TIDMBREI
To: RNS
Date: 22 March 2021
From: BMO Real Estate Investments Limited
LEI: 231801XRCB89W6XTR23
Interim results in respect of the six-month period ended 31 December 2020
* Net asset value total return* of 3.0 per cent
* Portfolio ungeared total return* of 3.4 per cent
* Annualised dividend yield* of 4.8 per cent based on the period end
share price
* Dividend cover* of 118.9 per cent for the period
* See Alternative Performance Measures
The Chairman, Vikram Lall, stated:
Since we issued our last Annual Report Brexit has happened with Britain leaving
the EU, and a vaccination programme is underway to combat the Covid-19
pandemic. However, much uncertainty remains in relation to the longer-term
effect of Brexit, and to the time it will take for the UK economy and
employment levels to recover from the severe downturn of 2020. Retail and
hospitality distress continues. There is also much debate over the effects of
working from home on future occupancy levels of UK offices.
The Group's performance reflects these challenging conditions in the UK
commercial property market with capital values decreasing by 1.1 per cent. The
net asset value ('NAV') total return per share for the period was 3.0 per cent
and the NAV per share at the period end was 98.1 pence.
The share price increased by 8.9 per cent over the six months to 61 pence per
share, giving a share price total
return of 11.6 per cent, with the discount to NAV narrowing to 37.8 per cent at
the period end, compared to a discount of 42.0 per cent as at 30 June 2020. The
share price has increased significantly since the period end and at the date of
writing is at 70p pence per share.
Rent Collection
It has been a difficult period for rent collection since the Covid-19 outbreak.
However, the Group's rent collection for Quarter's 2 to 4 of 2020 is currently
ahead of expectations at 94.5 per cent. The Group's collection statistics for
the first quarter of 2021 are currently at 90 per cent and the expectation is
that the final collection statistics will be at a similar level to those
experienced in the previous three quarters.
Property Market
The UK commercial property market delivered a total return of 1.1 per cent in
the six months to 31 December 2020 with capital falls of 1.1 per cent, as
measured by the MSCI UK Quarterly Property Index ('MSCI'). The market showed
some signs of steadying following the initial shock from the pandemic and
related economic lockdowns, but sentiment remained cautious.
The retail sector remained weak and delivered a total return of -4.0 per cent,
with both occupier and investor sentiment depressed. Retail warehousing was
less affected than town centre retailing. Industrials delivered an 8.6 per cent
total return, pulling well ahead of other sectors, with the South-East
out-performing, supported by strong occupier take-up and investor demand. The
Office market faltered to record a -0.6 total return, as concerns about a
reduction in office demand, due to a permanent shift to working from home,
gained ground. Total returns for alternatives were 0.7 per cent in the
six-month period, led by residential property.
The current cycle has affected rent collection rates, especially in retail and
leisure but with offices and industrial more resilient. Investment activity
staged some recovery, to move above the long-term average by year-end, helped
by overseas buying and with transactions focused on Central London offices and
industrials. The annual income return was stable at 4.5 per cent over the
period.
Portfolio
The Group's property portfolio delivered a total return of 3.4 per cent over
the six-month period, compared with 1.1 per cent for MSCI. Both capital and
income returns were ahead of the Index. Over the twelve months to December 2020
the Group's property portfolio produced an ungeared total return of 1.4 per
cent, 3.4 per cent of outperformance against MSCI which returned -2.0 per cent.
At the All Property level valuations were again under pressure though there was
much variance in subsector performance. Favourable portfolio composition led to
capital growth of 0.9 per cent for the Company's assets over the period,
alongside an income return of 2.6 per cent. The portfolio continues to deliver
an above market income yield and a below market vacancy rate of 5.3 per cent,
much of which is attributable to ongoing project work rather than structural
void. Rent collection remains the overriding focus in the current environment
with recovery over the period in excess of 94 per cent. Average unexpired lease
length has remained steady at six years.
