TIDMWHR
RNS Number : 4601T
Warehouse REIT PLC
15 November 2023
15 November 2023
Warehouse REIT plc
(the "Company" or "Warehouse REIT", together with its
subsidiaries, the "Group")
Resilient occupier market and active asset management supports
leasing momentum and valuation uplift, providing a strong platform
to drive rents and earnings
Neil Kirton, Chairman of Warehouse REIT commented:
"In June we set out a plan to drive earnings by capturing
portfolio reversion, selling non-core assets to reduce expensive
debt and progressing Radway Green. We have made good progress. Our
focus on multi-let industrials where demand is resilient and supply
is tight has supported further leasing momentum; we have delivered
asset sales significantly ahead of book value and strengthened the
balance sheet with 88% of our debt now hedged.
"A consensus is emerging that interest rates will remain 'higher
for longer' and we are managing our business accordingly. Key to
this is delivering value for shareholders at Radway Green, which is
a highly attractive development but not one we will undertake
alone. We have therefore launched a process for a sale of the
whole, or a majority, of the asset, which will enable the business
to focus on what it does well - active asset management. This is
also the most effective way to deliver sustainable earnings growth
over the long term."
Portfolio valuation increase driven by ERV growth, with
valuation yields stable
-- Like-for-like portfolio valuation increased 1.0% to GBP811.3
million (31 March 2023: GBP828.8 million)
o Yields broadly flat, with like-for-like growth in estimated
rental values of 2.8% benefitting from our leasing activity;expect
ERV growth for the year of 5-6%
-- EPRA NTA per share up 0.9% to 123.7p (31 March 2023: 122.6p)
with a total accounting return of 3.5%
Leasing activity capturing reversion, driving rents 31.8% ahead
of previous rents
-- 48 lease events over 0.5 million sq ft securing GBP3.4
million in contracted rent, including:
o GBP0.7 million from 23 new lettings, 21.5% ahead of previous
contracted rent;
o GBP0.9 million from 15 renewals, 36.7% ahead of previous
contracted rent; and
o GBP1.8 million from 10 rent reviews, 32.4% ahead of previous
contracted rent
-- 1.7% like-for-like growth in contracted rents, with 11.7%
portfolio reversion as at 30 September 2023
-- Occupancy stable at 96.0% with c.98.0% of HY24 rent already collected
-- Post period-end, a further 14 lease events over 0.7 million
sq ft, 20.5% ahead of previous contracted rent taking like-for-like
growth in contracted rents to 3.4% for the first seven months
Targeted disposal plan well progressed, capitalising on pockets
of demand with sales ahead of book
-- GBP39.6 million of non-core asset sales completed, 20.1%
ahead of March 2023 book value; generating GBP5.4 million of
profit
-- Total sales of GBP94.3 million since disposal plan announced in November 2022
-- Evaluating options to deliver value at Radway Green, Crewe to further reduce debt
-- GBP21.0 million of debt repaid during the period and GBP7.8
million allocated to value-enhancing capital expenditure
initiatives
Robust financial performance and sound financial management
-- Operating profit up 1.5% to GBP17.3 million (30 Sept 2022:
GBP17.0 million), reflecting leasing momentum and reduction in
total cost ratio of 440 basis points to 23.2%
-- Adjusted earnings of GBP9.8 million (30 Sept 2022: GBP11.1
million), primarily reflecting increased debt costs
-- Adjusted EPS of 2.3p (30 Sept 2022: 2.6p)
-- Dividend maintained at 3.2p; dividend cover expected to
improve as ongoing asset management initiatives conclude; fully
cash covered when profits on disposals included
-- GBP320.0 million of debt refinanced with more favourable
covenants and additional interest rate caps of GBP50.0 million
acquired; 87.7% of debt hedged against interest rate volatility
with no major refinancing until 2028
-- LTV at 34.0%, with significant headroom of GBP35.0 million in cash and available facilities
Progressing our sustainability strategy
-- 64.1% of the portfolio now EPC A-C rated (31 March 2023: 60.2%)
Financial highlights
Six months to 30 September 2023 2022
Gross property income GBP23.3m GBP24.1m
------------- -----------
Operating profit before change in GBP17.3m GBP17.0m
value of investment properties
------------- -----------
IFRS profit/(loss) before tax GBP22.0m (GBP46.4m)
------------- -----------
IFRS earnings per share 5.2p (10.9p)
------------- -----------
EPRA earnings per share 1.0p 2.6p
------------- -----------
Adjusted earnings per share 2.3p 2.6p
------------- -----------
Dividends per share 3.2p 3.2p
------------- -----------
Total accounting return 3.5% (9.9%)
------------- -----------
Gross to net rental income ratio 95.1% 94.1%
------------- -----------
Total cost ratio 23.2% 27.6%
------------- -----------
As at 30 September 31 March
2023 2023
------------- -----------
Portfolio valuation GBP811.3m GBP828.8m
------------- -----------
IFRS net asset value GBP536.8m GBP528.5m
------------- -----------
IFRS net asset value per share 126.4p 124.4p
------------- -----------
EPRA net tangible assets ("NTA") per
share 123.7p 122.6p
------------- -----------
Loan to value ("LTV") ratio 34.0% 33.9%
------------- -----------
Investment portfolio statistics
As at 30 September 31 March
2023 2023
Contracted rent GBP43.8m GBP45.3m
------------- ----------
ERV GBP52.0m GBP53.3m
------------- ----------
Passing rent GBP41.3m GBP41.2m
------------- ----------
WAULT to expiry 5.2 years 5.5 years
------------- ----------
WAULT to first break 4.4 years 4.5 years
------------- ----------
EPRA topped up yield 5.5% 5.5%
------------- ----------
Equivalent yield 6.3% 6.5%
------------- ----------
Occupancy 96.0% 95.8%
------------- ----------
Meeting
A meeting for professional investors and analysts will be held
at 9.00am on 15 November 2023 at the offices of FTI Consulting, 200
Aldersgate, London EC1A 4HD. Registration is required for this
event, please email FTI Consulting at
warehousereit@fticonsulting.com should you wish to attend.
The results presentation will also be available in the Investor
Centre section of the Group's website.
Enquiries
Warehouse REIT plc
via FTI Consulting
Tilstone Partners Limited
Simon Hope, Peter Greenslade, Paul Makin, Jo Waddingham
+44 (0) 1244 470 090
G10 Capital Limited (part of the IQEQ Group, AIFM)
Maria Baldwin
+44 (0) 207 397 5450
FTI Consulting (Financial PR & IR Adviser to the
Company)
Dido Laurimore, Richard Gotla
+44 (0) 7904 122207 / WarehouseReit@fticonsulting.com
Further information on Warehouse REIT is available on its
website: warehousereit.co.uk
Notes
Warehouse REIT is a UK Real Estate Investment Trust that invests
in UK warehouses, focused on multi-let assets in industrial hubs
across the UK.
We provide a range of warehouse accommodation in key locations
which meets the needs of a broad range of occupiers. Our focus on
multi-let assets means we provide occupiers with greater
flexibility so we can continue to match their requirements as their
businesses evolve, encouraging them to stay with us for longer.
We invest in our business by selectively acquiring assets with
potential and by delivering opportunities we have created. Through
pro-active asset management we unlock the value inherent in our
portfolio, helping to capture rising rents and driving an increase
in capital values to deliver strong returns for our investors over
the long term.
Sustainability is embedded throughout our business, helping us
meet the expectations of our stakeholders today and futureproofing
our business for tomorrow.
The Company is an alternative investment fund ("AIF") for the
purposes of the AIFM Directive and as such is required to have an
investment manager who is duly authorised to undertake the role of
an alternative investment fund manager ("AIFM"). The AIFM and the
Investment Manager is currently G10 Capital Limited (Part of the
IQEQ Group).
Forward-looking statements
Certain information contained in these half-year results may
constitute forward-looking information. This information relates to
future events or occurrences or the Company's future performance.
All information other than information of historical fact is
forward-looking information. The use of any of the words
"anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "project", "should", "believe", "predict" and "potential"
and similar expressions are intended to identify forward-looking
information. This information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information. No assurance can be given that this
information will prove to be correct, and such forward looking
information included in this announcement should not be relied
upon. Forward-looking information speaks only as of the date of
this announcement.
The forward-looking information included in this announcement is
expressly qualified by this cautionary statement and is made as of
the date of this announcement. The Company and its Group do not
undertake any obligation to publicly update or revise any
forward-looking information except as required by applicable
securities laws.
Chairman's statement
When we announced our full-year results in June, we reiterated
our focus on driving earnings through capturing the reversion in
our portfolio, reducing the variable rate element of our debt and
delivering value at our Radway Green development in Crewe. We are
pleased to be reporting good progress against these targets with
0.5 million sq ft of leasing activity, GBP39.6 million of asset
sales completed, and a GBP320 million debt refinancing, extending
the term and improving the covenants on our debt. Radway Green is
an outstanding development opportunity but in the current
environment, our focus is on extracting value from it in the near
term.
Our leasing activity over the six months has generated an
additional GBP1.2 million in rent, bringing contracted rent to
GBP43.8 million as at 30 September 2023 with a like-for-like
increase of 1.7% for the six-month period. New lettings have been
achieved on average 21.5% ahead of previous rent while renewals and
rent reviews were 36.7% and 32.4% ahead respectively. This is a
good performance and reflects both the expertise of the Tilstone
team as well as our focus on multi-let industrial space. Ours is a
scarce asset class with new development constrained by a strict
planning environment and with average capital values of GBP92.4 per
sq ft well below rebuild cost, new development is rarely economic.
At the same time, it appeals to a broad spectrum of occupier, from
light industrial, to technology, warehousing and e-commerce. This
is reflected in our occupier base which comprises businesses across
a range of industries and is a key advantage from a risk
diversification perspective.
We have been particularly pleased with the performance of
Bradwell Abbey, Milton Keynes which we acquired 15 months ago. An
undermanaged estate in an emerging economic hub, it is an excellent
case study of what we do well. Following a partial refurbishment,
we are now achieving top rents of c. GBP10 psf on the largest units
ranging up to GBP19 psf on the smaller units; this compares to
average rents of GBP7.89 per sq ft on acquisition. Our improvements
have also increased EPC A-C rated space to 71% from 38% at
acquisition.
The context for the half year has been an uncertain economic
environment with perhaps some greater clarity over peak interest
rates tempered by the growing 'higher for longer' perspective.
Against this backdrop, we have prioritised optimising the balance
sheet to enable the business to focus on its competitive advantage
in asset management and with that in mind, we are evaluating our
options with respect to Radway Green. With potential for over 1.8
million sq ft, this is an exceptionally well-located logistics
development opportunity, just 1.5 miles from Junction 16 of the M6.
We assembled the site through a series of acquisitions starting in
2017 and we achieved full planning consent during the period,
making this a highly attractive opportunity for asset owners or
developers with a low cost of capital. In the current environment,
it would not be prudent to progress this development using our own
balance sheet. In addition, the pre-let we were close to signing at
the start of the period has now fallen away as the proposed
occupier required the space sooner than originally envisaged. While
disappointing not to be progressing this development as planned, we
consider a sale of the whole or a majority of the scheme to be in
the best interests of shareholders and have therefore launched a
formal process to deliver this. We will update the market as
appropriate.
The Board is alert to all opportunities to deleverage, but not
at any price. We have completed on the sale of GBP39.6 million of
properties since 1 April 2023, all of which are non-core or where
we have successfully delivered on our asset management initiatives.
Sales were on average 20.1% ahead of book value, demonstrating that
there are pockets of demand for well-let and well-located
industrial assets. This continuing programme of disposals not only
strengthens our balance sheet, but also progresses the reshaping of
our portfolio, increasing our weighting towards multi-let assets in
leading industrial hubs.
Financial performance
We reported a 1.5% increase in operating profits before
interest, reflecting the impact of disposals, offset by our
successful leasing activity and a fall in overall operating
expenditure. However, with SONIA increasing 300 basis points since
1 October 2022, adjusted earnings per share fell 11.5% to 2.3 pence
(H1 FY22: 2.6 pence).
Yields have continued to stabilise and were broadly flat in the
period. ERV growth across the portfolio was 2.8%, demonstrating the
continuing attraction of our assets and driving an increase of 1.0%
in the like-for-like value of our portfolio to GBP811.3 million.
EPRA NTA per share increased 0.9% to 123.7 pence (31 March 2023:
122.6 pence), contributing to a total accounting return of 3.5%.
Reflecting our very strong performance in the years following IPO,
our average total accounting return is 7.8% per annum.
We took further steps to optimise our capital structure in June
2023 by refinancing our previous GBP320 million facility and
extending the tenure from January 2025 to June 2028. The new
facility comprises a GBP220 million term loan and a GBP100 million
revolving credit facility with a club of four lenders; HSBC, Bank
of Ireland, NatWest and Santander. It was agreed with more
favourable covenants, reflecting the strength of our banking
relationships as well as the quality of our portfolio.
Last year, we acquired GBP200 million of interest rate caps,
fixing SONIA at 1.5% and in November this year, we are replacing
the GBP30 million of caps expiring this month with GBP50 million of
caps, fixing SONIA at 2.0% and effectively hedging 87.7% of our
debt.
These measures significantly reduce the risk that earnings are
impacted by changes in the cost of finance, providing greater
confidence in our earnings trajectory.
