 million (31 December 2020 and 30 June
2020: GBP11.9 million) is recognised for the German capital gains
tax that would potentially be payable on the sale of the relevant
investment properties.
The subsidiary company which conducts the Group's German
operations is periodically subject to routine tax audits. Such an
audit is underway for the years from 2014 to 2018 but the Board
does not consider that this will result in any material additional
tax liability arising.
9. Earnings per share
Basic EPS
Earnings per share ("EPS") is calculated as the profit
attributable to ordinary shareholders of the Company for each
period divided by the weighted average number of ordinary shares in
issue throughout the relevant period.
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
---------------------------------- ------------ ------------- ------------
Profit / (loss) for the period 63.6 (113.6) (115.0)
---------------------------------- ------------ ------------- ------------
Number Number Number
---------------------------------- ------------ ------------- ------------
Weighted average shares in issue 324,035,146 324,035,146 324,035,146
---------------------------------- ------------ ------------- ------------
Pence Pence Pence
per share per share per share
---------------------------------- ------------ ------------- ------------
Basic EPS 19.6 (35.1) (35.5)
---------------------------------- ------------ ------------- ------------
In calculating the weighted average number of shares in issue
for basic EPS:
-- where shares have been issued during the period in settlement
of an incentive fee relating to the results of the prior year, they
are treated as having been issued on the first day of the period
rather than their actual date of issue, which is typically in
March; and
-- shares to be issued at the balance sheet date in settlement
of an incentive fee relating to the results of that period are not
taken into account.
Diluted EPS
The weighted average number of shares used in the calculation of
diluted EPS is required to include any shares to be issued in
respect of an incentive fee as if those shares had been in issue
throughout the whole of the period over which the fee was earned,
although in fact they will not have been issued until the following
period. Since no incentive fee has been recognised for either the
current period or the prior year, there are no shares to be issued
and diluted EPS is therefore the same as basic EPS.
EPRA EPS and Adjusted EPRA EPS
EPRA, the European Public Real Estate Association, publishes
guidelines for calculating adjusted earnings designed to represent
core operational activities. EPRA EPS is calculated in accordance
with the EPRA Guidance currently in force.
An Adjusted EPRA earnings calculation has also been presented.
This adjusted measure was designed to reflect the fact that, as a
Group with unusually long leases and a high proportion of fixed or
minimum rental increases to spread over the lease terms, the
Company's Dividend Cover would be artificially high if calculated
on the basis of EPRA EPS. Adjusted EPRA EPS removes the effect of
the Rent Smoothing Adjustments, including the impact of Covid-19
rent concessions. It also excludes any non-recurring costs or
income which do not relate to the Group's routine operations, such
as costs incurred for share placings, though there have been no
such costs since 2016. The adjusted measure also excludes any
incentive fees which are paid in shares, as they are considered to
be linked to revaluation movements and are therefore best treated
consistently with revaluations, which are excluded from EPRA
EPS.
EPRA and Adjusted EPRA earnings are calculated as:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------------------- ------------ ------------- ------------
Profit / (loss) for the period
in IFRS earnings 63.6 (113.6) (115.0)
EPRA adjustments :
Investment property revaluation
(note 10 ) (36.5) 166.5 142.0
Deferred tax on German investment
property revaluations (note
8 ) 0.7 - (0.1)
EPRA earnings 27.8 52.9 26.9
Other adjustments :
Rent Smoothing Adjustments (note
10 ) (7.6) (23.7) (9.8)
Rent deferrals (0.8) (17.7) (0.6)
Adjusted EPRA earnings 19.4 11.5 16.5
----------------------------------- ------------ ------------- ------------
In calculating Adjusted EPRA EPS, the weighted average number of
shares is calculated using the actual date on which any shares are
issued during the year so as not to create a mismatch between the
basis of calculation of Adjusted EPRA EPS and the dividends per
share paid in the year. In this way the Group's measure of Dividend
Cover is considered to be more precisely calculated. The weighted
average number of shares applied in calculating Adjusted EPRA EPS
has been derived as follows:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
Number Number Number
------------------------------------- ------------ ------------- ------------
Shares in issue throughout the
period 324,035,146 322,850,595 322,850,595
Pro rata adjustment for shares
issued in March 2020 in settlement
of 2019 incentive fee - 925,633 663,869
Adjusted EPRA EPS: weighted
average shares in issue 324,035,146 323,776,228 323,514,464
------------------------------------- ------------ ------------- ------------
As a result of those adjustments, the EPRA EPS and Adjusted EPRA
EPS figures are as follows:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
Pence Pence Pence
per share per share per share
------------------- ------------ ------------- ------------
EPRA EPS 8.6 16.3 8.3
Adjusted EPRA EPS 6.1 3.5 5.1
------------------- ------------ ------------- ------------
10. Investment properties
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------------------- ------------ ------------- ------------
Freehold investment properties
At the start of the period 1,705.8 1,802.4 1,802.4
Revaluation movement 40.7 (102.9) (97.4)
Currency translation movement (5.4) 6.3 7.6
Disposals (0.1) - -
At the end of the period 1,741.0 1,705.8 1,712.6
----------------------------------- ------------ ------------- ------------
Leasehold investment properties
At the start of the period 269.8 308.9 308.9
Revaluation movement 3.5 (39.6) (34.6)
Revaluation movement in headlease
liabilities (0.1) (0.1) (0.1)
Increase in headlease liabilities - 0.6 -
At the end of the period 273.2 269.8 274.2
----------------------------------- ------------ ------------- ------------
Total investment properties
At the start of the period 1,975.6 2,111.3 2,111.3
Revaluation movement 44.3 (142.5) (132.0)
Currency translation movement (5.4) 6.3 7.6
Revaluation movement in headlease
liabilities (0.1) (0.1) (0.1)
Disposals (0.1) - -
Increase in headlease liabilities - 0.6 -
At the end of the period 2,014.3 1,975.6 1,986.8
----------------------------------- ------------ ------------- ------------
The properties were valued as at 30 June 2021 at GBP1,985.7
million (31 December 2020: GBP1,946.9 million; 30 June 2020:
GBP1,958.7 million) by CBRE Limited or Christie & Co in their
capacity as independent external valuers. Of the total fair value,
GBP113.7 million (31 December 2020: GBP115.3 million; 30 June 2020:
GBP116.5 million) relates to the Group's German investment
properties, the valuations of which are translated into Sterling at
the prevailing exchange rate at each balance sheet date.
The valuations were prepared on a fixed fee basis, independent
of the portfolio value, and were undertaken in accordance with RICS
Valuation - Global Standards 2020 on the basis of fair value,
supported by reference to market evidence of transaction prices for
similar properties where available. The valuers considered there to
be a shortage of such evidence for the Leisure and Budget Hotels
valuations as at 31 December 2020 and 30 June 2020. While the Royal
Institution of Chartered Surveyors mandated that valuations in
certain sectors should be subject to "material valuation
uncertainty" as at 31 December 2020 and 30 June 2020, this proviso
was applied on a sector basis. The 31 December 2020 and 30 June
2020 valuations of the healthcare assets, which accounted for 39%
of the Group's property assets by value at those dates, did not
carry such a proviso. None of the 30 June 2021 valuations in any
sector were subject to material valuation uncertainty.
The historic cost of the Group's investment properties,
translated at historic foreign exchange rates, as at 30 June 2021
was GBP1,479.2 million (31 December 2020 and 30 June 2020:
GBP1,479.6 million).
All of the investment properties are held within six (31
December 2020 and 30 June 2020: six) ring-fenced security pools as
security under fixed charges in respect of separate secured debt
facilities.
Under the Group's accounting policy, in line with IFRS, the
carrying value of leasehold properties is grossed up by the present
value of minimum headlease payments. The corresponding liability to
the head leaseholder is included in the balance sheet as a finance
lease obligation. The reconciliation between the carrying value of
the investment properties and their independent external valuation
is as follows:
Unaudited Audited Unaudited
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------------------- ---------- ------------- ----------
Carrying value 2,014.3 1,975.6 1,986.8
Gross-up of headlease liabilities (28.6) (28.7) (28.1)
----------------------------------- ---------- ------------- ----------
Independent external valuation 1,985.7 1,946.9 1,958.7
----------------------------------- ---------- ------------- ----------
Included within the carrying value of investment properties at
30 June 2021 is GBP187.1 million (31 December 2020: GBP181.4
million; 30 June 2020: GBP167.8 million) in respect of Rent
Smoothing Adjustments (described in note 4 and in the Supplementary
Information following these condensed financial statements),
representing the amount of the net mismatch between rent included
in the income statement and cash rents actually receivable. This
net receivable increases over broadly the first half of each lease
term in the case of fixed or minimum uplifts, or over the period of
the temporary rent reductions agreed with tenants in light of
Covid-19. The balance then unwinds, reducing to zero by the end of
the lease term. The difference between rents on a straight line
basis and rents actually receivable is included within, but does
not increase over fair value, the carrying value of investment
properties.