The portfolio's Industrial assets were unsurprisingly the main driver for
performance over the period, delivering 7.8 per cent as a consequence of both
yield hardening and rental growth. This is reflective of their core South-East,
and predominantly urban locations, which continue to experience high levels of
occupier demand. The Industrial assets at Hemel Hempstead, Banbury and
Bracknell, and the multi-let estate at Colnbrook, Heathrow were amongst the top
performers over the period. The investment in this segment of the market is now
45 per cent of assets by value.
Office assets delivered a positive return of 0.6 per cent over the period,
albeit with capital falls, and performance led by asset management initiatives
in the south east, particularly at County House, Chelmsford.
The Company's retail assets delivered a marginally negative total return of
-0.5 per cent over the six months, outperforming the MSCI Index of -4.0 per
cent by some margin. This relative outperformance was entirely on account of
the strong showing of, and the relative weighting to low rented, essential,
non-fashion and convenience led retail warehousing. Relative performance was
improved further by the absence of shopping centres and department stores and
underweight exposure to hospitality and leisure.
The Company has reduced its exposure to retail in recent years with eleven
sales since 2015, bringing the weighting to the High Street down to 9 per cent.
No purchases or sales were completed over the period, with the focus very much
on protection of the balance sheet, given the uncertainty surrounding the
outcomes from the pandemic. Notwithstanding this, and despite the fact that the
Company's retail property is fully let, this element of the portfolio remains
under continual review, evidenced by the fact that the two high street units at
Winchester have recently been sold for £2.9 million. While the Board remains
wary of illiquidity in parts of the high street market, we have continued to
see interest in the Company's assets which tend to be in the smaller lot sizes.
There is the potential for continued opportunistic disposals from the sector
over the coming months. In terms of acquisitions the existing cash balance is
healthy with further cash availability in the form of an undrawn credit
facility. With some comfort from rent collection trends, the Company is well
placed to explore potential acquisitions to add to revenue.
Borrowings and Cash
The Group currently has borrowings of £90 million from a non-amortising term
loan facility agreement with Canada Life Investments which expires in November
2026. There is also a £20 million 5-year revolving credit facility agreement
with Barclays Bank plc which is currently undrawn and is available until March
2025. The covenants on both facilities are comfortably met. Net gearing
represented 25.8 per cent of the investment properties of the Group as at 31
December 2020. The weighted average interest rate (including amortisation of
refinancing costs) on the Group's total current borrowings is 3.1 per cent. The
Company continues to maintain a prudent attitude to gearing.
The Group had £14.1 million of cash available at 31 December 2020 and the £20
million revolving credit facility also available if required.
Dividends and Dividend Cover
Given the significant economic risks and continuing uncertainty regarding the
path of Covid-19, the Board made the decision to cut the quarterly dividend by
50 per cent in June 2020 to 0.625 pence per share. The Board was also mindful
that the level of dividend paid in the previous financial year was 84.3 per
cent covered by profits.
As mentioned above, rent collection rates have been comparatively strong and
the first quarterly interim dividend for the year ended 30 June 2021, paid in
December 2020, was increased by 36 per cent to 0.85 pence per share. A second
interim dividend of 0.85 pence per share will be paid on 31 March 2021 to
shareholders on the register on 12 March 2021. The Board will continue to
monitor rental receipts and earnings closely and keep the future level of
dividends under review.
Given the reduced level of dividends being paid out in the six months, the
dividend cover was at 118.9 per cent, compared with a dividend cover of 69.6
per cent for the equivalent period last year.
Board Changes
As indicated in our last Annual Report, Andrew Gulliford decided to retire as a
director, and he did so on 10 March 2021. The board thanks Andrew for the
significant contribution he has made to the group since its inception in 2004.
We will miss his extensive experience of the UK commercial property market, his
detailed knowledge of the group's portfolio and his sage advice.
On 10 March 2021, Rebecca Gates was appointed to the Board. Rebecca is an
experienced property professional who has spent the last 23 years of her career
in a variety of roles within the real estate investment
management business and is currently Head of UK Property Asset Management for
LaSalle Investment
Management.
Environmental, Social and Governance ('ESG')
The unprecedented conditions caused by the coronavirus pandemic has impacted
everyone in how we go about our daily lives and collectively in the way we
interact with each other.
