TIDMAIRE
RNS Number : 8095P
Alternative Income REIT PLC
22 February 2021
THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND
IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN THE UNITED
STATES OF AMERICA, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA,
CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA.
22 February 2021
Alternative Income REIT plc
(the "Company" or the "Group")
Interim Report and Financial Statements for the half year ended
31 December 2020
The Board of Directors of Alternative Income REIT plc (ticker:
AIRE), the owner of a diversified portfolio of UK commercial
property assets predominantly let on long leases, is pleased to
announce its interim report and financial statements for the half
year ended 31 December 2020.
Financial Highlights
-- Unaudited Net Asset Value of GBP68.17 million and of 84.68
pence per share ('pps') as at 31 December 2020 (31 December 2019:
GBP76.17 million and 94.63 pps) - further details in the NAV
section of the Chairman's Statement below.
-- Operating profit of GBP3.48 million (including gain on sale
of investment property but excluding fair value changes) for the
half year (half year ended 31 December 2019: GBP3.03 million) -
further details in the Financial Results section of the Chairman's
Statement below.
-- Unadjusted profit before tax of GBP3.03 million and 3.77 pps
for the half year (half year ended 31 December 2019: profit of
GBP2.07 million and 2.57 pps).
-- EPRA Earnings per Share (1) for the half year of 3.43 pence
(half year ended 31 December 2019: 2.87 pps).
o The EPRA EPS includes accruals to reflect the minimum
contracted uplifts, the spreading of rent free periods, the
amortisation of loan arrangement fees and the movement in the
provision for impairment of trade receivables. Excluding these
items from the Group's EPRA EPS, the unaudited adjusted cash
earnings were 3.19 pence per share, reflecting 141.6% cash dividend
cover for the half year (half year ended 31 December 2019: 2.22
pence per share; 80.7% cash dividend cover).
-- Total dividends of 2.25 pps have been declared for the half
year (half year ended
31 December 2019: 2.75 pps ).
o As announced on 4 February 2021, a quarter of the Group's rent
is derived from the hotel and leisure industry, which has been
particularly adversely affected by the COVID-19 related lockdown
measures enforced during 2020 and, indeed, most remain closed. As a
result, the Group currently has arrears from this sector equal to
c.8% of its 2020 rents, which, when combined with the remedial work
that the Group completed in December 2020 to ensure that its
property in Swindon conforms with current Building Regulations, has
impacted the Group's cash position, resulting in a lower dividend
declared on 4 February 2021 in respect of the final quarter of
2020.
o The Board continues to target a resumption of a fully covered
annual dividend of 5.5 pence per share (2) , all else being equal,
by September 2022.
-- The price of the Company's Ordinary Shares on the Main Market
of the London Stock Exchange was 60.00 pps as at 31 December 2020
(31 December 2019: 74.68 pps).
-- As at 31 December 2020, the Group had a GBP41.00 million loan
facility with Canada Life Investments and was geared to 36.6% of
the Gross Asset Value ('GAV') (31 December 2019: 34.5%).
-- EPRA Cost Ratio (3) of 12.6% as at 31 December 2020 (31 December 2019: 16.3%).
(1) see Note 7 of the Consolidated Financial Statements,
Glossary for definitions and abbreviations, and Key Performance
Indicators section below for their definitions.
2 This is a target only and not a profit forecast. There can be
no assurance that the target will be met and it should not be taken
as an indicator of the Company's expected or actual results.
3 A definition of EPRA measures is set out in the EPRA Unaudited
Performance Measures section further below.
Property Highlights
-- As at 31 December 2020, the Group's property portfolio had a
fair value of GBP108.53 million, including GBP4.75m for the newly
acquired property, Droitwich Spa Retail Park (31 December 2019:
GBP112.99 million) - see Financial Results section within the
Chairman's Statement below.
-- The weighted average unexpired lease term ('WAULT') as at 31
December 2020 was 18.3 years to the earlier of break and expiry (31
December 2019: 20.0 years) and 20.3 years to expiry (31 December
2019: 22.1 years).
-- The assets were fully let as at 31 December 2020 (31 December 2019: fully let).
-- Rent and other income recognised during the half year was
GBP3.53 million (half year to 31 December 2019: GBP3.63 million).
The number of tenants as at 31 December 2020 was 22 (31 December
2019: 21).
-- The portfolio had annualised gross passing rental income of
GBP6.94 million as at 31 December 2020 (31 December 2019: GBP6.78
million).
-- EPRA Net Initial Yield (3) ('NIY') of 5.49% as at 31 December
2020 (31 December 2019: 5.04%).
-- EPRA topped-up NIY (3) of 7.04% as at 31 December 2020 (31 December 2019: 6.30%).
Post balance sheet highlights
-- By week commencing 15 February 2021, in respect of the March,
June and September 2020 rent quarters, the Group had collected
91.5% of rents due and payment plans are in place in respect of the
remaining 8.5%. By the same date, the Group had collected 86.6% of
its December 2020 quarter's rent and agreed, or is the process of
agreeing, rent concessions with the remaining 13.4%.
-- As previously announced, and in line with its commitment set
out in the results of the Annual General Meeting announcement on 26
November 2020, the Board is continuing to engage in an open and
transparent dialogue with shareholders and expects to provide an
update shortly.
-- On 4 February 2021, the Board declared an interim dividend of
1.00 pps in respect of the period from 1 October 2020 to 31
December 2020. This will be paid on 26 February 2021 to
shareholders on the register as at 12 February 2021. The
ex-dividend date was 11 February 2021.
ENQUIRIES
Alternative Income REIT PLC
Steve Smith - Chairman via Maitland/AMO below
M7 Real Estate Ltd
Richard Croft +44 (0)20 3657 5500
Panmure Gordon (UK) Limited +44 (0)20 7886 2500
Alex Collins
Tom Scrivens
Chloe Ponsonby
Maitland/AMO (Communications Adviser) +44(0) 7747 113 930
James Benjamin james.benjamin@maitland.co.uk
The Company's LEI is 213800MPBIJS12Q88F71.
Further information on Alternative Income REIT plc is available
at www.alternativeincomereit.com (4)
NOTES
Alternative Income REIT PLC aims to generate a sustainable,
secure and attractive income return for shareholders from a
diversified portfolio of UK property investments, predominately in
alternative and specialist sectors. The majority of the assets in
the Group's portfolio are let on long leases which contain
inflation linked rent review provisions.
The Company's investment adviser is M7 Real Estate Limited
("M7"). M7 is a leading specialist in the pan-European, regional,
multi-tenanted real estate market. Majority owned by its senior
managers, it has over 200 employees in 14 countries across Europe.
The team manages over 835 properties with a value of circa EUR5.1
billion.
(4) Neither the content of the Company's website, nor the
content on any website accessible from hyperlinks on its website or
any other website, is incorporated into, or forms part of, this
announcement nor, unless previously published on a Regulatory
Information Service, should any such content be relied upon in
reaching a decision as to whether or not to acquire, continue to
hold, or dispose of, securities in the Company.
Chairman's Statement
Overview
I am pleased to present the unaudited interim report and
financial statements for the Group for the half year ended 31
December 2020.
The past year has seen unprecedented challenges as the COVID-19
pandemic continues to create global uncertainty. However, I am
pleased to reflect that, at the start of the new year, the
vaccination programme may be turning the tide and that we have
cause to look forward with cautious optimism.
Whilst the full impact of the pandemic on the economy and, in
particular, the property sector is still to be understood, in spite
of considerable uncertainty, the Group has continued to make
progress. We were particularly pleased to have completed the
disposal of the Wet 'n' Wild Water Park, North Shields ("Wet 'n'
Wild") at a significant premium to cost and book value, and
subsequently to redeploy the proceeds through the acquisition of
the Droitwich Spa Retail Park, at a yield which was materially
higher than both the 6.0% exit yield on Wet 'n' Wild and the
Group's 5.76% portfolio valuation yield at the time. This
transaction was the first investment for the Company identified by
its Investment Adviser, M7 Real Estate Limited, and the Board
believes it to be an asset with good defensive qualities and the
potential to deliver excellent long term returns for
shareholders.
Over the period, the Board's focus has been the health, safety
and wellbeing of its stakeholders, coupled with proportionate
support for its tenants, to ensure that as far as possible the
financial position of both landlord and its lessees remains healthy
and sustainable, cognisant of the duty to act in the best interests
of the Company's shareholders as a whole. By week commencing 15
February 2021, in respect of the March, June and September 2020
rent quarters, the Group had collected 91.5% of rents due and
payment plans are in place in respect of the remaining 8.5%. By the
same date, the Group had collected 86.6% of its December 2020
quarter's rent and agreed, or is the process of agreeing, rent
concessions with the remaining 13.4%.
The Board believes that the Group is well positioned given its
diversified, 100% let portfolio, generally strong rent collection,
a robust balance sheet and modest overhead. The focus remains on
generating a progressive cash covered dividend from the Group's now
fully invested portfolio.
