TIDMLXI
RNS Number : 8317I
LXI REIT PLC
29 November 2018
29 November 2018
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014. This
announcement has been authorised for release by the Board of
Directors.
LXi REIT plc
(the "Company" or the "Group")
HALF-YEAR RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2018
The Board of LXi REIT plc (ticker: LXI), the specialist
inflation-protected very long income REIT, is pleased to report its
results for the Group for the six month period from 1 April 2018 to
30 September 2018.
Financial highlights
Six months Six months
to to
30 September 30 September
2018 2017
---------------------------- ----------------- -----------------
Total NAV return per share 8.08% 7.15%
EPRA NAV per share 113.00 pence 105.01 pence
Earnings per share 8.70 pence 9.26 pence
Dividend per share 2.75 pence 1.00 pence
Adjusted earnings per 3.17 pence 1.49 pence
share
EPRA earnings per share 2.80 pence 1.13 pence
Operating profit GBP18.39 million GBP10.01 million
Portfolio valuation GBP318.79 GBP159.92
million million
Loan to value ratio 29% 29%
Average fixed cost of
debt 2.90% 2.93%
Average debt maturity 11 years 12 years
---------------------------- ----------------- -----------------
-- Total net asset value ("NAV") return per share (inclusive of
dividends) for the six month period was 8.08%. This represents
significant over delivery on the Company's annual target of
8%(1)
-- EPRA NAV per share increased in the six month period by 5.33
pence or 4.95% to 113.00 pence at 30 September 2018
-- Dividend per share ("DPS") declared for the six month period
of 2.75 pence putting the Company on track to meet its full year
target of 5.50 pence(1)
-- DPS fully covered by EPRA earnings per share ("EPS") of 2.80
pence for the half-year which excludes developer licence fees and
Adjusted EPS of 3.17 pence including developer licence fees(2)
-- Operating profit of GBP18.39 million comprising income from
the Group's property portfolio and changes in fair value of
investment property net of administrative and other expenses
-- Portfolio independently valued by Knight Frank LLP at
GBP318.79 million as at 30 September 2018 including all commitments
on forward funded assets, representing a like for like uplift of
12% from acquisition price (excluding acquisition costs)(3)
-- Loan to value reducing from 31 March 2018 to 29% with
material headroom to our medium term maximum of 35%
-- Low all-in fixed cost of debt of 2.90% and long average debt
maturity of 11 years underpinning our ability to grow investor
returns through inflation-linked rent reviews
-- Total shareholder return since IPO in February 2017 of 21%
reflecting the strong performance of the Company's portfolio,
increased dividend targets, dividend payments and share price
1 These are targets only and not a profit forecast and there can
be no assurance that they will be met
2 A reconciliation to EPS under International Financial
Reporting Standards is included in Note 24 to the condensed
consolidated financial statements
3 A reconciliation to the fair value of investment property is
included in Note 8 to the condensed consolidated financial
statements
Operating highlights
Six months Six months
to to
30 September 30 September
2018 2017
------------------------------- -------------- --------------
Average acquisition NIY 5.98% 5.94%
Rents containing index-linked
or fixed uplifts 97% 96%
WAULT to first break 23 years 24 years
Portfolio let or pre-let 100% 100%
Property sectors 9 8
Separate tenants 29 17
Acquisitions made 'off
market' 83% 84%
Geared IRR on disposals 47% n/a
------------------------------- -------------- --------------
-- Average acquisition net initial yield ("NIY") to 30 September
2018 of 5.98% net of acquisition costs, representing a 308 bps
spread to all-in fixed cost of debt
-- 97% of the Group's rental income either contains index-linked
rent reviews or fixed rental uplifts underpinning the Company's
ability to grow returns over the short and longer term
-- A long weighted average unexpired lease term ("WAULT") to
first break of over 23 years providing security and predictability
to the Group's income
-- Portfolio 100% let or pre-let and income producing during the
period to 29 separate financially strong tenants across nine
defensive and robust sectors on full repairing and insuring
leases
-- 83% of properties transacted on an 'off market' basis
avoiding competition and providing value at the point of
acquisition
-- Two profitable disposals in the period generating an average
geared internal rate of return ("IRR") of 47% at a significant
premium to acquisition cost and book value
Post period end highlights
-- Raised GBP175 million of gross equity proceeds via a
significantly oversubscribed share issue that closed on 11 October
2018 increasing market capitalisation to over GBP400 million
-- 11 further acquisitions totalling GBP172 million excluding
acquisition costs representing full deployment of the net proceeds
within four weeks as described in detail in the Chairman's
statement
-- Portfolio, including above acquisitions, annual passing rent
of GBP27 million from 34 separate financially strong tenants across
nine defensive and robust sectors
-- Agreed new 15 year GBP75 million loan facility with Scottish
Widows Limited at a low 1.55% p.a. margin to gear the new
equity
-- Additional assets under offer/in solicitors' hands to ensure
deployment of the debt proceeds in short order
Stephen Hubbard, Chairman of LXi REIT plc, commented:
"This has been another busy and successful six months,
implementing our investment strategy, delivering on and in many
cases exceeding our targets. The secure income and capital growth
of our portfolio has provided a total NAV return of 8.08% in the
first half of the year and we are on track to meet and fully cover
our 5.50 pence dividend target for the full year.
We were delighted that new and existing shareholders supported
our growth plans by subscribing for a further GBP175 million of
equity, shortly after the period end, increasing our market
capitalisation to over GBP400 million. The full deployment of the
net proceeds within four weeks of the raise has facilitated further
diversification of the Group's portfolio and provided further value
to our shareholders through accretive acquisitions."
FOR FURTHER INFORMATION, PLEASE CONTACT:
LXI REIT Advisors Limited Via Newgate Communications
John White (Partner, Fund Manager)
Simon Lee (Partner, Fund Manager)
Peel Hunt LLP Tel: 020 7418 8900
Luke Simpson
---------------------------------
Newgate Communications (PR Adviser) Tel: 020 7680 6550
James Benjamin Email: lxireit@newgatecomms.com
Anna Geffert
---------------------------------
The Company's LEI is: 2138008YZGXOKAXQVI45
NOTES:
LXI REIT plc invests in UK commercial property assets let, or
pre-let, on very long (typically 20 to 30 years to expiry or first
break), inflation-linked leases to a wide range of strong tenant
covenants across a diverse range of robust property sectors.
The Company may invest in fixed-price forward funded
developments, provided they are pre-let to an acceptable tenant and
full planning permission is in place. The Company will not
undertake any direct development activity nor assume direct
development risk.
The Company is targeting an annual dividend of 5.50 pence per
ordinary share, starting from the financial period commenced 1
April 2018, with the potential to grow the dividend in absolute
terms through upward-only inflation-protected long-term lease
agreements, and is targeting a net total shareholder return of a
minimum of 8 per cent. plus per annum over the medium term.*
The Company, a real estate investment trust ("REIT")
incorporated in England and Wales, is listed on the premium listing
segment of the Official List of the UK Listing Authority and was
admitted to trading on the main market for listed securities of the
London Stock Exchange in February 2017. The Company is a
constituent of the FTSE EPRA/NAREIT index.
Further information on the Company is available at
www.lxireit.com
* These are targets only and not a profit forecast and there can
be no assurance that they will be met
Meeting for investors and analysts at 10.30am today and audio
recording of results available
A meeting for investors and analysts will be held at 10.30am
today at:
Newgate Communications
Sky Light City Tower
50 Basinghall Street
London, EC2V 5DE
In addition, later in the day an audio recording of this meeting
and the presentation will also be available to download from the
Company's website: www.lxireit.com.
The Interim Report and Accounts will also be made available on
the Company's website at www.lxireit.com. In accordance with
Listing Rule 9.6.1, copies of these documents will be submitted to
the UK Listing Authority via the National Storage Mechanism and
will be available for viewing shortly at
www.morningstar.co.uk/uk/NSM.
CHAIRMAN'S STATEMENT
Dear shareholder
This has been another busy and successful period, implementing
our investment strategy, delivering on and in many cases exceeding
our targets. The Group's portfolio comprises high quality
commercial assets, across a wide range of defensive and robust
sectors with a diverse geographical spread, let to strong tenants
on long term index-linked leases, underpinning our
inflation-protected returns.
We are on track to meet and fully cover our increased full year
dividend per share target of 5.50 pence to 31 March 2019 and the
secure income and capital growth of our portfolio has provided a
total NAV return of 8.08% in the first half of the year.
Our Investment Advisor continues to manage the portfolio
effectively, transacting carefully and quickly both in recycling
and deploying new capital. This was demonstrated by the two
profitable disposals and six accretive acquisitions in the period
and the performance of our portfolio to date.
After the period end, we were delighted that new and existing
shareholders supported our growth plans by subscribing for a
further GBP175 million of equity, increasing the Company's market
capitalisation to over GBP400 million and broadening our share
register with new long term investors. Deployment of the net
proceeds has thus far facilitated further diversification of the
Group's portfolio and income and is expected to continue to provide
further value to our shareholders over the short and longer
term.
The Group's investment property was independently valued at 30
September 2018 at GBP318.79 million, representing an uplift of 12%
from acquisition price (excluding acquisition costs). The valuation
includes capital commitments on forward funded assets and no
portfolio premium has been applied. A reconciliation to the fair
value of the portfolio is included in Note 8 to the condensed
consolidated financial statements.
Set against a range of political, economic and market risks,
including those relating to Brexit, the Group has positioned itself
well with strong foundations on which to further build. We have
built a defensive portfolio benefitting from very long term and
inflation-linked leases to a wide range of strong tenants across
robust sectors.
Our investment strategy is focussed on reducing the risk of
impact of cyclical or economic downturns. Much of the Group's
tenant and sector exposures perform well during times of greater
uncertainty and the Group has also strategically concentrated on
assets that demonstrate low rents and strong alternative use and
residual land value.
The long-lease sector has historically experienced lower levels
of volatility in periods of uncertainty and the demand and relative
weight of capital attracted to secure long-let property assets
increases during such times. As a result, our Investment Advisor
receives regular interest, which it monitors closely, in the
Group's portfolio.
The selective profitable disposals during the period demonstrate
our willingness to capitalise on this interest where opportunities
are available to reinvest capital in accretive acquisitions at
attractive pricing, delivering further growth to our shareholders
and to maintain conservative levels of exposure and a long dated
secure income stream.
We continue to see opportunities to employ our strategies,
including through forward funding pre-let developments in smaller
lot sizes and relationship-driven 'off market' purchases. Our
recent acquisitions and those we expect to close in the immediate
future demonstrate attractive pricing and high net initial yields
that we expect to deliver value whilst, equally importantly,
providing a buffer to market values to help protect against
softening yields in more adverse markets.
The Board considers the financial performance of the Group to be
particularly strong especially in view of the relatively short
period since IPO, greatly evidencing the value achieved at and from
the point of purchase and the successful implementation of our
strategies by the Investment Advisor.