The Company has strived to make its contribution by engaging with its
occupiers, and looking to support and be flexible with them as they strive to
keep their businesses intact through the pandemic, to liaising with them in the
development of Covid assessments and measures so they can remain operational
whilst complying with government guidelines. These events have sharpened our
awareness of occupiers as an important stakeholder group.
Whilst the Company's focus on the social element of ESG has been strong during
the period, this has not been at the expense of environmental aspirations. The
Company has been actively progressing its approach to environmental risk and
opportunity during recent months and has been working hard in preparation for
setting and publishing its net zero carbon ambition in 2021
ESG remains a key aspect of the Company's forward strategy. The unprecedented
events of 2020 have given great insight and understanding of both the power of
nature and of the human need, and the extent to which our communities are
intrinsically woven into our activities. A short update on our progress is
provided below and we will provide a further summary of progress in our Annual
Report later this year, with a more detailed insight of our performance in our
2021 ESG Report.
Outlook
In these uncertain times the diversification of the Company's asset and tenant
base should provide relative resilience. This has been demonstrated in the
encouraging rent collection and vacancy statistics achieved over the course of
the pandemic thus far. We continue to expect disruption to revenues as lockdown
and associated support eases, with the impact most meaningful for the retail
and leisure markets, although offices will not be entirely immune. Against this
background and despite the prolonged uncertainty, the Company has sufficient
cash resources and a portfolio of buildings that continue to experience good
levels of occupier demand.
Environmental, Social and Governance ("ESG")
Highlights for the half year period to 31 December 2020
The Company has continued to advance the implementation of its ESG Strategy
over the period with progress being made in a number of areas. The coronavirus
pandemic has significantly impacted occupational use of some assets and as such
made key indicators around absolute energy use and carbon emissions difficult
to interpret. However, on a like-for-like basis, comparing landlord procured
energy in the first half of the current reporting year with the first half of
the previous reporting year, a 15 per cent reduction in energy use can be
determined, equating to some 19 per cent in terms of carbon emissions. This can
almost certainly be attributed to the lower occupation rates seen in
multi-occupied assets on account of covid related restrictions. The impact a
new normal return to work might have on these indicators will be interesting to
observe.
The distribution profile of Energy Performance Certificate (EPC) ratings
remains broadly unchanged across the portfolio. The overall number of
certificates held has increased by four on account of demise changes but
exposure to lower F & G rated areas remains unchanged at 11 representing 5 per
cent in terms of estimated rental value.
The Company engaged WSP UK Limited to provide advice and technical expertise on
the assessment and evaluation of physical climate risks and opportunities
through detailed scenario modelling and analysis. Outputs from the modelling
have now been delivered in the form of detailed property level dashboards for
practical incorporation into individual asset business plans and to support
disclosures under the Taskforce for Climate-related Financial Disclosures
(TCFD) initiative.
We are pleased to report that the Company submitted to the 2020 Global Real
Estate Sustainability Benchmark (GRESB) survey and maintained its year on year
improvement trajectory by achieving a score of 64, representing a 6.6 per cent
increase in the previous year's result of 60. The Fund also improved its rating
in GRESB's public disclosure analysis, achieving an A grade indicating the
highest level of reporting and transparency.
The Company is also delighted to report the achievement of a Gold Award from
the European Public Real estate Association (EPRA) for the standard of its
disclosures in its 2020 Annual ESG Report.
These indicators confirm that good progress is being made and that the Company
has a solid platform from which to continue making further incremental
improvements.