Financial Results Half year Half year .
ended 31 December ended 31
2020 (unaudited) December Year ended
2019 (unaudited) 30 June
2020 (audited)
Operating profit before fair value changes
and gain [GBP'000] 3,050 3,027 5,803
Increase / (decrease) in fair values [GBP'000] 270 (245) (9,411)
Capital gain on sale of Wet 'n' Wild Water
Park [GBP'000] 425 - -
Operating profit/(loss) [GBP'000] 3,745 2,782 (3,608)
Profit/(loss) before tax [GBP'000] 3,033 2,067 (5,050)
Profit/(loss) per share - basic and diluted
[pence] 3.77 2.57 (6.27)
EPRA Earnings per Share (EPS) - basic
and diluted [pence] 3.43 2.87 5.42
Adjusted EPS* - basic and diluted [pence] 3.19 2.22 4.25
Net Asset Value (NAV) & EPRA NAV per share
[pence] 84.68 94.63 83.58
EPRA Cost Ratio [%] 12.6 16.3 21.1
Annualised charges [%] 1.14 1.60 2.22
Gearing ratio [%] 36.6 34.5 37.0
* The EPRA EPS includes accruals to reflect the minimum
contracted uplifts, the spreading of rent-free periods, the
amortisation of loan arrangement fees and the movement in the
provision for impairment of trade receivables. Excluding these
items from the Group's EPRA EPS, the unaudited adjusted cash
earnings were 3.19 pence per share, reflecting 141.6% cash dividend
cover for the half year (half year ended 31 December 2019: 2.22
pence per share; 80.7% cash dividend cover). As shown in the above
table, the gain on the disposal of Wet 'n' Wild was GBP425,202
which after taking account of the corresponding reversal of rent
smoothing for minimum uplifts of GBP115,568 was equivalent to 0.39
pence per share.
NAV
At 31 December 2020, the independent fair valuation undertaken
by Knight Frank of the Company's property portfolio was GBP108.53
million, including GBP4.75 million for the property at Droitwich
Spa Retail Park acquired in early December 2020 (31 December 2019:
GBP112.99 million).
As described in the latest Annual Report, the fair value of the
Group's property portfolio (including the Wet 'n' Wild held for
sale) declined from GBP112.99 million (31 December 2019) to
GBP104.76 million (30 June 2020). GBP6.15 million (74%) of this
movement was driven by the leisure, gym and hotel properties, and a
further GBP1.30 million (16%) was due to the automotive
dealerships. These property sectors, both occupational and
investment markets, were amongst the most adversely affected by the
COVID-19 related lockdown in effect from 23 March 2020.
During the half year ended 31 December 2020, property values
within the portfolio have stabilised. The exception is an uplift
(GBP1.70 million) during Q4 for the hotel property in Swindon where
the 31 December 2020 valuation reflects the completion of remedial
work and agreement reached with Travelodge.
Dividends & Earnings
The Company declared interim dividends of 2.25 pps in respect of
the half year ended 31 December 2020 (half year ended 31 December
2019: 2.75 pps). As set out in Note 8 to the Consolidated Financial
Statements, these dividends were covered by EPRA earnings of 3.43
pps (31 December 2019: 2.87 pps), and the Group's adjusted earnings
(representing cash) were 3.19 pps (31 December 2019: 2.22 pps).
As announced on 4 February 2021, a quarter of the Group's rent
is derived from the hotel and leisure industry, which has been
particularly adversely affected by the COVID-19 related lockdown
measures enforced during 2020 and, indeed, most remain closed. As a
result, the Group currently has arrears from this sector equal to
c.8% of its 2020 rents, which, when combined with the remedial work
that the Group completed in December 2020 to ensure that its
property in Swindon conforms with current Building Regulations, has
impacted the Group's cash position, resulting in a lower dividend
declared on 4 February 2021 in respect of the final quarter of
2020.
The Board continues to target a resumption of a fully covered
annual dividend of 5.5 pence per share (2) , all else being equal,
by September 2022.
Shareholder Engagement
Whilst the Board was disappointed by the rejection of the
revised Investment Policy at the Annual General Meeting on 26
November 2020 ("AGM"), it recognises that in the current febrile
atmosphere our major investors voted for a cautious approach, at
least in the short term, and the Board understands and is fully
supportive of their decision. The Board felt confident that the
proposed amendments would have enabled the Company to take
advantage of current market opportunities and deliver significant
added value for shareholders, but given the lack of appetite
amongst investors, the Board recognises the need for caution. One
disappointing aspect of the AGM was the level of voting
participation, particularly amongst smaller investors.
Following discussions with Glenstone Property PLC ("Glenstone"),
which holds 14.73% of the Company's issued share capital following
its Tender Offer, the Board and its adviser have been in regular
communication with Glenstone in relation to its request for
representation on the Board.
As announced on 4 February 2021, the Board is engaging in an
open and transparent dialogue with shareholders and will provide an
update shortly.
Future Growth and Outlook
Despite the potential impact of Brexit and, latterly, the major
disruption caused by the COVID-19 pandemic, the appetite for well
let UK commercial property with secure income remains relatively
strong. We therefore remain confident that the Group's diversified
robust portfolio is well positioned to absorb potential market
dislocation.
The Board believes that it has taken a disciplined and timely
approach, particularly in relation to cost management and the
appointment of a talented, proficient team of service providers and
advisers. The Group has a strong foundation from which to deliver
attractive total returns including a potentially progressive
dividend and believes the portfolio to be well positioned for the
better times that we expect to lie ahead.
Finally, I would like to thank our service providers, our
advisers and my fellow Directors for their input, effort and
support during very challenging times. Thank you also to our
shareholders for their continued patience and support during what
have been trying circumstances.
Steve Smith
Chairman
22 February 2021
Unaudited Key Performance Indicators ('KPIs')
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE
----------------------------------- -------------------------------- ----------------------------
1. Net Initial Yield 5.53 %
('NIY') The NIY is an indicator at 31 December 2020
Annualised rental income of the ability of the (30 June 2020: 5.77%;
based on the cash rents Company to meet its target 31 December 2019: 5.04%)
passing at the balance dividend .
sheet date, less non-recoverable
property operating expenses,
divided by the market
value of the property,
increased by purchasers'
costs estimated by the
Group's External Valuers.
18.3 years to break and
2. WAULT to break and 20.3 years to expiry
expiry The WAULT is a key measure at 31 December 2020
The average lease term of the quality of the (30 June 2020: 19.5 years
remaining to expiry across portfolio. Long leases to break and 21.6 years
the portfolio, weighted underpin the security to expiry; 31 December
by contracted rent. of the Group's future 2019: 20.0 years to break
income. and 22.1 years to expiry)
3. Net Asset Value ('NAV') GBP 68.17 million/ 84.68
NAV is the value of an Provides stakeholders pps
entity's assets minus with the most relevant at 31 December 2020
the value of its liabilities. information on the fair (30 June 2020: GBP67.29
value of the assets and million, 83.58 pps and
liabilities of the Group. 31 December 2019: GBP76.17
million, 94.63 pps)
4. Dividend 2.25 pps
Dividends declared in The Company seeks to deliver for the half year ended
relation to the period. a sustainable income stream 31 December 2020
from its portfolio, which (year ended 30 June 2020:
it distributes as dividends. 5.00pps; half year ended
31 December 2019: 2.75pps)
5. Adjusted EPS 3.19 pps
Adjusted EPS from core This reflects the Company's for the half year ended
operational activities, generation of cash earnings 31 December 2020
as adjusted for non-cash from the portfolio which (year ended 30 June 2020:
items. A key measure underpins dividends. 4.25 pps; half year to
of a company's underlying 31 December 2019: 2.22
operating results from pps)
its property rental business
and an indication of
the extent to which current
dividend payments are
supported by cash earnings.
See note 7 to the Consolidated
Financial Statements.
6. Leverage (Loan-to-GAV) 36.6 %
The proportion of the The Group utilises borrowings at 31 December 2020
Group's property that to enhance returns over (30 June 2020: 37.0%
is funded by borrowings. the medium term. Borrowings and 31 December 2019:
will not exceed 40% of 34.5%)
GAV (measured at drawdown).
EPRA Unaudited Performance Measures
Detailed below is a summary table showing the EPRA performance
measures of the Group (5)
MEASURE AND DEFINITION PURPOSE PERFORMANCE
----------------------------------- -------------------------------- -----------------------------
EPRA NIY 5.49 %
Annualised rental income A comparable measure for at 31 December 2020
based on the cash rents portfolio valuations. (30 June 2020: 5.72 %
passing at the balance This measure should make and 31 December 2019:
sheet date, less non-recoverable it easier for investors 5.04%)
property operating expenses, to judge how the valuation
divided by the market of two portfolios compare.
value of the property,
increased by (estimated)
purchasers' costs.
EPRA 'Topped-Up' NIY 7.04 %
This measure incorporates A comparable measure for at 31 December 2020
an adjustment to the portfolio valuations. (30 June 2020: 6.97%
EPRA NIY in respect of This measure should make and 31 December 2019:
the expiration of rent it easier for investors 6.30%)
free periods (or other to judge how the valuation
unexpired lease incentives of two portfolios compare.
such as discounted rent
periods and stepped rents).
EPRA NAV GBP68.17 million / 84.68
NAV adjusted to include Makes adjustments to IFRS pps
properties and other NAV to provide stakeholders at 31 December 2020
investment interests with the most relevant (30 June 2020: GBP67.29
at fair value and to information on the fair million, 83.58 pps and
exclude certain items value of the assets and 31 December 2019: GBP76.17
not expected to crystallise liabilities within a real million, 94.63 pps)
in a long term investment estate investment company
property business. with a long term investment
strategy.
