TIDMCREI
RNS Number : 7603P
Custodian REIT PLC
22 November 2016
THE INFORMATION IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT
FOR PUBLICATION, RELEASE OR DISTRIBUTION DIRECTLY OR INDIRECTLY IN
OR INTO OR FROM THE UNITED STATES, AUSTRALIA, JAPAN, THE REPUBLIC
OF SOUTH AFRICA, ANY EEA STATE (OTHER THAN THE UK) OR ANY OTHER
EXCLUDED TERRITORY.
22 November 2016
Custodian REIT plc
("Custodian REIT" or "the Company")
Interim Results
Custodian REIT (LSE: CREI), the UK commercial real estate
investment company focused on smaller lot sizes, today reports its
interim results for the six months ended 30 September 2016 ("the
Period").
Financial highlights and performance summary
-- Net asset value ("NAV") per share total return(1) of 3.4%
-- NAV per share of 101.7p
-- Portfolio value of GBP383.5m
-- Profit after tax of GBP8.3m
-- GBP43.0m(2) of new equity raised at an average premium of 5.0% to dividend adjusted NAV
-- Dividends of 3.25p per share paid in the Period(3) , proposed
Q2 dividend of 1.5875p per share
-- GBP66.6m invested in 18 acquisitions and on-going developments during the Period
-- GBP15.0m committed pipeline of property acquisition opportunities
-- GBP3.5m portfolio valuation uplift(4) including GBP3.3m from
successful asset management initiatives
-- Portfolio net initial yield(5) 6.95%, unexpired lease term(6)
6.2 years, occupancy rate(7) 97.8%
-- Net gearing(8) of 21.1% loan-to-value
-- Drawn down GBP45.0m 12-year fixed rate loan and repaid GBP20m five-year variable rate loan
-- Heads of terms agreed for a GBP50m 15-year fixed rate loan
(1) NAV movement including dividends paid.
(2) Before costs and expenses of GBP0.6m.
(3) Dividends of 1.6625pps and 1.5875pps paid for the quarters
ended 31 March 2016 and 30 June 2016 respectively.
(4) Before the impact of acquisition costs.
(5) Portfolio passing rent divided by portfolio valuation plus
estimated purchasers' costs of 6.5%.
(6) Weighted average unexpired lease term to the earlier of
first break or expiry.
(7) Portfolio passing rent divided by portfolio passing rent
plus the estimated rental value ("ERV") of vacant space.
(8) Gross borrowings less unrestricted cash divided by portfolio
valuation.
Unaudited Unaudited
6 months 6 months Audited
to to 12 months
30 September 30 September to 31 March
2016 2015 2016
----------------------------------- -------------- -------------- -------------
Total return
NAV per share total return 3.4% 4.6% 6.2%
Total shareholder return(9) 0.9% 1.8% 3.5%
Dividends paid (p per share) 3.25 3.0 6.25
Capital values
NAV (GBPm) 297.1 196.5 255.1
NAV per share (p) 101.7 103.0 101.5
Net gearing 21.1% 13.7% 19.1%
Investment property portfolio
valuation (GBPm) 383.5 232.9 319.0
Ordinary share price (p) 105.0 108.5 107.3
Premium to NAV per share 3.2% 5.3% 5.7%
Market capitalisation (GBPm) 306.7 207.0 269.6
European Public Real Estate
Association ("EPRA") performance
measures
EPRA earnings(10) (GBPm) 8.4 6.4 13.9
EPRA earnings per share(11)
(p) 3.0 3.5 6.8
EPRA NAV per share(12) (p) 101.7 103.0 101.5
David Hunter, Chairman of Custodian REIT, said:
"This has been another successful period of capital raising and
investment as we continue to target growth to realise the potential
economies of scale offered by the Company's relatively fixed cost
base, while adhering to the Company's investment policy and
maintaining the quality of both properties and income.
"I believe the current market dynamic supports our strategy of
targeting high quality, smaller lot size properties across regional
markets, with the type of institutional grade property targeted by
the Company showing value relative to larger lots through a higher
net income return and opportunities for future rental growth.
"We remain well placed to meet our target of paying further
quarterly dividends, fully covered by income, to achieve an annual
dividend for the year of 6.35p per share. I expect occupational
demand, combined with a limited supply of new development, to drive
rental growth and lower vacancy rates across regional markets,
which will support our objectives to both grow the dividend on a
sustainable basis and deliver capital value growth for our
shareholders over the long-term."
(9) Share price movement including dividends paid.
(10) Profit after tax excluding gains on investment properties
(Note 3).
(11) Earnings per share ("EPS") excluding gains on investment
properties. Basic EPS for the Period is 3.0p (30 September 2015:
4.3p, 31 March 2016: 5.5p).
(12) NAV per share excluding recognised fair value adjustments
on financial instruments and deferred tax.
Important notice
Past performance cannot be relied on as a guide to future
performance.
Further information
Further information regarding the Company can be found at the
Company's website www.custodianreit.com or please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Nathan Imlach Tel: +44 (0)116 240 8740
/ Ian Mattioli
www.custodiancapital.com
Numis Securities Limited
Hugh Jonathan/Nathan Brown Tel: +44 (0)20 7260 1000
www.numiscorp.com
Camarco
Ed Gascoigne-Pees Tel: +44 (0)20 3757 4984
www.camarco.co.uk
Chairman's statement
I am pleased to report the Company has delivered further
positive returns for the six months ended 30 September 2016 ("the
Period"), while continuing to expand its property portfolio. We
invested a total of GBP66.6m during the Period, completing 18
acquisitions and achieving practical completion on one development,
funded by GBP43.0m raised from the issue of new shares. Of this,
GBP11.9m was raised after the EU referendum when many of our peers'
shares were trading at a discount to NAV and therefore unable to
raise new equity. We continue to target growth to realise the
potential economies of scale offered by the Company's relatively
fixed cost base, while adhering to the Company's investment policy
and maintaining the quality of both properties and income.
At the same time as growing the portfolio, we have continued to
pay fully covered dividends in line with target and minimised 'cash
drag' on the issue of new shares by taking advantage of the
flexibility offered by the Company's GBP35.0m revolving credit
facility.
The successful deployment of new monies on the acquisition of
high quality assets at an average net initial yield of 7.4%
supports our objective to deliver strong income returns from a
focus on smaller lots in strong, regional markets.
Market
Custodian Capital Limited ("CCL" or "the Manager"), the
Company's discretionary investment manager, anticipates medium term
rental growth in the regional occupational property market. This
market has remained robust throughout a period of turbulence in the
capital markets following the EU referendum, primarily driven by a
lack of supply, limited development and generally low rental levels
from which rental growth can be obtained. We believe these
strengths in the occupational market will drive performance through
the next phase of the market, where the focus will be on income,
occupancy levels and income growth. Regional markets and sub-GBP10m
lot sizes in particular (where there has been less market pressure
in the last two years) are well placed to out-perform whole market
forecasts with the benefit of higher yielding assets, fundamentally
under-rented properties and a lack of supply that we expect to
sustain rental growth.
Underlining our confidence in regional property markets' ability
to out-perform in a low return environment, we raised GBP25m of new
equity in October through a placing to progress Custodian REIT's
investment strategy. The Manager has access to a strong pipeline of
acquisition opportunities and a track record of committing new
equity promptly.
Net asset value
The Company delivered NAV per share total return of 3.4% for the
Period. The first half was a period of significant new investment,
where the initial costs (primarily stamp duty) of investing
GBP66.6m in property acquisitions diluted NAV per share total
return by circa 1.2p, partially offset by raising GBP43.0m at a 5%
premium to dividend adjusted NAV, which added 0.55p per share(13) .
Acquisition costs incurred during the Period represented 5.7% of
the total consideration, lower than the typical purchasers' costs
of 6.5% due to the purchase of a portfolio of 10 light industrial
units ("the Light Industrial Portfolio") for GBP26.75m being made
by way of a corporate acquisition (Note 9), allowing the Company
and vendor to share the associated cost savings.