As at 30 September 2023, the Group's loan to value remains
within our target range of 30% to 40%, at 34.0%, with GBP35.0
million of headroom within our new facilities.
Environmental, social and governance
ESG considerations are now firmly embedded in the way we do
business. Last year, we set out an annual commitment to reduce our
Scope 1 and 2 emissions by 4.2%, but we also recognise that we have
a key role to play in helping our occupiers to reduce their
emissions. Accurately measuring Scope 3 emissions is an important
first step and one we are focused on this year. Our close
engagement with occupiers and the steps we have taken to introduce
green leases encouraging data sharing wherever possible are already
having a positive impact in this regard. We have delivered good
progress on EPCs with 64% of the portfolio now rated EPC A - C by
sq ft, up from 60% at the start of the period.
As previously announced, Martin Meech stepped down from the
Board at the Annual General Meeting ('AGM') in September 2023. He
has made a very significant contribution to our development as a
listed company, and we wish him well for the future. Following a
comprehensive search, Dominic O'Rourke joined the Board as a
Non-Executive Director, also in September. He is currently Group
Property Director for FTSE 100 retailer Next plc, a role he has
held since 2014. His customer-facing experience in a sector that is
key for our business will be a highly positive and complementary
addition to the Board's expertise.
Outlook
Since I last wrote to you, interest rate expectations have
shifted. While peak rates may be in sight, the expectation is that
they will remain higher for longer, which inevitably has
implications for how we, and our peers, run our businesses.
Successfully restructuring our debt was the key balance sheet event
in the first half of the year and positions us well for the second
half, where our focus is on rebuilding dividend coverage. We have a
clear plan to achieve this, which includes capturing the reversion
in our portfolio, actively seeking a majority partner for or sale
of our Radway Green development and further reducing our finance
costs through asset sales and active financial management. We have
real conviction in this plan and that underpins our recommendation
to pay a second interim dividend of 1.6 pence, taking the total
dividend for the period to 3.2 pence, in line with last year.
The Board also believes that our focus on multi-let space in key
industrial hubs in the UK is one of the best places to be in real
estate. We benefit from supportive long-term trends, including
online retail and supply chain resilience but we also cater for a
broad range of other industries, reflecting our presence in
economically relevant centres in the UK. This diversity helps
protect our income and with a 'higher for longer' environment also
posing challenges for our occupiers, is a key benefit of our
business model. While we recognise there is an elevated risk around
tenant default, we are managing that appropriately, and we do
expect attractive levels of rental growth to continue across our
markets albeit at a lower, more sustainable level than in prior
years. Based on our recent trading, we would expect ERV growth for
the year to be in the region of 5-6%.
In conclusion, we firmly believe in the quality of our assets
and their potential to deliver an attractive total return over the
long-term but are also examining more immediate opportunities to
drive returns for shareholders. We set these priorities both as a
Board and significant shareholders ourselves.
Neil Kirton
Chairman
14 November 2023
Investment Advisor's report
Overview
This was a good period for the Group from an operational
perspective, with positive leasing momentum and low vacancy
contributing to a solid trading performance and uplift in
valuation. However, increased interest costs due to the 300 basis
point increase in SONIA since 1 October 2022 resulted in an 11.5%
reduction in adjusted earnings per share to 2.3p.
FY'24 priorities
At the start of the financial year, we set ourselves four
priorities. These were to:
-- continue to capture the reversionary potential of the portfolio,
-- dispose of further assets, to pay down the Group's floating
rate debt, strengthening the balance sheet and supporting
earnings;
-- progress the Radway Green development scheme; and
-- increase dividend cover by driving earnings through these actions.
We made good progress against the first two objectives in the
period which position the Group well for improving dividend cover,
our fourth objective. We are evaluating a range of options with
regards to Radway Green which will enable us to make further
progress on this in the coming period. More information can be
found in the relevant sections below.
Market overview
The long-term trends underpinning the wider industrial market,
including the dominance of e-commerce and focus on supply chain
resilience continue to play out albeit demand was more muted at the
big box end of the market, with take up back to pre-Covid averages
at 12.5 million sq ft for the six months to June (source: Savills).
Multi-let assets increasingly attract a broad range of uses
including innovation / technology, trade counters, retail,
quasi-office and business storage meaning the occupier pool is more
diverse and demand more resilient.
Void rates across the multi-let space have ticked up marginally
over the period to 8.2% for London and the South-east and 8.7% for
the rest of the UK (source: Gerald Eve) but remain well below
historic averages of 9.3% and 10.8% respectively. In London and the
South-east, where there is more reversion to capture and occupier
covenants are strong, landlords appear happy to hold out for the
right occupier rather than compromising on rents, explaining part
of the increase in vacancy. Vacancy is also notably lower in the
North-west, West and East Midlands at 6% or less.
For multi-let assets, where build cost per sq ft is typically
above capital value, new development is uneconomic in many regions.
Gerald Eve estimates that there is only 3.2 million sq ft of
multi-let space under construction with at most only 0.5 million sq
ft in any one region, having relatively limited impact on supply.
The higher cost of finance makes profitable development highly
challenging for all but those with the lowest cost of capital and
Savills report that in the big box space, there have been just 22
speculative announcements in the first half of the year compared to
39 over the comparable period last year. These dynamics are
supportive for long-term rental growth; multi-let ERVs are
estimated to be growing at an annualised rate of 7.0% in London and
the Southeast and 7.8% across the rest of the UK as at Q1 2023.
Having adjusted rapidly in the prior reporting period,
industrial yields have now effectively stabilised. This has been
driven by increased confidence in the prime end of the market and
supported by the weight of global equity which continues to target
the industrial space reflecting relatively attractive forward total
return prospects at 5.8% annualised for 2023-5, ahead of retail and
offices.
Actively managing the investment portfolio
The Group is highly focused on multi-let estates, which offer
more asset management opportunities than single-let assets,
creating more opportunities to raise the rental tone and therefore
more quickly capture the reversion created, while reducing risk by
having a more diverse range of occupiers. Multi-let assets are also
more flexible for occupiers, allowing them to scale up or down by
taking different units on the site. At 30 September 2023, multi-let
estates made up 70.4% of the portfolio by value (excluding
development land). The portfolio is spread across key economic hubs
such as the North-west, Midlands and Oxford-Cambridge Arc, in
gateway locations with access to major arterial routes and a
plentiful local labour force.
We keep the portfolio under constant review, to identify mature
or non-core assets that are candidates for disposal. This allows
the Group to pay down debt or redeploy the capital and better
focuses the portfolio on its most attractive opportunities. During
the first half, the Group disposed of five assets for GBP39.6
million, overall 20.1% ahead of book value. This brings total
disposals since our disposal plan was announced in November 2022 to
GBP94.3 million.
Disposals during in the period included Dales Manor Business
Park, Cambridge for GBP27.0 million, and smaller assets in Ipswich,
Ellesmere Port, the Isle of Wight and Cardiff. The disposals were
at a blended NIY of 5.3% and crystallised a profit of GBP5.4
million above 31 March 2023 valuations. We continue to be focused
on capital recycling and expect to make further progress in the
second half.
Following these disposals, the investment portfolio comprised
647 units across 8.0 million sq ft of space at the period end (31
March 2023: 693 units across 8.2 million sq ft). The table below
analyses the portfolio as at 30 September 2023:
Value Occupancy NIY NEY (%) Average ERV Capital
(GBPm) by ERV (%) rent (GBP value
(%) (GBP per (GBP
per sq ft) per
sq ft) sq ft)
----------------- -------- ---------- ----- -------- -------- -------- --------
Multi-let
more than
100k sq ft 367.1 94.8 5.6 6.3 5.77 6.55 89.43
Multi-let
less than
100k sq ft 150.4 96.1 6.1 6.7 6.68 7.33 97.79
Single-let
regional
distribution 129.6 100.0 5.2 5.8 5.22 5.95 93.86
Single-let
last mile 87.6 95.1 5.2 6.5 5.97 7.37 94.21
Total 734.7 96.0 5.6 6.3 5.87 6.69 92.37
Development
land 76.6
----------------- -------- ---------- ----- -------- -------- -------- --------
Total portfolio 811.3
----------------- -------- ---------- ----- -------- -------- -------- --------
At the period-end, the contracted rent roll for the investment
portfolio (excluding developments) was GBP43.8 million. The
estimated rental value (ERV) was GBP52.0 million, with the
difference reflecting GBP6.1 million of portfolio reversion and
GBP2.1 million of potential rent on vacant space. The structure of
the Group's leases supports capturing reversion, with less than 9%
of leases index linked. During the period we captured GBP0.4
million of reversion and GBP0.5 million from letting vacant space
with a further GBP0.5 million of reversion captured since 30
September 2023. More information can be found in the Leasing
Activity section below. Contracted rent from development property
was GBP0.2 million as at 30 September 2023. Total contracted rents
increased by 1.7% on a like-for-like basis during the period or
4.7% in the past 12 months.
The NIY of the Investment portfolio was 5.6% at 30 September
2023, with a reversionary yield of 6.6%. The WAULT for the
investment portfolio stood at 5.2 years (31 March 2023: 5.5
years).
Occupancy across the investment portfolio remained high at 96.0%
at the period-end (31 March 2023: 95.8%). Effective occupancy,
which excludes units under offer or undergoing refurbishment was
98.0% (31 March 2023: 98.4%), with 1.0% of the investment portfolio
under offer and a further 1.0% undergoing refurbishment at that
date.
Working with occupiers
The Group has a diverse occupier base of over 440 businesses,
with the top 15 accounting for 36.2% of the contracted rent roll
from the investment portfolio, and the top 100 generating 77.7%.
The spread of the Group's occupiers across industries and business
sizes means it is not reliant on any one occupier or industry. This
increases the Group's resilience and helps to mitigate financial
and leasing risks.
We monitor the strength of the occupier" covenants using credit
software such as Dun & Bradstreet, keeping us informed of what
impact evolving macro-economic conditions are having on their
business. During the period, we also ran a formal occupier survey,
with responses from around 50% of major occupiers. This showed that
trading conditions were the same, or better, for most respondents,
although they identified rising costs as an issue. Informal
discussions with occupiers also suggest that the very smallest
businesses may be finding it harder to adapt to higher costs, due
to lower pricing power in their markets.
Overall, the Group's occupiers appear well placed in the current
environment, and we have not yet seen a rise in corporate failures
or issues with rent collection escalate. As at 14 November 2023, we
had collected c.98.0% of the rent due in respect of the period and
we expect this to increase as we work with occupiers to collect the
outstanding amounts.
Leasing activity
The robust occupier demand described above has helped us to
continue to capture reversion in the portfolio through lease
renewals and new lettings. New leases were in line with ERVs, while
lease renewals and rent reviews are achieving strong average
uplifts against previous rental levels.
New leases
The Group completed 23 new leases on 0.1 million sq ft of space
during the period, which will generate annual rent of GBP0.7
million, 21.5% ahead of the previous contracted rent and in-line
with 31 March 2023 ERV. The level of incentives remained steady
over the period compared to the prior period.
Highlights included new leases for:
-- 20,700 sq ft at Delta Court Industrial Estate, Doncaster, to
a building and DIY supplier, on a five-year lease, at a rent of
GBP138,700 per annum, 15.7% ahead of previous contracted rent and
12.0% ahead of 31 March 2023 ERV. The letting is also the third
expansion by the occupier on the estate; and
-- 6,800 sq ft at Granby Industrial Estate, Milton Keynes, to an
event management company, on a ten-year term at a rent of
GBP57,400, 42.2% ahead of previous contracted rent and 6.3% above
the 31 March 2023 ERV.
Lease renewals
The Group continues to retain the majority of its occupiers,
with 79.0% remaining in occupation at lease expiry and 94.1% with a
break arising in the period.
There were 15 lease renewals on 0.1 million sq ft of space
during the period, generating an additional GBP0.2 million per
annum, 36.7% above the previous passing rent, and 7.8% above the
ERV.
Highlights included:
-- 21,100 sq ft at South Fort Street Edinburgh, across three
units, securing GBP200,200 of contracted rent at an average of
30.1% ahead of previous contracted rent and 5.5% ahead of 31 March
2023 ERV; and
-- 12,400 sq ft at Bradwell Abbey, Milton Keynes, across four
units, securing GBP120,000 of contracted rent at an average of
35.6% ahead of previous contracted rent and in-line with 31 March
2023 ERV.
Rent reviews
During the period, ten rent reviews were completed, generating
an additional GBP0.4 million per annum, 32.4% ahead of previous
rent and 12.1% ahead of the March 2023 ERV.
Highlights included:
-- two leases at Chittening Industrial Estate, Bristol, which
were settled at GBP390,000, 51.0% ahead of the previous contracted
rent, and 3.2% ahead of 31 March 2023 ERV; and
-- one lease at Howley Park Industrial Estate, Morley, settled
at GBP304,500, 31.5% ahead of the previous contracted rent and
15.0% ahead of the 31 March 2022 ERV.
Development activity
Radway Green is the Group's key logistics development
opportunity, in a premier location just 1.5 miles from Junction 16
of the M6 near Crewe. Targeting BREEAM Excellent, it will provide
state-of-the-art, sustainable warehouse space suitable for a
diverse range of occupiers.