Also included in the revaluation movement for the period is the
impact of back rent received during a prior year from a rent review
on the healthcare portfolio, which is recognised in revenue over
the remaining lease term despite the cash having been received in
2018, together with movements on the headlease liabilities.
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------------------- ------------ ------------- ------------
Revaluation movement 44.3 (142.5) (132.0)
Rent Smoothing Adjustments (note
4 ) (7.6) (23.7) (9.8)
Adjustment for back rent received (0.2) (0.4) (0.1)
Movement in headlease liabilities (0.1) (0.1) (0.1)
Revaluation movement in the
income statement 36.4 (166.7) (142.0)
----------------------------------- ------------ ------------- ------------
The Rent Smoothing Adjustments are further explained in the
Supplementary Information which follows these condensed financial
statements.
The Board determines the Group's valuation policies and
procedures and is responsible for overseeing the valuations.
Valuations performed by the Group's independent external valuers
are based on information extracted from the Group's financial and
property reporting systems, such as current rents and the terms and
conditions of lease agreements, together with assumptions used by
the valuers (based on market observation and their professional
judgement) in their valuation models.
At each reporting date, certain directors of the Investment
Adviser, who have recognised professional qualifications and are
experienced in valuing the types of property owned by the Group,
initially analyse the independent external valuers' assessments of
movements in the property valuations from the prior reporting date
or, if later, the date of acquisition. Positive or negative fair
value changes over a certain materiality threshold are considered
and are also compared to external sources, such as the MSCI indices
and other relevant benchmarks, for reasonableness. Once the
Investment Adviser has considered the valuations, the results are
discussed with the independent external valuers, focusing on
properties with unexpected fair value changes or any with unusual
characteristics. The Audit Committee assesses the valuation
process, including meetings with the independent external valuers
and evaluating their expertise and independence, and reports the
results of these assessments to the Board.
The fair value of the investment property portfolio has been
determined using an income capitalisation technique whereby
contracted and market rental values are capitalised with a market
capitalisation rate. This technique is consistent with the
principles in IFRS 13 and uses significant unobservable inputs,
such that the fair value measurement of each property within the
portfolio has been classified as level 3 in the fair value
hierarchy as defined in IFRS 13. There have been no transfers to or
from other levels of the fair value hierarchy during the year.
The key inputs for the level 3 valuations were as follows:
Fair value Inputs
----------------------------
Portfolio GBPm Key unobservable input Range Blended yield
---------------------- ---------- ------------------------- ------------- -------------
At 30 June 2021:
Healthcare 790.4 Net Initial Yield 3.9% - 4.5% 4.5%
Running Yield by January
2022 3.9% - 4.5% 4.5%
Leisure - UK 703.2 Net Initial Yield 4.8% - 7.0% 5.5%
Running Yield by January
2022 4.8% - 7.7% 5.7%
Future RPI assumption
per annum 2.5%
Topped Up Net Initial
Budget Hotels 407.0 Yield 5.3% - 15.2% 7.0%
Running Yield by January
2022 5.8% - 17.0% 7.2%
Future RPI assumption
per annum 2.5%
Topped Up Net Initial
Leisure - Germany 113.7 Yield 5.6% 5.6%
Running Yield by January
2022 5.8% 5.8%
---------------------- ---------- ------------------------- ------------- -------------
Total at 30 June
2021 2,014.3
---------------------- ---------- ------------------------- ------------- -------------
At 31 December
2020:
Healthcare 769.1 Net Initial Yield 3.9% - 4.5% 4.5%
Running Yield by January
2022 4.0% - 4.6% 4.6%
Leisure - UK 687.7 Net Initial Yield 4.8% - 7.3% 5.5%
Running Yield by January
2022 4.8% - 7.4% 5.7%
Future RPI assumption
per annum 2.5%
Topped Up Net Initial
Budget Hotels 403.5 Yield 5.3% - 13.9% 7.1%
Running Yield by January
2022 5.8% - 15.5% 7.2%
Future RPI assumption
per annum 2.5%
Leisure - Germany 115.3 Net Initial Yield 5.8% 5.8%
Running Yield by January
2022 5.9% 5.9%
---------------------- ---------- ------------------------- ------------- -------------
Total at 31 December
2020 1,975.6
---------------------- ---------- ------------------------- ------------- -------------
At 30 June 2020:
Healthcare 769.1 Net Initial Yield 3.9% - 4.5% 4.5%
Running Yield by January
2022 4.0% - 4.6% 4.6%
Topped Up Net Initial
Leisure - UK 697.7 Yield 4.9% - 6.1% 5.4%
Running Yield by January
2022 5.4% - 6.9% 5.7%
Future RPI assumption
per annum 2.1% - 2.5% 2.5%
Topped Up Net Initial
Budget Hotels 403.5 Yield 5.1% - 16.2% 6.9%
Running Yield by January
2022 5.1% - 16.2% 7.3%
Future RPI assumption
per annum 2.5% 2.5%
Leisure - Germany 116.5 Net Initial Yield 5.6% 5.6%
Running Yield by January
2022 5.9% 5.9%
Total at 30 June
2020 1,986.8
---------------------- ---------- ------------------------- ------------- -------------
The principal sensitivity of measurement to variations in the
significant unobservable outputs is that decreases in Net Initial
Yield, decreases in Running Yield and increases in RPI will
increase the fair value (and vice versa).
Other than headlease payments, the majority of which are
recoverable from tenants, the Group did not have any contractual
investment property commitments at any balance sheet date. With the
exception of a property where a negligible proportion of the
Group's income arises from an operating agreement, all property
liabilities including repairs and maintenance are tenant
liabilities, except at Manchester Arena where such costs relating
to the structure and common areas are liabilities of the Group in
the first instance. These costs total GBP1.2 million per annum as
at 30 June 2021, of which 89% is currently recoverable from tenants
leaving a negligible net cost of GBP0.1 million per annum to be
borne by the Group.
11. Cash and cash equivalents
Unaudited Audited Unaudited
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
-------------------------------- ---------- ------------- ----------
Free cash and cash equivalents 189.1 196.6 226.4
Secured cash 25.4 23.1 14.7
214.5 219.7 241.1
-------------------------------- ---------- ------------- ----------
Secured cash is held in accounts over which the providers of
secured debt have fixed security. The Group is unable to access
this cash unless and until it is released to free cash each
quarter, which takes place after quarterly interest and loan
repayments have been made as long as the terms of the associated
secured facility are complied with.
12. Trade and other receivables
Unaudited Audited Unaudited
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
--------------------------------- ---------- ------------- ----------
Trade receivables 0.1 0.6 0.2
Accrued income - deferred rents 19.1 18.4 8.9
Prepayments 0.6 0.6 0.8
Other receivables 0.2 0.4 -
20.0 20.0 9.9
--------------------------------- ---------- ------------- ----------
Having been reviewed for any expected credit losses, no material
impairment was considered necessary for trade receivables, accrued
income or other receivables.
13. Trade and other payables
Unaudited Audited Unaudited
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------ ---------- ------------- ----------
Trade payables 0.2 1.0 1.1
Rent received in advance and
other deferred income 20.2 19.6 20.1
Interest payable 7.8 8.0 7.9
Tax and social security 3.9 2.0 0.5
Accruals and other payables 1.5 2.3 1.5
33.6 32.9 31.1
------------------------------ ---------- ------------- ----------
14. Secured debt
Unaudited Audited Unaudited
30 June 31 December 30 June
Amounts falling due within one 2021 2020 2020
year GBPm GBPm GBPm
-------------------------------- ---------- ------------- ----------
Fixed rate secured debt 7.3 7.3 6.4
Unamortised finance costs (2.3) (2.3) (2.3)
-------------------------------- ---------- ------------- ----------
5.0 5.0 4.1
-------------------------------- ---------- ------------- ----------
Amounts falling due in more
than one year
-------------------------------- ---------- ------------- ----------
Fixed rate secured debt 841.2 847.7 852.0
Floating rate secured debt 73.3 73.3 73.3
Unamortised finance costs (3.3) (4.4) (5.7)
-------------------------------- ---------- ------------- ----------
911.2 916.6 919.6
-------------------------------- ---------- ------------- ----------
The Group had no undrawn, committed borrowing facilities at any
of the balance sheet dates shown above.