Pence per
share GBPmillion
---------------------------------- ---------- -----------
NAV at 31 March 2016 101.5 255.1
Issue of equity (net of costs) 0.3 42.4
101.8 297.5
Valuation movements relating to:
* Asset management activity 1.1 3.3
* Other valuation movements 0.1 0.2
------------------------------------ ---------- -----------
1.2 3.5
Profit on disposal of investment
properties 0.0 0.1
Impact of acquisition costs (1.2) (3.8)
Net valuation movement (0.0) (0.2)
Income 4.3 12.6
Expenses and net finance costs (1.4) (4.1)
Dividends paid(14) (3.0) (8.7)
NAV at 30 September 2016 101.7 297.1
------------------------------------ ---------- -----------
In addition to new acquisitions, activity during the Period also
focused on pro-active asset management, which generated GBP3.3m of
the GBP3.5m valuation uplift. During the remainder of this
financial year we intend to continue our asset management
activities and complete on the current acquisition pipeline,
deploying new monies raised from the recent equity issue and
drawing down debt to maintain gearing at or around our target level
of 25% loan to value ("LTV").
Share price
Total shareholder return for the first half of the financial
year was 0.9%, with a closing price of 105.0p per share on 30
September 2016 representing a 3.2% premium to NAV. During the
Period the Company traded consistently at a premium to NAV despite
the market turmoil caused by the EU referendum, with low volatility
offering shareholders stable returns. I believe the premium to NAV
has been a function of strong demand for closed-ended property
funds, the Company's investment strategy being focused on regional
property and the attractive level of income offered by the
Company's dividend policy.
13 0.3p per share through new issuance plus 0.25p per share
notional dividend saving due to new shares being issued
ex-dividend.
14 Dividends of 3.25p per share were paid on shares in issue
throughout the Period. Dividends paid on shares in issue at the end
of the Period averaged 3.0p per share due to new shares being
issued ex-dividend.
Placing of new ordinary shares
The Company issued 40.9m new shares during the Period at an
average premium to dividend adjusted NAV of 5.0%. These issues have
been accretive to NAV, with positive investor demand for the
Company's shares a testament to our success to date.
Since the Period end, a further 25.9m new shares have been
issued raising GBP26.8m (before costs and expenses).
Borrowings
The Company's target gearing ratio is 25% LTV. As at 30
September 2016 net gearing equated to 21.1% LTV. The Board is keen
to reduce risk to shareholders wherever possible by taking
advantage of the prevailing low interest rates to secure long term
borrowings at fixed rates.
On 6 June 2016 the Company drew down a new 12 year GBP45m term
loan facility with Scottish Widows plc with interest fixed at
2.987% per annum. The Company used the proceeds to repay in full a
GBP20m term loan with Lloyds Bank plc, which attracted interest of
1.95% per annum above three month LIBOR and was to be repaid in
October 2019.
Heads of terms have been agreed for a new 15 year GBP50m term
loan facility ("the New Loan") with a fixed margin of 1.6% per
annum over the 2032 swap rate.
Investment Manager
The Board is pleased with the progress and performance of the
Investment Manager, particularly its success in continuing growth
through the deployment of new monies and securing the earnings
required to pay fully covered dividends in line with target.
Dividends
Income is a major component of total return. The Company paid
dividends totalling 3.25p per share during the Period, comprising
interim dividends of 1.6625p per share and 1.5875p per share
relating to the quarters ended 31 March 2016 and 30 June 2016
respectively.
The Board has approved an interim dividend of 1.5875p per share
for the quarter ended 30 September 2016 which will be paid on 31
December 2016. In the absence of unforeseen circumstances the Board
believes the Company is well placed to meet its target of paying
further quarterly dividends, fully covered by income, to achieve an
annual dividend per share for the year ending 31 March 2017 of
6.35p (2016: 6.25p, 2015: 5.25p).
The Board's objective is to grow the dividend on a sustainable
basis, at a rate which is fully covered by projected net rental
income and does not inhibit the flexibility of the Company's
investment strategy.
Outlook
Custodian REIT's performance can be enhanced through the careful
deployment of new monies and continued asset management of the
portfolio. Our focus is on maintaining and enhancing cash flow from
the portfolio to support our objectives to pay fully covered
dividends and secure sustainable growth. While we can never rule
out some future impact on NAV as a result of falling confidence in
the property market, we believe we can secure sustainable income to
support future dividends and deliver capital growth for
shareholders over the long-term.
David Hunter
Chairman
21 November 2016
Investment Manager's report
Investment market
The property market appeared to free-wheel in the four months
leading up to the EU referendum, with most market protagonists
unprepared to make decisions either to buy or to sell, or to lease
or not to lease. The widespread expectation was for a 'remain' vote
and the consequential market shock saw the share price of listed
property companies move to deep discounts to NAV, open-ended funds
move to 'gate' redemptions and property valuers offer valuations
with a 'Brexit' qualification.
Five months later investment market activity has returned.
Listed property stocks have recovered (in the case of property
investment companies to pre-referendum levels), some of the
open-ended funds have re-opened and valuers have removed their
qualification. The investment market for smaller lot sized
properties has been sufficiently active for valuations to be
benchmarked against arm's length transactions and there is more
data to support further yield hardening than softening.
In central London markets the collapse in Sterling provided a
fillip to both overseas investors and open-ended fund managers
alike, allowing many fund managers to provide the liquidity they so
badly needed by selling prime London assets to overseas buyers who
were energised by currency gains.
At the opposite end of the market, domestic UK private investors
have been spurred on by the low cost of debt and the near zero
interest rates on their savings to increase property investments
and we have witnessed upwards pressure on pricing for higher
quality, smaller lot sized, well-let assets.
Occupational market
Regional occupational property markets feel distinctly
mid-cycle. While investment market activity over the last few
months has been more typical of 'end of cycle' behavior,
occupational markets are displaying very different dynamics.
Rents fell across the UK from 2008 until the start of 2015 when
we started to see rental growth driven not by excessive demand but
by a fundamental lack of supply, which is unlikely to loosen until
we witness widespread development. At present many markets are
delivering rental levels which are not sufficient to bring forward
new development. It would appear that there is a latent pool of
rental growth on which the market must deliver before we see supply
reach equilibrium with demand, thus maintaining pressure on rents
to grow.
This is a market where vacancy levels are low and landlords hold
sway in lease negotiations. Although many tenant negotiations
remain finely balanced it should be possible to minimise rental
voids and secure rental growth across the Company's portfolio in
the year ahead.
It has been telling that in almost all cases over the last 18
months our tenants have elected to remain in occupation at lease
break or expiry and the occupancy rate now stands at 97.8%, up from
96.8% six months ago.
Pipeline
As at 30 September 2016 Custodian REIT had completed GBP47.0m of
acquisitions following the EU referendum, demonstrating our
confidence in the market. September valuations recorded an increase
compared to purchase prices agreed in July when market volatility
had hit confidence. A further GBP13.4m of acquisitions have
completed post Period end.
The Company is considering a GBP25m pipeline of opportunities
including industrial, retail and alternative sector assets as well
as a committed pre-let industrial development funding in
Stevenage.
We are seeing some premium prices being paid for sub-GBP2m
properties with a very active private investor market. We have sold
one small property since the Period end with another under offer to
sell and intend to take advantage of this pricing arbitrage to sell
some more smaller assets and to re-invest in GBP2-10m lot size
assets where we have yet to witness the same pricing pressure.
Investment objective
The key investment objective of Custodian REIT is to provide
shareholders with an attractive level of income by maintaining the
high level of dividend, fully covered by earnings, with a
conservative level of gearing.
The Company is committed to minimising cash drag through the
prompt deployment of new funds from share placings and new debt.
The Company benefits from a GBP35m revolving credit facility, which
has been integral in reducing cash drag, giving us the flexibility
to reduce debt when new equity is issued.