The development has the potential to deliver 1.8 million sq ft
of space, across two phases. During the period, we discharged the
pre-commencement planning conditions on the 0.8 million sq ft Phase
1, allowing the contractor to start enabling and site clearance
works, to create a levelled and serviced plot. The Group also
achieved full planning permission on the remaining 1.0 million sq
ft Phase 2 having executed the s106 requirements during the first
half.
In June 2023, the Group announced that it was in discussions for
a pre-let on part of Phase 1; the proposed occupier is trading very
well and since that time has seen an acceleration in its timetable
which cannot be accommodated at Radway Green. As a result, the
pre-let has fallen away. The Group is currently evaluating a number
of options to deliver value for shareholders from this scheme which
include a sale of the whole, or a majority, of the asset but in any
event will not progress the development alone.
Capital expenditure
On average, the Group aims to invest around 0.75% of its gross
asset value ("GAV") in capital expenditure each year. This excludes
development projects and is therefore based on GAV excluding
developments. Total capital expenditure in the period was GBP2.2
million, equivalent to 0.3% of GAV excluding developments. At the
period-end, approximately 1.0% of the portfolio's ERV was under
refurbishment (31 March 2023: 1.3%). The Group's priorities when
investing in the portfolio are to drive rental growth, improve EPC
ratings and deliver other ESG improvements; approximately 20.0% of
capex spend is typically directed towards EPC-related improvements
and satisfies a minimum return of 10.0% from new capital
deployed.
Sustainability
The Group's sustainability strategy focuses on creating a
resilient portfolio, reducing the Group's carbon footprint,
supporting the Group's occupiers, and ensuring we have responsible
business foundations. We made good progress against each part of
the strategy during the first half of the financial year.
Creating a resilient portfolio
For FY24, the Group's targets include a 25% reduction in
properties with Energy Performance Certificate ("EPC") ratings of D
or E. During the first half, we reduced the number of D and E
ratings across the portfolio by c.10% both by number of units and
by square footage (on a like-for-like basis). By the period-end,
the proportion of units with A to C ratings had risen from 60.2% to
64.1%. Examples of progress include nine units at Bradwell Abbey
improving to B or C ratings. In total, we completed EPC assessments
on 85 units in the portfolio.
Reducing our footprint
In the prior year, we introduced Environmental Refurbishment and
Development Standards as part of our pathway to net zero. In the
first half of this year, we implemented a system to track
compliance with these standards.
We aim for all new utility contracts to be renewables-based and
the Group's property managers have continued to implement this
requirement.
Supporting our occupiers
We continue to engage with occupiers on sustainability matters,
to understand their issues and identify how we can work together to
address them. We ran an in-depth occupier survey at Bradwell Abbey,
Milton Keynes, which highlighted reducing energy use, LED lighting,
recycling and employee wellbeing as among their key issues. In
response to this, we are prioritising energy efficient initiatives
as part of the Group's refurbishment programme as set out above,
and we have plans for a café on the site, expected to open by
Christmas. We are rolling out similar surveys at the Group's
largest assets in the second half.
Ensuring responsible business foundations
Activities during the period included a data protection audit,
which confirmed that the Group is low risk as it does not hold or
process any sensitive data, as well as identifying some areas for
improvement.
We have also updated the Group's Modern Slavery statement and
created a supplier appointment checklist, which we are integrating
into the business. The checklist helps us to understand suppliers'
ESG credentials and ensure they are taking appropriate measures in
areas such as Modern Slavery.
We were also delighted to achieve an EPRA sBPR gold award for
the third year running, confirming our continuing dedication to
best practice sustainability reporting.
Financial review
Performance
Rental income for the period was GBP22.2 million (six months
ended 30 September 2022: GBP22.9 million), reflecting asset
disposals in the period and in the prior year, partially offset by
EPRA like-for-like rental growth of 1.3% and a full period of
ownership of Bradwell Abbey, which the Group acquired halfway
through the comparator period.
The Group's operating costs include its running costs (primarily
the management, audit, company secretarial, other professional, and
Directors' fees), and property-related costs (including legal
expenses, void costs and repairs). Total operating costs for the
six months were GBP8.7 million (six months ended 30 September 2022:
GBP10.0 million), with the cost base benefiting from a reduction in
the Investment Advisor's fee of GBP1.0 million and lower vacancy
costs. The net increase in the expected credit loss allowance was
low at GBP0.2 million (six months ended 30 September 2022: GBP0.1
million).
The total cost ratio, which is the adjusted cost ratio including
direct vacancy costs, was 23.2% (six months ended 30 September
2022: 27.6%). The ongoing charges ratio, representing the costs of
running the REIT as a percentage of NAV, was 1.4% (six months ended
30 September 2022: 1.3%).
The Group disposed of five assets in the period, resulting in a
net profit on disposal of GBP5.4 million.
At 30 September 2023, the Group recognised a gain of GBP6.8
million on the revaluation of its investment properties (six months
ended 30 September 2022: loss of GBP73.4 million), reflecting the
stabilisation of yields in the period and an increase in the
portfolio ERV of 2.8%.
Financing income in the period was GBP5.5 million (six months
ended 30 September 2022: GBP16.0 million), including GBP3.7 million
(six months ended 30 September 2022: GBP0.1 million) of interest
receipts from interest rate derivatives and a GBP1.6 million change
in the fair value of interest rate derivatives (six months ended 30
September 2022: GBP16.0 million).
Financing costs include the interest and fees on the Group's
revolving credit facility ("RCF") and term loan (see debt financing
and hedging). Total finance expenses were GBP13.0 million (six
months ended 30 September 2022: GBP5.9 million). The increase
primarily reflects the higher weighted average cost of debt, with
the SONIA reference rate having increased by 300 basis points
between the two periods. While the impact has been partly mitigated
by the interest rate caps taken out in the previous financial year
(see below), the all-in cost of debt for the period was 4.7% (six
months ended 30 September 2022: 2.8%). We aim to continue to reduce
the Group's variable-rate debt through further asset disposals.
Finance expenses in the period also included GBP1.7 million
relating to the accelerated amortisation of loan issue costs as a
result of the debt refinancing in the period (see below).
The statutory profit before tax was GBP22.0 million (six months
ended 30 September 2022: GBP46.4 million loss).
The Group has continued to comply with its obligations as a REIT
and the profits and capital gains from its property investment
business are, therefore, exempt from corporation tax. The
corporation tax charge for the period was therefore GBPnil (six
months ended 30 September 2022: GBPnil).
Earnings per share ("EPS") under IFRS was 5.2 pence (six months
ended 30 September 2022: 10.9 pence loss per share). EPRA EPS was
1.0 pence (six months ended 30 September 2022: 2.6 pence). Adjusted
earnings per share was 2.3 pence (six months ended 30 September
2022 (restated): 2.6 pence).
Dividends
The Company has declared the following interim dividends in
respect of the period:
Quarter to Declared Paid/to be Amount (pence)
paid
-------------- ---------------- ---------------- ---------------
30 June 2023 31 August 2023 6 October 2023 1.6
30 September 15 November 29 December
2023 2023 2023 1.6
Total 3.2
-------------------------------------------------- ---------------
The total dividend of 3.2 pence per share for the interim period
is in line with the Group's target for the year of 6.4 pence and
was 71.9% covered by adjusted EPS. Both interim dividends were
property income distributions. The cash cost of the total dividend
for the period will be GBP13.6 million (six months ended 30
September 2022: GBP14.0 million).
Valuation and net asset value
The portfolio was independently valued by CBRE as at 30
September 2023, in accordance with the internationally accepted
RICS Valuation - Global Standards 2020 (incorporating the
International Valuation Standards) (the "Red Book"), and the RICS
Valuation - Global Standards 2021 - UK national supplement.
The portfolio valuation was GBP811.3 million (31 March 2023:
GBP828.8 million), representing a 1.0% like-for-like valuation
increase or 1.3% valuation increase on the investment portfolio,
after taking account of capital expenditure of GBP7.8 million. The
EPRA NIY was 5.2% (31 March 2023: 5.0%) and the EPRA topped up NIY
was 5.5% (31 March 2023: 5.5%).
The valuation uplift contributed to an increase of 0.9% in the
EPRA NTA to 123.7 pence per share at the period-end (31 March 2023:
122.6 pence per share).
Debt financing and hedging
During the period, the Group refinanced its debt facilities,
extending the term and improving the covenants. The new GBP320.0
million facility comprises a GBP220.0 million term loan and a
GBP100.0 million RCF. It replaces the Company's previous GBP320.0
million debt facility and extends the tenure from January 2025 to
June 2028. The facility is provided by a club of four lenders:
HSBC, Bank of Ireland, NatWest and Santander. The minimum interest
cover is 1.5 times, compared to 2.0 times under the previous
facility, and the maximum LTV has been extended from 55% to 60%.
Both the term loan and the RCF attract a margin of 2.2% plus SONIA
for an LTV below 40% or 2.5% if the LTV is above 40%.
At 30 September 2023, GBP65.0 million was drawn against the RCF
and GBP220.0 million against the term loan. This gave total debt of
GBP285.0 million (31 March 2023: GBP306.0 million), with the Group
also holding cash balances of GBP9.5 million (31 March 2023:
GBP25.1 million). The LTV ratio at 30 September 2023 was therefore
34.0% (31 March 2023: 33.9%). Interest cover for the period was 3.1
times, meaning the Group was substantially within the covenants in
the debt facility.
At the period end, the Group had GBP230.0 million of interest
rate caps in place, of which GBP200.0 million fixed SONIA at 1.5%
and GBP30.0 million fixed SONIA at 1.75%. The GBP30.0 million
interest rate cap is due to expire in November 2023 and has been
replaced since the period end by a further cap of GBP50.0 million,
which fixes SONIA at 2.0% until November 2026.
We continue to explore opportunities to diversify the Group's
sources of debt funding, extend the average maturity of its debt
and further reduce the average cost of debt.
Post period-end activity
The Group completed a further 14 lease events over 0.7 million
sq ft, securing GBP4.1 million, 20.5% ahead of previous contracted
rent. Driven by a lease renewal of 71,000 sq ft at Kingsland
Grange, 42.3% ahead of prior rent, and a 500,000 sq ft rent review,
settled at GBP2.8m, 12.0% ahead of prior rent.
Principal risks and uncertainties
The principal risks facing the Group are documented on pages 60
to 64 of the Annual Report for the year ended 31 March 2023. Since
then, the Board has continued its regular review of risks and
emerging risks, including detailed consideration of those risks
that are most material to the Group and are recorded as its
principal risks.
During the period the Board has agreed an additional principal
risk, relating to the potential impact of a general economic
downturn on the warehouse market. This was already recognised as
one of the Group's business risks, but the Board considers that
changing economic conditions make it appropriate to now consider
this as one of the Group's principal risks.
Financial risks
-- Changes in interest rates could directly impact our cost of
capital, and indirectly may impact market stability.
-- It may become more difficult to raise funding through equity,
debt, or asset disposals, which may impact the Group's ability to
finance its activities and deliver growth.
Business risks
-- Returns may not be in line with our plans and forecasts, for
example because of an inappropriate investment strategy, poor
delivery of the strategy, or reduced capital valuations or rental
income.
-- The Group depends on the performance of its third-party
service providers, in particular the Investment Advisor, and poor
delivery by these providers could impact on the REIT's
performance.
-- Climate change may have an increasing impact across the
business, including adverse weather events, increasing utility
costs, and the potential for property values to be impacted.
-- A general economic downturn may have an impact on the
warehouse market, as current occupiers may struggle to cover costs
if business contracts; and potential occupiers may be less likely
to seek additional space or higher quality buildings.
Operational risks
-- A substantial increase in bad debts, arrears or slow payment
could have a direct impact on cash flow and profitability. It could
also negatively impact average lease lengths, void levels and
costs, resulting in reducing portfolio returns.
-- Inappropriate acquisitions could also increase risk in
relation to portfolio returns, as properties may be harder to let,
may not generate appropriate revenues, or may require additional
costs to support.
Compliance risks
-- Loss of REIT status, through failing to meet regulatory
requirements or the Listing Rules, would have a significant impact
on the Group's reputation and the financial returns for
investors.
-- Breaching the conditions of the Group's loan funding could
result in restrictions to funding and activities going forward. In
addition, the Board has approved and communicated the Group's
borrowing policy and breaching it may risk financial and reputation
damage.
Going concern
In preparing the financial statements, we, and the Company's
Board are required to assess whether the Group remains a going
concern. During the period, the Group generated gross property
income of GBP23.3 million and operating profits of GBP17.3 million,
showing that rents would have to fall by approximately 34.7% before
the business became loss-making. This is considered highly unlikely
given the high occupational demand for warehouse assets, the
Group's strong relationships with the broad range of occupiers
across the portfolio, the level of rent collection, and the fact
that the portfolio ERV exceeds the period-end contracted rent roll
by 15.7%.
At the same time, the Group has a strong balance sheet, with
substantial cash and headroom within its facilities at the
period-end of GBP35.0 million. The Group has refinanced its debt
facilities, extending the term by more than three years to June
2028, and at the date of this report has interest rate caps on
GBP250.0 million of debt.
We and the Company's Board have also carefully reviewed the risk
landscape and do not believe that the risks facing the Group have
materially increased. As a result, we are confident that the Group
remains a going concern.
Investment Manager
The Company is an alternative investment fund for the purposes
of the Alternative Investment Fund Managers Directive ("AIFMD")
and, as such, is required to have an Investment Manager who is duly
authorised to undertake that role. G10 Capital Limited ("G10") is
the Company's AIFM and Investment Manager and is authorised and
regulated by the Financial Conduct Authority.