EPRA Earnings/EPS GBP2.76 million/3.43
Earnings from operational A key measure of a company's pps
activities. underlying operating results EPRA earnings for the
and an indication of the half year ended 31 December
extent to which current 2020
dividend payments are (30 June 2020: GBP 4.36
supported by earnings. million/5.42 pps and
31 December 2019: GBP2.31
million/2.87 pps)
EPRA Vacancy 0 %
Estimated Market Rental A "pure" percentage measure EPRA vacancy as at 31
Value ('ERV') of vacant of investment property December 2020
space divided by ERV space that is vacant, (30 June 2020: 0% and
of the whole portfolio. based on ERV. 31 December 2019: 0%)
EPRA Cost Ratio 12.6 %
Administrative and operating A key measure to enable EPRA Cost Ratio as at
costs (including and meaningful measurement 31 December 2020. The
excluding costs of direct of the changes in a company's ratio is the same both
vacancy) divided by gross operating costs. including and excluding
rental income. the vacancy costs.
(30 June 2020: 21.1%
and 31 December 2019:
16.3%)
EPRA NNNAV is equal to EPRA NAV as there are no adjusting items.
As such, this measure has not been presented.
(5) The full calculations of these measures are set out in the
EPRA Unaudited Performance Measures Calculations section following
the financial statements
Investment Adviser's Report
Market Outlook
UK Economic Outlook
Lockdown measures introduced in early 2020 had a significant
impact on the UK economy, with GDP falling over 20% between Q4 2019
and Q2 2020(6) . However, the gradual easing of these restrictions
resulted in a stronger recovery than expected and GDP rose 15%
between April and September, to be just 8% below pre pandemic
levels(6) . The economic impact of lockdown measures implemented at
the end of 2020 is likely to be less severe than the first
lockdown. Now, more sectors have continued to operate and firms
have generally been more prepared, having adapted their business
models during the first lockdown. The extension of the Job
Retention Scheme should also mitigate the upward pressure on
unemployment whilst recently reported Government grants may help to
protect some small to medium sized businesses.
Despite the impact of the pandemic, inflation is expected to
rise close to the Bank of England's 2% target by the end of 2021,
but to remain below target thereafter. Rising unemployment and weak
inflationary pressure suggest that the Bank of England will not
raise short term rates for the foreseeable future. The Bank of
England announced a further expansion of its asset purchase
programme (QE) that will ensure the government can increase gilt
issuance without facing any substantial rise in borrowing
costs.
Forecasts suggest that it is likely to be several years before
the UK economy fully recovers to pre-pandemic levels. Whilst a
steady recovery can be expected throughout 2021, the risk of
sustained damage to some economic sectors (including retail,
hotels, hospitality, aviation and tourism) means that there is a
high level of uncertainty in the outlook, however, greater clarity
over the timing of COVID-19 vaccine distribution will undoubtedly
help the mapping of the route to recovery.
(6) UK Real Estate Market Outlook, December 2020, CBRE.
UK Real Estate Outlook
Despite economic uncertainty, the UK property market continues
to deliver healthy spreads over government bond yields, both in
absolute terms and relative to other markets. A global pandemic,
Brexit transition and ongoing economic slowdown, has seen central
banks keep interest rates low, with the chance of negative rates in
the UK now becoming a possibility. As a result, we expect to see
yield stability for many property sectors as investors seek a safe
haven offering attractive risk adjusted returns. Coupled with the
weight of frustrated capital which has been unable to invest over
the past year due to lockdown measures preventing in-person
inspections, investment demand is likely to be bolstered as the UK
enters its recovery phase with the potential to compress yields
further in certain markets.
Sectoral change stimulated by the COVID-19 pandemic had a
significant impact on specific markets during 2020, with high
street retail, shopping centres and leisure assets being impacted
most heavily by lockdown restrictions, whilst the extent of the
impact to offices is yet to be fully understood. Conversely, the
industrial and logistics sectors thrived during the year with the
ongoing trend to e-retailing only being accelerated.
The property industry continues to benefit from strong
competition amongst investors seeking long, inflation linked
income. Those markets that offer bond like income streams or are
linked to social infrastructure, such as distribution, last mile
logistics, supermarkets and certain alternative income will
continue to attract significant demand.
Financial Results
Rent and other income earned from the portfolio for the half
year ended 31 December 2020 was GBP3.53 million (half year to 31
December 2019: GBP3.63 million; year to 30 June 2020: GBP7.81
million), contributing to an operating profit before fair value
changes of GBP3.48 million (including the gain on sale of Wet 'n'
Wild) (half year to 2019: GBP3.03 million; year to 30 June 2020:
GBP5.80 million).
The portfolio has seen a gain of GBP0.27(7) million in fair
value of investment property over the period (half year to 31
December 2019: loss of GBP0.24 million; year to 30 June 2020: loss
of GBP9.41 million).
Administrative and property operations expenses, which include
the Investment Adviser's fee from 1 October 2020 and other costs
attributable to the running of the Group, were GBP0.44 million for
the period excluding service and direct recharges (half year to 31
December 2019: GBP0.61 million; year to 30 June 2020: GBP1.55
million). Annualised ongoing charges as a percentage of net asset
value for the period were 1.14% (half year to 31 December 2019:
1.60%; year to 30 June 2020: 2.22%).
The Group incurred finance costs of GBP0.71 million during the
period (half year to 31 December 2019: GBP0.72 million; year to 30
June 2020: GBP1.44 million).
The total profit before tax for the half year of GBP3.03 million
(half year to 31 December 2019: profit before tax of GBP2.07
million; year to 30 June 2020: loss before tax of GBP5.05 million)
equates to a basic earnings per share of 3.77 pence (half year to
31 December 2019: earnings of 2.57 pps; year to 30 June 2020: loss
of 6.27 pps).
EPRA EPS for the half year was 3.43 pence which, based on
dividends declared of 2.25 pence, reflects a dividend cover of
152.6 % (half year to 31 December 2019: EPRA earnings of 2.87
pence, dividends declared of 2.75 pence and dividend cover of
104.4%; year to 30 June 2020: EPRA earnings of 5.42 pence,
dividends declared of 5.00 pence and dividend cover of 108.4%).
Adjusted EPRA EPS for the period which equates to cash generated
from operations (and therefore excludes movements in accrued rent
debtors, reversal/impairment of trade receivables and the
amortisation of loan arrangement fees) were 3.19 pence which, based
on dividends declared of 2.25 pence, reflect a dividend cover of
141.6% (half year to 31 December 2019: Adjusted earnings per share
of 2.22 pence, dividends declared of 2.75 pence and dividend cover
of 80.7%; year to 30 June 2020: Adjusted earnings per share of 4.25
pence, dividends declared of 5.00 pence and dividend cover of
85.0%).
The Group's NAV as at 31 December 2020 was GBP68.17 million or
84.68 pps (31 December 2019: GBP76.17 million or 94.63 pps; 30 June
2020: GBP67.29 million or 83.58 pps). This is an increase of 1.09
pps or 1.31% over the half year ended 31 December 2020, and a
decrease of 9.95 pps of 11.75% over the year to 31 December 2020,
with the underlying movement in NAV set out in the table below:
Half year ended Half year ended Year ended 30 June
31 December 2020 31 December 2019 2020
Pence per Pence per Pence per
share GBP million share GBP million share GBP million
---------- ------------ ---------- ------------ ---------- ------------
NAV as at beginning of
year/period 83.586 67.27 94.810 76.32 94.810 76.32
Portfolio acquisition
costs - - (0.027) (0.02) - -
Change in fair value
of investment property 0.336 0.27 (0.277) (0.22) (11.691) (9.41)
Income earned for the
year 4.380 3.53 4.514 3.63 9.702 7.81
Gain on sale of property(8) 0.528 0.43 - - - -
Finance costs for the
year (0.884) (0.71) (0.755) (0.71) (1.791) (1.44)
Other expenses for the
year (0.591) (0.47) (0.888) (0.61) (2.494) (2.01)
Dividends paid during
the year (2.675) (2.15) (2.750) (2.22) (4.950) (3.98)
NAV as at the end of
the year 84.680 68.17 94.627 76.17 83.586 67.29
(7) the fair value increase includes accounting adjustments
relating to rent smoothing of (GBP0.36m) and movement in finance
lease obligation of (GBP0.02m).
(8) the gain on the disposal of Wet 'n' Wild was GBP425,202
which after taking account of the corresponding reversal of rent
smoothing for minimum uplifts of GBP115,568 is equivalent to 0.39
pence per share.
Valuation
The fair value of the Group's property portfolio (including the
Wet 'n' Wild Water Park held for sale) reduced from GBP112.99
million (31 December 2019) to GBP104.76 million (30 June 2020).
GBP6.15 million (74%) of this movement was driven by the leisure,
gym and hotel properties, and a further GBP1.30 million (16%) was
due to the automotive dealerships. These property sectors, both
occupational and investment markets, were amongst the most
adversely affected by the COVID-19 related lockdown in effect from
23 March 2020.
The property portfolio has seen a 3.60% increase in fair value
to GBP108.53 million since the 30 June 2020 valuation. When account
is taken for the disposal of Wet 'n' Wild and the acquisition of
Droitwich Spa Retail Park the core portfolio has seen an increase
of 1.83% in the half year ended 31 December 2020. The property
portfolio outperformed the MSCI All Property index, which showed a
1.25% decrease in capital value growth for half year ended 31
December 2020.
Dividends
Total dividends of 2.25 pps have been declared for the half year
(half year ended 31 December 2019: 2.75 pps). As announced on 4
February 2021, a quarter of the Group's rent is derived from the
hotel and leisure industry, which has been adversely affected by
the COVID-19 related lockdown measures enforced during 2020 and,
indeed, most remain closed. As a result, the Group currently has
arrears from this sector equal to c.8% of its 2020 rents, which,
when combined with the remedial work that the Group completed in
December 2020 to ensure that its property in Swindon conforms with
current Building Regulations, has impacted the Group's cash
position, resulting in a lower dividend declared on 4 February 2021
in respect of the final quarter of 2020.