Financial results
The Company has continued to deliver strong financial
performance with a total NAV return of 8.08% comprising dividends
paid and NAV growth in the half-year. The Company's two dividends
announced in respect of the half-year, totalling 2.75 pence per
share, reflect the annualised restated target of 5.50 pence (10%
ahead of our IPO target) which we are on course to meet, and were
fully covered by both the Group's Adjusted EPS of 3.17 pence and
EPRA EPS of 2.80 pence.
The Group's earnings and dividends are underpinned by the secure
and growing income of our portfolio, the gearing achieved from the
308 bps spread between the Group's average acquisition yield and
all-in fixed cost of debt and the low level of ongoing charges per
share stringently managed by the Investment Advisor to maximise
returns.
The NAV growth in the period of 4.95% reflects, inter alia:
(i) the discount achieved on forward funding pre-let
developments in smaller lot sizes (including three forward
funded/forward committed properties which were not included in the
31 March 2018 NAV) which have provided an average uplift of 19%
above investment price;
(ii) the profitable recycling of capital following two disposals
at a significant premium to acquisition cost and book value;
(iii) the capitalisation of inflation-linked rental growth; and
(iv) yield compression in the long-lease sector.
The Company's shares also performed well throughout the
half-year, ending the period at 115.50 pence, giving a total
shareholder return of 21% since IPO in February 2017. The
performance and liquidity of the shares is buoyed by the Company
having been added to the FTSE EPRA/NAREIT Global Real Estate Index
Series in June 2018, after successfully satisfying the required
eligibility criteria during the index's quarterly review.
Our portfolio and tenants
The Group's portfolio at 30 September 2018 was secured against
29 institutional-grade tenant covenants with strong financials,
diversified by geography and across a broad range of nine defensive
and robust property sectors.
The Group completed the acquisitions of the forward funded
development let to Lidl in Chard and the forward committed
developments let to Premier Inn in Middlesbrough and the Priory
Group in Co. Armagh, Northern Ireland, totalling an acquisition
price of GBP17.3 million.
The quality of our portfolio leads to regular interest in and
enquiries into the Group's assets. The Board opted to approve two
profitable disposals during the period, in order to recycle the
capital into accretive acquisitions and increase the Company's
value. The Group disposed of:
-- A manufacturing facility in Carlisle let on a long lease to
SIG Trading Limited for GBP12.2 million reflecting an exit yield of
5.38%, which compares favourably to the acquisition yield of 7.0%
paid by the Company in June 2017 and generated a geared IRR of 56%
p.a.; and
-- Two care homes in Leicestershire let to Prime Life Limited
for GBP19 million reflecting a low exit yield of 5.25%, which
compares favourably to the acquisition yield of 6.5% paid by the
Company in November 2017 and generated a geared IRR of 39% p.a.
The Company immediately reinvested the proceeds of the disposals
into three modern/newly-built industrial facilities from three
separate vendors at a blended net initial yield of 5.65% (net of
acquisition costs) for a combined purchase price of GBP37.1
million.
The properties are located in Widnes, Sunderland and Teesside
and are fully let to or guaranteed by the strong covenants of:
-- Stobart Group, a FTSE 250 listed company and one of the UK's
leading infrastructure and support service businesses operating in
the energy, aviation and rail sectors;
-- Johnson Matthey plc, a FTSE 100 company and a global leader
in sustainable technologies, with a market cap of approximately
GBP6.9 billion; and
-- Brenntag UK Limited, the UK trading company of Brenntag AG, a
leading chemicals distributor listed on the Frankfurt Stock
Exchange, with a market cap of approximately EUR7.2 billion.
The properties benefit from a weighted average unexpired lease
term to first break of over 23 years, with five yearly rent reviews
linked to the Retail Prices Index ("RPI") or a fixed uplift.
Completion dates for the disposals and acquisitions were aligned
in both cases to avoid any cash drag.
The Company has also fully deployed the net proceeds of its
recent GBP175 million capital raise within four weeks of the 16
October 2018 admission date of the new ordinary shares. Details of
the new assets are included below in the post balance sheet
events.
Dividends
During the six months, the Company declared a final dividend in
respect of the period ended 31 March 2018 which, combined with the
two previous interim dividends, met the increased dividend target
of 4.00 pence per share for that period.
The Company paid a quarterly interim dividend of 1.375 pence per
share on 29 September 2018 and declared a second quarterly interim
dividend of 1.375 pence per share to be paid on 21 December 2018 in
respect of the half-year. The second interim dividend is payable to
shareholders registered on 12 October 2018 and the shares went
ex-dividend on 11 October 2018.
In total, this takes the dividends paid and declared per share
in respect of the first half of the year to 2.75 pence, fully
covered by our EPRA and Adjusted EPS for the period and on course
to meet our 5.50 pence full year target.
Raising capital
Share issuance
On 11 October 2018 the Company closed a significantly
over-subscribed equity raise, with the level of demand allowing the
Board to exercise its option to increase the issue beyond the
target GBP100 million in order to raise a total of GBP175 million
which would allow the investment advisor to execute on its
attractive pipeline of accretive assets. The level of demand
reflects the increased attraction of investors to
inflation-protected income secured against a high quality
portfolio.
Debt financing
The Group leverages its assets to a conservative level to target
increased shareholder returns. During the half-year, the Group
benefited from two low cost, long term facilities with Scottish
Widows Limited, costing an all-in rate of 2.90% p.a. fixed to
expiry of the facilities in July 2029.
At the period end the total borrowings outstanding of GBP95
million represents an aggregate loan to value of 29% against the
Group's total assets on a balance sheet basis.
On 13 November 2018, the Company announced the agreement of a
new 15 year GBP75 million loan facility at a low 1.55% margin with
Scottish Widows to gear the proceeds of the recent equity raise, to
target increased investor returns and extend the average debt
maturity profile of the Group
Fixing our cost of debt underpins our ability to grow investor
returns in real terms in the medium term.
Corporate governance
The Company benefits from a strong independent Board of
non-executive directors with substantial real estate, financial,
commercial and operating experience and has the appropriate
sub-committees, including an Audit Committee and a Management
Engagement Committee, which meet on a regular basis.
The Board is responsible for directing and controlling the
Company and has overall authority for the management and conduct of
the Company's business, strategy and development. We recognise the
fundamental importance of good governance in exercising this
responsibility. The Board also views and approves in advance each
property acquisition and disposal, along with other significant
matters, including debt facilities and material appointments.
We continue to develop relationships with our shareholders
through regular updates to the market including the publication of
quarterly fact sheets. The Investment Advisor has had regular
communication with our investor base, particularly in the context
of our maiden financial results. I was also delighted to represent
the Board in attending our first annual results presentation on 21
May 2018.
The Company's first Annual General Meeting took place on 26 June
2018 where the Board was pleased to speak face to face with our
shareholders and we will continue to foster communication with
investors through two-way dialogue.
The Investment Advisor
LXi REIT Advisors Limited is the Investment Advisor of the
Company, providing day to day management services including
strategy, raising debt and equity finance, sourcing and advising on
investments for acquisition and disposal and due diligence in
relation to proposed investments.
The Investment Advisor has provided the Group with access to
opportunities at attractive pricing through long-established
industry contacts and extensive knowledge of the sector. This has
allowed the Group to source and transact on high quality
investments to create value for our shareholders.
The Board joins me in praising the performance of the team, in
particular for their work in managing the portfolio and achieving
growth through selective disposals aligned with immediate recycling
of capital, and the successful equity raise and subsequent
deployment that will provide further security and returns to
investors through diversification and accretive acquisitions.
We welcome the Investment Advisor's continued investment in
talent and resource which will further benefit the Group, and in
particular the recent appointment of Charlotte Fletcher as Head of
Transactions. Charlotte brings significant experience and expertise
that will benefit the Group's careful and rapid deployment of both
new and recycled capital.
Post balance sheet events
Since the half-year end the Company has acquired the following
assets:
-- Forward funding the pre-let development of a Travelodge
budget hotel at Edinburgh Park, Edinburgh for GBP6.6 million,
reflecting a 5.4% NIY on an unbroken 25 year lease from completion
of the building works, with five yearly Consumer Prices Index
("CPI") linked rent reviews
-- Forward funding the pre-let development of a Lidl and B&M
discount foodstore to be built at Cowdenbeath, East Fife, for
GBP8.5 million, reflecting a 6.0% NIY on a 25 year and a 15 year
lease from completion of the building works, with five yearly CPI
linked rent reviews
-- A Jurys Inn hotel in Plymouth for GBP30 million, reflecting a
5.7% NIY with an unbroken 24 year unexpired lease term, with five
yearly uncapped RPI linked rent reviews
-- A BCA car storage facility in Corby, Northamptonshire for
GBP60 million, reflecting a 5.25% NIY, rising to 6% at the next
rent review in three years' time, with an unbroken 18 year
unexpired lease term, with five yearly uncapped RPI linked rent
reviews
-- A The Range discount store in Carlisle for GBP4.3 million,
reflecting a 6% NIY with an unbroken 20 year unexpired lease term
with fixed five yearly rental uplifts of 2% p.a.
-- A portfolio of five geographically diversified Travelodge
budget hotels for a combined total consideration of GBP45 million,
reflecting a 5.8% NIY with a WAULT to first break of 24 years, each
benefiting from five yearly uncapped RPI linked rent reviews
-- An industrial facility in Newbury fully let to Snell Advanced
Media Limited, and guaranteed by its parent Belden Inc., for
GBP17.2 million, reflecting a 5.5% NIY with a 17 year unexpired
lease term, with five yearly RPI linked rent reviews
These acquisitions represent the selective and careful
deployment of the total net proceeds of the Company's recent equity
raise into assets that are highly accretive to the Group's
portfolio and rent review profile in short order.
The Investment Advisor is under offer/in solicitors' hands on a
number of further forward funding assets in order to deploy the
proceeds of the new debt facility in short order.
Outlook
The Board believes that in a continuing environment of economic
and geopolitical uncertainty due to major political events, the
Group's portfolio is resilient and increasingly attractive. The
Company provides a secure, diversified and growing index-linked
income stream as well as the potential for attractive capital
appreciation from our long-let, high quality and robust portfolio
across defensive sectors with strong tenant covenants.
Including post balance sheet acquisitions, 97% of the Group's
contracted rental income contains index-linked or fixed uplift rent
reviews and, when coupled with our low cost base and low all-in
cost of debt fixed for a further 13 years including the new
facility, gives the Board confidence that the Group can continue to
grow dividends and provide inflation-protected income.
Despite a rising interest rate environment, we expect there will
continue to be a significant positive spread between the Company's
growing index-linked portfolio yield and bond rates.
We remain confident of delivering further value to our
shareholders through the Investment Advisor's strategies of
acquiring selectively across a wide range of robust sectors on an
'off market' basis and forward funding pre-let developments in
smaller lot sizes and, in particular, of achieving the dividend
target of 5.50 pence per share for the full year.