Investment Advisor
Tilstone Partners Limited is Investment Advisor to the Company
and the Investment Manager.
Tilstone Partners Limited
14 November 2023
Directors' responsibilities statement
The Directors confirm to the best of our knowledge:
-- the condensed set of financial statements have been prepared
in accordance with IAS 34 'Interim Financial Reporting', and give a
true and fair view of the assets, liabilities, financial position
and profit of the Group, as required by DTR 4.2.4R;
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the financial year);
and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
The directors of Warehouse REIT plc are listed on the company
website warehousereit.co.uk
By order of the Board.
Neil Kirton
Director
14 November 2023
Results for the six months ended 30 September 2023
Condensed consolidated statement of comprehensive income
(unaudited)
For the six months ended 30 September 2023
Six months Six months
ended ended
30 September 30 September
Notes 2023 2022
Continuing operations GBP'000 GBP'000
--------------------------------------------------------------- ----- ------------- -------------
Gross property income 3 23,291 24,140
Service charge income 3 2,669 2,901
Service charge expense 4 (2,785) (3,123)
--------------------------------------------------------------- ----- ------------- -------------
Net property income 23,175 23,918
Property operating expenses 4 (2,031) (2,341)
--------------------------------------------------------------- ----- ------------- -------------
Gross profit 21,144 21,577
Administration expenses 4 (3,857) (4,550)
--------------------------------------------------------------- ----- ------------- -------------
Operating profit before gains on investment properties 17,287 17,027
Profit/(loss) on disposal of investment properties 11 5,419 (84)
Fair value gain/(loss) on revaluation of investment properties 11 6,778 (73,362)
--------------------------------------------------------------- ----- ------------- -------------
Operating profit/(loss) 29,484 (56,419)
Finance income 5 5,471 16,038
Finance expenses 6 (12,986) (5,974)
--------------------------------------------------------------- ----- ------------- -------------
Profit/(loss) before tax 21,969 (46,355)
Taxation 7 - -
--------------------------------------------------------------- ----- ------------- -------------
Total comprehensive income/(loss) for the period 21,969 (46,355)
--------------------------------------------------------------- ----- ------------- -------------
EPS (basic and diluted) (pence) 10 5.2 (10.9)
--------------------------------------------------------------- ----- ------------- -------------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of financial position
(unaudited)
As at 30 September 2023
30 September 31 March
2023 2023
Notes GBP'000 GBP'000
------------------------------------------ ----- ------------ ---------
Assets
Non-current assets
Investment property 11 822,410 842,269
Interest rate derivatives 15 11,064 7,387
------------------------------------------ ----- ------------ ---------
833,474 849,656
------------------------------------------ ----- ------------ ---------
Current assets
Investment property held for sale 12 2,750 625
Cash and cash equivalents 13 9,542 25,053
Trade and other receivables 14 15,135 9,258
Interest rate derivatives 15 150 -
------------------------------------------ ----- ------------ ---------
27,577 34,936
------------------------------------------ ----- ------------ ---------
Total assets 861,051 884,592
------------------------------------------ ----- ------------ ---------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 16 (281,015) (304,093)
Head lease liability 17 (13,871) (14,320)
Other payables and accrued expenses 18 - (11,300)
------------------------------------------ ----- ------------ ---------
(294,886) (329,713)
------------------------------------------ ----- ------------ ---------
Current liabilities
Other payables and accrued expenses 18 (20,781) (18,584)
Deferred income 18 (7,546) (7,115)
Head lease liability 17 (990) (705)
------------------------------------------ ----- ------------ ---------
(29,317) (26,404)
------------------------------------------ ----- ------------ ---------
Total liabilities (324,203) (356,117)
------------------------------------------ ----- ------------ ---------
Net assets 536,848 528,475
------------------------------------------ ----- ------------ ---------
Equity
Share capital 19 4,249 4,249
Share premium 275,648 275,648
Retained earnings 256,951 248,578
------------------------------------------ ----- ------------ ---------
Total equity 536,848 528,475
------------------------------------------ ----- ------------ ---------
Number of shares in issue (thousands) 424,862 424,862
------------------------------------------ ----- ------------ ---------
NAV per share (basic and diluted) (pence) 20 126.4 124.4
------------------------------------------ ----- ------------ ---------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of changes in equity
(unaudited)
For the six months ended 30 September 2023
Share Share Retained
capital premium earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----- ------- ------- -------- --------
Balance at 1 April 2022 4,249 275,648 459,057 738,954
----------------------------- ----- ------- ------- -------- --------
Total comprehensive loss - - (46,355) (46,355)
Dividends paid 9 - - (14,021) (14,021)
----------------------------- ----- ------- ------- -------- --------
Balance at 30 September 2022 4,249 275,648 398,681 678,578
----------------------------- ----- ------- ------- -------- --------
Balance at 1 April 2023 4,249 275,648 248,578 528,475
----------------------------- ----- ------- ------- -------- --------
Total comprehensive income - - 21,969 21,969
Dividends paid 9 - - (13,596) (13,596)
----------------------------- ----- ------- ------- -------- --------
Balance at 30 September 2023 4,249 275,648 256,951 536,848
----------------------------- ----- ------- ------- -------- --------
The accompanying notes form an integral part of these financial
statements.
Condensed consolidated statement of cash flows (unaudited)
For the six months ended 30 September 2023
Six months Six months
ended ended
30 30 September
September (Restated)
2023 2022
Notes GBP'000 GBP'000
------------------------------------------------------------------------- ----- ---------- -------------
Cash flows from operating activities
Operating profit/(loss) 29,484 (56,419)
Adjustments to reconcile profit/(loss) for the period to net cash flows:
(Profit)/loss from change in fair value of investment properties (6,778) 73,362
Realised (profit)/loss on disposal of investment properties (5,419) 84
Head lease asset depreciation 217 91
------------------------------------------------------------------------- ----- ---------- -------------
Operating cash flows before movements in working capital 17,504 17,118
Increase in other receivables and prepayments (6,155) (4,980)
(Decrease)/increase in other payables and accrued expenses (2,596) 2,086
Net cash flows generated from operating activities 8,753 14,224
------------------------------------------------------------------------- ----- ---------- -------------
Cash flows from investing activities
Acquisition of investment properties (5,560) (66,375)
Capital expenditure (3,710) (1,582)
Development expenditure (5,012) (2,847)
Purchase of interest rate caps (2,181) -
Interest received 3,188 1
Disposal of investment properties 38,458 4,603
------------------------------------------------------------------------- ----- ---------- -------------
Net cash generated from/(used in) investing activities 25,183 (66,200)
------------------------------------------------------------------------- ----- ---------- -------------
Cash flows from financing activities
Bank loans drawn down 306,000 65,000
Bank loans repaid (327,000) -
Loan interest and other finance expenses paid (10,000) (3,968)
Other finance expenses paid (99) -
Loan issuance fees (4,223) -
Head lease payments (529) (526)
Dividends paid in the period (13,596) (14,020)
Net cash flows (used in)/generated from financing activities (49,447) 46,486
------------------------------------------------------------------------- ----- ---------- -------------
Net decrease in cash and cash equivalents (15,511) (5,490)
Cash and cash equivalents at the start of the period 25,053 16,706
------------------------------------------------------------------------- ----- ---------- -------------
Cash and cash equivalents at the end of the period 13 9,542 11,216
------------------------------------------------------------------------- ----- ---------- -------------
The accompanying notes form an integral part of these financial
statements.
Notes to the condensed consolidated financial statements
(unaudited)
For the six months ended 30 September 2023
1. General information
Warehouse REIT plc (the "Company") is a closed-ended Real Estate
Investment Trust ("REIT") incorporated in England and Wales on 24
July 2017. The Company began trading on 20 September 2017. The
registered office of the Company is 65 Gresham Street, London EC2V
7NQ. The Company is admitted to trading on the Premium Listing
Segment of the Main Market, a market operated by the London Stock
Exchange.
2. Basis of preparation
These interim condensed consolidated unaudited financial
statements have been prepared in accordance with IAS 34 Interim
Financial Reporting and International Financial Reporting Standards
("IFRS") and interpretations issued by the International Accounting
Standards Board ("IASB") as adopted by the United Kingdom.
These interim condensed consolidated unaudited financial
statements should be read in conjunction with the Company's last
financial statements for the year ended 31 March 2023. These
interim condensed consolidated unaudited financial statements do
not include all of the information required for a complete set of
annual financial statements prepared in accordance with IFRS as
adopted by the UK; however, they have been prepared using the
accounting policies adopted in the audited financial statements for
the year ended 31 March 2023 and selected explanatory notes have
been included to explain events and transactions that are
significant in understanding changes in the Company's financial
position and performance since the last financial statements.
The financial statements have been prepared under the historical
cost convention, except for investment property and interest rate
derivatives, which have been measured at fair value. The interim
financial statements are presented in Pound Sterling and all values
are rounded to the nearest thousand pounds (GBP'000), except when
otherwise indicated.
The financial information contained within these interim results
does not constitute full statutory accounts as defined in section
434 of the Companies Act 2006. The financial statements for the six
months ended 30 September 2023 have not been either audited or
reviewed by the Company's Auditor. The information for the year
ended 31 March 2023 has been extracted from the latest published
Annual Report and Financial Statements, which has been filed with
the Registrar of Companies. The Auditor reported on those accounts;
its report was unqualified and did not contain a statement under
sections 498(2) or (3) of the Companies Act 2006.
The Directors have made an assessment of the Group's ability to
continue as a going concern and are satisfied that the Group has
the resources to continue in business for the foreseeable future,
for a period of not less than 12 months from the date of this
report. Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern.
2.1 Changes to accounting standards and interpretations
There were several new standards and amendments to existing
standards, which are required for the Group's accounting period
beginning on 1 April 2023, which have been considered and applied
as follows:
-- amendments to IAS 1 Presentation of Financial Statements; and
-- amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
There was no material effect from the adoption of the
above-mentioned amendments to IFRS effective in the period. They
have no significant impact to the Group as they are either not
relevant to the Group's activities or require accounting, which is
already consistent with the Group's current accounting
policies.
2.2 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with
IAS 34 requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of an asset or
liability in the future.
Judgements
In the course of preparing the financial statements, no
judgements have been made in the process of applying the Group's
accounting policies, other than those involving estimations, that
have had a significant effect on the amounts recognised in the
financial statements.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimate, which has the most
significant risk of material change to the carrying value of assets
recognised in the consolidated financial statements:
Valuation of property
The valuations of the Group's investment property are at fair
value as determined by the external valuer on the basis of market
value in accordance with the internationally accepted RICS
Valuation - Professional Standards 2020 (incorporating the
International Valuation Standards), in accordance with IFRS 13. The
key estimates made by the valuer are the ERV and equivalent yields
of each investment property and the land values per acre for
development properties. The valuers have considered the impact of
climate change and that this has not had a material impact on the
valuation at the current time. See notes 11 and 21 for further
details.
2.3 Restatement of financial statements
Following a review of the gross service charge income recognised
for the six months ended 30 September, it was noted that there was
an inconsistency in the methodology prescribed in the previous
year's annual financial statements. The comparative service charge
income and expenditure have been updated to reflect this, with no
change to net property income previously recognised.
In addition, during the six months ended 31 March 2023, the
licence fee previously levied over the land at Radway Green, Crewe
was renegotiated to commence upon construction of the site. The
comparative adjusted earnings have been updated to reflect the
change in negotiations.
2.4 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are consistent with those applied within
the Company's Annual Report and Financial Statements for the year
ended 31 March 2023.
Basis of consolidation
The Company does not meet the definition of an investment entity
and, therefore, does not qualify for the consolidation exemption
under IFRS 10. The consolidated financial statements comprise the
financial statements of the Group and its subsidiaries as at 30
September 2023. Subsidiaries are consolidated from the date of
acquisition, being the date on which the Group obtained control,
and will continue to be consolidated until the date that such
control ceases. An investor controls an investee when the investor
is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. In preparing these financial
statements, intra--group balances, transactions and unrealised
gains or losses have been eliminated in full. All subsidiaries have
the same year-end as the Company. Uniform accounting policies are
adopted in the financial statements for like transactions and
events in similar circumstances.
Functional and presentation currency
The objective of the Group is to generate returns in Pound
Sterling and the Group's performance is evaluated in Pound
Sterling. Therefore, the Directors consider Pound Sterling as the
currency that most faithfully represents the economic effects of
the underlying transactions, events and conditions and have,
therefore, adopted it as the functional and presentation
currency.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment in and provision
of UK urban warehouses.
Derivative financial instruments
Derivative financial instruments, comprising interest rate
derivatives for mitigating interest rate risks, are initially
recognised at fair value, and are subsequently measured at fair
value, being the estimated amount that the Group would receive or
pay to terminate the agreement at the period-end date, taking into
account current interest rate expectations and the current credit
rating of the Group and its counterparties. Premiums payable under
such arrangements are initially capitalised into the statement of
financial position.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs significant to the fair
value measurement as a whole. Changes in fair value of interest
rate derivatives are recognised within finance expenses in profit
or loss in the period in which they occur.