The rate of investment during the Period has been ahead of the
Board's expectations, which we believe demonstrates the success of
the Company's strategy of focusing on smaller lots in strong,
regional markets. We remain confident we can continue to acquire
properties that meet the Company's investment criteria and improve
the portfolio mix. In the remainder of this financial year we
expect to see continued rental growth and low vacancy rates
supporting the Company's investment objectives.
Portfolio performance
During the Period the Company completed on 18 new property
acquisitions and achieved practical completion on a development
funding (Cannock) with another (Stevenage) ongoing, adding GBP66.6m
of assets to the portfolio. Property acquisitions and the completed
development funding are shown below:
Industrial
Location: Cannock (development Location: Tamworth
funding) Tenant: DB Schenker
Tenant: Hellerman Tyton NIY: 5.65%
Net initial yield ("NIY"): 6.38% Consideration: GBP4.70m
Consideration: GBP4.22m
------------------------------------ ----------------------------
Location: Wolverhampton Location: Winsford
Tenant: Assa Abloy Tenant: H&M
NIY: 7.51% NIY: 7.15%
Consideration: GBP4.50m Consideration: GBP5.55m
------------------------------------ ----------------------------
Location: Irlam* Location: West Bromwich*
Tenant: Northern Commercial Tenant: Oyez Straker Group
NIY: 7.61% NIY: 7.24%
Consideration: GBP1.75m Consideration: GBP3.68m
------------------------------------ ----------------------------
Location: Christchurch* Location: Sheffield*
Tenant: Interserve Construction Tenant: Arkote
NIY: 8.24% NIY: 7.65%
Consideration: GBP2.30m Consideration: GBP1.50m
------------------------------------ ----------------------------
Location: Warrington* Location: Warrington*
Tenant: Dinex Tenant: DHL
NIY: 8.12% NIY:7.04%
Consideration: GBP2.15m Consideration: GBP3.10m
------------------------------------ ----------------------------
Location: Atherstone* Location: Westerham*
Tenant: North Warwickshire Borough Tenant: Aqualisa Products
Council NIY: 7.87%
NIY: 7.70% Consideration: GBP1.63m
Consideration: GBP1.42m
------------------------------------ ----------------------------
Location: Gateshead* Location: Kettering*
Tenant: Multi-let Tenant: Multi-let
NIY: 8.87% NIY: 7.52%
Consideration: GBP5.45m Consideration: GBP3.77m
------------------------------------ ----------------------------
*Acquired as part of the Light Industrial Portfolio
Retail
Location: Chester Location: Swindon
Tenant: TSB and Ciel (t/a Chesca) Tenant: Go Outdoors and B&M
NIY: 5.87% NIY: 6.86%
Consideration: GBP2.05m Consideration: GBP7.18m
----------------------------------- -----------------------------
Location: Leighton Buzzard
Tenant: Homebase
NIY: 6.91%
Consideration: GBP7.12m
----------------------------------- -----------------------------
Office
Location: Castle Donington Location: Cheadle
Tenant: National Grid Tenant: Wienerberger
NIY: 7.59% NIY: 9.81%
Consideration: GBP4.10m Consideration: GBP2.90m
--------------------------- -------------------------
At 30 September 2016 the Company's property portfolio comprised
128 assets and 251 tenants.
The portfolio is split between the main commercial property
sectors, in line with the Company's objective to maintain a
suitably balanced investment portfolio, but with a relatively low
exposure to office and a relatively high exposure to industrial and
to alternative sectors, often referred to as 'other' in property
market analysis. Sector weightings are shown below:
Valuation Weighting Weighting
30 September by income by income Valuation Valuation
2016 30 September 31 March movement movement(15)
Sector GBPm 2016 2016 GBPm %
------------ -------------- -------------- ----------- ---------- --------------
Industrial 167.6 44% 39% 1.5 1.0
Retail 109.3 27% 28% 1.6 1.7
Other 54.9 14% 18% (0.3) (0.4)
Office 51.7 15% 15% 0.7 1.7
383.5 100% 100% 3.5 1.1
------------ -------------- -------------- ----------- ---------- --------------
While deemed to be outside the core sectors of office, retail
and industrial the 'other' sector offers diversification of income
without adding to portfolio risk, containing assets considered
mainstream including car dealerships, pubs, restaurants and trade
counters, but which typically have not been owned by institutional
investors.
Office rents are growing strongly and supply is constrained by a
lack of development and the extensive conversion of secondary
offices to residential, making returns attractive. However, the
Company's relatively low exposure to the office sector is a
long-term strategic decision rather than a short-term comment on
the state of the office market. We are conscious that obsolescence
can be a real cost of office ownership, which can impact cash flow
and be at odds with the Company's relatively high target
dividend.
Similar to the office market, occupational demand and limited
supply is driving rental growth in the industrial sector and
returns are positive. As industrial property is less exposed to
obsolescence this sector remains a very good fit with the Company's
strategy.
Retail is split between high street and out-of-town retail
(retail warehousing). Strong comparison retail pitches in dominant
regional towns continue to show very low vacancy rates and offer
stable long-term cash flow with the opportunity for rental growth.
Retail warehousing is witnessing close to record low vacancy rates
as a restricted planning policy and lack of development combine
with retailers' requirements to offer large format stores, free
parking and 'click and collect' to consumers.
(15) Excluding the impact of acquisitions and disposals.
Portfolio risk
The portfolio's security of income is enhanced by 18% of income
benefitting from either fixed or indexed rent reviews, with
increasingly strong evidence of open market rental growth across
all sectors.
Short term income at risk is a relatively low proportion of the
portfolio's total income, with only 30% expiring in the next three
years (12% within one year).
Asset management
Our continuing focus on active asset management including rent
reviews, new lettings, lease extensions and the retention of
tenants beyond their contractual break clauses resulted in GBP3.3m
of the GBP3.5m valuation increase, with further initiatives
expected to complete in the coming months.
These strategies have also had a positive impact on the
portfolio's weighted average unexpired lease term to the first
lease break or expiry ("WAULT"), which decreased to 6.2 years from
6.7 years at 31 March 2016 despite the WAULT of properties acquired
during the Period being 4.9 years.
Key asset management initiatives undertaken during the Period
include:
-- Arrangement of simultaneous surrender and agreement of new
lease of a retail unit on High Street, Colchester to Metro Bank.
The new lease secures an increase in rent from GBP145,000 to
GBP200,000 per annum and a lease term of 25 years, with a break
option in year 15;
-- Extending Geldard LLP's lease at Pride Park, Derby by
removing a break clause with expiry now in June 2023;
-- Extending Brenntag UK's lease at an industrial unit in
Cambuslang with expiry moving from April 2021 to April 2031 with a
2.5% (annually compounded) minimum rental uplift from 2026;
-- Extending Tesco's lease at Causewayside House, Edinburgh with
expiry moving from December 2019 to December 2029;
-- Extending Savers' lease at a retail unit in Colchester with
expiry moving from December 2017 to December 2022;
-- Letting a vacant retail unit in Portsmouth to The Works on a
10 year lease with rent of GBP105,000 per annum; and
-- Agreeing terms for a new letting at Tilbrook 44 in Milton
Keynes on a 10 year lease with a rent of GBP265,000 per annum.
The Company sold a 63 room hotel on Castlegate Business and
Leisure Park, Dudley for GBP4.45m in July 2016, representing a NIY
of 5.08%, ahead of cost and 31 March 2016 valuation. The Company
also sold a non-core student residential building in Lenton,
Nottingham for GBP1.2m in May 2016, ahead of cost and 31 March 2016
valuation. The Company has used the proceeds from these disposals
to fund acquisitions better aligned to its stated investment
strategy.
Outlook
We expect to see larger funds continuing to sell smaller lots
regarded as being sub-scale for their ambitions. We anticipate this
trend will maintain a pipeline of new acquisition opportunities for
Custodian REIT, with the relative imbalance of demand leading to
smaller lots showing 'value' relative to larger lots in terms of
income returns.