Stephen Hubbard
Chairman of the Board of Directors
28 November 2018
INVESTMENT ADVISOR'S REPORT
LXi REIT Advisors Limited, the Investment Advisor to LXI REIT
plc, is pleased to report on the operations of the Group for the
six months ended 30 September 2018.
We have continued to execute on our investment strategy
successfully, delivering inflation-protected income and capital
growth underpinned by a carefully built portfolio of secure,
long-let and index-linked property assets, highly diversified by
sector, tenant and geography.
Secure Diversified Predictable Growing
The portfolio We have invested All of our leases We have transacted
WAULT at 30 September in 9 defensive contain regular on 10 forward
2018 of 23 years and robust property upward-only rent funded/forward
is one of the sectors and with reviews, 97% of committed acquisitions
longest in the significant geographic which are either which offer a
industry, and and tenant diversification index-linked or significant discount
the income was to spread our contain fixed to built values
secured against exposure. This uplifts. This and our network
29 strong tenants. also gives us coupled with the has helped us
Our blended acquisition the flexibility length of our source 83% of
yield of 5.98% to transact where leases means our our transactions
is 308 bps above we see the best earnings are predictable. 'off market' providing
our all-in fixed opportunity to value to shareholders
cost of debt of provide value at the point of
2.90% p.a. to our shareholders. transaction.
---------------------------- --------------------------- ------------------------
Portfolio overview
The headline statistics for the portfolio:
At 30 September 2018
Average NIY 5.98%
---------------------
WAULT to first break 23 years
---------------------
Index-linked or fixed
uplifts 97%
---------------------
Separate tenants 29
---------------------
Property sectors 9
---------------------
Portfolio valuation GBP318.79 million
---------------------
Delivering secure income
We are delivering against the Company's investment objective by
selectively acquiring properties let to a broad range of tenants
with strong financials and a proven operating track record,
diversifying our income stream by tenant, geography and sector.
Active management of the portfolio, including the recycling of
capital, allows us to maintain a long weighted average unexpired
lease term of which preserves the security and predictability of
the Group's income and underpins the dividends paid to our
shareholders.
Key to our objective is the inflation protection offered by our
portfolio. The Group aims to grow the dividend in real terms in
line with inflation. To achieve this protection, we have linked 97%
of the Group's rent reviews, by rental income, to inflation indexes
or providing fixed uplifts that mirror expected levels of
inflation. In the medium term, inflation is expected to outperform
open market rent reviews which is discussed in further detail
below.
The Group's rental income is further protected by the strong
residual land characteristics demonstrated by assets that are of
strategic importance to their tenant. This has been achieved by
investing in, inter alia, brand new forward funded assets designed
to the tenant's specification, sectors where tenants have
historically held their property freehold and property with a low
(or indeed reverse) spread between investment value and vacant
possession value due to underlying trading performance of the
asset.
Delivering attractive growth
The portfolio was valued at 30 September 2018 at GBP318.79
million, representing a like for like uplift of 12% from
acquisition price (excluding acquisition costs).
The portfolio was independently valued by Knight Frank LLP on an
individual property basis and without applying a premium or
discount to the portfolio as a whole. The valuation includes
capital commitments on forward funded assets. A reconciliation to
the fair value of the portfolio under IFRS is included in Note 8 to
the condensed consolidated financial statements.
The valuation does not include those assets acquired since 30
September 2018 with the net proceeds of the Company's equity raise
in October 2018 which are detailed in the Chairman's statement.
We employ a number of techniques to secure assets at an
attractive initial yield, without compromising on the asset
quality, security or lease length. These techniques ensure that
value growth is provided to shareholders at and from the point of
acquisition.
Forward funded structures benefit from materially lower purchase
costs (usually less than 3% versus 6.8%), significant discount to
built values for smaller sized assets along with a range of other
benefits (average valuation increase of 19%). We have described
these benefits and the implementation of our forward funding
strategy in detail below.
Our multi-sector approach allows for a selective and
opportunistic approach to acquisitions and disposals across a large
universe of assets to find value and avoid over heated sectors as
well as utilising early mover advantage in under-exploited asset
classes.
We have demonstrated the successful execution of this strategy
through our profitable disposals of the two care home assets let to
Prime Life Limited and an industrial facility let to SIG Trading
Limited in the period at a blended geared IRR of 47% p.a.
We also target transactions in smaller lot sizes (especially
forward fundings) generally to avoid the radar of most
institutional investors and more comprehensively marketed
properties to avoid competition on acquisitions which hardens net
initial yields.
Our range of longstanding contacts, including developers,
tenants, agents and vendors, has allowed us to acquire 83% of our
portfolio, and 100% of the acquisitions during the half-year,
through 'off market' purchases identified via our extensive
relationships, maintained by our reputation for speed and certainty
of transacting.
We also actively manage our portfolio throughout the life of the
asset, building relationships with tenants and working to enhance
the strategic importance of our assets.
Forward funding pre-let developments
Forward funding strategy
The Group's portfolio consists of a mix of built, forward funded
and forward commitment assets. Forward funded structures benefit
from materially lower purchase costs as well as significant
discounts to built values for smaller lot sizes which delivers
growth at and from the point of purchase.
This approach to forward funding pre-let developments,
especially in the smaller lot sizes, has allowed us to source high
quality, lower-priced assets (compared to built values) with
reduced competition and transaction costs. The approach also
ensures the asset acquired is brand new with a full unexpired lease
term and built to tenant specification to increase strategic
importance which are also key benefits of forward commitment
structures.
On all forward funded acquisitions, the Group avoids exposure to
development risk by ensuring, prior to land completion and entering
the funding agreement:
-- a fixed-price is agreed for the forward funded purchase,
covering land, construction cost and developer's profit - all cost
overruns are the risk of the developer/contractor;
-- full planning consent is in place;
-- a suitable tenant pre-let is in place;
-- the developer receives their profit only when the asset achieves practical completion;
-- any delay to practical completion of the works is the risk of
the developer, as they pay the Group a licence fee, which is
brought into the Group's Adjusted earnings, to the date that the
lease completes;
-- the main contractor is always a reputable entity with a
proven track record and provides a parent company guarantee or
performance bond;
-- a full suite of warranties is provided by the main contractor and professional team; and
-- all construction cost drawdowns are paid to the developer monthly in arrears.
Forward funding/commitment implementation
To date, the Group has achieved practical completion on seven
forward funding/commitment projects, four of which took place
during or since the half-year end. The average valuation gain
achieved over acquisition price (excluding acquisition costs)
across the forward funding assets is 19%.
Since the start of the half-year, the Group has achieved
practical completion on the following forward funding/forward
commitment development projects:
-- Industrial and head office facility built for the GE Oil
& Gas group in Cramlington near Newcastle, reached practical
completion on 30 April 2018 on schedule and on budget and the new
20 year lease with RPI linked uplifts completed;
-- Care home facility built for the Priory Group in Northern
Ireland, Co. Armagh, reached practical completion on 24 May 2018 on
schedule and on budget and the new 30 year lease with RPI linked
uplifts completed;
-- Discount retail park built for Aldi, Home Bargains, Heron
Foods, Starbucks and Greggs in Bradford reached practical
completion on 15 October 2018 on schedule and on budget and the new
20 year lease with RPI linked uplifts completed; and
-- Budget hotel and leisure scheme built for and let to
Travelodge, Costa Coffee and KFC in Camborne, reached practical
completion on 5 November 2018 and the new 25 year lease to
Travelodge with CPI linked uplifts completed.
All other projects are running on time and on budget with
practical completion expected on the following dates:
-- Travelodge budget hotel, Subway and Starbucks scheme in
Swindon, new blended 21 year lease with CPI linked uplifts to reach
PC Q4 2018;
-- Premier Inn budget hotel in Chesterfield, new 25 year lease
with CPI linked uplifts to reach PC Q4 2018; and
-- Lidl discount foodstore in Chard, new 15 year lease with RPI
linked uplifts to reach PC Q2 2019.
Since the half-year end the Company has invested in two further
forward fundings:
-- Travelodge budget hotel in Edinburgh Park, Edinburgh, new 25
year lease with CPI linked uplifts to reach PC Q3 2019; and
-- Lidl and B&M discount foodstore in Cowdenbeath, East
Fife, new 15 year lease and 25 year lease with CPI linked uplifts
to reach PC Q3 2019.
Market opportunity - rental growth
Inflation has historically outpaced open market rent reviews and
it has increased since the EU referendum result in June 2016, which
triggered a decline in the value of Sterling and pushed up the cost
of imported goods. As set out below, the anticipated continuing
outperformance of inflation over open market rental growth
forecasts is expected to prove advantageous to the Group's rental
growth.
The HM Treasury Forecasts for the Economy (Medium term
forecasts, August 2018) shows an average RPI growth forecast of
3.16% p.a. and an average CPI growth forecast of 2.12% p.a. from
2018 to 2022 (see below). The Investment Property Forum UK
Consensus Forecasts Report (Summer 2018) shows a materially lower
average open market rental growth forecast of 0.96% p.a. from 2018
to 2022 (see below).
RPI and CPI forecast
Year RPI p.a. CPI p.a.
======== ========
2018 3.4% 2.4%
======================== ======== ========
2019 3.1% 2.1%
======================== ======== ========
2020 3.0% 2.0%
======================== ======== ========
2021 3.1% 2.0%
======================== ======== ========
2022 3.2% 2.1%
======================== ======== ========
Average growth forecast
p.a. 3.16% 2.12%
======================== ======== ========
Source: HM Treasury Forecasts for the Economy (August 2018)
Open market rental growth forecast
Open market
rental growth
Year p.a.
==============
2018 0.9%
======================== ==============
2019 0.4%
======================== ==============
2020 0.7%
======================== ==============
2021 1.2%
======================== ==============
2022 1.6%
======================== ==============
Average growth forecast
p.a. 0.96%
======================== ==============
Source: Investment Property Forum UK Consensus Forecasts (Summer
2018)
The Investment Advisor has continued to implement the Group's
Investment Strategy, to take advantage of this economic reality of
inflation outperforming the more pedestrian open market rental
growth by linking 97% of passing rent to indexation or containing
fixed uplifts that mirror the forecast level of inflation over the
medium term.
This forecast inflation, together with the fixed low cost of
debt (as detailed below) which the Group has secured, is expected
to allow for:
-- higher income growth for the Group via rental increases in line with inflation;
-- enhanced dividend yield due to substantial free cash flows
generated via the 308 bps spread between triple net rental income
(5.98% average NIY) and low all-in cost of debt (2.90% p.a.) fixed
for a further 11 years - rising to 493 bps by expiry of the loan
facility, assuming rental growth of 2.50% p.a.; and
-- capital growth through: (i) the capitalisation of rental
increases following rent reviews; (ii) acquiring mispriced assets
where the seller is driven by factors other than price; and (iii)
the net purchase price on forward funding assets being a
significant discount to completed values and therefore providing
scope for 'natural' yield compression as soon as the property is
constructed.