3. Property income
Six months Six months
ended ended
30 September 30 September
2022
2023 (Restated)
GBP'000 GBP'000
---------------------- ------------ ------------
Rental income 22,245 22,941
Insurance recharged 854 827
Dilapidation income 192 372
---------------------- ------------ ------------
Gross property income 23,291 24,140
---------------------- ------------ ------------
Service charge income 2,669 2,901
---------------------- ------------ ------------
Total property income 25,960 27,041
---------------------- ------------ ------------
4. Property operating and administration expenses
Six months Six months
ended ended
30 September 30 September
2022
2023 (Restated)
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Service charge expenses 2,785 3,123
Premises expenses 922 953
Insurance 829 926
Rates 70 228
Utilities 35 103
Loss allowance on trade receivables 175 131
---------------------------------------------------------- ------------ ------------
Property operating expenses 2,031 2,341
---------------------------------------------------------- ------------ ------------
Investment Advisor's fees 2,820 3,804
Head lease asset depreciation 120 91
Directors' remuneration (including social security costs) 86 87
Other administration expenses 831 568
---------------------------------------------------------- ------------ ------------
Administration expenses 3,857 4,550
---------------------------------------------------------- ------------ ------------
Total 8,673 10,014
---------------------------------------------------------- ------------ ------------
5. Finance income
Six months Six months
ended ended
30 September 30
September
2023 2022
GBP'000 GBP'000
-------------------------------------------------- ------------ ----------
Interest receivable on derivatives 3,697 74
Change in fair value of interest rate derivatives 1,646 15,963
Income from cash and short-term deposits 128 1
Total 5,471 16,038
-------------------------------------------------- ------------ ----------
6. Finance expenses
Six months Six months
ended ended
30 September 30
September
2023 2022
GBP'000 GBP'000
----------------------------------------------------------- ------------ ----------
Loan interest 10,857 4,850
Accelerated loan arrangement fees 1,688 -
Head lease interest 473 515
Loan arrangement fees amortised 457 527
Other finance costs 99 80
Bank charges 3 2
----------------------------------------------------------- ------------ ----------
13,577 5,974
Less: amounts capitalised on the development of properties (591) -
Total 12,986 5,974
----------------------------------------------------------- ------------ ----------
The interest capitalisation rate for the six months ended 30
September 2023 was 4.7%.
7. Taxation
Corporation tax has arisen as follows:
Six months Six months
ended ended
30 September 30
September
2023 2022
GBP'000 GBP'000
----------------------------------------------------- ------------ ----------
Corporation tax on residual income for current period - -
----------------------------------------------------- ------------ ----------
Total - -
----------------------------------------------------- ------------ ----------
Reconciliation of tax charge to profit before tax:
Six months Six months
ended ended
30 September 30
September
2023 2022
GBP'000 GBP'000
----------------------------------------------------------------------------- ------------ ----------
Profit/(loss) before tax 21,969 (46,355)
----------------------------------------------------------------------------- ------------ ----------
Corporation tax at 25.0% (2022: 19.0%) 5,492 (8,807)
Change in value of investment properties (including gain/(loss) on disposal) (3,049) 13,939
Change in value of interest rate derivatives (412) (3,033)
Tax-exempt property rental business (2,031) (2,099)
----------------------------------------------------------------------------- ------------ ----------
Total - -
----------------------------------------------------------------------------- ------------ ----------
8. Operating leases
Operating lease commitments - as lessor
The Group has entered into commercial property leases on its
investment property portfolio. These non-cancellable leases have a
remaining term of up to 4.4 years.
Future minimum rentals receivable under non-cancellable
operating leases as at 30 September 2023 are as follows:
30 September 31
March
2023 2023
GBP'000 GBP'000
----------------------------- ------------ -------
Within one year 40,218 42,033
Between one and two years 33,818 33,340
Between two and three years 27,222 26,998
Between three and four years 22,362 22,360
Between four and five years 18,907 18,457
Between five and ten years 29,164 34,394
More than ten years 21,979 19,607
----------------------------- ------------ -------
Total 193,670 197,189
----------------------------- ------------ -------
9. Dividends
Pence
per
Six months ended 30 September 2023 share GBP'000
------------------------------------------------------------------------- ----- -------
Third interim dividend for year ended 31 March 2023 paid on 3 April 2023 1.60 6,798
Fourth interim dividend for year ended 31 March 2023 paid on 7 July 2023 1.60 6,798
Total dividends paid during the period 3.20 13,596
------------------------------------------------------------------------- ----- -------
Paid as:
Property income distributions 3.20 13,596
Ordinary dividends - -
------------------------------------------------------------------------- ----- -------
Total 3.20 13,596
------------------------------------------------------------------------- ----- -------
Pence per
Six months ended 30 September 2022 share GBP'000
-------------------------------------------------------------------------- --------- -------
Third interim dividend for year ended 31 March 2022 paid on 1 April 2022 1.55 6,585
Fourth interim dividend for year ended 31 March 2022 paid on 30 June 2022 1.75 7,436
Total dividends paid during the period 3.30 14,021
-------------------------------------------------------------------------- --------- -------
Paid as:
Property income distributions 3.30 14,021
Ordinary dividends - -
-------------------------------------------------------------------------- --------- -------
Total 3.30 14,021
-------------------------------------------------------------------------- --------- -------
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group.
The Company declared a first interim dividend for the year
ending 31 March 2023 of 1.60 pence per share on 31 August 2023,
which was paid on 6 October 2023. The dividend was paid in full as
a property income distribution.
10. Earnings per share
Basic EPS is calculated by dividing profit for the period
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the period. As
there are no dilutive instruments in issue, basic and diluted EPS
are identical.
Six months Six months
ended ended
30 September 30
September
2023 2022
(Restated)
GBP'000 GBP'000
--------------------------------------------------- ------------ -----------
IFRS earnings/(loss) 21,969 (46,355)
--------------------------------------------------- ------------ -----------
EPRA earnings adjustments:
Interest from derivatives (3,697) (74)
(Gain)/loss on disposal of investment properties (5,419) 84
Fair value (gains)/losses on investment properties (6,778) 73,362
Changes in fair value of interest rate derivatives (1,646) (15,963)
--------------------------------------------------- ------------ -----------
EPRA earnings 4,429 11,054
Interest from derivatives 3,697 74
Accelerated amortisation of loan issue costs 1,688 -
--------------------------------------------------- ------------ -----------
Adjusted earnings 9,814 11,128
--------------------------------------------------- ------------ -----------
The adjusted earnings per share reflects our ability to generate
earnings from our portfolio.
The Company has also included an additional earnings measure
called 'Adjusted Earnings' and 'Adjusted EPS'. Adjusted Earnings
and Adjusted EPS is based on EPRA's Best Practices Recommendations
and recognises finance income earned from derivatives held at fair
value through profit and loss used to hedge the Company's floating
interest rate exposure.
The Board deems this a more relevant indicator of core earnings
as it reflects our ability to generate earnings from our
portfolio.
The comparative adjusted earnings have been restated due to the
renegotiation of the licence fee previously levied over Radway
Green, Crewe.
Six months Six months
ended ended
30 September 30
September
2023 2022
Pence Pence
------------------------ ------------ ----------
Basic IFRS EPS 5.2 (10.9)
------------------------ ------------ ----------
Diluted IFRS EPS 5.2 (10.9)
------------------------ ------------ ----------
EPRA EPS 1.0 2.6
------------------------ ------------ ----------
Adjusted EPS (restated) 2.3 2.6
------------------------ ------------ ----------
30 September 30
September
2023 2022
Number Number
of shares of shares
------------------------------------------------------- ------------ ----------
Weighted average number of shares in issue (thousands) 424,862 424,862
------------------------------------------------------- ------------ ----------
Please see table 2 of the supplementary notes for details on the
calculation of adjusted earnings.
11. UK investment property
Completed Development Total
investment property investment
and
property land property
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- ---------- ----------- ----------
Investment property valuation brought forward as at 1 April 2023 752,485 75,660 828,145
Acquisition of properties - - -
Capital expenditure 2,170 5,602 7,772
Disposal of properties (29,289) (3,125) (32,414)
Assets transferred to held for sale (2,750) - (2,750)
Movement in rent incentives 974 - 974
Fair value gains/(loss) on revaluation of investment property 8,330 (1,552) 6,778
----------------------------------------------------------------- ---------- ----------- ----------
Total portfolio valuation per valuer's report 731,920 76,585 808,505
Adjustment for head lease obligations 13,905 - 13,905
----------------------------------------------------------------- ---------- ----------- ----------
Carrying value at 30 September 2023 745,825 76,585 822,410
----------------------------------------------------------------- ---------- ----------- ----------
Completed Development Total
investment property and investment
property land property
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- ---------- ------------ ----------
Investment property valuation brought forward as at 1 April 2022 913,035 98,950 1,011,985
Transferred in the period 5,449 (5,449) -
Acquisition of properties 64,512 2,216 66,728
Capital expenditure 5,035 8,295 13,330
Disposal of properties (71,206) - (71,206)
Assets transferred to held for sale (625) - (625)
Movement in rent incentives 1,272 28 1,300
Fair value gains on revaluation of investment property (164,987) (28,380) (193,367)
----------------------------------------------------------------- ---------- ------------ ----------
Total portfolio valuation per valuer's report 752,485 75,660 828,145
Adjustment for head lease obligations 14,124 - 14,124
----------------------------------------------------------------- ---------- ------------ ----------
Carrying value at 31 March 2023 766,609 75,660 842,269
----------------------------------------------------------------- ---------- ------------ ----------
Realised loss on disposal of investment property
30 September 30
September
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------------- ------------ ----------
Net proceeds from disposals of investment property during the period 38,458 4,603
Carrying value of disposals (33,039) (4,687)
--------------------------------------------------------------------- ------------ ----------
Realised loss on disposal of investment property 5,419 (84)
--------------------------------------------------------------------- ------------ ----------
12. Investment properties held for sale
Completed Development Total
Investment property Investment
property and land property
GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ----------- ----------
Investment property held for sale
Carrying value at 31 March 2023 625 - 625
Disposal of properties (625) - (625)
Assets transferred in 2,750 - 2750
------------------------------------ ---------- ----------- ----------
Carrying value at 30 September 2023 2,750 - 2,750
------------------------------------ ---------- ----------- ----------
13. Cash and cash equivalents
30 31
September March
2023 2023
GBP'000 GBP'000
--------------------------------------- ---------- -------
Unrestricted cash and cash equivalents 9,542 18,990
Restricted cash and cash equivalents - 6,063
--------------------------------------- ---------- -------
Total 9,542 25,053
--------------------------------------- ---------- -------
14. Trade and other receivables
30 September 31
March
2023 2023
GBP'000 GBP'000
------------------------------------------- ------------ -------
Rent and insurance receivables 7,819 3,952
Payments in advance of property completion 2,139 2,080
Interest receivable on derivatives 1,687 1,050
Prepayments 1,057 191
Occupier deposits 643 698
Other receivables 1,790 1,287
------------------------------------------- ------------ -------
Total 15,135 9,258
------------------------------------------- ------------ -------
The rent and insurance receivables balance represent gross
receivables of GBP8.1 million (31 March 2023: GBP4.2 million), net
of a provision for doubtful debts of GBP0.3 million (31 March 2023:
GBP0.2 million).
15. Interest rate derivatives
31
30 September March
2023 2023
GBP'000 GBP'000
--------------------------------------------------- ------------ -------
At the start of the period 7,387 337
Additional premiums paid and accrued 2,181 10,926
Changes in fair value of interest rate derivatives 1,646 4,850
Interest rate derivative premium payable - (8,726)
--------------------------------------------------- ------------ -------
Balance at the end of the period 11,214 7,387
--------------------------------------------------- ------------ -------
Current asset 150 -
Non-current asset 11,064 7,387
Balance at the end of the period 11,214 7,387
--------------------------------- ------ -----
To mitigate the interest rate risk that arises as a result of
entering into variable rate linked loans, the Group entered into
interest rate derivatives against movements in SONIA. The
instruments have a combined notional value of GBP230.0 million with
GBP200.0 million at a strike rate of 1.50% and the remaining GBP30
million at a strike rate of 1.75%. The GBP30.0 million instrument
has a termination date of 20 November 2023, GBP100.0 million has a
termination date of 20 July 2025 and GBP100.0 million has a
termination date of 20 July 2027.
16. Interest-bearing loans and borrowings
30 September 31
March
2023 2023
GBP'000 GBP'000
---------------------------------------------------- ------------ --------
At the beginning of the period 306,000 271,000
Drawn in the period 306,000 65,000
Repaid in the period (327,000) (30,000)
---------------------------------------------------- ------------ --------
Interest-bearing loans and borrowings 285,000 306,000
---------------------------------------------------- ------------ --------
Unamortised fees at the beginning of the period (1,907) (2,784)
Loan arrangement fees paid in the period (4,223) (175)
Amortisation charge for the period 2,145 1,052
---------------------------------------------------- ------------ --------
Unamortised loan arrangement fees (3,985) (1,907)
---------------------------------------------------- ------------ --------
Loan balance less unamortised loan arrangement fees 281,015 304,093
---------------------------------------------------- ------------ --------
On 2 June 2023, the Company entered into a new GBP320.0 million
facility, replacing the Company's previous GBP320.0 million debt
facility and extends the tenure from January 2025 to June 2028. It
comprises a GBP220.0 million term loan and a GBP100.0 million
revolving credit facility ("RCF") with a club of four lenders;
HSBC, Bank of Ireland, NatWest, and Santander. The minimum interest
cover is 1.5 times compared to 2.0 times under the previous
facility and the maximum LTV has been extended to 60% from 55%.