The Board continues to target a resumption of a fully covered
annual dividend of 5.5 pence per share (2) , all else being equal,
by September 2022.
Refer to Note 8 of the Consolidated Financial Statements for
details.
Financing
As at 31 December 2020, the Group had fully utilised its GBP41
million loan facility with Canada Life Investments (31 December
2019 and 30 June 2020: GBP41 million facility utilised). This term
facility, which is repayable on 20 October 2025, allows up to 40%
loan to property value at drawdown and is provided on a portfolio
basis and has a loan to value covenant of 60%.
The weighted average interest cost of the Group's GBP41 million
facility is 3.19% (31 December and 30 June 2020: 3.19%).
Summary by Sector as at 31 December 2020
Gross
Passing
Market Occupancy WAULT to Rental
Number Valuation Value by ERV break Income ERV ERV
of
Sector Properties (GBPm) (%) (%) (years) (GBPm) (GBPm) (%)
------------------------ ----------- ---------- ------- ---------- --------- -------- ------- ------
Industrial 4 21.55 19.9 100 24.8 1.49 1.44 20.8
Hotel 3 20.85 19.2 100 15.0 1.36 1.43 20.6
Healthcare 3 18.28 16.8 100 28.0 1.10 1.09 15.7
Automotive & Petroleum 3 17.80 16.4 100 11.5 1.13 1.11 16.0
Student Accommodation 1 12.30 11.3 100 20.6 0.66 0.65 9.4
Leisure 2 5.75 5.3 100 8.8 0.37 0.40 5.8
Power Station 1 5.15 4.8 100 11.2 0.30 0.30 4.3
Retail 1 4.75 4.4 100 6.5 0.40 0.38 5.5
Education 1 2.10 1.9 100 23.1 0.13 0.13 1.9
Total/Average 19 108.53 100.0 100 18.3 6.94 6.93 100.0
----------- ---------- ------- ---------- --------- -------- ------- ------
Summary by Geographical Area as at 31 December 2020
Gross
Passing
Market Occupancy WAULT to Rental
Geographical Number Valuation Value by ERV break Income ERV ERV
of
Area Properties (GBPm) (%) (%) (years) (GBPm) (GBPm) (%)
-------------------- ----------- ---------- ------- ---------- --------- -------- ------- ------
West Midlands 4 26.50 24.4 100 13.8 1.84 1.80 25.9
The North West &
Merseyside 2 21.65 19.9 100 36.3 1.22 1.18 17.0
Rest of South East 4 18.25 16.8 100 12.1 1.07 1.05 15.3
South West 2 12.60 11.6 100 24.8 0.68 0.81 11.7
Yorkshire and the
Humber 2 11.68 10.8 100 13.0 0.81 0.80 11.5
Scotland 1 6.95 6.4 100 15.7 0.65 0.59 8.5
London 1 5.75 5.3 100 8.8 0.37 0.40 5.8
Eastern 3 5.15 4.8 100 11.2 0.30 0.30 4.3
Total/Average 19 108.53 100.0 100 18.3 6.94 6.93 100
----------- ---------- ------- ---------- --------- -------- ------- ------
The weighting of the Group's contracted rental income, based on
the type of rent review associated with each lease is as follows:
RPI inflation linked: 64.9%; CPI inflation linked: 22.1% and Open
Market Value Reviews: 13.0%.
Top Ten Tenants Annual % of
Passing Portfolio
Tenant Property Rental Total
Income Passing
(GBP'000) Rental
Income
----------------------- --------------------------------------- ---------- ----------
Lyndon Croft Care Centre, Solihull
Prime Life Limited and Westerlands Care Village, Brough 680 9.8
Meridian Metal Trading Grazebrook Industrial Estate, Dudley
Limited and Provincial Park, Sheffield 669 9.6
Mears Group Plc Bramall Court, Salford 655 9.4
Jupiter Hotels Limited Mercure City Hotel, Glasgow 650 9.4
Motorpoint Limited Motorpoint, Birmingham 500 7.2
Premier Inn Hotels
Limited Premier Inn, Camberley 449 6.5
Handsale Limited Silver Trees, Bristol 417 5.7
Volkswagen Group
UK Limited Audi, Huddersfield 396 5.8
Hoddesdon Energy
Limited Hoddesdon Energy, Hoddesdon 300 4.3
B&M Bargains Droitwich Spa Retail Park, Droitwich 272 3.9
The Group's top ten tenants, listed above, represent 71.9% of
the total passing rental income of the portfolio.
Lease Expiry Portfolio
Year Expiring passing Cumulative (GBP'000)
rent pa (GBP'000)
2021 - -
------------------- ---------------------
2022 123 123
------------------- ---------------------
2023 286 409
------------------- ---------------------
2024 - 409
------------------- ---------------------
2025 396 805
------------------- ---------------------
2026 - 805
------------------- ---------------------
2027 905 1,709
------------------- ---------------------
2028 282 1,991
------------------- ---------------------
2029 272 2,263
------------------- ---------------------
2030 - 2,263
------------------- ---------------------
2031 - 2,263
------------------- ---------------------
2032 771 3,034
------------------- ---------------------
2033 364 3,398
------------------- ---------------------
2034 - 3,398
------------------- ---------------------
2035 - 3,398
------------------- ---------------------
2036+ 3,544 6,942
------------------- ---------------------
M7 Real Estate Limited
22 February 2021
Interim Management Report and Directors' Responsibility Statement
Interim Management Report
The important events that have occurred during the period under
review, the key factors influencing the financial statements and
the principal risks and uncertainties for the remaining half year
of the financial year are set out in the Chairman's Statement and
the Investment Adviser's Report above.
The principal risks facing the Company are unchanged since the
date of the Annual Report and Financial Statements for the year
ended 30 June 2020 as set out in that report on pages 21 to 25 and
in Note 19 to the Financial Statements on pages 78 & 79.
Risks faced by the Company include, but are not limited to,
tenant default, portfolio concentration, property defects, rate of
inflation, property market, property valuation, illiquid
investments, breach of borrowing covenants, use of service
providers, dependence on the Investment Adviser, ability to meet
objectives, Group REIT status, political/economic risks and
Brexit.
Responsibility Statement
We confirm that to the best of our knowledge:
-- the consolidated condensed set of financial statements has
been prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first half of the financial year and their impact on the
consolidated condensed set of financial statements; and a
description of the principal risks and uncertainties for the
remaining half of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
half of the current financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
A list of the Directors is maintained on the Company's website
at www.alternativeincomereit.com
Steve Smith
Chairman
22 February 2021
Consolidated Condensed Statement of Comprehensive Income
For the half year ended 31 December 2020
Half year Half year
ended 31 ended 31 Year ended
December December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
Notes GBP'000 GBP'000 GBP'000
Income
Rental and other income 3 3,526 3,634 7,810
Property operating expense 4 (88) (68) (515)
Net rental and other income 3,438 3,566 7,295
Other operating expenses 4 (388) (539) (1,492)
Operating profit before
fair value changes 3,050 3,027 5,803
Gain on sale of investment
property 15 425 - -
Change in fair value of
investment
properties 9 270 (245) (9,411)
Operating profit/ (loss) 3,745 2,782 (3,608)
Finance expense 5 (712) (715) (1,442)
Profit/ (loss) before tax 3,033 2,067 (5,050)
Taxation 6 - - -
Profit/ (loss) after tax 3,033 2,067 (5,050)
Other comprehensive income - - -
Total comprehensive profit/
(loss) for the year 3,033 2,067 (5,050)
----------------------- --------------------- ---------------------
Earnings/ (loss) per share
(pence per share) (basic
and diluted) 7 3.77 2.57 (6.27)
======================= ===================== =====================
The notes further below form an integral part of these Consolidated
Financial Statements.
Consolidated Condensed Statement of Financial Position
As at 31 December 2020
As at As at As at
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current Assets
Investment property 9 106,551 111,966 100,273
106,551 111,966 100,273
Current Assets
Receivables and prepayments 10 3,740 1,980 5,417
Cash and cash equivalents 1,670 4,758 2,288
5,410 6,738 7,705
Non-current assets held
for sale 15 - - 2,734
----------------------- --------------------- ---------------------
Total Assets 111,961 118,704 110,712
----------------------- --------------------- ---------------------
Non-current Liabilities:
Interest bearing loans
and borrowings 12 (40,464) (40,349) (40,417)
Lease obligations 13 (353) (450) (373)
(40,817) (40,799) (40,790)
----------------------- --------------------- ---------------------
Current Liabilities
Payables and accrued
expenses 11 (2,939) (1,683) (2,595)
Lease obligations 13 (39) (48) (41)
(2,978) 1,731 (2,636)
----------------------- --------------------- ---------------------
Total Liabilities (43,795) (42,530) (43,426)
----------------------- --------------------- ---------------------
Net Assets 68,166 76,174 67,286
----------------------- --------------------- ---------------------
Equity
Share capital 17 805 805 805
Capital reserve and retained
earnings 67,361 75,369 66,481
Total capital and reserves
attributable to equity
holders
of the Group 68,166 76,174 67,286
----------------------- --------------------- ---------------------
Net Asset Value per share
(pence per share) 7 84.68 94.63 83.58
======================= ===================== =====================
The notes further below form an integral part of these Consolidated
Financial Statements.