Asset management
Our collaborative asset management is designed and implemented
to ensure that our property meets our tenants' requirements,
thereby strengthening our relationships with them and improving the
quality of the income, and in doing so increasing the underlying
capital values.
Initiatives can include agreeing new lettings, extending lease
lengths on existing assets, facilitating tenants' capital and fit
out expenditure and successfully negotiating rent reviews.
During the first half of the year, 45 CPI and two RPI linked
rent uplifts were agreed with tenants. The capitalisation of these
index-linked rental uplifts has contributed to the Group's NAV
growth in the period.
As part of the acquisition and lease back to Stobart in Widnes,
the Group facilitated the build of 20 acres of concrete hard
standing for storage and a new 23,000 sq ft head office facility,
which completed in October 2018. Rent was received under the new
leases from the date of legal completion, meaning that a return was
received on the Group's investment from the date of
acquisition.
The head office underlines the tenant's commitment to the
property and the whole project demonstrates our collaborative
approach to asset management in order to enhance security of income
and underlying capital values.
Four forward funding/commitment assets built to tenant
specification and on new fully unexpired long term leases reached
practical completion during the period and are described in detail
in forward funding implementation above.
Equity raises
We were delighted to raise a further GBP175 million of gross
equity proceeds in October 2018 to support the continued growth and
further diversification of the portfolio through a strong pipeline
of accretive assets we had built to transact in very short
order.
Our existing investors continued to support the growth of the
Company through the open offer and we also welcomed a substantial
number of new long term shareholders. We have fully deployed the
net proceeds of the equity raised within four weeks of the
admission date and are under offer/in solicitors' hands on further
assets, including a number forward fundings, that will align the
drawdown of the new Scottish Widows debt facility with deployment
of the funds. Full details of the acquisitions since the period end
are given in the Chairman's statement.
Debt finance
The Group benefits from fixed low cost, long term debt, ensuring
that increases in rental income are reflected in the returns paid
to shareholders. A summary of the Group's debt facilities is as
follows:
Lender Fixed rate p.a. Loan expiry Facility
Scottish Widows 2.93% 11 years GBP55 million
Limited
---------------- ------------ --------------
Scottish Widows 2.85% 11 years GBP40 million
Limited
---------------- ------------ --------------
At 30 September 2.90% 11 years GBP95 million
2018
---------------- ------------ --------------
Scottish Widows 1.55% margin 15 years GBP75 million
Limited
---------------- ------------ --------------
The Group uses gearing to enhance investor returns and benefits
from a low all-in cost of debt across the facilities. The average
maturity has increased to 13 years as a result of the new facility,
allowing the Group to continue to benefit from a significant spread
from debt cost to NIY for the long term notwithstanding rising
interest rates in the wider UK economy.
Financial performance
The Group continued to demonstrate strong financial performance
in the first half of the year by executing our strategies described
above to yield secure inflation-protected income as well as capital
growth over a low fixed cost base.
Total NAV return
The Group's total NAV return was 8.08% for the half-year,
comprising EPRA NAV growth of 5.33 pence per share and dividends
per share paid in the six months totalling 3.375 pence, over
opening EPRA NAV per share of 107.67 pence. This demonstrates both
the level of earnings generated from our property rental business
which underpins the dividend and the like for like valuation growth
of the portfolio. This represents significant over delivery on our
annual target of 8%.
EPRA NAV per share
EPRA NAV per share as at 30 September 2018 was 113.00 pence,
demonstrating NAV growth of 4.95% since 31 March 2018. The growth
was the result of the selective disposals at a significant premium
to book value of GBP2.91 million, capitalisation of rental growth
and yield compression resulting in changes in fair value (in
particular on forward funded assets) of GBP8.72 million and EPRA
earnings of GBP5.51 million from the property rental business.
Adjusted earnings per share
The Group's Adjusted earnings per share for the first six months
was 3.17 pence, which fully covers the 2.75 pence dividend per
share paid and declared in respect of the half-year. The Board and
Investment Advisor consider the Group's Adjusted earnings when
assessing dividend levels as described in detail in Note 24 to the
condensed consolidated financial statements. Adjusted earnings is a
measure that combines the Group's EPRA earnings of 2.80 pence per
share, which also fully cover the dividend, with developer licence
fees receivable on forward funded assets during the period.
Total expense ratio
The Group's low and largely fixed cost base gives an annualised
total expense ratio for the first half of the year of 1.26% (30
September 2017: 1.55% annualised, 31 March 2018: 1.14%). This
reflects an investment advisory fee materially lower than many of
our peer group set at 0.75% on market capitalisation up to GBP500
million, which will reduce to 0.65% on market capitalisation above
GBP500 million. We are committed to continue maintaining a low
level of ongoing charges in order to maximise our returns to
shareholders. The proceeds of our recent equity raise will further
reduce the fixed cost per share and increase shareholder
returns.
Dividends
The Company met its dividend target for the period ended 31
March 2018 through a final 2.00 pence dividend per share and
declared interim dividends per share of 1.375 pence in respect of
the quarter ended 30 June 2018 and 1.375 pence in respect of the
quarter ended 30 September 2018.
Dividends declared in respect of the first half of the year were
fully covered by the Group's EPRA and Adjusted earnings.
The Company remains on track to achieve its target dividend of
5.50 pence per share for the year to 31 March 2019 and for the
Group's EPRA and Adjusted earnings to fully cover the dividend and
is well positioned to continue to grow dividends in absolute terms
over the short and longer term in line with inflation.
Outlook
Our portfolio is well placed to deliver attractive
inflation-protected income and capital growth to our shareholders
over the short and longer term through our secure, long-let,
index-linked and diversified assets leased to institutional-grade
tenants as well as from our growing pipeline of attractive
investments and the potential to carefully recycle our existing
assets.
Our strategy is continuing to provide growth, both at the point
of and from acquisition, through carefully investing, largely 'off
market', in smaller lot sizes and also moving early into growth
sectors across the long-let property space in the UK, which is
itself benefiting from yield compression, as well as on an ongoing
basis through active management of the portfolio and the
implementation of our forward funding strategy.
Unsolicited interest in the Group's property assets is common
due to the quality of our portfolio. The weight of capital seeking
secure, long-let and index-linked assets is increasing due to the
level of political and economic uncertainty. We constantly monitor
this interest as part of our management of the portfolio and over
time expect to continue to carefully recycle capital as a measure
to deliver further value to shareholders, lengthen income streams
and maintain conservative weightings to our sectors.
LXi REIT Advisors Limited
Investment Advisor
28 November 2018
KEY PERFORMANCE INDICATORS
Our objective is to deliver attractive, low-risk returns to
shareholders, by executing our investment policy. Set out below are
the key performance indicators ("KPIs") we use to track our
performance.
KPI and definition Relevance to strategy Performance Result
1. Total NAV return Total NAV return measures 8.08% 102% ahead of our medium
Total NAV return measures the ultimate outcome of our for the six months ended 30 term minimum target
the change in the EPRA NAV strategy, which is to September 2018
and dividends paid during deliver value (six months ended 30
the period to our shareholders through September 2017: 7.15%,
as a percentage of EPRA NAV our portfolio and to period ended 31 March 2018:
at the start of the period. deliver a secure and 11.91%)
We are targeting a minimum growing income stream.
of 8% p.a.
over the medium term.
---------------------------- ---------------------------- ----------------------------
2. Dividend per share The dividend reflects our 2.75 pence 10% ahead of our dividend
Dividends paid to ability to deliver a for the six months ended 30 target at IPO
shareholders and declared low-risk but growing income September 2018
in relation to the period. stream from our (six months ended 30
portfolio and is a key September 2017: 1.00 pence
element of our total NAV per share,
return. period ended 31 March 2018:
4.00 pence per share)
---------------------------- ---------------------------- ----------------------------
3. EPRA NAV per share The NAV reflects our 113.00 pence Increased EPRA NAV per
The value of our assets ability to grow the at 30 September 2018 share by 4.95%
(based on an independent portfolio and to add value (at 30 September 2017:
valuation) less the book to it throughout the life 105.01 pence per share,
value of our liabilities, cycle of our assets. at 31 March 2018: 107.67
attributable to pence per share)
shareholders and calculated
in accordance with EPRA
guidelines.
---------------------------- ---------------------------- ----------------------------
4. Loan to value ratio The LTV measures the 29% Significantly below our
The proportion of our total prudence of our financing at 30 September 2018 medium term maximum target
assets that is funded by strategy, balancing the (at 30 September 2017: 29%, of 35%
borrowings. Our target additional returns at 31 March 2018: 30%)
maximum LTV is and portfolio
35%. diversification that come
with using debt against the
need to successfully manage
risk.
---------------------------- ---------------------------- ----------------------------
5. Adjusted earnings per The Adjusted earnings per 3.17 pence Reflecting 1.2 times
share share reflects our ability for the six months ended 30 dividend cover
Post-tax Adjusted earnings to generate returns from September 2018
per share attributable to our portfolio, (six months ended 30
shareholders, which which ultimately underpins September 2017: 1.49 pence
includes the licence our dividend payments. A per share,
fee receivable on our reconciliation of Adjusted period ended 31 March 2018:
forward funded development earnings is 5.05 pence per share)
assets treated under IFRS included in Note 24 to the
as discounts to condensed consolidated
investment property financial statements.
acquisitions.
---------------------------- ---------------------------- ----------------------------
6. Total expense ratio The total expense ratio is 1.26% (annualised) for the In line with our target
The ratio of total a key measure of our six months ended 30
operating expenses, operational excellence. September 2018
including management fees Maintaining a low (six months ended 30
expressed as a percentage cost base supports our September 2017: 1.55%
of the net asset value. ability to pay dividends. (annualised),
period ended 31 March 2018:
1.14%)
---------------------------- ---------------------------- ----------------------------
7. Weighted average The WAULT is a key measure 23 years In line with our investment
unexpired lease term of the quality of our at 30 September 2018 objective
The average unexpired lease portfolio. Long lease terms (at 30 September 2017: 24
terms of the property underpin the years,
portfolio, weighted by security and predictability at 31 March 2018: 24 years)
annual passing rents. of our income stream.
Our target WAULT is a
minimum of 20 years.
---------------------------- ---------------------------- ----------------------------
8. Percentage of contracted This measures the extent to 97% In line with our investment
rents index-linked or fixed which we are investing in at 30 September 2018 objective
This takes the total value line with our investment (at 30 September 2017: 96%,
of contracted rents that objective, at 31 March 2018: 96%)
contain rent reviews linked to provide inflation-linked
to inflation returns.
or fixed uplifts as a
percentage of the total
passing rent of the
portfolio.