The debt is secured by charges over the Group's investment
properties and by fixed and floating charges over the other assets
of certain Group companies, not including the Company itself save
for a limited share charge over the parent company of one of the
ring-fenced subgroups. During the period and the prior year,
certain financial covenants were amended or waived to accommodate
the temporary Covid-19 rent concessions on the Leisure and Budget
Hotels portfolios described in the Investment Adviser's Report.
There were no defaults or breaches of any loan covenants during the
current period or any prior year.
At each balance sheet date, all financial assets and liabilities
other than derivatives in effective hedges and derivatives
classified as held for trading were measured at amortised cost.
As at 30 June 2021 the fair value of the Group's secured debt
was GBP948.6 million (31 December 2020: GBP969.2 million; 30 June
2020: GBP976.8 million). Fair value is not the same as a
liquidation valuation, the amount required to prepay the loans at
the balance sheet date, and therefore does not represent an
estimate of the cost to the Group of repaying the debt before the
scheduled maturity date, which would be materially higher.
The secured debt was valued in accordance with IFRS 13 by
reference to interbank bid market rates as at the close of business
on each balance sheet date by Chatham Financial Europe Limited. All
secured debt was classified as level 2 in the fair value hierarchy
as defined in IFRS 13 and its fair value was calculated using the
present values of future cash flows, based on market benchmark
rates (interest rate swaps) and the estimated credit risk of the
Group for similar financings. There were no transfers to or from
other levels of the fair value hierarchy during the current period
or prior year.
15. Interest rate derivatives
The notional amounts of the Group's interest rate derivatives
comprise:
Unaudited Audited Unaudited
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
--------------------------------- ---------- ------------- ----------
Interest rate swaps (weighted
average rate 1.3%) 50.0 50.0 50.0
Interest rate caps (weighted
average rate 1.5%):
In effective hedges 23.3 23.3 23.3
Classified as held for trading 3.2 3.2 3.2
--------------------------------- ---------- ------------- ----------
76.5 76.5 76.5
--------------------------------- ---------- ------------- ----------
The fair value of those interest rate derivatives and the
movement in fair value during the period was as follows:
Unaudited Audited Unaudited
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------- ---------- ------------- ----------
Interest rate swaps:
Falling due within one year (0.5) (0.6) (0.5)
Falling due in more than one
year (0.6) (1.1) (1.4)
------------------------------- ---------- ------------- ----------
(1.1) (1.7) (1.9)
Interest rate caps:
Falling due in more than one
year - - -
------------------------------- ---------- ------------- ----------
(1.1) (1.7) (1.9)
------------------------------- ---------- ------------- ----------
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------------------ ------------ ------------- ------------
At the start of the period (1.7) (1.0) (1.0)
Charge to the income statement
(note 7 ) - (0.1) -
Credit / (charge) to other comprehensive
income (note 7 ) 0.6 (0.6) (0.9)
At the end of the period (1.1) (1.7) (1.9)
------------------------------------------ ------------ ------------- ------------
The Group utilises interest rate derivatives in risk management
as cash flow hedges to protect against movements in future interest
costs on secured loans which bear interest at floating rates. The
derivatives have been valued in accordance with IFRS 13 by
reference to interbank bid market rates as at the close of business
on the last working day prior to each balance sheet date by Chatham
Financial Europe Limited. The fair values are calculated using
present values of future cash flows based on market forecasts of
interest rates and adjusted for the credit risk of the
counterparties. The amounts and timing of future cash flows are
projected on the basis of the contractual terms of the derivatives.
All interest rate derivatives are classified as level 2 in the fair
value hierarchy as defined in IFRS 13 and there were no transfers
to or from other levels of the fair value hierarchy during the
current or prior year.
The entire GBP50.0 million notional amount of the interest rate
swaps and GBP10.0 million of the notional amount of the interest
rate caps are used to hedge cash flow interest rate risk on GBP60.0
million of the floating rate loans described in note 14 . The
notional amounts of the interest rate derivatives equal the loan
principal balance, and their maturity dates also match. GBP3.3
million of the notional amount of the interest rate caps was not
designated for hedge accounting to allow for any future loan
prepayments and as a result, although the entire cash flow interest
rate is hedged, the hedges as measured for the purposes of IFRS 9
were expected on inception to be 94.5% effective throughout their
lives.
The remaining GBP16.5 million notional amount of the interest
rate caps is used to hedge cash flow interest rate risk on the
remaining GBP13.3 million of the floating rate loans described in
note 14 . Following a rebalancing of the hedging arrangements on
GBP3.2 million of the notional amount of the interest rate caps,
matching the loan principal that has been repaid from the proceeds
of investment property sales, the notional amounts of the interest
rate caps designated for hedge accounting equal the loan principal
balance and their maturity dates also match. As a result, these
hedges, which have a fair value of GBP6,000 (31 December 2020:
GBP6,000; 30 June 2020: GBP7,000), are expected to be 100%
effective throughout their lives. The remaining interest rate caps,
which have a fair value of GBP1,000 (31 December 2020: GBP1,000; 30
June 2020: GBP2,000), have been classified as held for trading.
The floating rate loans and interest rate derivatives are
contractually linked to LIBOR, a market rate which is expected to
become unavailable from the end of 2021. The Investment Adviser is
working with the Group's lenders and derivative counterparties to
transition to an alternative benchmark rate, currently expected to
be Sterling Overnight Index Average ("SONIA"). The transition is
not expected to have a material impact on the results or financial
position of the Group.
16. Deferred tax
The deferred tax liability relates to unrealised gains on the
Group's German investment properties.
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------------------ ------------ ------------- ------------
At the start of the period 11.9 11.3 11.3
Charge / (credit) to the income
statement (note 8 ) 0.7 - (0.1)
(Credit) / charge to other comprehensive
income (0.6) 0.6 0.7
At the end of the period 12.0 11.9 11.9
------------------------------------------ ------------ ------------- ------------
17. Share capital
Share capital represents the aggregate nominal value of shares
issued. The movement in the number of fully paid ordinary shares of
10p each in issue was as follows:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
Number Number Number
------------------------------- ------------ ------------- ------------
At the start of the period 324,035,146 322,850,595 322,850,595
Issue of ordinary shares in
settlement of 2019 incentive
fee - 1,184,551 1,184,551
At the end of the period 324,035,146 324,035,146 324,035,146
------------------------------- ------------ ------------- ------------
18. Reserves
The share premium reserve represents the surplus of the gross
proceeds of share issues over the nominal value of the shares, net
of the direct costs of those equity issues.
Retained earnings represent the cumulative profits and losses
recognised in the income statement together with any amounts
transferred or reclassified from the Group's share premium reserve
and other reserves, less dividends paid.
Other reserves represent the aggregate of:
-- the cumulative exchange gains and losses on foreign currency translation;
-- the cumulative gains or losses, net of tax, on effective cash flow hedging instruments; and
-- the impact on equity of any shares to be issued after the
balance sheet date, as described in note 20 , under the terms of
the incentive fee arrangements.
Movements in other reserves comprise:
Cash flow
Shares to
Currency hedging be
translation instruments issued Total
GBPm GBPm GBPm GBPm
-------------------------------- ----------- ----------- --------- -----
Period to 30 June 2021
(unaudited)
At the start of the period 5.4 (1.7) - 3.7
-------------------------------- ----------- ----------- --------- -----
Currency translation movements (1.8) - - (1.8)
Movement in fair value
of derivatives - 0.6 - 0.6
-------------------------------- ----------- ----------- --------- -----
Other comprehensive loss (1.8) 0.6 - (1.2)
At the end of the period 3.6 (1.1) - 2.5
-------------------------------- ----------- ----------- --------- -----
Year to 31 December 2020
(audited)
At the start of the year 3.3 (1.1) 4.9 7.1
-------------------------------- --- ----- ----- -----
Currency translation movements 2.1 - - 2.1
Movement in fair value
of derivatives - (0.6) - (0.6)
-------------------------------- --- ----- ----- -----
Other comprehensive income 2.1 (0.6) - 1.5
Shares issued in the year - - (4.9) (4.9)
At the end of the year 5.4 (1.7) - 3.7
-------------------------------- --- ----- ----- -----
Period to 30 June 2020
(unaudited)
At the start of the period 3.3 (1.1) 4.9 7.1
-------------------------------- --- ----- ----- -----
Currency translation movements 2.5 - - 2.5
Movement in fair value
of derivatives - (0.8) - (0.8)
-------------------------------- --- ----- ----- -----
Other comprehensive income 2.5 (0.8) - 1.7
Shares issued in the period - - (4.9) (4.9)
At the end of the period 5.8 (1.9) - 3.9
-------------------------------- --- ----- ----- -----
19. Net asset value per share
Net asset value ("NAV") per share is calculated as the net
assets of the Group attributable to shareholders divided by the
number of shares in issue at the end of each period.