BMO Real Estate Investments Limited
Condensed Consolidated Statement of Comprehensive Income
Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes £'000 £'000
£'000
Revenue
Rental income 8,283 8,305 17,011
Total revenue 8,283 8,305 17,011
Gains/(Losses)on investment
properties
Losses on sale of investment 6 - (987) (991)
properties realised
Unrealised gains/(losses) on 2,795 (2,473) (17,031)
revaluation of investment 6
properties
Total income 11,078 4,845 (1,011)
Expenditure
Investment management fee 2 (974) (1,318) (2,261)
Other expenses 3 (1,323) (884) (2,146)
Total expenditure (2,297) (2,202) (4,407)
Net operating profit/(loss) before 8,781 2,643 (5,418)
finance costs and taxation
Net finance costs
Interest receivable 2 14 34
Finance costs (1,680) (1,781) (3,507)
(1,678) (1,767) (3,473)
Net profit/(loss) from ordinary 7,103 876 (8,891)
activities before taxation
Taxation on profit on ordinary (87) (147) (258)
activities
Profit/(loss) for the period 7,016 729 (9,149)
Basic and diluted earnings per 5 2.9p 0.3p (3.8p)
share
BMO Real Estate Investments Limited
Condensed Consolidated Balance Sheet
31 December 31 December 30 June
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Non-current assets
Investment properties 6 314,368 322,405 308,734
Trade and other receivables 3,726 3,398 3,788
318,094 325,803 312,522
Current assets
Trade and other receivables 3,113 1,714 3,437
Cash and cash equivalents 14,093 16,618 13,726
17,206 18,332 17,163
Total assets 335,300 344,135 329,685
Current liabilities
Trade and other payables (8,462) (6,552) (6,319)
Tax payable (87) (147) (258)
(8,549) (6,699) (6,577)
Total assets less current 326,751 337,436 323,108
liabilities
Non-current liabilities
Interest-bearing bank loans 7 (89,640) (89,666) (89,542)
Trade and other payables (1,039) (773) (960)
(90,679) (90,439) (90,502)
Net assets 236,072 246,997 232,606
Represented by:
Share capital 9 2,407 2,407 2,407
Special distributable reserve 177,161 177,161 177,161
Capital reserve 54,917 66,684 52,122
Revenue reserve 1,587 745 916
Equity shareholders' funds 236,072 246,997 232,606
Net asset value per share 10 98.1p 102.6p 96.6p
BMO Real Estate Investments Limited
Condensed Consolidated Statement of Changes in Equity
For the period ended 31 December 2020 (unaudited)
Special
Distributable Capital Revenue
Share Capital Reserve Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000
At 1 July 2020 2,407 177,161 52,122 916 232,606
Profit for the period - - - 7,016 7,016
Dividends paid - - - (3,550) (3,550)
Transfer in respect of
gains on investment - - 2,795 (2,795) -
properties
At 31 December 2020 2,407 177,161 54,917 1,587 236,072
For the period ended 31 December 2019 (unaudited)
Special
Distributable Capital Revenue
Share Reserve Reserve Reserve Total
Capital £'000 £'000 £'000 £'000
£'000
At 1 July 2019 2,407 177,161 70,144 2,574 252,286
Profit for the - - - 729 729
period
Dividends paid 4 - - - (6,018) (6,018)
Transfer in
respect of losses - - (3,460) 3,460 -
on investment
properties
At 31 December 2,407 177,161 66,684 745 246,997
2019
For the year ended 30 June 2020 (audited)
Special
Distributable Capital Revenue
Share Capital Reserve Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000
At 1 July 2019 2,407 177,161 70,144 2,574 252,286
Loss for the year - - - (9,149) (9,149)
Dividends paid 4 - - - (10,531) (10,531)
Transfer in respect
of losses on - - (18,022) 18,022 -
investment
properties
At 30 June 2020 2,407 177,161 52,122 916 232,606
BMO Real Estate Investments Limited
Condensed Consolidated Statement of Cash Flows
Six months to Six months to Year to
31 December 31 December 30 June
Notes 2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating activities
Net profit/(loss) for the period before 7,103 876 (8,891)
taxation
Adjustments for:
Losses on sale of investment 6 - 987 991
properties
realised 6 (2,795) 2,473 17,031
Unrealised (gains)/losses on
revaluation of
investment properties
Realised capital contribution 6 - (12) (12)
Decrease/(increase) in operating
trade and other 386 1,699 (494)
receivables
Increase in operating trade and other 2,221 455 423
payables
Interest received (2) (14) (34)
Finance costs 1,680 1,781 3,507
8,593 8,245 12,521
Taxation paid (258) (295) (295)
Net cash inflow from operating activities 8,335 7,950 12,226
Cash flows from investing activities
Capital expenditure 6 (2,839) (1,184) (2,070)
Purchase of investment properties 6 - (718) (723)
Sale of investment properties 6 - 15,402 15,402
Interest received 2 14 34
Net cash (outflow)/inflow from investing (2,837) 13,514 12,643
activities
Cash flows from financing activities
Dividends paid (3,550) (6,018) (10,531)
Bank loan interest paid (1,581) (1,686) (3,470)
Bank loan repaid, net of costs - Barclays - (7,000) (7,000)
Net cash outflow from financing activities (5,131) (14,704) (21,001)
Net increase in cash and cash equivalents 367 6,760 3,868
Opening cash and cash equivalents 13,726 9,858 9,858
Closing cash and cash equivalents 14,093 16,618 13,726
BMO Real Estate Investments Limited
Notes to the Condensed Consolidated Financial Statements
for the six months to 31 December 2020
1. General information
The condensed consolidated financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom Financial Conduct Authority and IAS 34 'Interim Financial Reporting'.