The financial statements were approved by the Board of Directors
on 22 February 2021 and were signed on its behalf by:
Steve Smith
Chairman
Company number: 10727886
Consolidated Condensed Statement of Changes in Equity
For the half year ended 31 December 2020
Total capital
Capital and reserves
reserve attributable
Share and to equity
holders
Share premium retained of
capital account earnings the Group
Notes GBP'000 GBP'000 GBP'000 GBP'000
For the half year
ended
31 December 2020
(unaudited)
Balance as at 1 July
2020 805 - 66,481 67,286
Total comprehensive
income - - 3,033 3,033
Dividends paid 8 - - (2,153) (2,153)
Balance as at 31
December
2020 805 - 67,361 68,166
------------------ ------------------ ----------------- -------------------
For the half year
ended
31 December 2019
(unaudited)
Balance as at 1 July
2019 805 - 75,516 76,321
Total comprehensive
income - - 2,067 2,067
Share issue costs - - - -
Dividends paid 8 - - (2,214) (2,214)
Balance as at 31
December
2019 805 - 75,369 76,174
------------------ ------------------ ----------------- -------------------
For the year ended 30
June 2020 (audited)
Balance as at 1 July
2019 805 - 75,516 76,321
Total comprehensive
loss - - (5,050) (5,050)
Dividends paid 8 - - (3,985) (3,985)
Balance as at 30 June
2020 805 - 66,481 67,286
------------------ ------------------ ----------------- -------------------
The notes further below form an integral part of these Consolidated
Financial Statements.
Consolidated Condensed Statement of Cash Flows
For the half year ended 31 December 2020
Half year Half year Year
ended 31 ended 31 ended
December December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP '000 GBP '000 GBP '000
Cash flows from operating activities
Profit/ (loss) after tax 3,033 2,067 (5,050)
Adjustment for
Finance expenses 712 715 1,442
Gain on sale of investment property (425) - -
Change in fair value of investment
property (270) 245 9,411
Increase in other receivables and
prepayments 1,677 (828) (4,262)
Increase/(decrease) in other payables
and accrued expenses 342 (39) 694
Net cash flow generated from operating
activities 5,069 2,160 2,235
-------------------- --------------------- ------------------
Cash flows from investing activities
Purchase of investment property (5,007) (27) -
Additions to investment property (1,101)
Disposal of investment properties 3,159 - -
Net cash used in investing activities (2,849) (27) -
-------------------- --------------------- ------------------
Cash flows from financing activities
Finance costs paid (709) (673) (1,435)
Dividends paid (2,129) (2,221) (4,031)
Net cash used in from financing
activities (2,838) (2,894) (5,466)
-------------------- --------------------- ------------------
Net decrease in cash and cash
equivalents (618) (761) (3,231)
Cash and cash equivalents at start
of period 2,288 5,519 5,519
Cash and cash equivalents at end
of period 1,670 4,758 2,288
==================== ===================== ==================
The notes further below form an integral part of these Consolidated
Financial Statements.
Notes to the Consolidated Condensed Financial Statements
for the half year ended 31 December 2020
1. Corporate information
The Company is a public limited company and a closed-ended Real
Estate Investment Trust ('REIT') incorporated on 18 April 2017 and
domiciled in the UK and registered in England and Wales. The
registered office of the Company is located at 1 King William
Street, London, EC4N 7AF.
The consolidated financial statements for the period ended 31
December 2020 do not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. A copy of the statutory
accounts for the year ended 30 June 2020 has been delivered to the
Registrar of Companies. The auditor reported on those accounts. Its
report was unqualified and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006. The financial
statements for the period ended 31 December 2020 have not been
audited or reviewed by the Company's Auditors.
2. Accounting policies
2.1 Basis of preparation
These interim consolidated condensed unaudited financial
statements have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU and should be read in
conjunction with the Group's last financial statements for the year
ended 30 June 2020. These consolidated condensed unaudited
financial statements do not include all information required for a
complete set of financial statements proposed in accordance with
IFRS as adopted by the EU ('EU IFRS'). However, selected
explanatory notes have been included to explain events and
transactions that are significant in understanding changes in the
Group's financial position and performance since the last financial
statements.
The comparative figures disclosed in the consolidated condensed
unaudited financial statements and related notes have been
presented for both the six-month period ended 31 December 2019 and
year ended 30 June 2020.
Although not required by IAS 34, the comparative figures as at
31 December 2019 for the Consolidated Condensed Statement of
Financial Position and for the year ended 30 June 2020 for the
Consolidated Condensed Statement of Comprehensive Income,
Consolidated Condensed Statement of Changes in Equity and
Consolidated Condensed Statement of Cash Flows and related notes
have been included on a voluntary basis.
These consolidated condensed unaudited financial statements have
been prepared under the historical- cost convention, except for
investment property that has been measured at fair value. The
consolidated condensed unaudited financial statements are presented
in Sterling and all values are rounded to the nearest thousand
pounds (GBP'000), except when otherwise indicated.
Basis of consolidation
The consolidated condensed unaudited financial statements for
the half year ended 31 December 2020 incorporate the financial
statements of the Company and its subsidiaries (the 'Group').
Subsidiaries are entities controlled by the Company, being
Alternative Income Limited and Alternative Income REIT Holdco
Limited. IFRS 10 outlines the requirements for the preparation of
consolidated financial statements, requiring an entity to
consolidate the results of all investees it is considered to
control. Control exists where an entity is exposed to variable
returns and has the ability to affect those returns through its
power over the investee.
New standards, amendments and interpretations
There are a number of new standards or amendments which are
effective for the Group for the first time for the financial year
beginning 1 January 2020.
Standards issued but not yet effective
A number of new standards are effective for annual periods
beginning after 1 January 2020 and earlier application is permitted
however the Group has not early adopted the new or amended
standards in preparing these financial statements.
The following amended standards and interpretations are not
expected to have a significant impact on the Group's financial
statements:
-- Amendments to References to Conceptual Framework in IFRS Standards.
-- Definition of a Business (Amendments to IFRS 3).
-- Definition of Material (Amendments to IAS 1 and IAS 8).
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).
-- IFRS 17: Insurance Contracts.
-- Classification of Liabilities as Current or Non-current (Amendment to IAS 1)
-- Sale or Contribution of Assets between an Investor and its
Associated or Joint Venture (Amendments to IFRS 10 and IAS 28)
New/Revised International Financial Reporting Standards
Effectivity
Sale or contribution of assets between an investor Deferred
and its associate or joint venture (Amendments indefinitely
to IFRS 10 and IAS 28)
IFRS 17: Insurance Contracts 1
January
2021
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with EU
IFRS requires the Directors of the Group 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 the asset
or liability in the future.
There are not considered to be any judgements which have a
significant effect on the amounts recognised in the consolidated
financial information.
Estimates
In the process of applying the Group's accounting policies,
management has made the following estimates, which have a
significant effect on the amounts recognised in the consolidated
financial information:
Valuation of investment property
The fair value of investment property is determined, by external
property valuation experts, to be the estimated amount for which a
property should exchange on the date of the valuation in an arm's
length transaction. Properties have been valued on an individual
basis. The valuation experts use recognised valuation techniques,
applying the principles of both IAS 40 and IFRS13.
The valuations have been prepared in accordance with the Royal
Institution of Chartered Surveyors ('RICS') Valuation - Global
Standard January 2020. Factors reflected include current market
conditions, annual rentals, lease lengths and location. The
significant methods and assumptions used by valuers in estimating
the fair value of investment property are set out in note 9.
2.3 Segmental information
Each property held by the group is reported to the chief
operating decision maker individually. In the case of the group,
the chief operating decision maker is considered to be the three
Directors. The review process for segmental information includes
the monitoring of key performance indicators applicable across all
properties. These key performance indicators include Gross Passing
Rental Income, WAULT to break in years and valuation of properties.
All asset cost and rental allocations are reported by property too.
The internal financial reports received by the Directors cover the
group and all its properties and do not differ from amounts
reported in the financial statements. The Directors have considered
that each property has similar economic characteristics and have
therefore aggregated the portfolio into one reportable segment
under the provisions of IFRS 8.
2.4 Going concern
In assessing the Group's going concern assumptions, the
Directors have particularly considered the impact of the COVID-19
pandemic on the performance of the business.
The Directors have therefore projected the Group's cash flows
for the period up to 31 December 2021, challenging and sensitising
inputs and assumptions to ensure that the cash forecast reflects a
realistic outcome given the uncertainties associated with the
current economic environment.
The Directors note that the Group's main financing of GBP41m
does not mature until 2025 and the Group has reported full
compliance with its loan covenants to date. Based on the current
cash flow projections, the directors expect to continue to remain
compliant with the covenants.
The Directors also note that the headroom of the loan to value
covenant is significant and any fall in property values that caused
a breach would be significantly more than any currently
envisaged.
A 'severe, but plausible, downside' scenario has also been
projected. While rent collections have been strong, this scenario
anticipates further rent deferrals and write-offs where tenants
would have difficulty paying rents.
-- The Directors have assumed a rent collection of 80% for Q1
2021 and Q2 2021, decreasing to 70% in Q3 2021 and 60% in Q4 2021,
and recovering to 70% in Q1 2022 and then to 80% in Q2 2022 and 90%
in Q3 2022 and back to 100% by Q4 2022.
-- In such a scenario, the assumption is that 50% of these rent
deferrals would be written off, with the remainder repaid over the
course of 5 years from Q2 2023. This is in addition to any existing
agreements already made with tenants.
In this scenario the Group still has adequate headroom against
the interest cover covenant and positive cash balances.
Having assessed the heightened risks as well as mitigating
factors and management strategies available to reduce such risks,
the Directors have determined that the Group has adequate resources
to continue in operational existence for the foreseeable
future.