Growth in rents is now taking hold in the regional markets and
we expect this to continue, driven by the significant lack of
supply of good quality, modern real estate combined with growing
occupational demand.
I am confident the Company's strategy of targeting income with
low gearing in a well-diversified regional portfolio will continue
to deliver the stable long term returns demanded by our
shareholders.
Richard Shepherd-Cross
for and on behalf of Custodian Capital Limited
Investment Manager
21 November 2016
Portfolio summary
Town Address Tenant % Portfolio
Income(16)
Industrial
Gateshead Metro Riverside Multi-let 1.80%
Warrington Chesford Grange JTF Wholesale 1.72%
Ashby Ashby Park Teleperformance 1.65%
Winsford One Road H&M 1.50%
Salford Agecroft Commerce Park Restore 1.43%
Emerson Network
Bedford Priory Business Park Power & Elma Electronics 1.40%
Wolverhampton Cannock Road Assa Abloy 1.27%
Doncaster Carriage Way Portola Packaging 1.26%
Stone Stone Business Park Revlon International 1.14%
Redditch Acanthus Road AMCO Services 1.11%
Alto House, Ravensbank
Redditch Drive SAPA Profiles UK 1.08%
Pegasus Drive, Stratton Turpin Distribution
Biggleswade Business Park Services 1.06%
Kettering Kettering Venture Park Multi-let 1.06%
Severn Link Distribution
Chepstow Centre Multi-let 1.02%
Blakeney Way, Kingswood
Cannock Lakeside Hellermann Tyton 1.00%
Normanton Foxbridge Way YESSS Electrical 1.00%
Milton Keynes Bradbourne Drive Massmould 0.99%
Tamworth Relay Park D B Schenker 0.99%
Hawthornes Business
West Bromwich Park OyezStraker Group 0.99%
EAF Supply Chain
Warrington Leacroft Road & Synertec 0.92%
Western Wood Way, Langage Sherwin-Williams,
Plymouth Business Park Diversified Brands 0.91%
Bristol Albert Reach BSS 0.88%
Nuneaton Harrington Way DX Network Services 0.86%
South Delivery Office,
Coventry Orchard Business Park Royal Mail Group 0.83%
Kingsland Point, Kingsland
Warrington Grange DHL 0.81%
Trafford The Furrows, Trafford
Park Park Unilin Distribution 0.78%
Avonmouth RD Park Superdrug Stores 0.76%
Sytner Body Shop, Brades
Oldbury Road Sytner Group 0.74%
Bermondsey Verney Street Constantine 0.71%
Interserve Project
Christchurch Airfield Way Services 0.71%
Westburn Drive, Clydesmill
Cambuslang Industrial Estate Brenntag UK 0.70%
Howemoss Drive, Kirkhill
Aberdeen Industrial Estate DHL 0.68%
Warrington Chesford Grange Dinex Exhausts 0.65%
Edgehill Drive, Tournament
Warwick Fields Semcon 0.64%
Hamilton Livingstone Boulevard Ichor Systems 0.62%
West Midlands Ambulance
Erdington Opus Aspect Service NHS Trust 0.54%
Northbank Industrial
Estate, Irlam Wharf
Irlam Road Northern Commercials 0.50%
Synergy Health
Sheffield Sheffield Parkway (UK) 0.48%
Triumph Structures
Farnborough Invincible Road Farnborough 0.48%
Speke Estuary Commerce Park Powder Systems 0.48%
John Gray Building,
Westerham Hortons Way Aqualisa Products 0.48%
Coalville Reg's Way MTS Logistic 0.46%
Castleford Willowbridge Way, Whitwood Bunzl UK 0.44%
Parkway One Business
Sheffield Centre Arkote 0.43%
Kettering Telford Way Sealed Air 0.42%
Speke Estuary Commerce Park DHL 0.42%
North Warwickshire
Atherstone Innage Park Borough Council 0.41%
Lancaster Way, Ermine
Huntington Business Park PHS Group 0.37%
Kilmarnock Queens Drive Royal Mail Group 0.33%
Glasgow Campsie Drive DHL 0.33%
Normanton Loscoe Close Acorn Web Offset 0.31%
Shepcote Enterprise River Island Clothing
Sheffield Park & Andrew Page 0.30%
Phoenix Business Park,
Hinckley Brindley Road Multi-let 0.29%
Sovereign Air Movement
National Court, South & Nationwide Crash
Leeds Accommodation Road Repair 0.26%
Tilbrook Industrial
Milton Keynes Estate Vacant 0.00%
16 % of portfolio passing rent.
Town Address Tenant % Portfolio
Income
Retail
Wickes & Pets
Winnersh Gazelle Close at Home 2.02%
Portsmouth Commercial Road Multi-let 1.86%
County Road Retail Go Outdoors &
Swindon Park B&M 1.86%
Leighton Buzzard Vimy Road Homebase 1.86%
High Street/Trinity
Colchester Square Multi-let 1.78%
Banbury Southam Road B&Q 1.69%
North Row, Grafton
Milton Keynes Gate Staples UK 1.48%
Laura Ashley,
Discovery Retail Poundstretcher
Grantham Park, London Road & Carpetright 1.15%
Reiss & House
Guildford Market Street of Fraser 0.99%
Colchester Long Wyre Street Poundland & Savers 0.88%
Southampton Above Bar Street URBN UK 0.78%
Torpoint Anthony Road Sainsbury's 0.77%
The Crystal Retail
Stourbridge Centre Multi-let 0.76%
Norwich White Lion Street Specsavers 0.71%
Majestic Wine
& T J Morris (t/a
Portishead Harbour Road Home Bargains) 0.67%
Shrewsbury Pride Hill Cotswold Outdoor 0.57%
Llandudno Mostyn Street WH Smith 0.53%
Nottingham St Peter's Gate The White Company 0.50%
Jewellery
Quarter, Birmingham Frederick Street Multi-let 0.47%
Eastgate Street &
Chester Eastgate Row Chesca & TSB 0.45%
Kings Lynn High Street Top Man 0.44%
Weston-Super-Mare High Street Superdrug Stores 0.44%
Glasgow Argyle Street Greggs 0.42%
Superdrug Stores
& Portsmouth City
Southsea Palmerston Road Council 0.41%
Eastgate Street & Kuoni Travel &
Chester Eastgate Row Aslan Jewellery 0.39%
Edinburgh George Street Phase Eight 0.39%
Portsmouth Commercial Road The Works 0.37%
Scarborough Westborough Waterstones 0.33%
Wilkinson Hardware
Taunton East Gate Stores 0.33%
Dumfries High Street Iceland Foods 0.33%
Bury St Edmunds Cornhill Street The Works 0.32%
Bedford Silver Street Waterstones 0.30%
Trident House, Mosquito
St Albans Way EE 0.27%
Bath Street and High
Redcar Street Multi-let 0.26%
Hinckley Castle Street WH Smith 0.25%
Tesco Stores &
Edinburgh Causewayside House R Scott Bathrooms 0.31%
Framemaker Galleries
& Danish Wardrobe
Cirencester Dyer Street Company 0.24%
Chester Watergate Street Whistles Holdings 0.20%
Bury St Edmunds Abbeygate Street Savers 0.18%
Done Brothers
Cheltenham High Street (t/a Betfred) 0.15%
Town Address Tenant % Portfolio
Income
Office
West Malling Kings Hill Avenue Regus 1.98%
Birmingham Lancaster House Multi-let 1.86%
Gateway House, Grove Mattioli Woods,
Leicester Park RBS & Regus 1.70%
Edinburgh Causewayside House Multi-let 1.25%
Cardinal House, Manor
Leeds Road Enact 1.20%
Osprey House, Pentagon
Castle Donington Business Park National Grid 1.14%
Cheadle Royal Business
Cheadle Park Wienerberger 1.07%
Leeds David Street Enact 1.03%
Derby Pride Park Edwards Geldards 0.91%
Mattioli Woods
Leicester MW House, Grove Park & Erskine Murray 0.89%
Glasgow West George Street Multi-let 0.76%
Solihull Westbury House Lyons Davidson 0.67%
Town Address Tenant % Portfolio
Income
Other
Crewe Phoenix Leisure Park Multi-let 1.87%
St Catherine's Leisure
Perth Park Multi-let 1.38%
Park Gate Bentley,
Knutsford Mobberley Road R Stratton & Co 1.30%
Torquay Abbey Sands Multi-let 1.01%
Gillingham Beechings Way Co-Operative 0.95%
Leicester Aylestone Road Magnet 0.88%
Marshall Motor
Peterborough Mallory Road Group 0.80%
Portishead Harbour Road Travelodge 0.71%
Stephenson Road,
Lincoln North Hykeham MKM Building Supplies 0.60%
Allen Ford (t/a
Solihull Coventry Road, Elmdon Kia) 0.51%
Counterpoint, Weston Plumbase, Multi
Crewe Road Tile & F1 Autocentres 0.50%
Redhill Brighton Road Honda Motor Europe 0.50%
Bluecoat House, Saw
Bath Close Prezzo 0.43%
Stonegate Pub
High Wycombe Frogmore Co 0.41%
Castleford Castlewood Way MKM Building Suppliers 0.39%
Watford The Dome Roundabout Pizza Hut 0.37%
Southsea Palmerston Road JD Wetherspoon 0.30%
Leicester Grove Farm Triangle Pizza Hut 0.29%
Portishead Harbour Road JD Wetherspoon 0.25%
Basingstoke Chequers Road Teddies Nurseries 0.22%
Chesham Bois Moor Road Teddies Nurseries 0.18%
The Old Knutsford Knutsford Day
Knutsford Library Nursery 0.18%
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2016
Audited
Unaudited Unaudited 12 months