The condensed consolidated financial statements do not include all of the
information required for a complete set of IFRS financial statements and should
be read in conjunction with the consolidated financial statements for the Group
for the year ended 30 June 2020 which were prepared under full IFRS
requirements. The accounting policies used in preparation of the condensed
consolidated financial statements are consistent with those of the consolidated
financial statements of the Group for the year ended 30 June 2020.
2. Investment management fee Six months to Six months to
31 December 31 December Year to
2020 2019 30 June
£'000 £'000 2020
£'000
Investment management fee - basic fee 974 1,044 1,995
Investment management fee - performance - 274 266
fee
974 1,318 2,261
3. Other expenses Six months to Six months to
31 December 31 December Year to
2020 2019 30 June
£'000 £'000 2020 £'000
Direct operating expenses of let rental 358 358 647
property
Direct operating expenses of vacant 272 14 205
property
Provision for bad debts 209 69 413
Valuation and other professional fees 132 126 249
Directors' fees 80 80 159
Administrative fee 55 55 110
Other expenses 217 182 363
1.323 884 2,146
4. Dividends
Six months to Six months to Year ended 30 June
31 December 2020 31 December 2019 2020
Rate Rate Rate
£'000 (pence) £'000 (pence) £'000 (pence)
Property Income
Distributions:
Fourth interim for the 1,504 0.625 3,009 1.25 3,009 1.25
prior year
First interim 2,046 0.850 3,009 1.25 3,009 1.25
Second interim - - - - 3,009 1.25
Third interim - - - - 1,504 0.625
3,550 1.475 6,018 2.50 10,531 4.375
A second interim dividend for the year to 30 June 2021, of 0.85 pence per
share, will be paid on 31 March 2021 to shareholders on the register at close
of business on 12 March 2021.
5. Earnings per share Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
Net profit/(loss) attributable to ordinary
shareholders (£'000) 7,016 729 (9,149)
Weighted average of ordinary shares in issue
during period 240,705,539 240,705,539 240,705,539
Return per share 2.9p 0.3p (3.8p)
Earnings for the six months to 31 December 2020 should not be taken as a guide
to the results for the year to 30 June 2021.
6. Investment properties
Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
£'000 £'000 £'000
Freehold and leasehold
properties
Opening market value 312,285 343,550 343,550
Capital expenditure 2,839 1,184 2,070
Purchase - 718 723
Sales - net proceeds - (15,402) (15,402)
- losses on sales - (9,367) (9,372)
Unrealised losses realised - 8,380 8,381
during the period
Unrealised gains on investment 10,609 4,048 3,951
properties
Unrealised losses on investment (7,814) (6,521) (20,982)
properties
Realised capital contribution - 12 12
Accrued selling costs - - -
Movement in lease incentive (94) (877) (646)
receivable
Closing market value 317,825 325,725 312,285
Adjustment for lease incentives (3,457) (3,320) (3,551)
Balance sheet carrying value 314,368 322,405 308,734
Six months Six months Year to
to 31 to 31 30 June
December December 2020
2020 2019 £'000
£'000 £'000
Losses on sale - (9,367) (9,372)
Unrealised losses realised during the year - 8,380 8,381
Losses on sale of investment properties realised - (987) (991)
Six months Six months Year to
to 31 to 31 30 June
December December 2020
2020 2019 £'000
£'000 £'000
Unrealised gains on investment properties 10,609 4,048 3,951
Unrealised losses on investment properties (7,814) (6,521) (20,982)
Unrealised gains/(losses) on revaluation of 2,795 (2,473) (17,031)
investment properties
All the Group's investment properties were valued as at 31 December 2020 by
qualified professional valuers working in the company of Cushman & Wakefield.