EPRA, the European Public Real Estate Association, publishes
guidelines for the calculation of three measures of NAV to enable
consistent comparisons of different property companies. The Group
uses EPRA Net Tangible Assets ("EPRA NTA") as the most meaningful
measure of long term performance, which is the measure adopted by
the majority of UK REITs establishing it as the industry standard
benchmark. It excludes items that are considered to have no impact
in the long term, such as the fair value of derivatives and a
portion of the deferred tax on investment properties held for long
term benefit.
Unaudited Audited Unaudited
30 June 2021 31 December 2020 30 June 2020
------------------ ------------------- ------------------
Basic NAV and EPRA Pence per Pence per Pence per
NTA GBPm share GBPm share GBPm share
------- --------- -------- --------- ------- ---------
Basic and diluted
NAV 1,260.2 388.9 1,221.5 377.0 1,244.1 383.9
EPRA adjustments:
Adjustment for deferred
tax on German investment
property revaluations 6.0 1.9 6.0 1.8 6.0 1.8
Fair value of interest
rate derivatives 1.1 0.3 1.7 0.5 1.9 0.7
EPRA NTA 1,267.3 391.1 1,229.2 379.3 1,252.0 386.4
--------------------------- ------- --------- -------- --------- ------- ---------
20. Related party transactions and balances
a) Interests in shares
In aggregate, the Management Team and entities related to them
are beneficially interested in 40,164,756 shares in the capital of
the Company as at 30 June 2021, which amounts to a 12.4%
interest.
The direct and indirect beneficial interests of the Directors
and their families in the share capital of the Company are as
follows:
Unaudited Audited Unaudited
30 June 2021 31 December 2020 30 June 2020
-------------------------- -------------------------- --------------------------
Percentage Number Percentage Number Percentage
Number of of issued of of issued of of issued
shares share capital shares share capital shares share capital
--------------- ---------- -------------- ---------- -------------- ---------- --------------
Nick Leslau * 18,342,009 5.66% 18,342,009 5.66% 18,342,009 5.66%
Mike Brown 1,183,580 0.37% 1,183,580 0.37% 1,183,580 0.37%
Sandy Gumm 192,574 0.06% 192,574 0.06% 192,574 0.06%
Martin Moore 127,226 0.04% 127,226 0.04% 127,226 0.04%
Ian Marcus 95,871 0.03% 95,871 0.03% 95,871 0.03%
Jonathan Lane 57,471 0.02% 57,471 0.02% 57,471 0.02%
Leslie Ferrar 26,286 0.01% 26,286 0.01% 26,286 0.01%
--------------- ---------- -------------- ---------- -------------- ---------- --------------
* comprising 16,850,300 shares held by an entity in which he has
a 95% indirect interest and 1,491,709 shares held in a company
which he wholly owns.
Prestbury Incentives Limited and Prestbury Investment Partners
Limited are owned and controlled by the Management Team, as Nick
Leslau, Mike Brown and Sandy Gumm are shareholders and directors of
both Prestbury Investment Partners Limited and the parent
undertaking of Prestbury Incentives Limited. In addition to the
personal holdings disclosed above, those companies hold shares in
the Company as follows:
Unaudited Audited Unaudited
30 June 2021 31 December 2020 30 June 2020
-------------------------- -------------------------- --------------------------
Percentage Number Percentage Number Percentage
Number of of issued of of issued of of issued
shares share capital shares share capital shares share capital
---------------------- ---------- -------------- ---------- -------------- ---------- --------------
Prestbury Incentives
Limited 19,262,042 5.94% 19,262,042 5.94% 19,262,042 5.94%
Prestbury Investment
Partners Limited 1,184,551 0.37% 1,184,551 0.37% 1,184,551 0.37%
---------------------- ---------- -------------- ---------- -------------- ---------- --------------
20,446,593 6.31% 20,446,593 6.31% 20,446,593 6.31%
---------------------- ---------- -------------- ---------- -------------- ---------- --------------
b) Dividends paid to related parties and key management personnel
Dividends were paid to related parties and key management
personnel as follows:
Unaudited
Unaudited Audited Six months
Six months Year to to
to 30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------- ------------ ------------- ------------
Prestbury Incentives Limited 1.4 3.0 1.6
Nick Leslau * 1.3 2.9 1.5
Mike Brown 0.1 0.2 0.1
Prestbury Investment Partners
Limited 0.1 0.1 0.1
Other directors - 0.1 -
2.9 6.3 3.3
------------------------------- ------------ ------------- ------------
Nick Leslau, Mike Brown and Sandy Gumm are shareholders and
directors of both Prestbury Investment Partners Limited and the
parent undertaking of Prestbury Incentives Limited, together with
the other members of the Management Team, Tim Evans and Ben
Walford. Other senior members of the Prestbury team also have
equity interests in those companies.
* comprising dividends paid on ordinary shares held by an LLP in
which he has a 95% indirect interest and another company which he
wholly owns.
c) Directors' fees
Fees totalling GBP200,000 per annum are payable to the four
independent non-executive Directors. The Directors connected to
Prestbury Investment Partners Limited (Nick Leslau, Mike Brown and
Sandy Gumm) do not receive Directors' fees. Total Directors' fees
of GBP100,000 were payable in the period (year to 31 December 2020:
GBP200,000; six months to 30 June 2020: GBP100,000). No fees were
outstanding at any balance sheet date.
d) Advisory fees payable - relationship between Company and Investment Advisor
The Investment Advisory Agreement sets out the terms of the
relationship between the Company and the Investment Adviser,
including services to be provided and the calculation of the
advisory fee and any incentive fee. The agreement has a termination
date in December 2025 and neither party to the agreement has any
contractual renewal right. The agreement may be terminated in
certain circumstances which are summarised on page 59 of the March
2016 Secondary Placing Disclosure Document which is available in
the Investor Centre of the Company's website. It includes a right
for the Company to terminate the agreement without compensation in
the event of an unremedied breach by the Investment Adviser and a
right for the Company or the Investment Adviser to terminate in the
event of a change of control of the Company. The maximum
termination fee is four times the previous quarter's advisory fee,
with any such termination payment designed to cover the cost of
redundancies and office wind down costs that may be required
following the Investment Adviser's loss of the management of the
Group. Nick Leslau, Mike Brown and Sandy Gumm, who are Directors of
the Company, are also directors and shareholders in the Investment
Adviser.
e) Advisory fees payable - basis of calculation of fees
EPRA introduced new methods of calculation of EPRA net asset
value with effect from 1 January 2020. In considering that change,
the Remuneration Committee concluded that, in order for the
calculation of the advisory and incentive fees to remain consistent
with the way that those fees had been calculated since the
Company's listing and as set out in the Investment Advisory
Agreement, the fees would continue to be calculated on the basis of
the EPRA NAV methodology in place at the time of the agreement.
That basis is set out in the EPRA Guidance previously issued in
2016, referred to in these financial statements as "2016 basis EPRA
NAV".