6 months 6 months to
to 30 Sept to 30 Sept 31 Mar
2016 2015 2016
Note GBP000 GBP000 GBP000
------------------------------------------ ----- ------------ ------------ -----------
Revenue 4 12,575 8,686 19,012
Investment management fee (1,414) (974) (2,200)
Operating expenses of rental property
* rechargeable to tenants (590) (427) (451)
* directly incurred (569) (180) (572)
Professional fees (169) (191) (356)
Directors' fees (80) (77) (172)
Administrative expenses (63) (66) (100)
Expenses (2,885) (1,915) (3,851)
Operating profit before financing
and revaluation of investment
properties 9,690 6,771 15,161
------------------------------------------ ----- ------------ ------------ -----------
Unrealised gains/(losses) on revaluation
of investment properties:
- relating to property revaluations 9 3,502 2,624 3,031
* relating to costs of acquisition 9 (3,759) (1,168) (5,768)
Profit on disposal of investment
properties 128 77 56
------------------------------------------ ----- ------------ ------------ -----------
Net (losses)/gains on investment
properties (129) 1,533 (2,681)
Operating profit before financing 9,561 8,304 12,480
------------------------------------------ ----- ------------ ------------ -----------
Net finance costs (including one-off
items) 5,6 (1,266) (399) (1,273)
Profit before tax 8,295 7,905 11,207
------------------------------------------ ----- ------------ ------------ -----------
Income tax 7 - - -
Profit and total comprehensive
income for the Period, net of
tax 8,295 7,905 11,207
Attributable to:
Owners of the Company 8,295 7,905 11,207
Earnings per ordinary share:
Basic and diluted (p per share) 3 3.0 4.3 5.5
EPRA (p per share) 3 3.0 3.5 6.8
The profit for the Period arises from the Company's continuing
operations.
Condensed consolidated statement of financial position
As at 30 September 2016
Registered number: 8863271
Unaudited Unaudited Audited
30 Sept 30 Sept 31 Mar
2016 2015 2016
Note GBP000 GBP000 GBP000
------------------------------- ----- ---------- ---------- ----------
Non-current assets
Investment properties 9 383,537 232,850 318,966
Total non-current assets 383,537 232,850 318,966
------------------------------- ----- ---------- ---------- ----------
Trade and other receivables 10 4,045 1,931 4,518
Cash and cash equivalents 12 6,661 8,347 5,455
Total current assets 10,706 10,278 9,973
------------------------------- ----- ---------- ---------- ----------
Total assets 394,243 243,128 328,939
------------------------------- ----- ---------- ---------- ----------
Equity
Issued capital 14 2,921 1,908 2,512
Share premium 110,913 7,404 68,874
Retained earnings 183,250 187,145 183,674
Total equity attributable
to equity holders of the
Company 297,084 196,457 255,060
------------------------------- ----- ---------- ---------- ----------
Non-current liabilities
Borrowings 13 85,901 39,280 65,143
Other payables 571 - 571
------------------------------- ----- ---------- ---------- ----------
Total non-current liabilities 86,472 39,280 65,714
------------------------------- ----- ---------- ---------- ----------
Current liabilities
Trade and other payables 11 5,664 3,741 3,681
Deferred income 5,023 3,650 4,484
Total current liabilities 10,687 7,391 8,165
------------------------------- ----- ---------- ---------- ----------
Total liabilities 97,159 46,671 73,879
------------------------------- ----- ---------- ---------- ----------
Total equity and liabilities 394,243 243,128 328,939
------------------------------- ----- ---------- ---------- ----------
These interim financial statements of Custodian REIT plc were
approved and authorised for issue by the Board of Directors on 21
November 2016 and are signed on its behalf by:
David Hunter
Director
Condensed consolidated statement of cash flows
For the period ended 30 September 2016
Unaudited Unaudited Audited
6 months 6 months 12 months
to 30 Sept to 30 Sept to 31 Mar
2016 2015 2016
Note GBP000 GBP000 GBP000
-------------------------------------- ----- ------------ ------------ -----------
Operating activities
Operating profit 9,561 8,304 12,480
Adjustments for:
Increase in fair value of investment
property 9 (3,502) (2,624) (3,031)
Profit on disposal of investment
properties (128) (77) (56)
Income tax 7 - - -
Cash flows from operating activities
before changes in working capital
and provisions 5,931 5,603 9,393
-------------------------------------- ----- ------------ ------------ -----------
Decrease/(increase) in trade
and other receivables 453 (797) (3,615)
Increase in trade and other
payables 2,521 2,008 2,399
Cash generated from operations 8,905 6,814 8,177
-------------------------------------- ----- ------------ ------------ -----------
Interest paid 6 (1,026) (431) (1,307)
-------------------------------------- ----- ------------ ------------ -----------
Net cash flows from operating
activities 7,879 6,383 6,870
-------------------------------------- ----- ------------ ------------ -----------
Investing activities
Purchase of investment property (66,591) (23,353) (109,674)
Disposal of investment property 5,650 492 1,821
Interest received 5 25 4 22
Net cash from investing activities (60,916) (22,857) (107,831)
-------------------------------------- ----- ------------ ------------ -----------
Financing activities
Proceeds from the issue of
share capital 43,033 14,294 77,719
Payment of costs of share issue (585) (282) (1,632)
Net borrowings received (net
of costs) 20,514 15,407 41,700
Dividends paid 8 (8,719) (5,447) (12,220)
Net cash from financing activities 54,243 23,972 105,567
-------------------------------------- ----- ------------ ------------ -----------
Net increase in cash and cash
equivalents 1,206 7,498 4,606
Cash and cash equivalents at
start of the Period 5,455 849 849
-------------------------------------- ----- ------------ ------------ -----------
Cash and cash equivalents at
end of the Period 6,661 8,347 5,455
-------------------------------------- ----- ------------ ------------ -----------
Condensed consolidated statements of changes in equity
For the period ended 30 September 2016
Issued Share Retained Total
capital premium earnings equity
Note GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- --------- ---------- ---------- ----------
As at 31 March 2016 (audited) 2,512 68,874 183,674 255,060
Profit and total comprehensive
income for Period - - 8,295 8,295
Transactions with owners
of the Company, recognised
directly in equity
Dividends 8 - - (8,719) (8,719)
Issue of share capital 14 409 42,039 - 42,448
As at 30 September 2016
(unaudited) 2,921 110,913 183,250 297,084
-------------------------------- ------- --------- ---------- ---------- ----------
For the period ended 30 September 2015
Issued Share Retained Total
capital premium earnings equity
Note GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- --------- ---------- ---------- ----------
As at 31 March 2015 (audited) 1,776 175,009 3,201 179,986
Profit and total comprehensive
income for Period - - 7,905 7,905
Transactions with owners
of the Company, recognised
directly in equity
Dividends 8 - - (5,447) (5,447)
Issue of share capital 14 132 13,881 - 14,013
Transfer of reserves 14 - (181,486) 181,486 -
As at 30 September 2015
(unaudited) 1,908 7,404 187,145 196,457
-------------------------------- ------- --------- ---------- ---------- ----------
Notes to the interim financial statements for the period ended
30 September 2016
1. Corporate information
The Company is a public limited company incorporated and
domiciled in England and Wales, whose shares are publicly traded on
the London Stock Exchange plc's main market for listed securities.