Both the term loan and the RCF attract a margin of 2.2% plus SONIA
for an LTV below 40% or 2.5% if above. The Company has GBP230.0
million of interest rate caps in place, of which GBP200.0 million
fixes SONIA at 1.5% and the remaining GBP30.0 million fixes SONIA
at 1.75%. The facilities are secured on all properties within the
portfolio.
As at 30 September 2023, there is GBP35.0 million (31 March
2023: GBP14.0 million) available to draw.
The debt facility includes interest cover and market value
covenants that are measured at a Group level. The Group has
complied with all covenants throughout the financial period.
17. Head lease obligations
The following table analyses the minimum lease payments under
non-cancellable finance leases using an average discount rate of
6.91%:
30 September 31
March
2023 2023
GBP'000 GBP'000
-------------------------------------------- ------------ -------
Current liabilities
Within one year 990 705
-------------------------------------------- ------------ -------
Non-current liabilities
After one year but not more than five years 2,975 2,975
Later than five years 10,896 11,345
-------------------------------------------- ------------ -------
Non-current head lease obligations 13,871 14,320
-------------------------------------------- ------------ -------
Total 14,861 15,025
-------------------------------------------- ------------ -------
18. Other liabilities - other payables and accrued expenses,
provisions and deferred income
30 September 31
March
2023 2023
GBP'000 GBP'000
---------------------------------------------- ------------ -------
Loan interest payable 4,547 3,691
Administration expenses payable 2,571 2,170
Capital expenses payable 12,623 3,864
Other expenses payable 683 3,504
Property operating expenses payable 357 855
Deferred consideration payable - 4,500
Other payables and accrued expenses - current 20,781 18,584
---------------------------------------------- ------------ -------
30 September 31
March
2023 2023
GBP'000 GBP'000
-------------------------------------------------- ------------- -------
Capital expenses payable - 11,300
Other payables and accrued expenses - non-current - 11,300
-------------------------------------------------- ------------- -------
30 September 31
March
2023 2023
GBP'000 GBP'000
---------------- ------------ -------
Deferred income 7,546 7,115
---------------- ------------ -------
Deferred income 7,546 7,115
---------------- ------------ -------
During the year ended 31 March 2021, the Group exchanged
contracts to acquire land for GBP15.0 million. The first three
instalments were paid for a total of GBP2.5 million to the year
ended 31 March 2022 with an additional GBP1.5 million paid during
the year ended 31 March 2023 and GBP1.0 million in the period ended
30 September 2023. The final instalment of GBP10.3 million is due
to be paid on 1 September 2024.
19. Share capital
Share capital is the nominal amount of the Company's ordinary
shares in issue.
30 September 31
March
2023 2023
Ordinary shares of GBP0.01 each Number GBP'000 Number GBP'000
------------------------------------ ----------- ------------ ----------- -------
Authorised, issued, and fully paid:
At the start of the period 424,861,650 4,249 424,861,650 4,249
Balance at the end of the period 424,861,650 4,249 424,861,650 4,249
------------------------------------ ----------- ------------ ----------- -------
The share capital comprises one class of ordinary shares. At
general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and, on a poll, to one vote for
every share held. There are no restrictions on the size of a
shareholding or the transfer of shares, except for the UK REIT
restrictions.
20. Net asset value per share
Basic NAV per share is calculated by dividing net assets
attributable to ordinary equity holders of the Company in the
statement of financial position by the number of ordinary shares
outstanding at the end of the period. As there are no dilutive
instruments in issue, basic and diluted NAV per share are
identical.
30 September 31
2023 March
2023
GBP'000 GBP'000
------------------------------------------------------ ------------ -------
IFRS net assets attributable to ordinary shareholders 536,848 528,475
IFRS net assets for calculation of NAV 536,848 528,475
Adjustment to net assets:
Fair value of interest rate derivatives (see note
15) (11,214) (7,387)
------------------------------------------------------ ------------ -------
EPRA NTA 525,634 521,088
------------------------------------------------------ ------------ -------
30 September 31
March
2023 2023
GBP'000 GBP'000
--------------------------------------------- ------------ -------
IFRS basic and diluted NAV per share (pence) 126.4 124.4
EPRA NTA per share (pence) 123.7 122.6
--------------------------------------------- ------------ -------
30 September 31
March
2023 2023
Number Number
of shares of shares
-------------------------------------- ------------ ----------
Number of shares in issue (thousands) 424,862 424,862
-------------------------------------- ------------ ----------
21. Fair value
IFRS 13 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables, and other current liabilities
approximate their carrying amounts due to the short-term maturities
of these instruments. Interest-bearing loans and borrowings are
disclosed at amortised cost. The carrying value of the loans and
borrowings approximate their fair value due to the contractual
terms and conditions of the loan. The loans are at variable
interest rates of between 2.2% and 2.5% above SONIA.
Interest rate derivatives
The fair value of the interest rate cap contracts is recorded in
the statement of financial position and is revalued quarterly by an
independent valuations specialist, Chatham Financial. The fair
value is determined by forming an expectation that interest rates
will exceed strike rates and discounting these future cash flows at
the prevailing market rates as at the year-end.
Investment properties
Six-monthly valuations of the investment properties are
performed by CBRE, an accredited independent external valuer with
recognised and relevant professional qualifications and recent
experience of the location and category of the investment property
being valued. The valuations are the ultimate responsibility of the
Directors, who appraise these every six months.
The valuation of the Group's investment property at fair value
is determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS Valuation -
Professional Standards January 2020 (incorporating the
International Valuation Standards).
Completed investment properties are valued by adopting the
'income capitalisation' method of valuation. This approach involves
applying capitalisation yields to current and future rental
streams, net of income voids arising from vacancies or rent-free
periods and associated running costs. These capitalisation yields
and future rental values are based on comparable property and
leasing transactions in the market using the valuer's professional
judgement and market observations. Other factors taken into account
in the valuations include the tenure of the property, tenancy
details and ground and structural conditions.
Development property and land has been valued by adopting the
'comparable method' of valuation and where appropriate supported by
a 'residual development appraisal'. The comparable method involves
applying a sales rate per acre to relevant sites supported by
comparable land sales. Residual development appraisals have been
completed where there is sufficient clarity regarding planning and
an identified or indicative scheme. In a similar manner to 'income
capitalisation', development inputs include the capitalisation of
future rental streams with an appropriate yield to ascertain a
gross development value. The costs associated with bringing a
scheme to the market are then deducted, including construction
costs, professional fees, finance, and developer's profit, to
provide a residual site value.
The following tables show an analysis of the fair values of
investment properties recognised in the statement of financial
position by level of the fair value hierarchy
30 September 2023
-----------------------------------
Level Level Level Total
1 2 3
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- -------- ------- ------- -------
Investment properties and assets held for sale - - 811,255 811,255
Interest rate derivatives - 11,214 - 11,214
----------------------------------------------- -------- ------- ------- -------
Total - 11,214 811,255 822,469
----------------------------------------------- -------- ------- ------- -------
31 March 2023
----------------------------------
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------- ------- ------- -------
Investment properties - - 828,770 828,770
Interest rate derivatives - 7,387 - 7,387
---------------------------------------------- ------- ------- ------- -------
Total - 7,387 828,770 836,157
---------------------------------------------- ------- ------- ------- -------
Explanation of the fair value hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
-- Level 2 - use of a model with inputs (other than quoted
prices included in Level 1) that are directly or indirectly
observable market data; and
-- Level 3 - use of a model with inputs that are not based on observable market data.
Sensitivity analysis to significant changes in unobservable
inputs within the valuation of investment properties
The following table analyses:
-- the fair value measurements at the end of the reporting period;
-- a description of the valuation techniques applied;
-- the inputs used in the fair value measurement, including the
ranges of rent charged to different units within the same building;
and
-- for Level 3 fair value measurements, quantitative information
about significant unobservable inputs used in the fair value
measurement.
30 September 2023
Fair value Valuation Key
GBP'000 technique Unobservable Range
inputs
------------------------------ ------------ ---------------- -------------- ---------------------
Completed investment property 734,428 Income ERV GBP2.38 per
capitalisation sq ft-GBP12.71
per sq ft
Equivalent 5.1%-20.7%
yield
------------------------------ ------------ ---------------- -------------- ---------------------
Development property and land 76,827 Comparable Sales rate GBP200,000-GBP700,000
method/ per acre
residual method
------------------------------ ------------ ---------------- -------------- ---------------------
811,255
------------------------------ ------------ ---------------- -------------- ---------------------
31 March 2023
Fair Value Valuation Key
GBP'000 technique unobservable Range
inputs
------------------------------ ---------- ---------------- ---------------- ---------------------
Completed investment property 753,110 Income ERV GBP2.38 per sq
capitalisation ft-GBP17.50 per
sq ft
Equivalent yield 5.03%-19.77%
------------------------------ ---------- ---------------- ---------------- ---------------------
Development property and land 75,660 Comparable Sales rate per GBP200,000-GBP925,000
method/ acre
residual method
------------------------------ ---------- ---------------- ---------------- ---------------------
828,770
------------------------------ ---------- ---------------- ---------------------------------------
Significant increases/decreases in the ERV (per sq ft per annum)
and rental growth per annum in isolation would result in a
significantly higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result in a significantly
higher/lower fair value measurement.
Generally, a change in the assumption made for the ERV (per sq
ft per annum) is accompanied by:
-- a similar change in the rent growth per annum and discount rate (and exit yield); and
-- an opposite change in the long-term vacancy rate.
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to a gain of GBP6,778,000 (six months to 30
September 2022: loss of GBP73,362,000) and are presented in the
condensed consolidated statement of comprehensive income in line
item 'fair value gains on investment properties'.
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Group's assets and liabilities is
considered the same as their fair value.
22. Related party transactions
Directors
The Directors (all Non-Executive Directors) of the Company and
its subsidiaries are considered to be the key management personnel
of the Group. Directors' remuneration for the period totalled
GBP86,360 (six months to 30 September 2022: GBP87,280) and as at 30
September 2023, a balance of GBPnil (31 March 2023: GBPnil) was
outstanding. The Directors who served during the period received
GBP0.8 million in dividend payments (30 September 2022: GBP0.8
million).
Investment Advisor
The Company is party to an Investment Management Agreement with
the Investment Manager, pursuant to which the Investment Manager
has appointed the Investment Advisor to provide investment advisory
services relating to the respective assets on a day-to-day basis in
accordance with their respective investment objectives and
policies, subject to the overall supervision and direction by the
Investment Manager and the Board of Directors.
For its services to the Group, the Investment Advisor receives
an annual fee at the rate of 1.1% of the NAV of the Company up to
GBP500 million, then at a lower rate of 0.9% thereafter.
During the period, the Group incurred GBP2,819,726 (30 September
2022: GBP3,803,682) in respect of the Investment Advisor's fees.
GBP1,436,000 (31 March 2023: GBP1,529,000) was outstanding as at
the period-end date.
Subsidiaries
As at 30 September 2023, the Company owned directly or
indirectly a 100% controlling stake in Tilstone Holdings Limited,
Tilstone Warehouse Holdco Limited, Tilstone Industrial Warehouse
Limited, Tilstone Retail Warehouse Limited, Tilstone Industrial
Limited, Tilstone Retail Limited, Tilstone Trade Limited, Tilstone
Basingstoke Limited, Tilstone Glasgow Limited, Tilstone Radway
Limited, Tilstone Chesterfield Limited, Tilstone Liverpool Limited,
Warehouse 1234 Limited, Tilstone Property Holdings Limited, and
Tilstone Oxford Limited.
Tilstone Property Holdings Limited has applied to the Registrar
of Companies to be voluntary struck off and dissolved, it is
expected that this process will complete on 19 November 2023.
23. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
24. Post balance sheet events
A second interim dividend of 1.6 pence per share in respect of
the year ended 31 March 2024 will be paid full PID on 29 December
2023 to shareholders on the register on 1 December 2023.
Supplementary notes
For the six months ended 30 September 2023
The Group is a member of the European Public Real Estate
Association ("EPRA"). EPRA has developed and defined the following
performance measures to give transparency, comparability, and
relevance of financial reporting across entities that may use
different accounting standards. The following measures are
calculated in accordance with EPRA guidance.