In addition, following a proposal made by the Investment
Adviser, with effect from 1 April 2020 the advisory fee was reduced
to the extent that the Group's net assets include surplus cash
realised on the disposal of a portfolio of hospitals in August 2019
and that surplus cash remains available for deployment. The balance
of the surplus cash at 1 April 2020 was GBP158.3 million and at 30
June 2021 was GBP109.9 million. The 2016 basis EPRA NAV used for
the fee calculations reconciles to EPRA NTA as follows:
Unaudited Audited Unaudited
30 June 2021 31 December 2020 30 June 2020
------------------------------- ------------------ ------------------- ------------------
Pence per Pence per Pence per
GBPm share GBPm share GBPm share
------------------------------- ------- --------- -------- --------- ------- ---------
EPRA NTA 1,267.3 391.1 1,229.2 379.3 1,252.0 386.4
Adjustment to deferred
tax on German investment
property revaluations 6.0 1.8 6.0 1.9 6.0 1.8
------------------------------- ------- --------- -------- --------- ------- ---------
NAV for purposes
of incentive fee
calculation (2016
basis EPRA NAV) 1,273.3 392.9 1,235.2 381.2 1,258.0 388.2
Adjustment for surplus
cash (109.9) (33.9) (114.0) (35.2) (149.4) (46.1)
NAV for purposes
of advisory fee calculations 1,163.4 359.0 1,121.2 346.0 1,108.6 342.1
------------------------------- ------- --------- -------- --------- ------- ---------
Advisory fees payable to the Investment Adviser are calculated
as:
-- 1.25% per annum on NAV for the purposes of fee calculations up to GBP500 million, plus
-- 1.0% per annum on NAV for the purposes of fee calculations
between GBP500 million and GBP1 billion, plus
-- 0.75% per annum on NAV for the purposes of fee calculations
between GBP1 billion and GBP1.5 billion, plus
-- 0.5% per annum on NAV for the purposes of fee calculations over GBP1.5 billion.
During the period, advisory fees of GBP6.0 million (year to 31
December 2020: GBP12.8 million; six months to 30 June 2020: GBP6.7
million) plus VAT were payable in cash, of which GBPnil (31
December 2020: GBPnil; 30 June 2020; GBP0.1 million) was
outstanding as at the balance sheet date and included in trade and
other payables. The impact of adopting 2016 basis EPRA NAV is that
fees payable in the period were GBP22,000 (year to 31 December
2020: GBP44,000; six months to 30 June 2020: GBP22,000) higher than
they would have been under EPRA NTA.
f) Incentive fee payable
The Investment Adviser may become entitled to an incentive fee
intended to reward growth in Total Accounting Return ("TAR") above
an agreed benchmark and to maintain strong alignment of the
Investment Adviser's interests with those of shareholders. TAR is
measured as growth in 2016 basis EPRA NAV per share plus dividends
paid in the year.
The fee entitlement is calculated annually on the basis of the
Group's audited financial statements, with any fee payable settled
in shares in the Company (subject to certain limited exceptions
none of which have yet applied). Sales of these shares are
restricted (save for certain limited exceptions), with the
restriction lifted on a phased basis over a period from 18 to 42
months from the date of issue. Shares may be released from the sale
restriction in the event that shares need to be sold to settle the
tax liability on the receipt of those shares, but this exemption
has never been requested.
The incentive fee is calculated by reference to growth in TAR:
if that growth exceeds a hurdle rate of 10% over a given financial
year, an incentive fee equal to 20% of this excess is payable in
shares to the Investment Adviser. In the event of an incentive fee
being payable, a high water mark is established, represented by the
2016 basis EPRA NAV per share at the end of the relevant financial
year, after the impact of the incentive fee, which is then the
starting point for the cumulative hurdle calculations for future
periods. The hurdle is set at the higher of the 2016 basis EPRA NAV
at the start of the year plus 10% or the high water mark 2016 basis
EPRA NAV plus 10% per annum. In this way, the incentive fee is
never rebased upwards as a result of a year of low or negative
growth, maintaining strong alignment of management and shareholder
interests. Dividends or other distributions paid in any period are
treated as payments on account against achievement of the hurdle
rate of return. The incentive fee payable in any year is subject to
a cap of 5% of 2016 basis EPRA NAV, save for a fee payable in the
event of a change of control of the Company which is uncapped.
A high water mark of 431.1 pence per share was established at 31
December 2019 when a fee was last earned. The 2016 basis EPRA NAV
was 381.2 pence per share at the start of the year, therefore TAR
will have to exceed 124.4 pence per share for the year ending 31
December 2021 for a fee to be earned; given the Board's current
expectations of dividends to be declared over the remainder of
2021, that means 2016 basis EPRA NAV will have to exceed 491.1
pence per share (GBP1,591.4 million) at 31 December 2021 before any
incentive fee becomes payable. This compares with 2016 basis EPRA
NAV of 392.9 pence per share (GBP1,273.3 million) as at 30 June
2021.
In order to make a reasonable assessment of whether or not such
a fee will be payable, the Board has estimated the 2016 basis EPRA
NAV of the Group at 31 December 2021, assuming that:
-- there are no acquisitions, disposals or lease variations in the second half of 2021;
-- there is no change to the investment property valuations as at 30 June 2021;
-- no uplift in rent from the outstanding Ramsay rent review is
included, on the basis that the outcome of the review is not yet
known with sufficient certainty;
-- there are no currency translation gains or losses;
-- RPI uplifts are consistent with the expectations reflected in
the June 2021 independent investment property valuations; and
-- distributions over the remainder of the year are paid in line
with the Board's current expectations, with the special assumption
that there are no further widespread lockdowns or other pandemic
related events that vary the Board's assessment of the likelihood
of declaring a dividend for the fourth quarter.
This estimate does not constitute a forecast, but it represents
an illustrative case considered to provide a reasonable basis for
assessing whether an incentive fee will be payable, while
recognising the limitations inherent in any estimate of future
values. On the basis of these assumptions, no fee would be payable
for the 2021 year and as a result no fee is accrued at 30 June 2021
(30 June 2020: GBPnil).
21. Events after the balance sheet date
On 22 July 2021, the Company declared a distribution of GBP12.8
million as an interim dividend of 3.95 pence per share, which was
paid on 3 September 2021.
Supplementary Information
Shareholder Return - TAR and TSR
Shareholder return is one of the Group's principal measures of
performance. Total Shareholder Return ("TSR") is measured as the
movement in the Company's share price over a period, plus dividends
paid in the period. Total Accounting Return ("TAR") is a
shareholder return measure calculated as the movement in EPRA NTA
over a period plus dividends per share paid in the period.
TAR - EPRA NTA performance
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
Pence Pence Pence
----------------------------------- ---------- ------------ ----------
EPRA NTA per share:
at the start of the period 379.3 429.4 429.4
at the end of the period 391.1 379.3 386.4
Increase / (decrease) in EPRA NTA
per share 11.8 (50.1) (43.0)
Dividends per share 7.3 15.7 8.4
------------------------------------ ---------- ------------ ----------
Increase / (decrease) in EPRA NTA
plus dividends per share 19.1 (34.4) (34.6)
------------------------------------ ---------- ------------ ----------
TAR 5.0% (8.0)% (8.1)%
------------------------------------ ---------- ------------ ----------
TSR - share price performance
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
Pence Pence Pence
-------------------------------------- ---------- ------------ ----------
Mid-market closing share price:
at the start of the period 300.0 434.0 434.0
at the end of the period 380.0 300.0 270.0
Increase / (decrease) in share price 80.0 (134.0) (164.0)
Dividends per share 7.3 15.7 8.4
--------------------------------------- ---------- ------------ ----------
Increase / (decrease) in share price
plus dividends per share 87.3 (118.3) (155.6)
--------------------------------------- ---------- ------------ ----------
TSR 29.1% (27.3)% (35.9)%
--------------------------------------- ---------- ------------ ----------
EPRA measures
30 June 31 December 30 June
2021 2020 2020
EPRA Net Tangible Assets ("EPRA
NTA") per share 391.1 379.3p 386.4p
EPRA Net Reinstatement Value per
share 434.3 421.7p 429.0p
EPRA Net Disposal Value per share 380.6 364.3p 370.0p
EPRA Net Initial Yield 4.95% 4.44% 4.28%
EPRA Topped Up Net Initial Yield 5.36% 5.40% 5.31%
EPRA Vacancy Rate 0% 0% 0%
------------------------------------ ------- ----------- -------
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
EPRA EPS 8.6p 16.3p 8.3p
EPRA Capital Expenditure GBP0.1m GBP0.5m GBP0.2m
EPRA Cost Ratio excluding direct
vacancy costs 12.6% 14.8% 14.6%
EPRA Cost Ratio including direct
vacancy costs 12.9% 15.1% 14.8%
----------------------------------- ---------- ------------ ----------
Adjusted EPRA measures
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
------------------------------------ ---------- ------------ ----------
Adjusted EPRA EPS * 6.1p 3.5p 5.1p
Adjusted EPRA Cost Ratio excluding
direct vacancy costs 14.4% 18.4% 17.5%
Adjusted EPRA Cost Ratio including
direct vacancy costs 14.8% 18.7% 17.6%
------------------------------------- ---------- ------------ ----------
* calculation explained in note 9 to the financial statements
EPRA NTA
30 June 2021 31 December 2020 30 June 2020
------------------ ------------------ ------------------
Pence per Pence per Pence per
GBPm share GBPm share GBPm share
------- --------- ------- --------- ------- ---------
Basic NAV 1,260.2 388.9 1,221.5 377.0 1,244.1 383.9
EPRA adjustments :
Adjustment for deferred
tax on investment property
revaluations * 6.0 1.9 6.0 1.8 6.0 1.8
Fair value of derivatives 1.1 0.3 1.7 0.5 1.9 0.7
EPRA NTA 1,267.3 391.1 1,229.2 379.3 1,252.0 386.4
----------------------------- ------- --------- ------- --------- ------- ---------
* in accordance with the EPRA Guidance, half of the deferred tax
is adjusted for in the EPRA NTA calculation
EPRA Net Reinstatement Value
The EPRA Net Reinstatement Value is calculated on the assumption
that the Group never sells assets and is intended to represent the
value that would be required to rebuild the portfolio.