Therefore, the Directors continue to adopt the going concern
basis of accounting in preparing the financial statements.
2.5 Summary of significant accounting policies
The accounting policies and methods of computation and
presentation adopted in the preparation of the interim financial
statements are consistent with those applied in the Audited
Financial Statements.
The Audited Financial Statements are available at
www.alternativeincomereit.com .
3. Rental and other income
Half year Half year
ended 31 ended 31 Year ended
December December 30 June 2020
2020 (unaudited) 2019 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Gross rental income 3,245 3,056 6,073
Service charges and
direct recharges*
(see note 4) 38 - 459
Spreading of rent
indexation 284 286 720
Spreading of tenant
incentives - rent
free periods (41) 292 558
Other property income - - -
--------------------- --------------------- ---------------------
Total rental and other
income 3,526 3,634 7,810
--------------------- --------------------- ---------------------
All rental, service charges and direct recharges and other
income are derived from the United Kingdom.
*During the audit of the annual accounts of the Group, the
directors have reviewed the underlying agreements and determined
that the Company is a principal under IFRS 15. As a result, the
relevant income and expenses generated/incurred relating to service
charges and direct recharges have been recognised and presented as
gross in the financial statements. Please refer to note 4 for the
relevant expense incurred during the period ended 31 December 2020
and year ended 30 June 2020. For the half year ended 31 December
2019, service charges and direct recharges were presented net,
however these figures have not been restated as they were not
material.
4. Expenses
Half year Half year
ended 31 ended 31 Year ended
December December 30 June 2020
2020 (unaudited) 2019 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Property operating expenses 53 68 56
Service charges and direct
recharges (see note 3) 35 - 459
---------------------- ---------------------- ----------------------
88 68 515
---------------------- ---------------------- ----------------------
Other operating expenses
Investment management
fee 89 270 408
Auditor remuneration 58 42 120
(Reversal)/ provision
for impairment of trade
receivables (3) - 213
Operating costs 221 189 550
Directors' remuneration 38 38 94
(Reversal of write off)/
write off of unreconciled
difference (15) - 107
---------------------- ---------------------- ----------------------
Total other operating
expenses 388 539 1,492
---------------------- ---------------------- ----------------------
Total operating expenses 476 607 2,007
---------------------- ---------------------- ----------------------
5. Finance expenses
Half year Half year
ended 31 ended 31 Year ended
December December 30 June 2020
2020 (unaudited) 2019 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest payable on
loan 656 658 1,315
Amortisation of loan
arrangement fee (note
12) 47 56 124
Other finance costs 9 1 3
Total 712 715 1,442
--------------------- ----------------------- -----------------------
6. Taxation
Half year Half year
ended 31 ended 31 Year ended
December December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Tax charge comprises:
Analysis of tax charge
in the period
Profit/ (loss) before
tax 3,033 2,067 (5,050)
--------------------- ----------------------- ---------------------
Theoretical (tax credit)/tax
at UK corporation tax standard
rate of 19.00%
(2019: 19.00%) 576 393 (960)
Adjusted for tax exempt
items under the REIT
regime:
Change in fair value of
investment properties (51) - 1,788
Exempt REIT net profit (525) (393) (828)
Total - - -
===================== ======================= =====================
The Group obtained REIT status on 13 October 2017, at which
point any gains or losses arising from property business have been
extinguished. As such, no deferred tax asset or liability has
been
recognised in the current period.
Factors that may affect future tax charges
Due to the Group's status as a REIT and the intention to
continue meeting the conditions required to retain approval as a
REIT in the foreseeable future, the Group has not provided deferred
tax on any capital gains and losses arising on the revaluation or
disposal of investments.
7. Earnings/ (loss) per share and NAV per share
Half year Half year
ended 31 ended 31 Year ended
December December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
Earnings/ (loss) per
share:
Total comprehensive profit/
(loss) (GBP'000) 3,033 2,067 (5,050)
Weighted average number of
shares (million) 80.5 80.5 80.5
Earnings/ (loss) per share (basic
and diluted) (pence) 3.77 2.57 (6.27)
------------------- ----------------------- -----------------
EPRA EPS:
Total comprehensive profit/
(loss) (GBP'000) 3,033 2,067 (5,050)
Adjustment to total comprehensive
profit/ (loss):
Change in fair value of investment
properties (GBP'000) (270) 245 9,411
------------------- ----------------------- -----------------
EPRA earnings (basic and diluted)
(GBP'000) 2,763 2,312 4,361
------------------- ----------------------- -----------------
EPRA EPS (basic and
diluted) (pence) 3.43 2.87 5.42
------------------- ----------------------- -----------------
Adjusted EPS:
EPRA earnings (basic and diluted)
(GBP'000) 2,763 2,312 4,361
Adjustments:
Rental income recognised in respect
of guaranteed fixed rental uplifts
(GBP'000) (284) (286) (720)
Rental income recognised in respect
of rent-free periods (GBP'000) 41 (292) (558)
Amortisation of loan arrangement
fee (GBP'000) 47 56 124
(Reversal)/ provision for impairment
of trade receivables (GBP'000) (3) - 213
------------------- ----------------------- -----------------
Adjusted earnings (basic and
diluted) (GBP'000) 2,564 1,790 3,420
------------------- ----------------------- -----------------
Adjusted EPS (basic and diluted)
(pence)* 3.19 2.22 4.25
------------------- ----------------------- -----------------
NAV per share:
Net assets (GBP'000) 68,166 76,174 67,286
------------------- ----------------------- -----------------
Ordinary Shares (million) 80.5 80.5 80.5
NAV per share (pence) 84.68 94.63 83.58
------------------- ----------------------- -----------------
*Adjusted EPS is a measure used to assess the level of the
Group's dividend payments. This metric adjusts EPRA earnings for
non-cash items in arriving at an adjusted EPS as supported by cash
flows.
Earnings per share are calculated by dividing (loss)/profit for
the period attributable to ordinary equity holders of the Company
by the weighted average number of Ordinary Shares in issue during
the period. EPRA NAV and EPRA NNNAV (refer to Glossary) are equal
to the NAV presented in the Consolidated Statement of Financial
Position under IFRS and there are no adjusting items. Accordingly,
a reconciliation between these measures has not been presented.
8. Dividends paid
Half year Half year
ended 31 ended 31 Year ended
December December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Fourth interim dividend
declared and
paid in respect of the
quarter ended
30 June 2020 at 1.425p per
Ordinary
Share (2019: quarter ended
30 June
2019 at 1.375p per Ordinary
Shares) 1,147 1,107 1,107
First interim dividend
declared and
paid in respect of the
quarter ended
30 September 2020 at 1.25p
per Ordinary
Share (2019: quarter ended
30 September
2019 at 1.375p per Ordinary
Share) 1,006 1,107 1,107
Second interim dividend
declared and
paid in respect of the
quarter ended
31 December 2019 at 1.375p
per Ordinary
Share - - 1,107
Third interim dividend
declared and
paid in respect of the
quarter ended
31 March 2020 at 0.825p per
Ordinary
Share - - 664
Total dividends declared and
paid
during the period/year** 2,153 2,214 3,985
----------------------- ----------------------- -----------------------
Fourth interim dividend
declared in
respect of the quarter ended
30 June
2019 at 1.375p per Ordinary
Shares - (1,107) (1,107)
Second interim dividend
declared and
paid in respect of the
quarter ended
31 December 2020 at 1.00p
per Ordinary
Share* (2019: quarter ended
31 December
2019 at 1.375p per Ordinary
Share 805 1,107 -
Fourth interim dividend
declared in
respect of the quarter ended
30 June
2020 at 1.425p per Ordinary
Share* (1,147) - 1,147
Total dividends in respect of
the
period/year 1,811 2,214 4,025
----------------------- ----------------------- -----------------------
* Dividends declared after the period/year end are not included
in the Consolidated Financial Statements as a liability.
** Dividends paid per cash flow statement amount to GBP2,129
(GBP'000) include the amount of withholding tax paid.
9. Investment property
Half year ended
31 December 2020
Half year
ended 31 Year ended
December 30 June
(unaudited) 2019 (unaudited) 2020 (audited)
Investment Investment
properties properties
freehold leasehold Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK Investment
property
At the beginning
of the
period/year 87,130 14,780 101,910 112,990 112,990
Acquisition
during
the period/year 5,007 - 5,007 - -
Addition to
investment
property 1,101 - 1,101 - -
Reclassification
between assets (12,089) 12,089 - - -
Revaluation of
investment
property 542 70 612 333 (8,087)
Non-current asset
held for sale
(note
15) - - - - (2,850)
Adjustment to
cost* - - - (333) (143)
--------------- ----------- -----------------------
Valuation
provided
by Knight Frank
LLP 81,591 26,939 108,530 112,990 101,910
--------------- ----------- ----------------------- ----------------------- -------------------
Adjustment to fair value
for rent smoothing (note
10) (2,466) (1,522) (2,224)
Reclassification to Non-current asset
held for sale (note 15) - - 116
Adjustment for
lease
obligations 487 498 471
Total investment
property 106,551 111,966 100,273
----------------------- ----------------------- -------------------
Change in fair value of
Investment property
Change in fair value before adjustments
for lease incentives and lease obligations 612 333 (8,087)
Movement in lease
obligations 16 - (46)
Adjustment to fair value for
rent smoothing of lease income
(including reversal as result
of sale) (358) (578) (1,278)
270 (245) (9,411)
======================= ======================= ===================
*The adjustment on cost relates to the reversal of a provision
raised in the prior period.