---------------------------- ---------------------------- ----------------------------
EPRA PERFORMANCE MEASURES
The table below shows additional performance measures,
calculated in accordance with the Best Practices Recommendations of
the European Public Real Estate Association ("EPRA"). We provide
these measures to aid comparison with other European real estate
businesses.
Reconciliations of EPRA Earnings and NAV are included in Notes
24 and 25 of the condensed consolidated financial statements
respectively.
KPI and definition Purpose Performance
1. EPRA NAV Adjusts NAV under IFRS to provide GBP222.47 million / 113.00 pence per
Net asset value adjusted to include stakeholders with the most relevant share
properties and other investment information on the fair at 30 September 2018
interests at fair value value of the assets and liabilities (30 September 2017: GBP145.07 million
and to exclude certain items not within a true real estate investment / 105.01 pence per share,
expected to crystallise in a long company, with a long 31 March 2018: GBP211.98 million /
term investment property term investment strategy. 107.67 pence per share)
business.
-------------------------------------- --------------------------------------
2. EPRA Earnings A key measure of a company's GBP5.51 million / 2.80 pence per
Earnings from operational activities underlying operating results and an share
(which excludes the licence fees indication of the extent for the period ended 30 September
receivable on our forward to which current dividend payments 2018
funded development assets). are supported by earnings. (30 September 2017: GBP1.18 million /
1.13 pence per share,
31 March 2018: GBP5.82 million / 4.20
pence per share)
-------------------------------------- --------------------------------------
3. EPRA Triple Net Asset Value Adjusts EPRA NAV to provide GBP223.15 million / 113.34 pence per
("NNNAV") stakeholders with the most relevant share
EPRA NAV adjusted to include the fair information on the current At 30 September 2018
values of: fair value of all the assets and (30 September 2017: GBP145.29 million
(i) financial instruments; liabilities within a real estate / 105.17 pence per share,
(ii) debt and; company. 31 March 2018: GBP212.92 million /
(iii) deferred taxes. 108.15 pence per share)
-------------------------------------- --------------------------------------
4. EPRA NIY This measure should make it easier 5.18%
Annualised rental income based on the for investors to judge for themselves at 30 September 2018
cash rents passing at the reporting how the valuations (30 September 2017: 5.44%,
date, less non-recoverable of two portfolios compare. 31 March 2018: 5.47%)
property operating expenses, divided
by the market value of the property,
increased with (estimated)
purchasers' costs.
-------------------------------------- --------------------------------------
5. EPRA 'Topped-Up' NIY This measure should make it easier 6.95%
This measure incorporates an for investors to judge for themselves at 30 September 2018
adjustment to the EPRA NIY in respect how the valuations (30 September 2017: 7.29%,
of the expiration of rent-free of two portfolios compare. 31 March 2018: 7.67%)
periods (or other unexpired lease
incentives, such as discounted rent
periods and step rents).
-------------------------------------- --------------------------------------
6. EPRA Vacancy A 'pure' (%) measure of investment 0.00%
Estimated market rental value ("ERV") property space that is vacant, based at 30 September 2018
of vacant space divided by the ERV of on ERV. (30 September 2017: 0.00%,
the whole portfolio. 31 March 2018: 0.00%)
-------------------------------------- --------------------------------------
7. EPRA Cost Ratio A key measure to enable meaningful 17.25%
Administrative and operating costs measurement of the changes in a for the period ended 30 September
(including and excluding costs of company's operating costs. 2018
direct vacancy) divided (30 September 2017: 42.74%,
by gross rental income. 31 March 2018: 25.83%)
(no direct vacancy costs incurred)
-------------------------------------- --------------------------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Audit Committee, which assists the Board with its
responsibilities for managing risk, considers that the principal
risks and uncertainties as presented on page 24 of the 31 March
2018 Annual Report were unchanged during the period and for the
remaining six months of the financial year. These risks include
property and real estate risks, tenant default risk, financial
risks and other risks, including dependence on the Investment
Advisor, compliance and political uncertainty regarding the
potential outcome and impact of Great Britain leaving the European
Union. The Board and the Investment Advisor continue to monitor
developments closely.
DIRECTORS RESPONSIBILITIES STATEMENT
The Directors confirm that to the best of their knowledge this
condensed set of financial statements has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the operating and financial review includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority namely:
-- an indication of important events that have occurred during
the period and their impact on the condensed consolidated financial
statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- disclosure of any material related party transactions in the
period are included in Note 19 to the condensed consolidated
financial statements.
A list of the Directors is shown in the Company Information
section of the Interim Report.
For and on behalf of the Board
Stephen Hubbard
Chairman of the Board of Directors
28 November 2018
INDEPENT REVIEW REPORT TO LXI REIT PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the interim report for the six months
ended 30 September 2018, which comprise the condensed consolidated
statement of comprehensive income, the condensed consolidated
statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated cash
flow statement and the related notes.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report is the responsibility of and has been
approved by the Directors. The Directors are responsible for
preparing the interim report in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in Note 1 of the Annual Report the annual financial
statements of the Group are prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. The condensed set of financial statements
included in this interim report 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 report
based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of interim financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity', issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim report for the six months ended 30 September 2018 is
not prepared, in all material respects, in accordance with
International Accounting Standard 34, as adopted by the European
Union, and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
BDO LLP
Chartered Accountants
London
United Kingdom
28 November 2018
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period
from Period
21 December from 21
Six months 2016 December
ended 30 to 30 2016 to
September September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
---------------------- ----- ------------ ------------- ----------
Rental income 3 8,163 2,637 9,339
Administrative
and other
expenses 4 (1,405) (1,127) (2,412)
Operating
profit before
change in
fair value
and gain
on disposal
of investment
property 6,758 1,510 6,927
Change in
fair value
of investment
property 8 8,721 8,501 15,056
Gain on disposal
of investment
property 8 2,910 - 91
---------------------- ----- ------------ ------------- ----------
Operating
profit 18,389 10,011 22,074
Finance income 5 37 8 43
Finance costs 6 (1,290) (335) (1,151)
---------------------- ----- ------------ ------------- ----------
Profit before
tax 17,136 9,684 20,966
Taxation 7 - - -
Profit and
total comprehensive
income attributable
to shareholders 17,136 9,684 20,966
====================== ===== ============ ============= ==========
Earnings
per share
- basic and
diluted 24 8.70p 9.26p 15.12p
====================== ===== ============ ============= ==========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
------------------------------- ----- ---------------- ---------------- ------------
Non-current assets
Investment property 8 306,071 144,233 255,178
------------------------------- ----- ---------------- ---------------- ------------
Total non-current assets 306,071 144,233 255,178
------------------------------- ----- ---------------- ---------------- ------------
Current assets
Trade and other receivables 10 4,742 3,483 5,624
Deferred acquisition
costs 281 2,448 1,274
Deferred share issue 206 - -
costs
Restricted cash 11 6,234 13,917 17,876
Cash and cash equivalents 11 5,584 29,157 30,787
------------------------------- ----- ---------------- ---------------- ------------
Total current assets 17,047 49,005 55,561
------------------------------- ----- ---------------- ---------------- ------------
Total assets 323,118 193,238 310,739
=============================== ===== ================ ================ ============
Current liabilities
Trade and other payables 12 7,326 4,015 5,237
------------------------------- ----- ---------------- ---------------- ------------
Total current liabilities 7,326 4,015 5,237
------------------------------- ----- ---------------- ---------------- ------------
Non-current liabilities
Bank borrowings 13 93,321 44,152 93,521
------------------------------- ----- ---------------- ---------------- ------------
Total non-current liabilities 93,321 44,152 93,521
------------------------------- ----- ---------------- ---------------- ------------
Total liabilities 100,647 48,167 98,758
=============================== ===== ================ ================ ============
Net assets 222,471 145,071 211,981
=============================== ===== ================ ================ ============
Equity
Share capital 14 1,969 1,382 1,969
Share premium reserve 15 58,979 - 58,979
Capital reduction reserve 123,421 134,005 130,067
Retained earnings 38,102 9,684 20,966
------------------------------- ----- ---------------- ---------------- ------------
Total equity 222,471 145,071 211,981
=============================== ===== ================ ================ ============
Net asset value per
share - basic and diluted 25 113.00p 105.01p 107.67p
=============================== ===== ================ ================ ============
EPRA net asset value
per share 25 113.00p 105.01p 107.67p
=============================== ===== ================ ================ ============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital
Six months ended 30 September Share premium reduction Retained Total
2018 (unaudited) capital reserve reserve earnings equity
Note GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ----- --------- --------- ----------- ---------- --------
Balance at 1 April 2018 1,969 58,979 130,067 20,966 211,981
Profit and total comprehensive
income attributable to
shareholders - - - 17,136 17,136
Dividends Paid
Final dividend in respect
of the period ended 31
March 2018 at 2.00 pence
per ordinary share 16 - - (3,938) - (3,938)
First interim dividend
in respect of the year
ending 31 March 2019 at
1.375 pence per ordinary
share 16 - - (2,708) - (2,708)
Balance at 30 September
2018 1,969 58,979 123,421 38,102 222,471
================================ ===== ========= ========= =========== ========== ========
Period from 21 December Share Capital
2016 to 30 September 2017 Share premium reduction Retained Total
(unaudited) capital reserve reserve earnings equity
Note GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------ --------- ---------- ----------- ---------- --------
Balance at 21 December - - - - -
2016
Profit and total comprehensive
income attributable to
shareholders - - - 9,684 9,684
Transactions with owners
First issue of ordinary
shares in the period 14,15 1,382 136,768 - - 138,150
Share issue costs 14,15 - (2,763) - - (2,763)
Cancellation of share
premium 15 - (134,005) 134,005 - -
Balance at 30 September
2017 1,382 - 134,005 9,684 145,071
================================ ====== ========= ========== =========== ========== ========
Share Capital
Share premium reduction Retained Total
capital reserve reserve earnings equity
--------------------------------
Period from 21 December
2016 to 31 March 2018
(audited) Note GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------ --------- ---------- ----------- ---------- --------
Balance at 21 December - - - - -
2016
Profit and total comprehensive
income attributable to
shareholders for the period - - - 20,966 20,966
Transactions with owners
First issue of ordinary
shares in the period 14,15 1,382 136,768 - - 138,150
Share issue costs 14,15 - (2,688) - - (2,688)
Cancellation of share
premium 15 - (134,005) 134,005 - -
Second issue of ordinary
shares in the period 15 587 59,613 - - 60,200
Share issue costs 15 - (709) - - (709)
Dividends Paid
First interim dividend
in respect of the period
ended 31 March 2018 at
1.00 pence per ordinary
share 16 - - (1,969) - (1,969)
Second interim dividend
in respect of the period
ended 31 March 2018 at
1.00 pence per ordinary
share 16 - - (1,969) - (1,969)
Balance at 31 March 2018 1,969 58,979 130,067 20,966 211,981
================================ ====== ========= ========== =========== ========== ========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Period from
Six months 21 December Period from
ended 30 2016 to 30 21 December
September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited) (audited)
Note GBP000 GBP000 GBP000
--------------------------- ----- ------------ ------------- -------------
Cash flows from
operating activities
Profit before tax 17,136 9,684 20,966
Adjustments for:
Finance income 5 (37) (8) (43)
Finance costs 6 1,290 335 1,151
Change in fair
value of investment
property 8 (8,721) (8,501) (15,056)
Gain on disposal
of investment property 8 (2,910) - (91)
Tenant lease incentives 3 (1,184) (494) (1,687)
--------------------------- -----
Operating results
before working
capital changes 5,574 1,016 5,240
Decrease/(increase)
in trade and other
receivables 622 (3,483) (5,624)
Increase in trade
and other payables 1,021 1,877 3,121
--------------------------- ----- ------------ ------------- -------------
Net cash flow generated
from/(used in)
operating activities 7,217 (590) 2,737
--------------------------- ----- ------------ ------------- -------------
Cash flows from
investing activities
Purchase of investment
properties (67,213) (135,547) (238,452)
Proceeds from sale
of investment property 31,196 - 702
Interest received 37 8 43
--------------------------- -----
Net cash flow used
in investing activities (35,980) (135,539) (237,707)
--------------------------- ----- ------------ ------------- -------------
Cash flows from
financing activities
Proceeds from shares
issued in the period - 138,150 198,350
Share issue costs
paid - (2,763) (3,397)
Dividend paid (6,645) - (3,458)
Interest paid (1,383) (335) (1,313)
Bank borrowings
drawn 11,642 31,082 77,124
Loan arrangement
fees paid (54) (848) (1,549)
--------------------------- -----
Net cash flow generated
from financing
activities 3,560 165,286 265,768
--------------------------- ----- ------------ ------------- -------------
Net (decrease)/increase
in cash and cash
equivalents (25,203) 29,157 30,787
Cash and cash equivalents 30,787 - -
at the beginning
of the period
--------------------------- ----- ------------ ------------- -------------
Cash and cash equivalents
at the end of the
period 11 5,584 29,157 30,787
=========================== ===== ============ ============= =============
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
This consolidated set of interim financial statements has been
prepared in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority and IAS 34 Interim Financial Reporting, as adopted by the
European Union.