30 June 2021 31 December 2020 30 June 2020
------------------ ------------------ ------------------
Pence per Pence per Pence per
GBPm share GBPm share GBPm share
------- --------- ------- --------- ------- ---------
Basic NAV 1,260.2 388.9 1,221.5 377.0 1,244.1 383.9
EPRA adjustments:
Adjustment for real
estate transfer taxes 134.0 41.4 131.5 40.5 132.3 40.8
Deferred tax on investment
property revaluations 12.0 3.7 11.9 3.7 11.9 3.6
Fair value of interest
rate derivatives 1.1 0.3 1.7 0.5 1.9 0.7
EPRA Net Reinstatement
Value 1,407.3 434.3 1,336.6 421.7 1,390.2 429.0
---------------------------- ------- --------- ------- --------- ------- ---------
EPRA Net Disposal Value per share
The EPRA Net Disposal Value Represents the Group's value under a
disposal scenario, with the fair values of financial instruments,
including fixed rate debt, shown to the full extent of their
liability, calculated as follows:
30 June 2021 31 December 2020 30 June 2020
------------------ ------------------ ------------------
Pence per Pence per Pence per
GBPm share GBPm share GBPm share
------- --------- ------- --------- ------- ---------
Basic NAV 1,260.2 388.9 1,221.5 377.0 1,244.1 383.9
EPRA adjustments:
Fair value of fixed
rate debt (26.8) (8.3) (40.9) (12.7) (45.2) (13.9)
EPRA Net Disposal
Value 1,233.4 380.6 1,180.6 364.3 1,198.9 370.0
--------------------- ------- --------- ------- --------- ------- ---------
The fair value of the fixed rate debt is defined by EPRA as a
mark-to-market adjustment measured in accordance with IFRS 9 in
respect of all debt not held on the balance sheet at its fair
value. It should be noted that the fair value of debt is not the
same as a liquidation valuation, so the fair value adjustment above
does not reflect the liability that would crystallise if the debt
was repaid on the balance sheet date, which would be materially
higher.
EPRA Net Initial Yield and EPRA Topped Up Net Initial Yield
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
----------------------------------------- ------- ----------- -------
Investment property, all of which
is completed and wholly owned,
at external valuation 1,985.7 1,946.9 1,958.7
Allowance for estimated purchasers'
costs 134.0 131.5 132.2
------------------------------------------ ------- ----------- -------
Grossed up completed property portfolio
valuation 2,119.7 2,078.4 2,090.9
------------------------------------------ ------- ----------- -------
Annualised cash passing rental
income 105.9 98.3 90.4
Annualised non-recoverable property
outgoings (1.0) (1.0) (0.9)
------------------------------------------ ------- ----------- -------
Annualised net rents 104.9 97.3 89.5
Notional rent increase on expiry
of rent concessions, rent free
periods and other lease incentives 8.8 15.0 21.5
------------------------------------------ ------- ----------- -------
Topped-up annualised net rents 113.7 112.3 111.0
------------------------------------------ ------- ----------- -------
EPRA Net Initial Yield 4.95% 4.68% 4.28%
EPRA Topped Up Net Initial Yield 5.36% 5.40% 5.31%
------------------------------------------ ------- ----------- -------
The EPRA Net Initial Yields reflect temporary rent concessions
on the Budget Hotels and Pubs portfolios arising as a result of the
Covid-19 pandemic.
EPRA Vacancy Rate
30 June 31 December 30 June
2021 2020 2020
GBP000 GBP000 GBP000
--------------------- ------- ----------- -------
ERV of vacant space 40 40 40
ERV of portfolio 114,770 111,536 113,281
EPRA Vacancy Rate 0% 0% 0%
---------------------- ------- ----------- -------
EPRA and Adjusted EPRA EPS
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
--------------------------------- ---------- ------------ ----------
Basic earnings attributable
to shareholders 63.6 (113.6) (115.0)
EPRA adjustments :
Investment property revaluation (36.5) 166.5 142.0
Deferred tax charge / (credit) 0.7 - (0.1)
EPRA earnings 27.8 52.9 26.9
Non-EPRA adjustments :
Rent Smoothing Adjustments (7.6) (23.7) (9.8)
Rent deferrals (0.8) (17.7) (0.6)
Adjusted EPRA earnings 19.4 11.5 16.5
--------------------------------- ---------- ------------ ----------
Six months Six months
to Year to to
30 June 31 December 30 June
Weighted average number of shares 2021 2020 2020
in issue Number Number Number
----------------------------------- ----------- ------------ -----------
EPRA EPS 324,035,146 324,035,146 324,035,146
Adjustment for weighting of
shares issued during the period
* - (258,918) (520,682)
----------------------------------- ----------- ------------ -----------
Adjusted EPRA EPS 324,035,146 323,776,228 323,514,464
----------------------------------- ----------- ------------ -----------
* EPRA EPS is calculated on the assumption that shares issued in
settlement of any incentive fee were in issue throughout the
period. Adjusted EPRA EPS is calculated using a weighted average
number of shares reflecting the actual date on which those shares
are issued.
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
Pence Pence Pence
per share per share per share
------------------- ---------- ------------ ----------
EPRA EPS 8.6 16.3 8.3
Adjusted EPRA EPS 6.1 3.5 5.1
------------------- ---------- ------------ ----------
EPRA Capital Expenditure
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
Wholly owned property GBPm GBPm GBPm
------------------------------------ ---------- ------------ ----------
Acquisitions - - -
Development - - -
Expenditure on completed investment
property held throughout the
year: -
Creation of additional lettable
area - - -
Enhancing existing space - - -
Other 0.1 0.5 0.2
------------------------------------ ---------- ------------ ----------
EPRA Capital Expenditure 0.1 0.5 0.2
------------------------------------ ---------- ------------ ----------
The Group does not have any joint ventures or other partial
interests in investment property so any EPRA capital expenditure
relates to wholly owned properties. The Group does not capitalise
any overheads or interest into its property portfolio and it does
not develop properties.
The Group's properties are let on full repairing and insuring
leases, so the Group incurs no routine ongoing capital expenditure
on its property portfolio except at Manchester Arena, where such
costs relating to the structure and common areas are liabilities of
the Group in the first instance. The EPRA Capital Expenditure in
the current period represents GBP0.1 million (year to 31 December
2020: GBP0.2 million; six months to 30 June 2020: GBP0.2 million)
for capital works at Manchester Arena within the service charge
that is not recoverable from tenants. The remaining expenditure in
the prior year comprises GBP0.3 million for the acquisition of car
park equipment.