Valuation of investment property
Valuation of investment property is performed by Knight Frank
LLP, accredited independent external valuers with recognised and
relevant professional qualifications and recent experience of the
location and category of the investment property being valued.
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 (incorporating the International Valuation
Standards).
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(such as lettings, tenants' profiles, future revenue streams,
capital values of fixtures and fittings, plant and machinery, any
environmental matters and the overall repair and condition of the
property) and discount rates applicable to those flows.
10. Receivables and prepayments
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Receivables
Rent debtor 1,342 424 1,174
Less: Provision for impairment
of trade receivables* (210) - (213)
Other debtors - - 2,211
Total Receivables 1,132 424 3,172
--------------------- ----------------------- ---------------------
Rent smoothing debtor - rent
indexation 1,881 1,522 1,598
Rent smoothing debtor - rent
free periods 585 - 626
Tenant deposit asset (note 11) 123 - -
Other prepayments 19 34 21
Total 3,740 1,980 5,417
===================== ======================= =====================
The aged debtor analysis of receivables which are past due but
not impaired is as follows:
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Less than three months
due 618 424 3,089
Between three and
six months due 514 - 83
Between six and twelve
months due - - -
1,132 424 3,172
--------------------- --------------------- ----------------------
11. Payables and accrued expenses
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Deferred income 1,443 1,018 1,265
Trade creditors 62 237 87
Accruals 618 - 395
Tenant deposit liability 123 - -
(note 10)
Other creditors 693 428 848
2,939 1,683 2,595
--------------------- --------------------- ----------------------
12. Interest bearing loans and borrowings
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Facility drawn at the beginning
of the period/year 41,000 41,000 41,000
----------------------- ---------------------- ---------------------
Less: unamortised loan issue
costs incurred (583) (686) (686)
Less: adjustment on loan
issue cost - (21) (21)
Plus: amortised loan issue
costs 47 56 124
At end of period/ year 40,464 40,349 40,417
----------------------- ---------------------- ---------------------
Repayable between 1 and
2 years - - -
Repayable between 2 and
5 years - - -
Repayable in over 5 years 41,000 41,000 41,000
Total 41,000 41,000 41,000
----------------------- ---------------------- ---------------------
As at 31 December 2020, the Group had utilised all of its GBP41
million fixed interest loan facility with Canada Life Investments
and was geared at a loan to Gross Asset Value ('GAV') of 36.6%. The
weighted average interest cost of the Group's facility is 3.19% and
the facility is repayable on 20 October 2025.
31 December 31 December 30 June 2020
2020 (unaudited) 2019 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Reconciliation to cash
flows from financing activities
At the beginning of
the period/year 40,417 40,314 40,314
Interest paid (709) (673) (1,435)
---------------------- ---------------------- ---------------------
Total changes from financing
cash flows (709) (673) (1,435)
Other changes
Movement in interest payable
presented under other creditors (3) (42) (7)
Interest expense 712 715 1,442
Adjustment on loan
issue costs - (21) (21)
Amortisation of loan
issue costs 47 56 124
Total other changes 756 708 1,538
At the end of the
period/year 40,464 40,349 40,417
---------------------- ---------------------- ---------------------
13. Lease obligations
At the commencement date, the lease liability is measured at the
present value of the lease payments that are not paid on that
date.
The following table analyses the minimum lease payments under
non-cancellable leases:
31 December
31 December 2019 (unaudited) 30 June
2020 (unaudited) - restated 2020 (audited)
GBP'000 GBP'000 GBP'000
Within one year 50 48 50
After one year but less than
five years 200 167 200
More than five years 538 283 563
Total undiscounted lease
liabilities: 788 498 813
Less: Future finance charge
on lease obligations (396) - (399)
Present value of lease
liabilities: 392 498 414
---------------------- ---------------------- ----------------------
Lease liabilities included in the statement
of financial position:
Current 39 48 41
Non-current 353 450 373
Total: 392 498 413
---------------------- ---------------------- ----------------------
14. Commitments
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 between 6 months and 90 years.
Future minimum rentals receivable under non-cancellable
operating leases as at 30 June 2020 are as follows:
31 December
31 December 2019 (unaudited) 30 June
2020 (unaudited) - restated 2020 (audited)
GBP'000 GBP'000 GBP'000
Less than one year 6,880 6,332 6,449
One to two years 6,947 6,758 6,603
Two to three years 7,101 6,754 6,626
Three to four years 7,187 6,841 6,729
Four to five years 6,966 6,934 6,758
Five to ten years 30,470 31,681 30,429
Ten to fifteen years 27,615 29,520 28,231
Over fifteen years 61,807 67,931 64,735
Total 154,973 162,751 156,559
-------------------- -------------------- --------------------
During the half year ended 31 December 2020 (2019: GBPnil) there
were no material contingent rents recognised as income.
15. Non-current assets held for sale
31 December
31 December 2019 (unaudited) 30 June
2020 (unaudited) - restated 2020 (audited)
GBP'000 GBP'000 GBP'000
Assets held for sale
Investment property - Wet
'n' Wild - - 2,734
Total - - 2,734
----------------------- ------------------ --------------------
Details of the disposal of Wet 'n' Wild is as follows:
Half year
from 1 July Half year from
2020 to 31 1 July 2019 Year ended
Gain on sale of investment December 2020 to 31 December 30 June
property (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Gross proceeds on 3,204 - -
disposal
Selling costs (45) - -
Net proceeds on disposal 3,159 - -
Carrying value (2,734) - -
---------------- ----------------------- -----------------------
Gain on disposal 425 - -
---------------- ----------------------- -----------------------
In addition to above gain on sale, an amount of GBP115,568
relating to the property were released in the statement of
comprehensive income under "rental and other income".
16. Investments in subsidiaries
The Company has two wholly owned subsidiaries as disclosed
below:
Country of Ordinary
Name and company registration Date of Principal Shares
number and incorporation incorporation activity held
Alternative Income
REIT
Holdco Limited Real
(Company England and 7 November Estate
number 11052186) Wales 2017 Company 73,158,502*
Alternative Income Real
Limited (Company England and Estate
number 10754641) Wales 4 May 2017 Company 73,158,501*
* Ordinary shares of GBP1.00 each.
Alternative Income REIT Plc as at 30 June 2020 owns 100%
controlling stake of Alternative Income REIT Holdco Limited.
Alternative Income REIT Holdco Limited holds 100% of Alternative
Income Limited.
17. Issued share capital
Half year ended
31 December 2020 For the year ended
(unaudited) 30 June 2020 (audited)
Number Number
of of
Ordinary Ordinary
GBP'000 Shares GBP'000 Shares
Ordinary Shares issued
and
fully paid
At the beginning of the
period/year 805 80,500,000 805 80,500,000
At the end of the period/year 805 80,500,000 805 80,500,000
-------- --------------- -------------------- ---------------
18. Transactions with related parties
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions.
Subsidiaries
Alternative Income REIT Plc as at 31 December 2020 owns 100%
controlling stake of Alternative Income REIT Holdco Limited and
Alternative Income REIT Holdco Limited holds 100% of Alternative
Income Limited.
Directors
Directors of the Group are considered to be the key management
personnel. Directors' remuneration is disclosed in note 4.
Investment Manager
M7 Real Estate Ltd - from 14 May 2020 to date
M7 Real Estate Ltd was appointed as Investment Advisor on 14 May
2020. The Interim Investment Advisory agreement specifies that
there are no fees payable up to 30 September 2020. From 1 October
2020, an annual management fee of 0.50% per annum of NAV (subject
to a minimum fee of GBP90,000 per quarter) will be due and paid
quarterly in advance. During the period 1 October 2020 to 31
December 2020, the Group incurred GBP90,000 in respect of
investment management fees and expenses of which GBPnil was
outstanding at period end.
AEW UK Investment Management LLP("AEW UK") - from 1 July 2019 to
9 April 2020
The Group was party to an Investment Management Agreement, with
AEW UK, pursuant to which the Group appointed AEW UK to provide
investment management 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 of the Board of Directors.
Under the Investment Management Agreement, AEW UK received a
management fee which was calculated monthly at a rate equivalent to
0.75% per annum of NAV (excluding un-invested fund-raising
proceeds) and paid quarterly in arrears. During the period 1 July
2019 to 9 April 2020, the Group incurred GBP407,708 (half year
ended 31 December 2019: GBP269,584, 30 June 2020: GBPnil) in
respect of investment management fees and expenses of which
GBP137,445 (31 December 2019: 134,576, 30 June 2020: GBP137,445)
was outstanding at 31 December 2020.
19. Events after reporting date
Dividend
On 4 February 2021, the Board declared an interim dividend of
1.00 pps in respect of the period from 1 October 2020 to 31
December 2020. This will be paid on 26 February 2021 to
shareholders on the register as at 12 February 2021. The
ex-dividend date was 11 February 2021.
EPRA Unaudited Performance Measures Calculations
31 December 31 December 30 June 2020
2020 (unaudited) 2019 (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Investment property -
wholly owned 108,530 112,990 104,760
Allowance for estimated
purchaser's costs 8,140 7,683 7,857
Gross up completed
property portfolio
valuation 116,670 120,673 112,617
Annualised cash passing
rental income 6,460 6,117 6,496
Property outgoings (55) (40) (55)
------------------
Annualised net rents 6,405 6,077 6,441
Add: notional rent expiration
of rent free periods and
fixed uplifts 1,812 1,531 1,407
------------------
EPRA 'topped-up'
NIY 8,217 7,608 7,848
EPRA NIY 5.49% 5.04% 5.72%
EPRA 'topped-up'
NIY 7.04% 6.30% 6.97%
------------------- ------------------ ---------------------
EPRA NIY basis of calculation
EPRA NIY is calculated as the annualised net rent, divided by
the gross value of the completed property portfolio.