The condensed consolidated financial statements for the six
months ended 30 September 2018 have been reviewed by the Company's
Auditor, BDO LLP, in accordance with International Standard on
Review Engagements 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity and were
approved for issue on 28 November 2018. The condensed consolidated
financial statements are unaudited and do not constitute statutory
accounts for the purposes of the Companies Act 2006.
The comparative financial information presented herein for the
period from 21 December 2016 to 31 March 2018 does not constitute
full statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The Group's Annual Report for the period ended
31 March 2018 has been delivered to the Registrar of Companies. The
Group's independent auditor's report on those accounts was
unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006.
-- Standards effective from 1 April 2018
The Group has applied the same accounting policies in this
condensed set of financial statements as in its financial
statements to 31 March 2018, except for those that relate to new
standards and interpretations effective for the first time for
periods beginning on or after 1 January 2018. New standards
impacting the Group that have been adopted for the first time in
this set of condensed financial statements are:
o IFRS 9 Financial Instruments; and
o IFRS 15 Revenue from Contracts with Customers.
IFRS 9 Financial Instruments
IFRS 9 replaces IAS 39 Financial Instrument: Recognition and
Measurement and introduces a single model that has initially only
two classification categories rather than the multiple
classification and measurement models in the previous standard. The
new models are amortised cost and fair value.
Due to the nature of the Group's financial instruments, the
adoption of IFRS 9 does not have a material impact on the Group's
results or financial position and does not require a restatement of
comparative figures.
The fair value of each category of the Group's financial
instruments approximates to their carrying value other than the
Group's debt instruments, the fair value of which is disclosed in
Note 9. Where financial assets and liabilities are measured at fair
value the measurement hierarchy, valuation techniques and inputs
used are consistent with those used at 31 March 2018. There were no
movements between different levels of the fair value hierarchy in
the period.
Having considered the requirements of IFRS 9, under section
5.5.15(b), the Board has applied the simplified approach when
considering the Expected Credit Loss ("ECL") model when determining
the expectations of impairment. Under the simplified approach the
Company is always required to measure lifetime expected losses.
Given the nature of the Group's receivables and counterparties,
the Board does not consider any to be impaired. They believe that
all are fully recoverable and the probability of credit loss is
immeasurably small and therefore any ECL arising to be
immaterial.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 has replaced IAS 11 Construction Contracts and IAS 18
Revenue. The standard introduces a new revenue recognition model
that recognises revenue either at a point in time or over time
(effective for annual periods beginning on or after 1 January
2018).
The Directors are satisfied the standard has no material impact
on the financial statements as rental income is outside the scope
of the standard and the Group's only revenue is currently generated
from rental income from leases that do not contain any service
components.
-- Standards in issue but not yet effective
The following new standard, which is not yet effective and has
not been early adopted in this financial information will or may
have an effect on the Group's future financial statements:
o IFRS 16 Leases: introduction of a single, on-balance sheet
accounting model for leases which refers primarily to accounting
for lessees (effective for annual periods beginning on or after 1
January 2019).
The Directors have given due consideration to the impact on the
consolidated financial statements of the standard listed above and
at present they do not anticipate that the adoption of these
standards and interpretations will have a material impact on the
consolidated financial statements in the period of initial
application, other than on presentation and disclosure.
-- Going concern
The condensed consolidated financial statements have been
prepared on a going concern basis.
The Group benefits from a secure income stream from long leases
with its tenants, which is not overly reliant on any one tenant and
present a well-diversified risk. The Group's cash balance at 30
September 2018 was GBP5.58 million (30 September 2017: GBP29.16
million, 31 March 2018: GBP30.79 million) which was readily
available and GBP6.23 million which is restricted (30 September
2017: GBP13.92 million, 31 March 2018: GBP17.88 million) (Note 11).
At 30 September 2018, the Group had capital commitments totalling
GBP10.39 million (30 September 2017 GBP15.31 million, 31 March
2018: GBP21.65 million) (Note 22).
Restricted cash is held by the bank subject to certain
properties entering the security pool and is expected to be fully
drawn down by 31 December 2018.
After the period end the Group received cash in respect of gross
equity issue proceeds of GBP175.25 million (Note 26) and agreed a
new loan facility of GBP75 million (Note 26).
As a result, the Directors believe that the Group is well placed
to manage its financing and other business risks and that the Group
will remain viable, continuing to operate and meet its liabilities
as they fall due.
The Directors believe that there are currently no material
uncertainties in relation to the Group's ability to continue in
operation for the period of at least 12 months from the date of
approval of the condensed consolidated financial statements. The
Board is, therefore, of the opinion that the going concern basis
adopted in the preparation of the condensed consolidated financial
statements is appropriate.
2. Significant accounting judgments, estimate and
assumptions
In the application of the Group's accounting policies the
Directors are required to make estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are outlined below:
Estimates:
-- Valuation of investment properties
The Group uses the valuation carried out by Knight Frank LLP
(the "Independent Valuer") as the fair value of its property
portfolio. The valuation is based upon assumptions including future
rental income and the appropriate capitalisation rate. The
Independent Valuer makes reference to market evidence of
transaction prices for similar properties.
The Group's properties have been independently valued by its
Independent Valuer in accordance with the definitions published by
the Royal Institute of Chartered Surveyors ("RICS") Valuation -
Professional Standards, July 2017, Global and UK Editions (commonly
known as the 'Red Book').
Investment properties under construction are financed by the
Group where the Group enters into contracts for the development of
a pre-let property under a funding agreement. All such contracts
specify a fixed amount of consideration. The Group does not expose
itself to any speculative development risk as the proposed building
is pre-let to a tenant under an agreement for lease and the Group
enters into a fixed-price development agreement with the developer.
Investment properties under construction are initially recognised
at cost (including any associated costs), which reflect the Group's
investments in the assets. Subsequently, the assets are remeasured
to fair value at each reporting date. The fair value of investment
properties under construction is estimated as the capitalised
income calculated by the Independent Valuer, less any costs still
payable in order to complete, which include an appropriate
developer's margin.
With respect to the condensed consolidated financial statements,
investment properties are valued at their fair value at each
reporting date in accordance with IFRS 13 which recognises a
variety of fair value inputs depending upon the nature of the
investment. Given the bespoke nature of each of the Group's
investments, all of the Group's investment properties are included
in Level 3. Details of the nature of these inputs and sensitivity
analysis is provided in Note 8.
Judgments:
-- Classification of lease arrangements - the Group as lessor
The Group has acquired investment property that is leased to
tenants. In considering the classification of lease arrangements,
at inception of each lease the Group considers the economic life of
the asset compared with the lease term and the present value of the
minimum lease payments and any residual value compared with the
fair value and associated costs of acquiring the asset as well as
qualitative factors as indicators that may assert to the risks and
rewards of ownership having been substantially retained or
transferred. Based on evaluation the Group has determined that it
retains all the significant risks and rewards of ownership of its
investment property and accounts for the lease arrangements as
operating leases.
3. Net rental income
Period from
21 December Period from
Six months 2016 to 30 21 December
ended 30 September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
------------------------- --------------------- ------------- -------------
Rental income from
investment property 6,979 2,143 7,652
Tenant lease incentives
(Note 8) 1,184 494 1,687
-------------------------
8,163 2,637 9,339
========================= ===================== ============= =============
4. Administrative and other expenses
Period from
Six months 21 December Period from
ended 30 2016 to 30 21 December
September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
-------------------------- ------------ ------------- -------------
Investment advisory
fees 804 640 1,387
Legal and professional
fees 155 176 397
Directors' fees 67 77 142
Employer's national
insurance 5 6 15
Corporate administration
fees 107 69 193
Other administrative
costs 168 72 72
Advertising & Marketing 39 32 76
Fees paid to the
Company's Independent
Auditor 60 55 130
--------------------------
1,405 1,127 2,412
========================== ============ ============= =============
Fees paid to the Company's Independent Auditor comprise
GBP20,000 for the interim review (30 September 2017: GBP20,000, 31
March 2018: GBP20,000), GBP40,000 accrued in respect of the audit
of the Annual Report and financial statements (30 September 2017:
GBPNil, 31 March 2018: GBP95,000) and GBPNil for the audit of the
Company's initial accounts (30 September 2017: GBP15,000, 31 March
2018: GBP15,000).
The Company has paid no additional fees to the Company's
Independent Auditor in the period which have been treated as a
reduction in equity as share issue costs (30 September 2017:
GBP92,000, 31 March 2018: GBP97,000).
The Directors' fees are satisfied by way of ordinary shares
acquired at market value, such ordinary shares are acquired on
behalf of the Directors by the Company's broker.
LXi REIT Advisors Limited is the Investment Advisor of the
Company. Under the Investment Advisory agreement, the Investment
Advisor advises the Company in relation to the management,
investment and reinvestment of the assets of the Group.