EPRA Cost Ratios
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
---------------------------------------- ---------- ------------ ----------
Revenue (note 4 ) 60.5 121.7 60.9
Tenant contributions to property
outgoings (note 4 ) (0.8) (1.7) (0.9)
---------------------------------------- ---------- ------------ ----------
EPRA gross rental income 59.7 120.0 60.0
Non-recoverable property operating
expenses (note 5 ) * 0.4 1.7 1.1
Less headlease costs included
in non-recoverable property operating
expenses (note 5 ) (0.2) (0.6) (0.3)
Administrative expenses (note
6 ) 7.5 17.0 8.1
---------------------------------------- ---------- ------------ ----------
EPRA costs including direct vacancy
costs 7.7 18.1 8.9
Direct vacancy costs (0.2) (0.3) (0.1)
---------------------------------------- ---------- ------------ ----------
EPRA costs excluding direct vacancy
costs 7.5 17.8 8.8
---------------------------------------- ---------- ------------ ----------
EPRA Cost Ratio including direct
vacancy costs 12.9% 15.1% 14.8%
EPRA Cost Ratio excluding direct
vacancy costs 12.6% 14.8% 14.6%
---------------------------------------- ---------- ------------ ----------
* included within GBP1.2 million (year to 31 December 2020:
GBP3.3 million; six months to 30 June 2020 GBP2.0 million) of
property costs payable by the Group are GBP0.8 million (31 December
2020: GBP1.7 million; 30 June 2020 GBP0.9 million) of headlease and
other costs that are recoverable from the tenants.
The Group capitalises the initial direct costs incurred in
obtaining a lease which are then charged to the income statement
over the term of the relevant lease. During the period, costs of
GBPnil (year to 31 December 2020: GBP54,000; six months to 30 June
2020 GBP53,000) were capitalised, and GBP3,000 (year to 31 December
2020: GBP4,000; six months to 30 June 2020: GBP2,000) was released
from capitalised costs and charged to the income statement. Costs
of GBP16,000 (year to 31 December 2020: GBP568,000; six months to
30 June 2020 GBP534,000) for negotiating and documenting Covid-19
rent concessions, and rent review and other letting costs of
GBP19,000 (year to 31 December 2020 and six months to 30 June 2020:
GBP35,000) are included in non-recoverable property operating
expenses. A further GBP3,000 (year to 31 December 2020 and six
months to 30 June 2020: GBP106,000) relating to the amendment of
loan facilities as a result the Covid-19 rent concessions is
included in finance costs. The Group otherwise has no capitalised
overheads or other operating expenses and does not capitalise
interest.
Adjusted EPRA Cost Ratios
The Group also calculates an Adjusted EPRA Cost Ratio excluding
revenue recognised ahead of cash receipt as a result of Rent
Smoothing Adjustments (described in note 4 ) to present what the
Board considers to be a measure of cost efficiency more directly
relevant to its business model.
Six months Six months
to Year to to
30 June 31 December 30 June
2021 2020 2020
GBPm GBPm GBPm
------------------------------------- ---------- ------------ ----------
EPRA gross rental income 59.7 120.0 60.0
Rent Smoothing Adjustments (7.6) (23.6) (9.8)
------------------------------------- ---------- ------------ ----------
Adjusted EPRA gross rental income
excluding
non-cash items 52.1 96.4 50.2
EPRA costs including direct vacancy
costs 7.7 18.1 8.9
Direct vacancy costs (0.2) (0.3) (0.1)
EPRA costs excluding direct vacancy
costs 7.5 17.8 8.8
------------------------------------- ---------- ------------ ----------
Adjusted EPRA Cost Ratio including
direct vacancy costs 14.8% 18.7% 17.6%
Adjusted EPRA Cost Ratio excluding
direct vacancy costs 14.4% 18.4% 17.5%
------------------------------------- ---------- ------------ ----------
Like for like rental growth by portfolio
Leisure Healthcare Budget Hotels Total
Passing rent GBPm GBPm GBPm GBPm
------- ---------- ------------- -------
At 1 January 2021 47.5 36.6 29.2 113.3
Movement in Euro exchange
rate (0.3) - - (0.3)
----------------------------- ------- ---------- ------------- -------
Like for like passing
rent 47.2 36.6 29.2 113.0
Rental uplifts 0.7 1.0 - 1.7
At 30 June 2021 47.9 37.6 29.2 114.7
----------------------------- ------- ---------- ------------- -------
Increase in like for like
passing rent 1.6% 2.8% - 1.5%
Portfolio valuation at
30 June 2021 806.9 790.4 388.4 1,985.7
----------------------------- ------- ---------- ------------- -------
Leisure Healthcare Budget Hotels Total
Passing rent GBPm GBPm GBPm GBPm
------- ---------- ------------- -------
At 1 January 2020 46.8 35.6 28.3 110.7
Movement in Euro exchange
rate 0.4 - - 0.4
----------------------------- ------- ---------- ------------- -------
Like for like passing
rent 47.2 35.6 28.3 111.1
Rental uplifts 0.3 1.0 0.9 2.2
At 31 December 2020 47.5 36.6 29.2 113.3
----------------------------- ------- ---------- ------------- -------
Increase in like for like
passing rent 0.8% 2.8% 2.9% 2.0%
Portfolio valuation at
31 December 2020 793.0 769.1 384.8 1,946.9
----------------------------- ------- ---------- ------------- -------
Leisure Healthcare Budget Hotels Total
Passing rent GBPm GBPm GBPm GBPm
------- ---------- ------------- -------
At 1 January 2020 46.8 35.6 28.3 110.7
Movement in Euro exchange
rate 0.4 - - 0.4
----------------------------- ------- ---------- ------------- -------
Like for like passing
rent 47.2 35.6 28.3 111.1
Rental uplifts (0.3) 1.0 - 0.7
At 30 June 2020 46.9 36.6 28.3 111.8
----------------------------- ------- ---------- ------------- -------
Increase in like for like
passing rent (0.8)% 2.8% - 1.0%
Portfolio valuation at
30 June 2020 804.8 769.1 384.8 1,958.7
----------------------------- ------- ---------- ------------- -------
Like for like figures exclude foreign currency translation
movements and any properties not held throughout the period.
Like for like rental growth by country
Total
UK Germany portfolio
Passing rent GBPm GBPm GBPm
------- ------- ----------
At 1 January 2021 106.2 7.1 113.3
Movement in Euro exchange
rate - (0.3) (0.3)
------------------------------ ------- ------- ----------
Like for like passing
rent 106.2 6.8 113.0
Rental uplifts 1.7 - 1.7
At 30 June 2021 107.9 6.8 114.7
------------------------------ ------- ------- ----------
Increase in like for like
passing rent 1.6% - 1.5%
Portfolio valuation at
30 June 2021 1,872.0 113.7 1,985.7
------------------------------ ------- ------- ----------
Total
UK Germany portfolio
Passing rent GBPm GBPm GBPm
------- ------- ----------
At 1 January 2020 104.2 6.5 110.7
Movement in Euro exchange
rate - 0.4 0.4
------------------------------ ------- ------- ----------
Like for like passing
rent 104.2 6.9 111.1
Rental uplifts 2.0 0.2 2.2
At 31 December 2020 106.2 7.1 113.3
------------------------------ ------- ------- ----------
Increase in like for like
passing rent 1.9% 3.3% 2.0%
Portfolio valuation at
31 December 2020 1,831.6 115.3 1,946.9
------------------------------ ------- ------- ----------
Total
UK Germany portfolio
Passing rent GBPm GBPm GBPm
------- ------- ----------
At 1 January 2020 104.2 6.5 110.7
Movement in Euro exchange
rate - 0.4 0.4
------------------------------ ------- ------- ----------
Like for like passing
rent 104.2 6.9 111.1
Rental uplifts 0.7 - 0.7
At 30 June 2020 104.9 6.9 111.8
------------------------------ ------- ------- ----------
Increase in like for like
passing rent 1.0% - 1.0%
Portfolio valuation at
30 June 2020 1,842.2 116.5 1,958.7
------------------------------ ------- ------- ----------
Like for like figures exclude foreign currency translation
movements and any properties not held throughout the period.
Rent Smoothing Adjustments
The Group's revenue recognition accounting policy, in line with
IFRS, requires the impact of any fixed or minimum rental uplifts to
be spread evenly over the term of a lease and as a result there is
a material mismatch between the rental cash flows and rental
revenues shown in the income statement. The adjustments relate to
the 41% of contracted portfolio rents (before rent concessions)
that are subject to fixed uplifts, the 6% of contracted portfolio
rents with minimum uplifts on RPI-linked reviews, and the temporary
Covid-19 rent concessions agreed with the tenants of the Budget
Hotels and Pubs portfolios in 2020 which represent lease
modifications under IFRS 16.
A receivable is included in the book value of investment
property for the amount of rent included in the income statement
ahead of actual cash receipts. A receivable relating to fixed and
minimum uplifts increases over broadly the first half of the later
of the lease commencement date or the date of acquisition, then
unwinds to zero over the remainder of each lease term. If a lease
is extended, the receivable at the date of modification is not
adjusted but the smoothing is recalculated over the new term from
that date. A receivable relating to rent concessions increases over
the period during which the rent is reduced, then unwinds to zero
over the remainder of each lease term.