All such valuers are chartered surveyors, being members of the Royal
Institution of Chartered Surveyors ('RICS'). There were no significant changes
to the valuation techniques used during the period and these valuation
techniques are detailed in the consolidated financial statements as at and for
the year ended 30 June 2020. The market value of these investment properties
amounted to £317,825,000 (31 December 2019: £325,725,000; 30 June 2020: £
312,285,000), however an adjustment has been made for lease incentives of £
3,457,000 that are already accounted for as an asset (31 December 2019: £
3,320,000; 30 June 2020: £3,551,000).
7. Interest-bearing bank loans
As part of the restructuring of the Group's long-term financing, IRP Holdings
Limited ("IRPH") entered into a £90 million eleven year non-amortising term
loan facility agreement with Canada Life.
Canada Life provided committed funds on 9 November 2015 and IRPH drew down the
loan in full on 13 November 2015. Interest is payable on this loan from the
first utilisation date, quarterly in arrears, at a fixed rate of 3.36 per cent
per annum. The loan is secured by means of a fixed charge over specific
properties. The loan has a maturity date of 9 November 2026.
On 27 March 2020, IPT Property Holdings Limited ("IPTH") entered into a £20
million five year revolving credit facility ("RCF") agreement with Barclays.
The loan facility expires on 27 March 2025 and can be drawn down or repaid at
anytime. Interest accrues on the bank loan at a variable rate, based on 3 month
LIBOR plus margin and mandatory lending costs, and is payable quarterly. The
margin is 1.7 per cent per annum for the duration of the loan. As at 31
December 2020 none of the RCF was drawn down (at 30 June 2020 and 31 December
2019, none of the RCF was drawn down).
At 31 December 2020 borrowings of £90 million were drawn down. The balance
sheet value is stated at an amortised cost of £89,640,000 (31 December 2019: £
89,666,000 and 30 June 2020: £89,542,000). Amortised cost is calculated by
deducting loan arrangement costs, which are amortised back over the life of the
loan. The fair value of the Canada Life loan is shown in note 8.
8. Fair value measurements
The fair value measurements for financial assets and financial liabilities are
categorised into different levels in the fair value hierarchy based on the
inputs to valuation techniques used.
The different levels are defined as follows:
· Level 1 - Unadjusted, fully accessible and current quoted prices in
active markets for identical assets or liabilities. Examples of such
instruments would be investments listed or quoted on any recognised stock
exchange.
· Level 2 - Quoted prices for similar assets or liabilities, or other
directly or indirectly observable inputs which exist for the duration of the
period of investment. Examples of such instruments would be those for which
the quoted price has been suspended, forward exchange rate contracts and
certain other derivative instruments.
· Level 3 - External inputs are unobservable. Fair value is the
Directors' best estimate, based on advice from relevant knowledgeable experts,
use of recognised valuation techniques and on assumptions as to what inputs
other market participants would apply in pricing the same or similar
instruments.
All of the Group's investments in direct property are included in Level 3 as it
involves the use of significant inputs. There were no transfers between levels
of the fair value hierarchy during the six-month period ended 31 December 2020.
Other than the fair values stated in the table below, the fair value of all
other financial assets and liabilities is not materially different from their
carrying value in the financial statements.