The investment advisory fee is calculated in arrears in respect
of each month, in each case based upon the average market
capitalisation of the Company on the following basis:
(a) One-twelfth of 0.75 per cent per calendar month of market
capitalisation up to or equal to GBP500 million; and
(b) One-twelfth of 0.65 per cent per calendar month of market
capitalisation above GBP500 million.
No performance fee is payable to the Investment Advisor.
The appointment of the Investment Advisor shall continue in
force unless and until terminated by either party giving to the
other not less than 12 months' written notice, such notice not to
expire earlier than 27 February 2022.
5. Finance income
Period from
21 December Period from
Six months 2016 to 30 21 December
ended 30 September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
-------------------------- --------------------- ------------- -------------
Interest on cash held at
bank 37 8 43
--------------------------
37 8 43
========================== ===================== ============= =============
6. Finance costs
Period from
21 December Period from
Six months 2016 to 30 21 December
ended 30 September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
---------------------------------- --------------------- ------------- -------------
Interest payable on bank
borrowings 1,217 318 1,090
Amortisation of loan arrangement
fees 72 16 58
Bank charges 1 1 3
----------------------------------
1,290 335 1,151
================================== ===================== ============= =============
Capitalised finance costs are included within property
acquisitions in Note 8. The total interest payable on financial
liabilities carried at amortised cost comprised:
(i) the interest payable on bank borrowings totalling
GBP1,381,000 of which GBP164,000 was capitalised (30 September
2017: GBP318,000 of which GBPNil was capitalised, 31 March 2018:
GBP1,310,000 of which GBP220,000 was capitalised); and
(ii) the amortisation of loan arrangement fees totalling
GBP77,000 of which GBP5,000 was capitalised (30 September 2017:
GBP16,000 of which GBPNil was capitalised, 31 March 2018: GBP70,000
of which GBP12,000 was capitalised).
7. Taxation
The Group is a real estate investment trust ("REIT") and as a
result the profit and gains arising from the Group's property
rental business are exempt from UK corporation tax. Provided the
Group meets certain conditions as set out in the UK REIT
regulations. Profits arising from any residual activities (e.g.
trading activities and interest income), after the utilisation of
any available residual tax losses, are subject to corporation tax
at the main rate of 19% for the period.
Period from
Six months 21 December Period from
ended 30 2016 to 30 21 December
September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------- -------------
Current tax - - -
-------------------------------------- ------------ ------------- -------------
Total current tax - - -
Origination and reversal of temporary - - -
differences
-------------------------------------- ------------ ------------- -------------
Total deferred tax - - -
Tax charge - - -
====================================== ============ ============= =============
Reconciliation of the total tax charge
The reconciliation of profit before tax multiplied by the
standard rate of corporation tax for the period of 19% to the total
tax charge in the condensed consolidated statement of comprehensive
income is as follows:
Period from
Six months 21 December Period from
ended 30 2016 to 30 21 December
September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------- -------------
Profit before tax 17,136 9,684 20,966
-------------------------------------- ------------ ------------- -------------
Tax at the standard rate of UK
corporation tax of 19% 3,256 1,840 3,984
Effects of:
REIT exempt income (1,599) (225) (1,122)
Revaluation of investment properties (1,657) (1,615) (2,862)
Tax charge - - -
====================================== ============ ============= =============
UK REIT exempt income includes property rental income that is
exempt from UK Corporation Tax in accordance with Part 12 of CTA
2010.
8. Investment property
Investment
property
Investment Investment in
property property course
long leasehold freehold of construction Total
GBP000 GBP000 GBP000 GBP000
------------------------- ---------------- ----------- ----------------- ---------
Six months ended
30 September 2018
(unaudited)
Balance at 1 April
2018 12,585 216,026 26,567 255,178
Property acquisitions 5,992 46,392 17,593 69,977
Licence fee receivable
(Note 24) - - (740) (740)
Tenant lease incentives
(Note 3) 39 1,112 33 1,184
Property disposals - (28,249) - (28,249)
Change in fair value 794 5,716 2,211 8,721
Transfers of completed
property - 13,232 (13,232) -
------------------------- ---------------- ----------- ----------------- ---------
Balance at 30 September
2018 19,410 254,229 32,432 306,071
========================= ================ =========== ================= =========
Period from 21 December
2016 to 30 September
2017 (unaudited)
Balance at 21 December - - - -
2016
Property acquisitions - 127,931 7,680 135,611
Licence fee receivable
(Note 24) - - (373) (373)
Tenant lease incentives
(Note 3) - 494 - 494
Change in fair value - 5,440 3,061 8,501
------------------------- ---------------- ----------- ----------------- ---------
Balance at 30 September
2017 - 133,865 10,368 144,233
========================= ================ =========== ================= =========
Period from 21 December
2016 to 31 March
2018 (audited)
Balance at 21 December - - - -
2016
Property acquisitions 12,106 200,121 28,007 240,234
Licence fee receivable
(Note 24) - - (1,188) (1,188)
Tenant lease incentives
(Note 3) 196 1,491 - 1,687
Property disposals - (611) - (611)
Change in fair value 283 8,234 6,539 15,056
Transfers of completed
property - 6,791 (6,791) -
------------------------- ---------------- ----------- ----------------- ---------
Balance at 31 March
2018 12,585 216,026 26,567 255,178
========================= ================ =========== ================= =========
The investment property has been independently valued at fair
value by Knight Frank LLP, the Independent Valuer, an accredited
external valuer with recognised and relevant professional
qualifications and recent experience of the location and category
of the investment property being valued. The valuations are the
ultimate responsibility of the Directors.
The Independent Valuer valued the entire property portfolio at
GBP318.79 million at 30 September 2018 (30 September 2017:
GBP159.92 million, 31 March 2018: GBP278.92 million) including
capital commitments on forward funded assets.
All corporate acquisitions during the period have been treated
as asset purchases rather than business combinations as they are
considered to be acquisitions of property rather than a
business.
All ground rents payable by the Group on long leasehold
properties are nominal and as such no finance lease liability has
been recognised in respect of these properties.
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
--------------------------- ---------------- ---------------- ------------
Investment property
at fair value 306,071 144,233 255,178
Capital commitments
(Note 22) 10,386 15,308 21,647
Vender discount in
respect of rent-free
periods and top-ups 1,108 - 1,134
Licence fee receivable
(Note 10) 1,225 374 961
---------------------------
Total portfolio valuation 318,790 159,915 278,920
=========================== ================ ================ ============
Capital commitments represent the costs to bring the asset to
completion under the funding agreements with the developers which
includes a developer's margin. These costs are not provided for in
the statement of financial position.
Vendor discounts in respect of rent-free periods and top-ups
represent amounts by which a purchase price was reduced by the
vendor on acquisitions to cover future rent-free periods or periods
to the next rent review under the lease. The total portfolio
valuation assumes the property to be income generating during the
unexpired rent-free periods and passing rent to be the topped-up
rent during the unexpired period to next rent review and therefore
includes this income in the valuation.
Licence fee receivable represent amounts due from developers
under funding agreements that have not been settled at the period
end. The valuation assumes the property to be income generating
throughout the period of development and therefore includes this
income in the valuation.
Investment property at fair value
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
Valuation (Level 1) (Level 2) (Level 3) Total
GBP000 GBP000 GBP000 GBP000
---------------------- --------------- ------------- -------------- --------
At 30 September 2018
(unaudited) - - 306,071 306,071
====================== =============== ============= ============== ========
At 30 September 2017
(unaudited) - - 144,233 144,233
====================== =============== ============= ============== ========
At 31 March 2018
(audited) - - 255,178 255,178
====================== =============== ============= ============== ========
There have been no transfers between levels during the
period.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards (incorporating the International
Valuation Standards).
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(such as lettings, tenants' profiles, future revenue streams,
capital values of fixtures and fittings, plant and machinery, any
environmental matters and the overall repair and condition of the
property) and discount rates applicable to those assets.
The following descriptions and definitions relating to valuation
techniques and key inputs made in determining fair values are as
follows:
Valuation techniques: market value method
Under the market value method, the estimated amount for which an
asset or liability should exchange on the date of valuation between
a willing buyer and a willing seller in an arm's length transaction
after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion.
Observable input: passing rent
The prevailing rent at which space is let at the date of
valuation (range: GBP10,385 - GBP1,512,500 p.a.). Passing rents are
dependent upon a number of variables in relation to the Group's
property. These include: size, location, tenant covenant strength
and terms of the lease.
Unobservable input: rental growth
The estimated average increase in rent based on both market
estimations and contractual arrangements. A reduction of the
estimated future rental growth in the valuation model would lead to
a decrease in the fair value of the investment property and an
inflation of the estimated future rental growth would lead to an
increase in the fair value. No quantitative sensitivity analysis
has been provided for estimated rental growth as a reasonable range
would not result in a significant movement in fair value.
Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as
a percentage of the market value (or purchase price as appropriate)
plus standard costs of purchase (range: 4.24% - 6.33%).
Sensitivities of measurement of significant inputs
As set out within significant accounting estimates and judgments
above, the Group's property portfolio valuation is open to
judgments and is inherently subjective by nature. The table below
shows the sensitivities of measurement the Group's investment
property to certain inputs:
+25bps in -25bps in
-5% in passing +5% in passing net initial net initial
Valuation rent rent yield yield
GBP000 GBP000 GBP000 GBP000
---------------------------- --------------- --------------- ------------- -------------
At 30 September 2018
(unaudited) (15,899) 15,929 (14,800) 16,327
============================ =============== =============== ============= =============
At 30 September 2017
(unaudited) (8,030) 7,958 (7,138) 7,758
============================ =============== =============== ============= =============
At 31 March 2018 (audited) (14,183) 13,693 (12,742) 13,493
============================ =============== =============== ============= =============
Realised gain on disposal of investment property
During the period, the Group disposed of certain of its
investment property. The table below shows a reconciliation of the
gain recognised on disposal through the condensed consolidated
statement of comprehensive income and the realised gain on
disposals in the period which includes changes in fair value of the
investment property recognised in previous periods.
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
------------------------- ---------------- ---------------- ------------
Consideration received 31,196 - 729
Less:
Carrying value (28,249) - (611)
Selling costs (37) - (27)
------------------------- ---------------- ---------------- ------------
Gain on disposal
of investment property 2,910 - 91
Add:
Change in fair value 1,624 - -
recognised in previous
periods
------------------------- ---------------- ---------------- ------------
Realised gain on
disposal of investment
property 4,534 - 91
========================= ================ ================ ============
9. Financial instruments
Set out below is a comparison of the book value and fair value
of the Group's financial instruments where a difference exists. The
fair value of financial instruments not included in the comparison
is equal to book value.