Table 1: EPRA performance measures summary
Six months Six months
ended ended
30 September 30
September
Notes 2023 2022
------------------------------------------------ -------- ------------ ----------
EPRA EPS (pence) Table 2 1.0 2.6
EPRA cost ratio (including direct vacancy cost) Table 6 23.2% 27.6%
EPRA cost ratio (excluding direct vacancy cost) Table 6 22.2% 24.5%
------------------------------------------------ -------- ------------ ----------
30 September 31
March
Notes 2023 2023
----------------------------------- --------- ------------ ------
EPRA NDV per share (pence) Table 3 126.4 124.4
EPRA NRV per share (pence) Table 3 136.7 135.9
EPRA NTA per share (pence) Table 3 123.7 122.6
EPRA NIY Table 4 5.2% 5.0%
EPRA 'topped-up' net initial yield Table 4 5.5% 5.5%
EPRA vacancy rate Table 5 4.0% 5.0%
EPRA LTV Table 10 33.6% 36.5%
----------------------------------- --------- ------------ ------
Table 2: EPRA income statement and earnings performance
measures
Six months Six months
ended ended
30 September 30
September
2023 2022
(Restated)
GBP'000 GBP'000
------------------------------------------------------- ------------ ----------
Total property income 25,960 27,041
Less: service charge income (2,669) (2,901)
Less: dilapidation income (192) (372)
Less: insurance recharged (854) (827)
------------------------------------------------------- ------------ ----------
Rental income (A) 22,245 22,941
Property operating expenses (2,031) (2,341)
Service charge expenses (2,785) (3,123)
Add back: service charge income 2,669 2,901
Add back: dilapidation income 192 372
Add back: insurance recharged 854 827
Adjusted gross profit (B) 21,144 21,577
Administration expenses (3,857) (4,550)
------------------------------------------------------- ------------ ----------
Adjusted operating profit before interest and tax 17,287 17,027
Finance income 5,471 16,038
Finance expenses (12,986) (5,974)
Add back: accelerated amortisation of loan issue costs 1,688 -
Less change in fair value of interest rate derivatives (1,646) (15,963)
------------------------------------------------------- ------------ ----------
Adjusted profit before tax 9,814 11,128
Tax on adjusted profit - -
------------------------------------------------------- ------------ ----------
Adjusted earnings 9,814 11,128
Less: interest from derivatives (3,697) (74)
Less: accelerated amortisation of loan issue costs (1,688) -
------------------------------------------------------- ------------ ----------
EPRA earnings 4,429 11,054
------------------------------------------------------- ------------ ----------
Weighted average number of shares in issue (thousands) 424,862 424,862
------------------------------------------------------- ------------ ----------
Adjusted EPS (pence) 2.3 2.6
------------------------------------------------------- ------------ ----------
Weighted average number of shares in issue (thousands) 424,862 424,862
------------------------------------------------------- ------- -------
EPRA EPS (pence) 1.0 2.6
------------------------------------------------------- ------- -------
Gross to net rental income ratio (B/A) 95.1% 94.1%
------------------------------------------------------- ------- -------
The adjusted earnings per share reflects our ability to generate
earnings from our portfolio.
The Company has also included an additional earnings measure
called 'Adjusted Earnings' and 'Adjusted EPS'. Adjusted Earnings
and Adjusted EPS is based on EPRA's Best Practices Recommendations
and recognises finance income earned from derivatives held at fair
value through profit and loss used to hedge the Company's floating
interest rate exposure.
The Board deems this a more relevant indicator of core earnings
as it reflects our ability to generate earnings from our
portfolio.
The comparative adjusted earnings have been restated due to the
renegotiation of the licence fee previously levied over Radway
Green, Crewe.
Table 3: EPRA balance sheet and net asset value performance
measures
EPRA publishes Best Practices Recommendations ("BPR") for
financial disclosures by public real estate companies. EPRA net
disposal value ("NDV"), EPRA net reinvestment value ("NRV") and
EPRA net tangible assets ("NTA").
EPRA NTA is considered to be the most relevant measure for
Warehouse REIT's operating activities. A reconciliation of the
three EPRA NAV metrics from IFRS NAV is shown in the table
below.
EPRA NDV EPRA EPRA
NRV NTA
As at 30 September 2023 GBP'000 GBP'000 GBP'000
------------------------------------------------- --------- --------- ---------
Total properties(1) 811,255 811,255 811,255
Net borrowings(2) (275,458) (275,458) (275,458)
Other net liabilities 1,051 1,051 1,051
------------------------------------------------- --------- --------- ---------
IFRS NAV 536,848 536,848 536,848
------------------------------------------------- --------- --------- ---------
Exclude: fair value of interest rate derivatives - (11,214) (11,214)
Include: real estate transfer tax(3) - 55,165 -
------------------------------------------------- --------- --------- ---------
NAV used in per share calculations 536,848 580,799 525,634
------------------------------------------------- --------- --------- ---------
Number of shares in issue (thousands) 424,862 424,862 424,862
------------------------------------------------- --------- --------- ---------
NAV per share (pence) 126.4 136.7 123.7
------------------------------------------------- --------- --------- ---------
EPRA NDV EPRA NRV EPRA NTA
As at 31 March 2023 GBP'000 GBP'000 GBP'000
------------------------------------------------- --------- --------- ---------
Total properties(1) 828,770 828,770 828,770
Net borrowings(2) (280,947) (280,947) (280,947)
Other net liabilities (19,348) (19,348) (19,348)
------------------------------------------------- --------- --------- ---------
IFRS NAV 528,475 528,475 528,475
------------------------------------------------- --------- --------- ---------
Exclude: fair value of interest rate derivatives - (7,387) (7,387)
Include: real estate transfer tax(3) - 56,356 -
------------------------------------------------- --------- --------- ---------
NAV used in per share calculations 528,475 577,444 521,088
------------------------------------------------- --------- --------- ---------
Number of shares in issue (thousands) 424,862 424,862 424,862
------------------------------------------------- --------- --------- ---------
NAV per share (pence) 124.4 135.9 122.6
------------------------------------------------- --------- --------- ---------
(1. Professional valuation of investment property.)
2. Comprising interest-bearing loans and borrowings (excluding
unamortised loan arrangement fees) of GBP285,000,000 (31 March
2023: GBP306,000,000) net of cash of GBP9,542,000 (31 March 2023:
GBP25,053,000).
(3. EPRA NTA and EPRA NDV reflect IFRS values that are net of
real estate transfer tax. Real estate transfer tax is added back
when calculating EPRA NRV.)
EPRA NDV details the full extent of liabilities and resulting
shareholder value if Company assets are sold and/or if liabilities
are not held until maturity. Deferred tax and financial instruments
are calculated as to the full extent of their liability, including
tax exposure not reflected in the statement of financial position,
net of any resulting tax.
EPRA NTA assumes entities buy and sell assets, thereby
crystallising certain levels of deferred tax liability.
EPRA NRV highlights the value of net assets on a long-term basis
and reflects what would be needed to recreate the Company through
the investment markets based on its current capital and financing
structure. Assets and liabilities that are not expected to
crystallise in normal circumstances, such as the fair value
movements on financial derivatives and deferred taxes on property
valuation surpluses, are excluded. Costs such as purchasers' costs
are included.
Table 4: EPRA net initial yield
30 September 31 March
2023 2023
GBP'000 GBP'000
---------------------------------------------------------------------------------- ------------ --------
Total properties per external valuer's report 811,255 828,770
Less development property and land (76,585) (75,660)
---------------------------------------------------------------------------------- ------------ --------
Net valuation of completed properties 734,670 753,110
Add estimated purchasers' costs(1) 49,574 51,211
---------------------------------------------------------------------------------- ------------ --------
Gross valuation of completed properties including estimated purchasers' costs (A) 784,244 804,321
---------------------------------------------------------------------------------- ------------ --------
Gross passing rents(2) (annualised) 41,328 41,241
Less irrecoverable property costs(2) (680) (1,279)
---------------------------------------------------------------------------------- ------------ --------
Net annualised rents (B) 40,648 39,962
---------------------------------------------------------------------------------- ------------ --------
Add notional rent on expiry of rent-free periods or other lease incentives(3) 2,511 4,068
---------------------------------------------------------------------------------- ------------ --------
'Topped-up' net annualised rents (C) 43,159 44,030
---------------------------------------------------------------------------------- ------------ --------
EPRA NIY (B/A) 5.2% 5.0%
---------------------------------------------------------------------------------- ------------ --------
EPRA 'topped-up' net initial yield (C/A) 5.5% 5.5%
---------------------------------------------------------------------------------- ------------ --------
(1. Estimated purchasers' costs at 6.8%.)
(2. Gross passing rents and irrecoverable property costs
assessed as at the balance sheet date for completed investment
properties excluding development property and land.)
(3. Adjustment for unexpired lease incentives such as rent-free
periods, discounted rent period and step rents. The adjustment
includes the annualised cash rent that will apply at the expiry of
the lease incentive. Rent-frees expire over a weighted average
period of three months.)
EPRA NIY represents annualised rental income based on the cash
rents passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market value of the
property, increased with (estimated) purchasers' costs. It is a
comparable measure for portfolio valuations designed to make it
easier for investors to judge themselves how the valuation of
portfolio X compares with portfolio Y.
EPRA 'topped-up' NIY incorporates an adjustment to the EPRA NIY
in respect of the expiration of rent-free periods (or other
unexpired lease incentives such as discounted rent periods and step
rents).
NIY as stated in the Investment Advisor's report calculates net
initial yield on topped-up annualised rents but does not deduct
non-irrecoverable property costs.
Table 5: EPRA vacancy rate
30 September 31
March
2023 2023
GBP'000 GBP'000
------------------------------------------------ ------------ -------
Annualised ERV of vacant premises (D) 2,103 2,537
Annualised ERV for the investment portfolio (E) 52,015 50,736
------------------------------------------------ ------------ -------
EPRA vacancy rate (D/E) 4.0% 5.0%
------------------------------------------------ ------------ -------
EPRA vacancy rate represents ERV of vacant space divided by ERV
of the completed investment portfolio, excluding development
property and land. It is a pure measure of investment property
space that is vacant, based on ERV.
Table 6: Total cost ratio/EPRA cost ratio
Six months Six months
ended ended
30 September 30
September
2023 2022
GBP'000 GBP'000
----------------------------------------------------- ------------ ----------
Property operating expenses 2,031 2,341
Service charge expenses 2,785 3,123
Add back: service charge income (2,669) (2,901)
Add back insurance recharged (854) (827)
----------------------------------------------------- ------------ ----------
Net property operating expenses 1,293 1,736
Administration expenses 3,857 4,550
Less ground rents(1) (120) (91)
----------------------------------------------------- ------------ ----------
Total cost including direct vacancy cost (F) 5,030 6,195
Direct vacancy cost (219) (693)
----------------------------------------------------- ------------ ----------
Total cost excluding direct vacancy cost (G) 4,811 5,502
----------------------------------------------------- ------------ ----------
Rental income 22,245 22,941
Less ground rents paid (529) (526)
----------------------------------------------------- ------------ ----------
Gross rental income (H) 21,716 22,415
Less direct vacancy cost (219) (693)
----------------------------------------------------- ------------ ----------
Net rental income 21,497 21,722
----------------------------------------------------- ------------ ----------
Total cost ratio including direct vacancy cost (F/H) 23.2% 27.6%
----------------------------------------------------- ------------ ----------
Total cost ratio excluding direct vacancy cost (G/H) 22.2% 24.5%
----------------------------------------------------- ------------ ----------
Six months Six months
ended ended
30 September 30
September
2023 2022
GBP'000 GBP'000
---------------------------------------------------- ------------ ----------
Total cost including direct vacancy cost (F) 5,030 6,195
EPRA total cost including direct vacancy cost (I) 5,030 6,195
Direct vacancy cost (219) (693)
---------------------------------------------------- ------------ ----------
EPRA total cost excluding direct vacancy cost (J) 4,811 5,502
---------------------------------------------------- ------------ ----------
EPRA cost ratio including direct vacancy cost (I/H) 23.2% 27.6%
---------------------------------------------------- ------------ ----------
EPRA cost ratio excluding direct vacancy cost (J/H) 22.2% 24.5%
---------------------------------------------------- ------------ ----------
(1. Ground rent expenses included within administration expenses
such as depreciation of head lease assets.)
EPRA cost ratios represent administrative and operating costs
(including and excluding costs of direct vacancy) divided by gross
rental income. They are a key measure to enable meaningful
measurement of the changes in the Group's operating costs.
It is the Group's policy not to capitalise overheads or
operating expenses and no such costs were capitalised in either the
six months ended 30 September 2023 or six months to 30 September
2022.
Table 7: Lease data
Head rents
Year 1 Year 2 Years 3 Year payable Total
to 10 10+
As at 30 September GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2023
----------------------- --------- -------- -------- -------- ---------- --------
Passing rent of
leases expiring
in: 5,768 5,060 26,073 5,624 (1,197) 41,328
------------------------ -------- -------- -------- -------- ---------- --------
ERV of leases expiring
in: 9,225 5,902 31,293 6,802 (1,206) 52,016
------------------------ -------- -------- -------- -------- ---------- --------
Passing rent subject
to review in: 16,819 8,283 16,690 733 (1,197) 41,328
------------------------ -------- -------- -------- -------- ---------- --------
ERV subject to review
in: 22,712 9,650 20,125 735 (1,206) 52,016
------------------------ -------- -------- -------- -------- ---------- --------
WAULT to expiry is 5.2 years and to break is 4.4 years.
Head rents
Year 1 Year 2 Years 3 Year 10+ payable Total
to 10
As at 31 March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2023
------------------------ --------- -------- -------- -------- ---------- --------
Passing rent of leases
expiring in: 5,812 4,327 27,533 4,773 (1,204) 41,241
------------------------- -------- -------- -------- -------- ---------- --------
ERV of leases expiring
in: 9,239 5,062 33,716 6,460 (1,204) 53,273
------------------------- -------- -------- -------- -------- ---------- --------
Passing rent subject
to review in: 15,782 8,522 18,139 2 (1,204) 41,241
------------------------- -------- -------- -------- -------- ---------- --------
ERV subject to review
in: 21,055 10,280 23,140 2 (1,204) 53,273
------------------------- -------- -------- -------- -------- ---------- --------
WAULT to expiry is 5.6 years and to break is 4.5 years.