The valuation of grossed up completed property portfolio is
determined by Knight Frank as at 31 December 2020, plus an
allowance for estimated purchasers' costs. Estimated purchasers'
costs are determined by the relevant stamp duty liability, plus an
estimate by our valuers of agent and legal fees on notional
acquisition. The net rent deduction allowed for property outgoings
is based on our valuers' assumptions on future recurring
non-recoverable revenue expenditure.
In calculating the EPRA 'topped-up' NIY, the annualised net rent
is increased by the total contracted rent from expiry of rent free
periods and future contracted rental uplifts.
Calculation of EPRA
Vacancy Rate
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Annualised potential rental
value of vacant premises - - -
Annualised potential rental
value for the completed
property portfolio 6,925 6,698 6,729
EPRA Vacancy Rate 0.00% 0.00% 0.00%
Calculation of EPRA
Cost Ratios
31 December 31 December 30 June
2020 (unaudited) 2019 (unaudited) 2020 (audited)
GBP'000 GBP'000 GBP'000
Administrative/operating expense
per IFRS income statement 388 539 1,491
Property operating
expenses 53 50 56
EPRA Costs (including and excluding
direct vacancy costs) 441 589 1,547
Gross Rental Income 3,526 3,616 7,351
EPRA Cost Ratio (including
direct vacancy costs) 12.51% 16.29% 21.05%
EPRA Cost Ratio (excluding
direct vacancy costs) 12.51% 16.29% 21.05%
Company Information
Share Register Enquiries
The register for the Ordinary Shares is maintained by
Computershare Investor Services PLC. In the event of queries
regarding your holding, please contact the Registrar on 0370 707
1874 or email: web.queries@computershare.co.uk.
Changes of name and/or address must be notified in writing to
the Registrar, at the address shown below. You can check your
shareholding and find practical help on transferring shares or
updating your details at www.investorcentre.co.uk. Shareholders
eligible to receive dividend payments gross of tax may also
download declaration forms from that website.
Share Information
Ordinary GBP0.01 shares 80,500,000
SEDOL Number BDVK708
ISIN Number GB00BDVK7088
Ticker/TIDM AIRE
Share Prices
The Company's Ordinary Shares are traded on the Main Market of
the London Stock Exchange.
Frequency of NAV publication
The Group's NAV is released to the London Stock Exchange on a
quarterly basis and is published on the Company's website
www.alternativeincomereit.com .
Annual and Interim Reports
Copies of the Annual and Interim Reports are available from the
Group's website.
Financial Calendar
February 2021 Announcement of interim results
30 June 2021 Year end
October 2021 Announcement of annual results
November 2021 Annual General Meeting
31 December 2021 Half year end
Directors
Steve Smith (Independent non-executive Chairman)
Jim Prower (Independent non-executive Director)
Alan Sippetts (Independent non-executive Director)
Registered Office
1 King William Street
London
EC4N 7AF
AIFM
Langham Hall Fund Management LLP
1 Fleet Place
8(th) Floor
London
EC4M 7RA
Property Manager
Mason Owen and Partners Limited
7(th) Floor
20 Chapel Street
Liverpool
L3 9AG
Corporate Broker
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Company Website
https://www.alternativeincomereit.com/
Depositary
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Investment Adviser and Administrator
M7 Real Estate Limited
3(rd) Floor
The Monument Building
11 Monument Street
London
EC3R 8AF
Consultant Portfolio Manager
King Capital Consulting Limited
140a Tachbrook Street
London
SW1V 2NE
Company Secretary
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Communications Advisor
Maitland/AMO
3 Pancras Square
London
N1C 4AG
Glossary
Alternative Investment Langham Hall Fund Management LLP.
Fund Manager or AIFM
or Investment Manager
Annualised charges A measure of the Group's annualised operating
costs for the period as a percentage of
NAV.
Company Alternative Income REIT plc.
Contracted rent The annualised rent adjusting for the inclusion
of rent subject to rent free periods.
Earnings Per Share Profit for the period attributable to equity
('EPS') shareholders divided by the weighted average
number of Ordinary Shares in issue during
the period.
EPRA European Public Real Estate Association,
the industry body representing listed companies
in the real estate sector.
EPRA cost ratio (including The ratio of net overheads and operating
direct vacancy costs) expenses against gross rental income (with
both amounts excluding ground rents payable).
Net overheads and operating expenses relate
to all administrative and operating expenses.
EPRA cost ratio (excluding The ratio calculated above, but with direct
direct vacancy costs) vacancy costs removed from net overheads
and operating expenses balance.
EPRA Earnings Per A key measure of a company's underlying
Share operating results and an indication of
the extent to which current dividend payments
are supported by earnings.
EPRA NAV NAV adjusted to include properties and
other investment interests at fair value
and to exclude certain items not expected
to crystallise in a long term investment
property business.
EPRA NNNAV EPRA NAV adjusted to reflect the fair value
of debt and derivatives and to include
deferred taxation on revaluations.
EPRA Net Initial Annualised rental income based on the cash
Yield ('NIY') 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.
EPRA Topped-Up Net This measure incorporates an adjustment
Initial Yield to the EPRA NIY in respect of the expiration
of rent free periods (or other unexpired
lease incentives such as discounted rent
periods and step rents).
EPRA Vacancy Rate Estimated Rental Value of vacant space
as a percentage of the Estimated Rental
Value of the whole portfolio.
Equivalent Yield The internal rate of return of the cash
flow from the property, assuming a rise
to Estimated Rental Value at the next review
or lease expiry. No future growth is allowed
for.
Estimated Rental The external valuer's opinion as to the
Value ('ERV') open market rent which, on the date of
the valuation, could reasonably be expected
to be obtained on a new letting or rent
review of a property.
External Valuer An independent external valuer of a property.
The Group's External Valuer is Knight Frank
LLP.
Fair value The estimated amount for which a property
should exchange on the valuation date between
a willing buyer and a willing seller in
an arm's length transaction after proper
marketing and where parties had each acted
knowledgeably, prudently and without compulsion.
Fair value movement An accounting adjustment to change the
book value of an asset or liability to
its fair value.
FCA The Financial Conduct Authority.
Gross Asset Value The aggregate value of the total assets
('GAV') of the Group as determined in accordance
with IFRS.
IASB International Accounting Standards Board.
IFRS International Financial Reporting Standards,
as adopted by the European Union.
Investment Adviser M7 Real Estate Limited.
IPO The admission to trading on the London
Stock Exchange's Main Market of the share
capital of the Company and admission of
Ordinary Shares to the premium listing
segment of the Official List on 6 June
2017.
Lease incentives Incentives offered to occupiers to enter
into a lease. Typically this will be an
initial rent free period, or a cash contribution
to fit out. Under accounting rules the
value of the lease incentives is amortised
through the Consolidated Statement of Comprehensive
Income on a straight line basis until the
lease expiry.
Loan to Value ('LTV') The value of loans and borrowings utilised
(excluding amounts held as restricted cash
and before adjustments for issue costs)
expressed as a percentage of the combined
valuation of the property portfolio (as
provided by the valuer) and the fair value
of other investments.
Net Asset Value Net Asset Value is the equity attributable
('NAV') to shareholders calculated under IFRS.
Net Asset Value Equity shareholders' funds divided by the
per share number of Ordinary Shares in issue.
Net equivalent yield Calculated by the External Valuers, net
equivalent yield is the internal rate of
return from an investment property, based
on the gross outlays for the purchase of
a property (including purchase costs),
reflecting reversions to current market
rent and items as voids and non-recoverable
expenditure but ignoring future changes
in capital value. The calculation assumes
rent is received annually in arrears.
Net Initial Yield The initial net rental income from a property
('NIY') at the date of purchase, expressed as a
percentage of the gross purchase price
including the costs of purchase.
Net rental income Rental income receivable in the period
after payment of ground rents and net property
outgoings.
Ongoing Charges The ratio of annualised total administration
and property operating costs expressed
as a percentage of average NAV throughout
the period.
Ordinary Shares The main type of equity capital issued
by conventional Investment Companies. Shareholders
are entitled to their share of both income,
in the form of dividends paid by the Company,
and any capital growth.
Passing rent The gross rent, less any ground rent payable
under head leases.
pps Pence per share.
REIT A Real Estate Investment Trust. A company
which complies with Part 12 of the Corporation
Tax Act 2010. Subject to the continuing
relevant UK REIT criteria being met, the
profits from the property business of a
REIT, arising from both income and capital
gains, are exempt from corporation tax.
Reversion Increase in rent estimated by the Company's
External Valuers, where the passing rent
is below the ERV.
Share price The value of a share at a point in time
as quoted on a stock exchange. The Company's
Ordinary Shares are quoted on the Main
Market of the London Stock Exchange.
Total returns The returns to shareholders calculated
on a per share basis by adding dividend
paid in the period to the increase or decrease
in the share price or NAV. The dividends
are assumed to have been reinvested in
the form of Ordinary Shares or Net Assets.
Total Shareholder The percentage change in the share price
Return assuming dividends are reinvested to purchase
additional Ordinary Shares.
Weighted Average The average lease term remaining before
Unexpired Lease Term first break, or expiry, across the portfolio
('WAULT') weighted by contracted rental income (including
rent frees).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
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END
IR PPUQPPUPGGWG
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February 22, 2021 02:00 ET (07:00 GMT)
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