The interim financial statements have been prepared on a historical
cost basis, except for the revaluation of investment properties,
and are presented in pounds sterling with all values rounded to the
nearest thousand pounds (GBP000), except when otherwise indicated.
The interim financial statements were authorised for issue in
accordance with a resolution of the Directors on 21 November
2016.
2. Basis of preparation and accounting policies
2.1. Basis of preparation
The interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting. The interim
financial statements do not include all the information and
disclosures required in the annual financial statements. The annual
report for the year ending 31 March 2017 will be prepared in
accordance with International Financial Reporting Standards adopted
by the International Accounting Standards Board ("IASB") and
interpretations issued by the International Financial Reporting
Interpretations Committee ("IFRIC") of the IASB (together "IFRS")
as adopted by the European Union, and in accordance with the
requirements of the Companies Act applicable to companies reporting
under IFRS.
The information relating to the Period is unaudited and does not
constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006. A copy of the statutory
financial statements for the year ended 31 March 2016 has been
delivered to the Registrar of Companies. The auditor's report on
those financial statements was not qualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
The interim financial statements have been reviewed by the
auditor and its report to the Company is included within these
interim financial statements.
Certain statements in this report are forward looking
statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause
actual results or events to differ materially from those expressed
or implied by those statements. Forward looking statements
regarding past trends or activities should not be taken as
representation that such trends or activities will continue in the
future. Accordingly, undue reliance should not be placed on forward
looking statements.
2.2. Significant accounting policies
The principal accounting policies adopted by the Company and
applied to these interim financial statements are consistent with
those policies applied to the Company's annual report and financial
statements.
2.3. Going concern
The Directors believe the Company is well placed to manage its
business risks successfully. The Company's projections show that
the Company should continue to be cash generative and able to
operate within the level of its current financing arrangements.
Accordingly, the Directors continue to adopt the going concern
basis for the preparation of the interim financial statements.
2.4. Segmental reporting
An operating segment is a distinguishable component of the
Company that engages in business activities from which it may earn
revenues and incur expenses, whose operating results are regularly
reviewed by the Company's chief operating decision maker to make
decisions about the allocation of resources and assessment of
performance and about which discrete financial information is
available. As the chief operating decision maker reviews financial
information for, and makes decisions about, the Company's
investment properties and properties held for trading as a
portfolio the Directors have identified a single operating segment,
that of investment in commercial properties.
2.5. Principal risks and uncertainties
The Company'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 Company include
economic, strategic, regulatory, management and control, financial
and operational.
These risks, and the way in which they are mitigated and
managed, are described in more detail under the heading Principal
risks and uncertainties within the Company's Annual Report for the
year ended 31 March 2016. The Company's principal risks and
uncertainties have not changed materially since the date of that
report, other than the inherent risk of unidentified liabilities
associated with the corporate acquisition of the Light Industrial
Portfolio detailed in Note 9, which has been mitigated through
comprehensive due diligence and the provision of insured warranties
and indemnities from the vendor. While it is too early to
understand the full impact of 'Brexit', the Board does not consider
any remaining uncertainty likely to have a material impact on the
Company's performance. The Company's principal risks and
uncertainties are not expected to change materially for the
remaining six months of the Company's financial year.
3. Earnings per ordinary share
Basic EPS amounts are calculated by dividing net profit for the
Period attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares outstanding during
the Period.
Diluted EPS amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares outstanding during the
Period plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares. There are no dilutive
instruments.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Unaudited Unaudited Audited
6 months 6 months 12 months
to 30 Sept to 30 Sept to
2016 2015 31 Mar
2016
------------------------------------- -------------- -------------- --------------
Net profit and diluted net profit
attributable to equity holders
of the Company (GBP000) 8,295 7,905 11,207
Net losses/(gains) on investment
properties (GBP000) 129 (1,533) 2,681
------------------------------------- -------------- -------------- --------------
EPRA net profit attributable to
equity holders of the Company
(GBP000) 8,424 6,372 13,888
Weighted average number of ordinary
shares:
Issued ordinary shares at start
of the Period 251,242,071 177,605,659 177,605,659
Effect of shares issued during
the Period 25,045,659 5,135,246 26,590,709
------------------------------------- -------------- -------------- --------------
Basic and diluted weighted average
number of shares 276,287,730 182,740,905 204,196,368
Basic and diluted EPS (pence) 3.0 4.3 5.5
------------------------------------- -------------- -------------- --------------
EPRA EPS (pence) 3.0 3.5 6.8
------------------------------------- -------------- -------------- --------------
4. Revenue
Unaudited 6 months Unaudited Audited 12 months to
to 30 Sept 6 months 31 Mar
2016 to 30 Sept 2015 2016
GBP000 GBP000 GBP000
----------------------------------------------- ------------------ ---------------- --------------------
Gross rental income from investment properties 11,985 8,280 18,561
Income from recharges to tenants 590 406 451
12,575 8,686 19,012
----------------------------------------------- ------------------ ---------------- --------------------
5. Finance income
Unaudited 6 months Unaudited 6 months Audited 12 months to
to 30 Sept 2016 to 30 Sept 2015 31 Mar
GBP000 GBP000 2016
GBP000
--------------- ------------------ ------------------ --------------------
Bank interest 25 4 22
Finance income - 119 199
25 123 221
--------------- ------------------ ------------------ --------------------
6. Finance costs
Unaudited 6 months Unaudited Audited 12 months to
to 30 Sept 2016 6 months 31 Mar
GBP000 to 30 Sept 2016
2015 GBP000
GBP000
---------------------------------------------------- ------------------ ----------- --------------------
Amortisation of arrangement fees on debt facilities 265 91 187
Bank interest 1,026 431 1,307
1,291 522 1,494
---------------------------------------------------- ------------------ ----------- --------------------
During the Period the Company repaid a GBP20m term loan with
Lloyds Bank plc resulting in one-off costs of GBP0.165m related to
the accelerated amortisation of the associated deferred arrangement
fees.
7. Income tax
The tax charge assessed for the Period is lower than the
standard rate of corporation tax in the UK during the Period of
19.0%. The differences are explained below:
Unaudited 6 months Unaudited Audited 12 months to
to 30 Sept 2016 6 months 31 Mar
GBP000 to 30 Sept 2015 2016
GBP000 GBP000
---------------------------------------------------------- ------------------ ---------------- --------------------
Profit before income tax 8,295 7,905 11,207
---------------------------------------------------------- ------------------ ---------------- --------------------
Tax charge on profit at a standard rate of 19.0% (30
September 2015: 20.0%, 31 March 2016:
20.0%) 1,576 1,581 2,241
Effects of:
REIT tax exempt rental profits and gains (1,576) (1,581) (2,241)
Income tax expense for the Period - - -
---------------------------------------------------------- ------------------ ---------------- --------------------
Effective income tax rate 0.0% 0.0% 0.0%
---------------------------------------------------------- ------------------ ---------------- --------------------
The Company operates as a Real Estate Investment Trust and hence
profits and gains from the property investment business are
normally exempt from corporation tax.