31 December 31 December 30 June
2020 2019 2020
£'000 £'000 £'000
£90 million Canada Life Loan 92,584 95,676 95,913
2026*
*The fair value of the interest-bearing Canada Life Loan is based on the yield
on the Treasury 2% 2025 which would be used as the basis for calculating the
early repayment of such loan plus the appropriate margin. The Canada Life loan
is classified as Level 2 under the hierarchy of fair value measurement.
The Group's financial risk management objectives and policies are consistent
with those disclosed in the consolidated financial statements as at and for the
year ended 30 June 2020.
9. Share capital
31 December 31 December 30 June
2020 2019 2020
£'000 £'000 £'000
Allotted, called-up and fully
paid
240,705,539 Ordinary Shares of
1 pence each in issue 2,407 2,407 2,407
The Company issued no Ordinary Shares during the period.
10. Net asset value per share
Six months to Six months to Year ended
31 December 31 December 30 June
2020 2019 2020
Net asset value per ordinary 98.1p 102.6p 96.6p
share
Net assets attributable at the
period end (£'000) 236,072 246,997 232,606
Number of ordinary shares in
issue at the period end 240,705,539 240,705,539 240,705,539
11. Going concern
In assessing the going concern basis of accounting the Directors have had
regard to the guidance issued by the Financial Reporting Council.They have
considered the current cash position of the Group, the availability of the
loans and compliance with their covenants, forecast rental income and other
forecast cash flows.The Group has agreements relating to its borrowing
facilities with which it has complied during the period.Based on this
information the Directors believe that the Group has the ability to meet its
financial obligations as they fall due for a period of at least twelve months
from the date of the approval of the accounts.For this reason, they continue to
adopt the going concern basis in preparing the accounts.
12. Related party transactions
The Directors of the Company, who are considered to be the Group's key
management personnel, received fees for their services and dividends from their
shareholdings in the Company. No fees remained payable at the period end.
13. Operating segments
The Board has considered the requirements of IFRS 8 'Operating Segments'. The
Board is of the view that the Group is engaged in a single segment of business,
being property investment, and in one geographical area, the United Kingdom,
and that therefore the Group has only a single operating segment. The Board of
Directors, as a whole, has been identified as constituting the chief operating
decision maker of the Group. The key measure of performance used by the Board
to assess the Group's performance is the total return of the Group's net asset
value, as calculated under IFRS, and therefore no reconciliation is required
between the measure of profit or loss used by the Board and that contained in
the condensed consolidated financial statements.
14. Investment in subsidiary undertakings
The Group results consolidate those of IRP Holdings Limited ('IRPH') and IPT
Property Holdings Limited ('IPTH'). IRPH and IPTH are companies incorporated in
Guernsey whose principal business is that of a property investment company.
These companies are 100 per cent owned by the Group's ultimate parent company,
which is BMO Real Estate Investments Limited.
15. The report and accounts for the half-year ended 31 December 2020 is
available on the website www.bmorealestateinvestments.com
Statement of Principal Risks and Uncertainties
Covid-19 has had a significant effect on the commercial real estate market, and
the duration and consequences of the situation are uncertain, which has
resulted in a number of the residual risks increasing. The areas of increased
risk relate to the potential for tenant defaults, the volatility of the share
price and availability of cash resources. These areas are discussed in detail
in the Chairman's Statement. Since the outbreak, the Board have been meeting on
a significantly more frequent basis.
The Group's assets consist of direct investments in UK commercial property. Its
principal risks are therefore related to the UK commercial property market in
general but also the particular circumstances of the properties in which it is
invested and their tenants. Other risks faced by the Group include
geopolitical, market, investment and strategic, regulatory, tax structuring and
compliance, financial, reporting, credit, operational and environmental risks.
The Group is also exposed to risks in relation to its financial instruments.
These risks, and the way in which they are mitigated and managed, are described
in more detail under the heading 'Principal Risks and Future Prospects' within
the Business Model and Strategy in the Group's Annual Report for the year ended
30 June 2020. The Group's principal risks and uncertainties have not changed
materially since the date of that report and are not expected to change for the
remainder of the Company's financial year.