Table 8: Capital expenditure
Six months Year
ended ended
30 September 31
March
2023 2023
GBP'000 GBP'000
-------------------------------------------------------- ------------ -------
Acquisitions(1) - 66,728
Development spend(2) 5,602 8,295
Completed investment properties:(3)
No incremental lettable space - like-for-like portfolio 2,170 5,035
No incremental lettable space - other - -
Occupier incentives - -
-------------------------------------------------------- ------------ -------
Total capital expenditure 7,772 80,058
Conversion from accruals to cash basis 950 (1,082)
-------------------------------------------------------- ------------ -------
Total capital expenditure on a cash basis 8722 78,976
-------------------------------------------------------- ------------ -------
1. Acquisitions include GBPnil completed investment property and
GBPnil development property and land (31 March 2023: GBP64,512,000
and GBP2,216,000 respectively).
(2. Expenditure on development property and land.)
(3. Expenditure on completed investment properties.)
Table 9: Like-for-like rental income
Six months Six months
ended 30 ended 30
September September GBP Change
2023 2022 GBP'000 % Change
GBP'000 GBP'000
Like-for-like rental
income(1) 19,893 19,632 261 1.3%
Other adjustments 252 - 252 100.0%
Adjusted like-for-like
rental income 20,145 19,632 513 2.6%
Development lettings 257 169 88 52.1%
Properties acquired 1,097 571 526 92.1%
Properties sold 746 2,569 (1,823) (71.0%)
------------------------ ------------ ------------ ------------ ----------
Rental income 22,245 22,941 (696) (3.0%)
Dilapidation income 192 372 (180) (48.4%)
Insurance recharge 854 827 27 3.3%
Service charge income 2,669 2,901 232 8.0%
Total property income 25,960 27,041 1,081 (4.0%)
------------------------ ------------ ------------ ------------ ----------
1. Like-for-like portfolio valuation as at 30 September 2023:
GBP811.3 million (30 September 2022: GBP826.8 million).
Table 10: Loan to value ("LTV") ratio and EPRA LTV
Gross debt less cash, short-term deposits, and liquid
investments, divided by the aggregate value of properties and
investments.
As at As at
30 September 31 March
2023 2023
GBP'000 GBP'000
--------------------------------------- ------------- ---------
Interest-bearing loans and borrowings 285,000 306,000
Cash (9,542) (25,053)
---------------------------------------- ------------- ---------
Net borrowings (A) 275,458 280,947
Total portfolio valuation per valuer's
report (B) 811,255 828,770
LTV ratio (A/B) 34.0% 33.9%
---------------------------------------- ------------- ---------
EPRA LTV
As at As at
30 September 31 March 2023
2023
GBP000 GBP000
Interest-bearing loans and borrowings 285,000 306,000
Net payables 5,646 29,352
Cash (9,542) (25,053)
-------------------------------------- ------------- --------------
Net borrowings (A) 281,104 310,299
Investment properties at fair value 811,255 828,770
Interest rate derivatives 11,214 7,387
Head Lease Obligation 13,905 14,124
-------------------------------------- ------------- --------------
Total property value (B) 836,374 850,281
-------------------------------------- ------------- --------------
EPRA LTV (A/B) 33.6% 36.5%
-------------------------------------- ------------- --------------
Table 11: Total accounting return
The movement in EPRA NTA over a period plus dividends paid in
the period, expressed as a percentage of the EPRA NTA at the start
of the period.
Six months Year
ended ended
30 September 31 March 2023
2023
Pence per share Pence per
share
-------------------------------- --------------- --------------
Opening EPRA NTA (A) 122.6 173.8
Movement (B) 1.1 (51.2)
Closing EPRA NTA 123.7 122.6
Dividends per share (C) 3.2 6.5
--------------------------------- --------------- --------------
Total accounting return (B+C)/A 3.5% (25.7%)
--------------------------------- --------------- --------------
Table 12: Ongoing charges ratio
Ongoing charges ratio represents the costs of running the REIT
as a percentage of NAV as prescribed by the Association of
Investment Companies.
Six months ended Six months
30 September 2023 ended
30 September
2022
GBP'000 GBP'000
------------------------------------ ------------------ -------------
Administration expenses 3,856 4,550
Less: head lease asset depreciation (120) (91)
------------------------------------ ------------------ -------------
Ongoing charges 3,736 4,459
------------------------------------ ------------------ -------------
Annualised ongoing charges (A) 7,472 8,918
Opening NAV as at 1 April 528,475 738,954
NAV as at 30 September 536,848 678,578
Average undiluted NAV during the
period (B) 532,662 708,766
------------------------------------ ------------------ -------------
Ongoing charges ratio (A/B) 1.4% 1.3%
------------------------------------ ------------------ -------------
Glossary
Adjusted earnings per share ("Adjusted EPS")
Reflects our ability to generate earnings from our portfolio and
is based on IFRS earnings excluding unrealised fair value gains on
investment properties and derivatives, profit on disposal of
investment properties, one off costs, divided by the weighted
average number of shares in issue during the period.
Admission
The admission of Warehouse REIT plc onto the premium segment of
the main market of the London Stock Exchange on 12 July 2022.
AGM
Annual General Meeting.
AIC
The Association of Investment Companies.
AIFM
Alternative Investment Fund Manager.
AIFMD
The Alternative Investment Fund Managers Regulations 2013 (as
amended by The Alternative Investment Fund Managers (Amendment
etc.) (EU Exit) Regulations 2019) and the Investment Funds
Sourcebook forming part of the FCA Handbook.
APM
An Alternative Performance Measure is a numerical measure of the
Company's current, historical or future financial performance,
financial position, or cash flows, other than a financial measure
defined or specified in the applicable financial framework. In
selecting these APMs, the Directors considered the key objectives
and expectations of typical investors.
Company
Warehouse REIT plc.
Contracted rent
Gross annual rental income currently receivable on a property
plus rent contracted from expiry of rent-free periods and uplifts
agreed at the balance sheet date less any ground rents payable
under head leases.
Development property and land
Whole or a material part of an estate identified as having
potential for development. Such assets are classified as
development property and land until development is completed and
they have the potential to be fully income generating.
Effective occupancy
Total open market rental value of the units leased (including
assets under development, units undergoing refurbishment and units
under offer to let) divided by total open market rental value.
EPRA
The European Public Real Estate Association, the industry body
for European REITs.
EPRA cost ratio
The sum of property expenses and administration expenses as a
percentage of gross rental income, less ground rents calculated
both including and excluding direct vacancy cost.
EPRA earnings
IFRS profit after tax excluding movements relating to changes in
fair value of investment properties, gains/losses on property
disposals, changes in fair value of financial instruments and the
related tax effects.
EPRA earnings per share ("EPRA EPS")
A measure of EPS on EPRA earnings designed to present underlying
earnings from core operating activities based on the weighted
average number of shares in issue during the period.
EPRA guidelines
The EPRA Best Practices Recommendations Guidelines October 2019
and the EPRA Sustainability Best Practices Recommendations
Guidelines September 2017.
EPRA like-for-like rental income growth
The growth in rental income on properties owned throughout the
current and previous period under review. This growth rate includes
revenue recognition and lease accounting adjustments but excludes
development property and land in either year and properties
acquired or disposed of in either year.
EPRA LTV
The EPRA LTV's aim is to assess the gearing of the shareholder
equity within a real estate company.
EPRA NDV/EPRA NRV/EPRA NTA per share
The EPRA net asset value measures figures divided by the number
of shares outstanding at the balance sheet date.
EPRA net disposal value ("EPRA NDV")
The net asset value measure detailing the full extent of
liabilities and resulting shareholder value if company assets are
sold and/or if liabilities are not held until maturity. Deferred
tax and financial instruments are calculated as to the full extent
of their liability, including tax exposure not reflected in the
statement of financial position, net of any resulting tax.
EPRA net initial yield ("EPRA NIY")
The annualised passing rent generated by the portfolio, less
estimated non-recoverable property operating expenses, expressed as
a percentage of the portfolio valuation (adding notional
purchasers' costs), excluding development property and land.
EPRA net reinstatement value ("EPRA NRV")
The net asset value measure to highlight the value of net assets
on a long-term basis and reflect what would be needed to recreate
the Company through the investment markets based on its current
capital and financing structure. Assets and liabilities that are
not expected to crystallise in normal circumstances, such as the
fair value movements on financial derivatives and deferred taxes on
property valuation surpluses, are excluded. Costs such as
purchasers' costs are included.
EPRA net tangible assets ("EPRA NTA")
The net asset value measure assuming entities buy and sell
assets, thereby crystallising certain levels of deferred tax
liability.
EPRA 'topped-up' net initial yield
The annualised passing rent generated by the portfolio, topped
up for contracted uplifts, less estimated non-recoverable property
operating expenses, expressed as a percentage of the portfolio
valuation (adding notional purchasers' costs), excluding
development property and land.
EPRA vacancy rate
Total open market rental value of vacant units divided by total
open market rental value of the portfolio excluding development
property and land.
EPS
Earnings per share.
Equivalent yield
The weighted average rental income return expressed as a
percentage of the investment property valuation, plus purchasers'
costs, excluding development property and land.
ERV
The estimated annual open market rental value of lettable space
as assessed by the external valuer.
FCA
Financial Conduct Authority.
FTSE 250
Capitalisation-weighted index consisting of the 101st to the
350th largest companies listed on the London Stock Exchange.
FTSE All share
Capitalisation-weighted index, comprising around 600 of more
than 2,000 companies traded on the London Stock Exchange.
FTSE EPRA/NAREIT Global Real Estate Index Series
Free-float adjusted, market capitalisation-weighted index
designed to track the performance of listed real estate companies
in both developed and emerging countries worldwide. Constituents of
the Index are screened on liquidity, size, and revenue.
GAV
Gross asset value.
Gross rental income
Rental income, less ground rents paid.
Group
Warehouse REIT plc and its subsidiaries.
Gross to net rental income ratio
Represents the net income received from the portfolio after
deducting non-recoverable property costs incurred during the
period.
IASB
International Accounting Standards Board.
IFRS
International Financial Reporting Standards adopted by the
United Kingdom.
IFRS earnings per share ("EPS")
IFRS earnings after tax for the period divided by the weighted
average number of shares in issue during the period.
IFRS NAV per share
IFRS net asset value divided by the number of shares outstanding
at the balance sheet date.
Interest cover
Adjusted operating profit before gains on investment properties,
interest, and tax divided by the underlying net interest
expense.
Investment portfolio
Completed buildings and excluding development property and
land.
IPO
Initial public offering.
Like-for-like rental income growth
The increase in contracted rent of properties owned throughout
the period under review, expressed as a percentage of the
contracted rent at the start of the period, excluding development
property.
Like-for-like valuation increase
The increase in the valuation of properties owned throughout the
period under review, expressed as a percentage of the valuation at
the start of the period, net of capital expenditure.
Loan to value ratio ("LTV")
Gross debt less cash, short-term deposits, and liquid
investments, divided by the aggregate value of properties and
investments.
Main Market
The premium listing segment of the London Stock Exchange's Main
Market.
NAV
Net asset value.
Net initial yield ("NIY")
Contracted rent at the balance sheet date, expressed as a
percentage of the investment property valuation, plus purchasers'
costs, excluding development property and land.
Net rental income
Gross annual rental income receivable after deduction of ground
rents and other net property outgoings including void costs and net
service charge expenses.
Net reversionary yield ("NRY")
The anticipated yield to which the net initial yield will rise
(or fall) once the rent reaches the ERV.
Occupancy
Total open market rental value of the units leased divided by
total open market rental value excluding development property and
land, equivalent to one minus the EPRA vacancy rate.
Ongoing charges ratio
Ongoing charges ratio represents the costs of running the REIT
as a percentage of NAV as prescribed by the Association of
Investment Companies.
Passing rent
Gross annual rental income currently receivable on a property as
at the balance sheet date, less any ground rents payable under head
leases.
Property income distribution ("PID")
Profits distributed to shareholders, which are subject to tax in
the hands of the shareholders as property income. PIDs are usually
paid net of withholding tax (except for certain types of tax-exempt
shareholders). REITs also pay out normal dividends called
non-PIDs.
RCF
Revolving credit facility.
Real Estate Investment Trust ("REIT")
A listed property company that qualifies for, and has elected
into, a tax regime which is exempt from corporation tax on profits
from property rental income and UK capital gains on the sale of
investment properties.
RPI
Retail price index.
SONIA
Sterling Overnight Index Average.
Total accounting return
The movement in EPRA NTA over a period, plus dividends paid in
the period, expressed as a percentage of the EPRA NTA at the start
of the period.
Total cost ratio
EPRA cost ratio excluding one-off costs calculated both
including and excluding vacant property costs.
Weighted average unexpired lease term ("WAULT")
Average unexpired lease term to first break or expiry weighted
by contracted rent across the portfolio, excluding development
property and land.
The full half-yearly report can be accessed via the Company's
website at warehousereit.co.uk .
Neither the contents of Warehouse REIT plc's website, nor the
contents of any website accessible from hyperlinks on the website
(or any website) is incorporated into, or forms part of this
announcement.
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END
IR FFFFILRLSLIV
(END) Dow Jones Newswires
November 15, 2023 02:00 ET (07:00 GMT)
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