8. Dividends
Unaudited Unaudited Audited
6 months 6 months 12 months
to 30 Sept to 30 Sept to
2016 2015 31 Mar
GBP000 GBP000 2016
GBP000
--------------------------------------- ------------ ------------ -----------
Interim equity dividends per ordinary
share for the quarters ended:
31 March 2015: 1.50p(17) - 2,672 2,672
30 June 2015: 1.50p - 2,775 2,775
30 September 2015: 1.50p - - 2,907
31 December 2015: 1.5875p - - 3,866
31 March 2016: 1.6625p 4,227 - -
30 June 2016: 1.5875p 4,492 - -
8,719 5,447 12,220
--------------------------------------- ------------ ------------ -----------
All dividends paid are classified as property income
distributions ("PID") unless stated otherwise.
The Directors approved a second interim dividend relating to the
quarter ended 30 September 2016 of 1.5875p per ordinary share in
October 2016 which has not been included as a liability in these
interim financial statements. This interim dividend is expected to
be paid on 31 December 2016 to shareholders on the register at the
close of business on 14 October 2016.
In the absence of unforeseen circumstances, the Board intends to
pay further quarterly dividends to achieve an annual dividend of
6.35p per share for the financial year ending 31 March 2017(18)
.
9. Investment properties
GBP000
----------------------------------------- --------
At 31 March 2016 318,966
Additions (including acquisition costs) 70,350
Disposals (5,522)
Property revaluations 3,502
Acquisition costs (3,759)
Net revaluation loss (257)
As at 30 September 2016 383,537
------------------------------------------ --------
Included in investment properties is GBP1.45m relating to an
ongoing development funding at Stevenage.
Investment property additions include GBP26.75m relating to the
Light Industrial Portfolio, which the Company acquired by
purchasing the entire issued share capital of BLME (UK) GP Limited
and LIBF (II) S.à.r.l., being the partners in BLME Light Industrial
Building LP, an English limited partnership holding the title and
beneficial interest in the Light Industrial Portfolio.
(17) Designated as 1.287p per share PID and 0.213p per share
non-PID.
(18) This is a target only and not a profit forecast. There can
be no assurance that the target can or will be met and it
should not be taken as an indication of the Company's expected
or actual future results. Accordingly, shareholders or potential
investors in the Company should not place any reliance on this
target in deciding whether or not to invest in the Company or
assume that the Company will make any distributions at all and
should decide for themselves whether or not the target dividend
yield is reasonable or achievable.
The carrying value of investment property at 30 September 2016
comprises freehold and leasehold properties summarised as
follows:
Freehold Leasehold Total
Investment properties GBP000 GBP000 GBP000
------------------------ -------- --------- -------
Historical cost 338,164 52,399 390,563
Valuation (loss)/gain (3,251) 1,265 (1,986)
Disposals (5,040) - (5,040)
At 30 September 2016 329,873 53,664 383,537
------------------------ -------- --------- -------
The investment properties are stated at the Directors' estimate
of their 30 September 2016 fair values. Lambert Smith Hampton Group
Limited ("LSH"), a professionally qualified independent valuer,
valued the properties as at 30 September 2016 in accordance with
the Appraisal and Valuation Standards published by the Royal
Institution of Chartered Surveyors. LSH has recent experience in
the relevant location and category of the properties being
valued.
Investment properties have been valued using the investment
method which involves applying a yield to rental income streams.
Inputs include yield, current rent and ERV. For the Period end
valuation, the equivalent yields used ranged from 5.0% to 11.2%.
Valuation reports are based on both information provided by the
Company e.g. current rents and lease terms which are derived from
the Company's financial and property management systems are subject
to the Company's overall control environment, and assumptions
applied by the valuer e.g. ERVs and yields. These assumptions are
based on market observation and the valuer's professional
judgement. In estimating the fair value of the property, the
highest and best use of the properties is their current use.
10. Trade and other receivables
Unaudited Unaudited Audited
as at 30 as at 30 as at
Sept 2016 Sept 2015 31 Mar
GBP000 GBP000 2016
GBP000
Trade receivables 1,653 1,052 1,019
Other receivables 308 57 1,857
Prepayments and accrued income 2,084 822 1,642
4,045 1,931 4,518
-------------------------------- ----------- ----------- --------
The Company has provided fully for those receivable balances
that it does not expect to recover. This assessment has been
undertaken by reviewing the status of all significant balances that
are past due and involves assessing both the reason for non-payment
and the creditworthiness of the counterparty. Included within
accrued income are balances totalling GBP1.62m which are to be held
for a period more than one year.
11. Trade and other payables
Unaudited Unaudited Audited
as at 30 as at 30 as at
Sept 2016 Sept 2015 31 Mar
GBP000 GBP000 2016
GBP000
Falling due in less than one year:
Trade and other payables 958 564 437
Social security and other taxes 1,607 885 1,231
Accruals 2,652 2,038 1,566
Rental deposits 447 254 447
5,664 3,741 3,681
------------------------------------ ----------- ----------- --------
The Directors consider that the carrying amount of trade and
other payables approximates their fair value. Trade payables and
accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. For most suppliers interest is charged
if payment is not made within the required terms. Thereafter,
interest is chargeable on the outstanding balances at various
rates. The Company has financial risk management policies in place
to ensure that all payables are paid within the credit
timescale.
12. Cash and cash equivalents
Unaudited Unaudited Audited
as at 30 as at 30 as at
Sept 2016 Sept 2015 31 Mar
GBP000 GBP000 2016
GBP000
Cash and cash equivalents 6,661 8,347 5,455
--------------------------- ----------- ----------- --------
Cash and cash equivalents include GBP0.47m (30 September 2015:
GBP0.27m and 31 March 2016: GBP0.47m) of restricted cash in the
form of rental deposits and retentions held on behalf of
tenants.
13. Borrowings
Unaudited Unaudited Audited
as at 30 as at 30 as at
Sept 2016 Sept 2015 31 Mar
GBP000 GBP000 2016
GBP000
Falling due in more than one year:
Bank borrowings 87,000 40,000 66,000
Costs incurred in the arrangement
of bank borrowings (1,099) (720) (857)
85,901 39,280 65,143
------------------------------------ ----------- ----------- --------
On 6 June 2016 the Company agreed and drew down a new 12 year
GBP45m term loan facility with Scottish Widows plc which attracts
interest fixed at 2.987% per annum. The Company used the loan to
repay in full a GBP20m term loan with Lloyds Bank plc, which
attracted interest of 1.95% per annum above three month LIBOR,
incurring no early repayment penalties but which resulted in the
accelerated amortisation of deferred arrangement fees of
GBP0.2m.
Heads of terms have been agreed for a new GBP50m term loan
facility ("the New Loan"), repayable 15 years from drawdown at a
fixed rate of interest.
The Company's borrowing position at 31 March 2016 is set out in
the Annual Report for the year ended 31 March 2016.
14. Issued capital and reserves
Ordinary shares Unaudited
Share capital of 1p GBP000
------------------------ ---------------- ------------
At 30 September 2015 190,805,659 1,908
Issue of share capital 60,436,412 604
------------------------ ---------------- ------------
At 31 March 2016 251,242,071 2,512
------------------------ ---------------- ------------
Issue of share capital 40,890,000 409
At 30 September 2016 292,132,071 2,921
------------------------ ---------------- ------------
The Company has made further issues of new shares since the
Period end, which are detailed in Note 17.