So as not to overstate the portfolio value, any movement in the
receivable is offset against property revaluation movements. Since
this adjustment initially increases rental income and reduces
property revaluation gains (and vice versa in the second half of
each lease term or once the rent concession has expired) it does
not change the Group's retained earnings or net assets. Income
recognised in this way in excess of cash flow is also taken out of
Adjusted EPRA EPS so as not to artificially flatter the Group's
Dividend Cover.
The impact of the Rent Smoothing Adjustments on the Group's
balance sheet as at 30 June 2021 is as follows:
Receivable
at 30 June
2021 Maximum receivable Date of maximum
GBPm GBPm receivable
------------------------------------ ------------- -------------------- -----------------
Fixed/minimum uplifts recognised
ahead of cash receipt:
Healthcare - Ramsay hospitals 110.1 111.8 March 2023
German leisure * 36.8 40.3 June 2026
Healthcare - Lisson Grove hospital 12.8 20.6 March 2035
The Brewery 5.0 23.5 June 2041
Manchester Arena 3.4 8.9 June 2032
Pubs 0.6 2.0 March 2030
------------------------------------ ------------- -------------------- -----------------
168.7 207.1
Covid-19 related rent concessions:
Budget Hotels 17.3 21.1 Dec 2021
Pubs 1.1 1.1 Sept 2020
------------------------------------ ------------- -------------------- -----------------
187.1 229.3
------------------------------------ ------------- -------------------- -----------------
* at the period end Euro conversion rate of EUR1:GBP 0.86.
The future impact of this adjustment would change if there were
acquisitions, disposals or lease variations of properties with
fixed or minimum RPI-linked rental uplifts. Assuming no change in
the portfolio, the change in rental income that was recognised in
the current period and is expected for each of the next three
financial years (with the German adjustment translated at the 2021
average Euro conversion rate of EUR1:GBP 0.87) is as follows:
Fixed or minimum
RPI-linked Covid-19 rent Six months
uplifts concessions to 30 June
GBPm GBPm GBPm
------ ------------------ --------------- -------------
2021 7.3 7.3 14.6
2022 5.7 (1.2) 4.5
2023 4.3 (1.2) 3.1
2024 2.9 (1.2) 1.7
------- ------------------ --------------- -------------
Important notes
Forward looking information
This document includes forward looking statements which are
subject to risks and uncertainties. You are cautioned that forward
looking statements are not guarantees of future performance and
that if risks and uncertainties materialise, or if the assumptions
underlying any of these statements prove incorrect, the actual
results of operations and financial condition of the Group may
differ materially from those made in, or suggested by, the forward
looking statements. Other than in accordance with its legal or
regulatory obligations, the Company undertakes no obligation to
review, update or confirm expectations or estimates or to release
publicly any revisions to any forward looking statements to reflect
events that occur or circumstances that arise after 8 September
2021.
Rounding of financial statements
The condensed financial statements, including comparative
amounts, and certain other figures in this document are presented
in millions of pounds, rounded to one decimal place. Accordingly,
figures shown in the same category presented in different tables
may vary slightly and figures shown as totals in certain tables may
not be an arithmetic aggregation of the figures that precede them
as a result of rounding.
Glossary
Adjusted EPRA EPS EPRA EPS adjusted to exclude non-cash and non-recurring
costs, calculated on the basis of the time-weighted
number of shares in issue
CVA Company Voluntary Arrangement, a process under
UK insolvency law which allows a company to reschedule
its debts with the consent of a specified majority
of its creditors
Dividend Cover Adjusted EPRA EPS divided by dividends per share
EPRA European Public Real Estate Association
EPRA Cost Ratio An EPRA measure of operating costs as a percentage
of revenue, intended to facilitate comparison
of the operating efficiency of property companies
EPRA EPS A measure of EPS designed by EPRA to present
underlying earnings from core operating activities
EPRA Guidance The EPRA Best Practices Recommendations Guidelines
October 2019
EPRA NTA A measure of NAV designed by EPRA to present
the fair value of a company on a long term basis.
For these purposes, the Group uses EPRA Net Tangible
Assets as defined in the EPRA Guidance.
EPS Earnings per share, calculated as the profit
or loss for the period after tax attributable
to shareholders of the Company divided by the
weighted average number of shares in issue in
the period
ERV Estimated Rental Value: the independent valuers'
opinion of the open market rent which, on the
date of valuation, could reasonably be expected
to be obtained on a new letting or rent review
of a property
IFRS International Financial Reporting Standards
Investment Adviser Prestbury Investment Partners Limited
Investment Advisory The agreement between the Company (and its subsidiaries)
Agreement and the Investment Adviser, key terms of which
are set out on pages 204 to 221 of the Secondary
Placing Disclosure Document as modified by the
amendments to the bases of fee calculation set
out in note 20 to the condensed financial statements
Key Operating Asset An asset where the operations conducted from
the property are integral to the tenant's business
LTV Loan to value: the outstanding amount of a loan
as a percentage of the value of property on which
it is secured
Management Team Nick Leslau, Mike Brown, Tim Evans, Sandy Gumm
and Ben Walford, who are directors of the Investment
Adviser
NAV Net asset value
Net Initial Yield Annualised net rents on investment properties
as a percentage of the investment property valuation,
less purchaser's costs
Net Loan To Value LTV calculated on the gross loan amount less
or Net LTV cash balances
REIT Real Estate Investment Trust
Rent Smoothing Adjustments The adjustments required to recognise any mismatch
between rent received in the income statement
and cash rent received
Running Yield The anticipated Net Initial Yield at a future
date, taking account of any rent reviews or other
changes in rent in the intervening period
Secondary Placing The Secondary Placing Disclosure Document dated
Disclosure Document 14 March 2016 which is available in the Investor
Centre of the Company's website under "Circulars
to Shareholders/2016"
Topped Up Net Initial Net Initial Yield adjusted to reflect the contracted
Yield rent for those properties which are subject to
a temporary rent concession at the valuation
date
Total Accounting The movement in EPRA NTA over a period plus dividends
Return paid in the period, expressed as a percentage
of the EPRA NTA at the start of the period
Total Shareholder The movement in share price over a period plus
Return dividends paid in that period, expressed as a
percentage of the share price at the start of
the period
Uncommitted Cash Cash balances not subject to fixed charges in
favour of lenders, net of any creditors or other
cash commitments at the balance sheet date
Weighted Average The term to the first tenant break or expiry
Unexpired Lease Term of the leases in the portfolio, weighted by rental
value before rent concessions, also referred
to as WAULT
Company Information
Registered office Cavendish House, 18 Cavendish Square, London W1G
0PJ
Directors Martin Moore, Non-Executive Chairman
Mike Brown
Leslie Ferrar, Chairman of the Audit Committee
Sandy Gumm
Jonathan Lane, Chairman of the Nominations Committee
Nick Leslau
Ian Marcus, Senior Independent Director and Chairman
of the Remuneration Committee
Company Secretary Sandy Gumm
Investment Adviser Prestbury Investment Partners Limited
Cavendish House, 18 Cavendish Square, London W1G
0PJ
Nominated Adviser Stifel Nicolaus Europe Limited
and Broker 150 Cheapside, London EC2V 6ET
Auditors BDO LLP
55 Baker Street, London W1U 7EU
Property valuers CBRE Limited
St Martin's Court, 10 Paternoster Row, London EC4M
7HP
Christie & Co
Whitefriars House, 6 Carmelite Street, London EC4Y
0BS
Derivatives valuers Chatham Financial Europe Limited
12 St James's Square, London SW1Y 4LB
Financial PR adviser FTI Consulting LLP
200 Aldersgate, Aldersgate Street, London EC1A
4HD
Email: SecureIncomeREIT@fticonsulting.com
Registrar Link Group
10(th) Floor, Central Square, 29 Wellington Street,
Leeds LS1 4DL
Registrar's helpline: 0371 664 0300
Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international
rate. The helpline is open 9.00am - 5.30pm, Monday
to Friday excluding public holidays in England
and Wales
Registrar's email: ShareholderEnquiries@LinkGroup.co.uk
Company website www.SecureIncomeREIT.co.uk
Company email Enquiries@SecureIncomeREIT.co.uk
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