Statement of Directors' Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
· the condensed set of consolidated financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted by the
European Union;
· the Chairman's Statement constituting the Interim Management Report
together with the Statement of Principal Risks and Uncertainties include a fair
review of the information required by the Disclosure and Transparency Rules
('DTR') 4.2.7R, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the
condensed set of consolidated financial statements; and
· the Chairman's Statement together with the consolidated financial
statements include a fair review of the information required by DTR 4.2.8R,
being related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the financial
position or performance of the Group during that period, and any changes in the
related party transactions described in the last Annual Report that could do
so.
On behalf of the Board
Vikram Lall
Chairman
19 March 2021
Alternative Performance Measures
The Company uses the following Alternative Performance Measures ('APMs'). APMs
do not have a standard meaning prescribed by GAAP and therefore may not be
comparable to similar measures presented by other entities.
Discount or Premium - The share price of an Investment Company is derived from
buyers and sellers trading their shares on the stock market. If the share price
is lower than the NAV per share, the shares are trading at a discount. This
usually indicates that there are more sellers than buyers. Shares trading at a
price above the NAV per share, are said to be at a premium.
Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
Pence Pence Pence
Net Asset Value per share 98.1 102.6 96.6
Share price per share 61.0 84.0 56.0
Discount 37.8% 18.1% 42.0%
Dividend Cover - The percentage by which profits for the year (less gains/
losses on investment properties) cover the dividend paid.
A reconciliation of dividend cover is shown below:
Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
£'000 £'000 £'000
Profit/(loss) for the period 7,016 729 (9,149)
Add back: Realised losses/(gains) - 987 991
Unrealised (2,795) 2,473 17,031
(gains)/losses
Profit before investment gains 4,221 4,189 8,873
and losses
Dividends 3,550 6,018 10,531
Dividend Cover percentage 118.9% 69.6% 84.3%
.
Dividend Yield - The annualised dividend divided by the share price at the
period end. An analysis of dividends is contained in note 4.
Net Gearing - Borrowings less net current assets divided by value of investment
properties.
Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
£'000 £'000 £'000
Loans 89,640 89,666 89,542
Less net current assets (8,657) (11,633) (10,586)
Total 80,983 78,033 78,956
Value of investment properties 314,368 322,405 308,734
Net Gearing 25.8% 24.2% 25.6%
Portfolio (Property) Capital Return - The change in property value during the
period after taking account of property purchases and sales and capital
expenditure, calculated on a quarterly time-weighted basis.
Portfolio (Property) Income Return - The income derived from a property during
the period as a percentage of the property value, taking account of direct
property expenditure, calculated on a quarterly time-weighted basis.
Portfolio (Property) Total Return - Combining the Portfolio Capital Return and
Portfolio Income Return over the period, calculated on a quarterly
time-weighted basis.
Total Return - The return to shareholders calculated on a per share basis by
adding dividends 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, respectively, on the date on which they were
quoted ex-dividend.
Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
NAV per share at the start of the 96.6p 104.8p 104.8p
period
NAV per share at the end of the period 98.1p 102.6p 96.6p
Change in the period +1.6% -2.1% -7.8%
Impact of dividend reinvestments +1.5% +2.4% +4.1%
NAV total return for the period +3.0% +0.3% -3.7%
Six months to Six months to Year to
31 December 31 December 30 June
2020 2019 2020
Share price per share at the start of 56.0p 80.0p 80.0p
the period
Share price per share at the end of 61.0p 84.0p 56.0p
the period
Change in the period +8.9% +5.0% -30.0%
Impact of dividend reinvestments +2.6% +3.2% +5.1%
Share price total return for the +11.6% +8.2% -24.9%
period
Enquiries to:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court,
Les Banques,
St Peter Port
Guernsey GY1 3QL
Tel: 01481 745001
Fax: 01481 745051
P Lowe, S Macrae
BMO Investment Business Limited
Tel: 0207 628 8000
Fax: 0131 225 2375
The full interim report for the period to 31 December 2020 will be sent to
shareholders and will be available for inspection at Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 3QL, the registered office of the Company,
and from the Company's website: www.bmorealestateinvestments.com
END
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