Rights, preferences and restrictions on shares
All ordinary shares carry equal rights and no privileges are
attached to any shares in the Company. All the shares are freely
transferable, except as otherwise provided by law. The holders of
ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share at meetings of
the Company. All shares rank equally with regard to the Company's
residual assets.
At the Annual General Meeting ("AGM") of the Company held on 26
July 2016, the Board was given authority to issue up to 100,000,000
shares, pursuant to section 551 of the Companies Act 2006. This
authority is intended to satisfy market demand for the ordinary
shares and raise further monies for investment in accordance with
the Company's investment policy.
In addition, the Company was granted authority to make market
purchases of up to 27,888,207 Ordinary Shares under section 701 of
the Companies Act 2006.
The following table describes the nature and purpose of each
reserve within equity:
Reserve Description and purpose
------------------ --------------------------------------
Share premium Amounts subscribed for share capital
in excess of nominal value less
any associated issue costs that
have been capitalised.
Retained earnings All other net gains and losses
and transactions with owners (e.g.
dividends) not recognised elsewhere.
During the period ended 30 September 2015, the Company cancelled
the share premium account standing at the date of the 2015 AGM, as
detailed in the Annual Report for the year ended 31 March 2016.
15. Financial instruments
Fair values
The fair values of financial assets and liabilities are not
materially different from their carrying values in the interim
financial statements. The fair value hierarchy levels are as
follows:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities;
-- Level 2 - inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3 - inputs for the assets or liability that are not
based on observable market data (unobservable inputs).
There have been no transfers between Levels 1, 2 and 3 during
the Period. The main methods and assumptions used in estimating the
fair values of financial instruments and investment property are
detailed below.
Investment property - level 3
Fair value is based on valuations provided by an independent
firm of chartered surveyors and registered appraisers. These values
were determined after having taken into consideration recent market
transactions for similar properties in similar locations to the
investment properties held by the Company. The fair value hierarchy
of investment property is level 3. At 30 September 2016, the
Company fair value of investment properties was GBP383.5m.
Interest bearing loans and borrowings - level 3
As at 30 September 2016 the amortised cost of the Company's
loans with Lloyds Bank plc and Scottish Widows plc approximated
their fair value.
Trade and other receivables/payables - level 3
The carrying amount of all receivables and payables deemed to be
due within one year are considered to reflect the fair value.
16. Related party transactions
Transactions with directors
Each of the directors is engaged under a letter of appointment
with the Company and does not have a service contract with the
Company. Under the terms of their appointment, each director is
required to retire by rotation and seek re-election at least every
three years. Each director's appointment under their respective
letter of appointment is terminable immediately by either party
(the Company or the director) giving written notice and no
compensation or benefits are payable upon termination of office as
a director of the Company becoming effective.
Fees payable to the Manager
On 25 February 2014 the Company entered into a three year
Investment Management Agreement ("IMA") with the Investment
Manager, under which the Investment Manager has been appointed as
Alternative Investment Fund Manager with responsibility for the
property management of the Company's assets, subject to the overall
supervision of the Directors. The Investment Manager manages the
Company's investments in accordance with the policies laid down by
the Board and the investment restrictions referred to in the IMA,
and charges fees for annual management and administration as set
out in the Annual Report.
Ian Mattioli is Chief Executive of Mattioli Woods plc, the
parent company of the Investment Manager, and is a director of the
Investment Manager. As a result, Ian Mattioli is not independent.
The Company Secretary, Nathan Imlach, is also a director of
Mattioli Woods plc and the Investment Manager.
During the Period the Company paid the Investment Manager
GBP1.75m (September 2015: GBP1.59m, March 2016: GBP2.72m) in
respect of annual management charges, administrative fees and
marketing fees. During the Period the Company paid Mattioli Woods
plc GBP0.02m in respect of transaction support on the acquisition
of the Light Industrial Portfolio detailed in Note 9.
The Company owed GBPnil to the Investment Manager at 30
September 2016 (September 2015: GBP0.01m, March 2016:
GBP0.02m).
Certain investment properties are partially let to Mattioli
Woods plc. Mattioli Woods plc paid the Company rentals of GBP0.2m
during the Period (September 2015: GBP0.2m, March 2016: GBP0.4m)
and owed the Company GBPnil at 30 September 2016 (September 2015:
GBP54,736, March 2016: GBPnil).
Ian Mattioli, Nathan Imlach, Richard Shepherd-Cross and the
private pension schemes of Ian Mattioli, Nathan Imlach and Richard
Shepherd-Cross continue to have a beneficial interest in the
Company.
17. Events after the reporting date
Property acquisitions and disposals
On 5 October 2016 the Company acquired a distribution unit in
Burton upon Trent, let to Kings Road Tyres and Repairs Limited for
GBP7.06m. The lease expires in July 2031 with a passing rent of
GBP0.51m per annum, reflecting a NIY of 6.77%.
On 6 October 2016 the Company acquired a distribution unit in
Daventry, let to Cummins Limited for GBP3.08m. The lease expires in
July 2019 with a passing rent of GBP0.22m per annum, reflecting a
NIY of 6.75%.
On 7 October 2016 the Company acquired a distribution unit in
Bedford, let to Heywood Williams Components Limited for GBP3.25m.
The lease expires in April 2022 with passing rent of GBP0.24m per
annum, reflecting a NIY of 6.78%.
On 8 November the Company sold a 9,144 sq ft car dealership on
Coventry Road, Solihull for GBP1.88m, GBP0.35m ahead of the 30
September 2016 valuation.
New equity
On 21 October 2016 the Company raised GBP25.0m (before costs and
expenses) through the issue of 24,131,274 new ordinary shares of 1p
each in the capital of the Company at a price of 103.6p per share,
a premium of approximately 3.5% to the dividend adjusted unaudited
NAV as at 30 September 2016.
On 17 November 2016 the Company raised GBP1.84m (before costs
and expenses) through the issue of 1,750,000 new ordinary shares of
1p each in the capital of the Company at a price of 105.12p per
share, a premium of approximately 5% to the dividend adjusted
unaudited NAV as at 30 September 2016.
Independent auditor's review report to Custodian REIT plc for
the period ended 30 September 2016
We have been engaged by the Company to review the condensed set
of interim financial statements in the interim financial statements
for the period ended 30 September 2016 which comprise the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed
consolidated statement of cash flows, the condensed consolidated
statement of changes in equity and the related notes 1-17. We have
read the other information contained in the interim financial
statements and considered whether they contain any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The interim financial statements are the responsibility of, and
have been approved by, the Directors. The Directors are responsible
for preparing the interim financial statements in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in the notes, the annual financial statements of
the Company are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in these interim financial statements has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim financial
statements based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim financial statements for the period ended 30
September 2016 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Birmingham, United Kingdom
21 November 2016
Directors' responsibilities for the interim financial
statements
The Directors have prepared the interim financial statements of
the Company for the period from 1 April 2016 to 30 September
2016.
We confirm that to the best of our knowledge:
a) The condensed interim financial statements have been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the EU;
b) The condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.4R;
c) The interim financial statements includes a fair review of
the information required by DTR 4.2.7R of the Disclosure and
Transparency Rules, being an indication of important events that
have occurred during the first six months of the financial year,
and their impact on the Condensed Financial Statements, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
d) The interim financial statements includes a fair review of
the information required by DTR 4.2.8R of the Disclosure and
Transparency Rules, being material related party transactions that
have taken place in the first six months of the current financial
year and any material changes in the related party transactions
described in the last Annual Report.
A list of the current directors of Custodian REIT plc is
maintained on the Company's website at www.custodianreit.com.
By order of the Board
David Hunter
Chairman
21 November 2016
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FEDFAFFMSEFF
(END) Dow Jones Newswires
November 22, 2016 02:00 ET (07:00 GMT)
Custodian Property Incom... (LSE:CREI)
Historical Stock Chart
From Apr 2024 to May 2024
Custodian Property Incom... (LSE:CREI)
Historical Stock Chart
From May 2023 to May 2024