Bank borrowings Book value Fair value
GBP000 GBP000
---------------------------------- ----------- -----------
At 30 September 2018 (unaudited) 93,321 92,639
================================== =========== ===========
At 30 September 2017 (unaudited) 44,151 43,931
================================== =========== ===========
At 31 March 2018 (audited) 93,521 92,579
================================== =========== ===========
10. Trade and other receivables
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
------------------------ ---------------- ---------------- ------------
Recoverable VAT 1,631 2,617 3,499
Licence fee receivable
(Note 8) 1,225 374 961
Rent receivable 1,822 97 1,130
Prepayments and
other receivables 64 395 34
------------------------
4,742 3,483 5,624
======================== ================ ================ ============
All amounts were due for receipt within one year.
Trade and other receivables that are financial assets amount to
GBP3,110,000 (30 September 2017: GBP886,000, 31 March 2018:
GBP2,125,000) which comprises licence fee receivable and rent
receivable
11. Cash reserves
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
---------------------- ---------------- ---------------- ------------
Cash at bank 4,182 22,353 30,712
Cash held by lawyers 1,402 6,803 75
---------------------- ---------------- ---------------- ------------
Total cash and
cash equivalents 5,584 29,156 30,787
Restricted cash 6,234 13,918 17,876
---------------------- ---------------- ---------------- ------------
Total cash at
bank 11,818 43,074 48,663
====================== ================ ================ ============
Cash held by lawyers is money held in escrow for expenses
expected to be incurred in relation to investment properties
pending completion. These funds are available immediately on
demand.
12. Trade and other payables
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
----------------------------- ---------------- ---------------- ------------
Accrued investment property
costs 2,704 2,512 1,636
Deferred rental income 2,483 983 1,978
Accruals 440 314 281
Trade and other payables 1,681 190 1,324
Directors' fees 18 16 18
-----------------------------
7,326 4,015 5,237
============================= ================ ================ ============
All amounts were due for payment within one year.
Trade and other payables that are financial liabilities amount
to GBP4,843,000 (30 September 2017: GBP3,032,000, 31 March 2018:
GBP3,259,000) which comprises accrued investment property costs,
accruals, trade and other payables and Directors' fees.
13. Bank borrowings
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
------------------------------------ ---------------- ---------------- ------------
Capital outstanding
At start of period 95,000 - -
Drawdowns - 45,000 95,000
------------------------------------ ---------------- ---------------- ------------
At end of period 95,000 45,000 95,000
Less: unamortised loan arrangement
fees (1,679) (848) (1,479)
------------------------------------ ---------------- ---------------- ------------
Carrying value 93,321 44,152 93,521
==================================== ================ ================ ============
Maturity of bank borrowings
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
--------------------------------- ---------------- ---------------- ------------
Repayable between 1 and 2 years - - -
Repayable between 2 and 5 years - - -
Repayable after 5 years 93,321 44,152 93,521
---------------------------------
93,321 44,152 93,521
================================= ================ ================ ============
At 30 September 2018, the Group's borrowings consisted of two
facilities with Scottish Widows Limited both of which mature in
July 2029. The first is a fixed rate, interest only loan facility
of GBP55 million. The facility has a fixed all-in rate payable of
2.93% p.a., for the duration of the 12 year loan term. The second
is a fixed rate, interest only loan facility of GBP40 million. The
facility has a fixed all-in rate payable of 2.85% p.a., for the
duration of the loan term.
On 13 November 2018, the Group announced the agreement of a new
15 year GBP75 million loan facility at a low 1.55% margin with
Scottish Widows.
The Group has remained compliant with the covenants throughout
the period up to the date of this report.
The facilities are secured against certain of the Group's
investment property.
14. Share capital
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
-------------------------------- ---------------- ---------------- ------------
Authorised:
196.88 million ordinary shares
of GBP0.01 each 1,969 1,382 1,969
================================ ================ ================ ============
Issued and fully paid:
196.88 million ordinary shares
of GBP0.01 each 1,969 1,382 1,969
================================ ================ ================ ============
On 27 January 2017, 50,000 redeemable preference shares of
GBP1.00 were issued at par. These shares were subsequently redeemed
at par and cancelled on 22 February 2017.
The Company achieved admission to the premium listing segment of
the Official List of the London Stock Exchange on 27 February 2017.
At IPO, the Company issued 138,150,000 shares of 1 pence nominal
value and a premium of 99 pence per share for total consideration
of GBP138.15 million.
On 16 October 2017 the Company issued 58,731,707 additional
shares of 1 pence nominal value and a premium of 101.5 pence per
share for total consideration of GBP60.20 million.
On 16 October 2018 the Company issued 155,433,165 additional
shares of 1 pence nominal value and a premium of 111.75 pence per
share for total consideration of GBP175.25 million.
15. Share premium reserve
The share premium relates to amounts subscribed for share
capital in excess of nominal value net of directly attributable
share issue costs.
Share premium reserve GBP000
------------------------------------------------ -------
Six months ended 30 September 2018 (unaudited)
Balance at 1 April 2018 58,979
Balance at 30 September 2018 58,979
================================================ =======
Period from 21 December 2016 to 30 September
2017 (unaudited)
Balance at 21 December 2016 -
Share premium arising on first issue of ordinary
shares 136,768
Share issue costs (2,763)
Transfer to capital reduction reserve (134,005)
--------------------------------------------------
Balance at 30 September 2017 -
================================================== ==========
Period from 21 December 2016 to 31 March 2018
(audited)
Balance at 21 December 2016 -
Share premium arising on first issue of ordinary
shares 136,768
Share issue costs (2,688)
Transfer to capital reduction reserve (134,005)
Share premium arising on second issue of ordinary
shares 59,613
Share issue costs (709)
--------------------------------------------------- ----------
Balance at 31 March 2018 58,979
=================================================== ==========
On 27 January 2017, a resolution was passed authorising the
cancellation of the share premium reserve conditional on the
following terms:
-- Admission of the ordinary shares of the Company to listing on
the UK Listing Authority's Official List
-- The Company's ordinary shares to commence trading on London
Stock Exchange's Main Market for listed securities
-- Approval of the court for the reduction of share capital
The amount standing to the credit of the share premium reserve
of the Company following completion of the IPO (less issue expenses
set off against the share premium reserve) was, as a result,
transferred to the capital reduction reserve. This is a
distributable reserve which is capable of being applied in any
manner in which the Company's profits available for distribution
(as determined in accordance with the Companies Act 2006) are able
to be applied.
In order to cancel the share premium reserve, the Company
obtained a court order on 28 June 2017. An SH19 form was sent to
Companies House with a copy of the court order and the certificate
of cancellation was issued by the Registrar of Companies on 28 June
2017.
16. Dividends
Dividends paid and declared GBP000
-------------------------------------------------- -------
Six months ended 30 September 2018 (unaudited)
Final dividend in respect of period ended 31
March 2018
at 2.00 pence per ordinary share 3,938
First interim dividend in respect of year ending
31 March 2019
at 1.375 pence per ordinary share 2,708
-------------------------------------------------- -------
Total dividends paid 6,646
================================================== =======
Total dividends paid for the period 3.375p
-------------------------------------------------- -------
Total dividends declared for the period 2.750p
-------------------------------------------------- -------
Period from 21 December 2016 to 31 March 2018
(audited)
First interim dividend in respect of period
ended 31 March 2018
at 1.00 pence per ordinary share 1,969
Second interim dividend in respect of period
ended 31 March 2018
at 1.00 pence per ordinary share 1,969
----------------------------------------------- ------
Total dividends paid 3,938
=============================================== ======
Total dividends paid for the period 2.00p
----------------------------------------------- ------
Total dividends declared for the period 4.00p
----------------------------------------------- ------
Dividends in respect of the period ended 31 March 2018
On 23 November 2017, the Company announced first interim
dividend in respect of the period from 21 December 2016 to 30
September 2017 of 1.00 pence per ordinary share which was paid on
29 December 2017 to ordinary shareholders on the register on 1
December 2017.
On 16 February 2018, the Company announced second interim
dividend in respect of the period from 1 October 2017 to 31
December 2017 of 1.00 pence per ordinary share which was paid on 29
March 2018 to ordinary shareholders on the register on 2 March
2018.
On 21 May 2018, the Company proposed final dividend in respect
of the period from 1 January 2018 to 31 March 2018 of 2.00 pence
per ordinary share which was paid on 2 July 2018 to shareholders on
the register at the close of business on 6 June 2018. The ordinary
shares went ex-dividend on 7 June 2018. The final dividend was
approved by shareholders at the Company's AGM on 26 June 2018.
Dividends in respect of the year ending 31 March 2019
On 6 August 2018, the Company announced first interim dividend
in respect of the period from 1 April 2018 to 30 June 2018 of 1.375
pence per ordinary share which was paid on 28 September 2018 to
ordinary shareholders on the register on 7 September 2018.
On 4 October 2018, the Company announced second interim dividend
in respect of the period from 1 July 2018 to 30 September 2018 of
1.375 pence per ordinary share which is payable on 21 December 2018
to ordinary shareholders on the register on 12 October 2018.
17. Operating leases - The Group as lessor
The future minimum lease receivable by the Group under
non-cancellable operating leases at 30 September 2018 are as
follows:
Lease receivables < 1 year 2-5 years > 5 years Total
GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- ---------- ---------- --------
At 30 September 2018 (unaudited) 17,516 70,114 334,058 421,688
================================== ========= ========== ========== ========
At 30 September 2017 (unaudited) 9,065 36,286 175,476 220,827
================================== ========= ========== ========== ========
At 31 March 2018 (audited) 15,475 61,941 318,152 395,568
================================== ========= ========== ========== ========
At 30 September 2018, all of the Group's leases:
-- were on full repairing and insuring terms, meaning the
tenants are responsible for repair, maintenance and outgoings;
-- provided for fixed rents (rather than turnover rents), which
review on an upward-only basis (either annually or five yearly).
The vast majority (97%) have rent reviews directly linked to
inflation or on a fixed uplift basis; and
-- had long contractual terms, averaging 23 years to the earlier
of first tenant break or expiry.
18. Segmental information
Operating segments are identified on the basis of internal
financial reports about components of the Group that are regularly
reviewed by the chief operating decision maker (which in the
Group's case is the Board, comprising the non-executive Directors,
and the Investment Advisor) in order to allocate resources to the
segments and to assess their performance.
The internal financial reports contain financial information at
a Group level as a whole and there are no reconciling items between
the results contained in these reports and the amounts reported in
the condensed consolidated financial statements. These internal
financial reports include the IFRS figures but also report the
non-IFRS figures for the EPRA performance measures and Adjusted
earnings as disclosed in Note 24 and 25.
The Group's property portfolio comprises investment property,
diversified across nine different property sub-sectors. The
Directors consider that all the properties have similar economic
characteristics. Therefore, in the view of the Directors, there is
one reportable segment.
All of the Group's properties are based in the UK and as such no
geographical grouping is considered appropriate for segmental
analysis.
One tenant contributed individually 10% or more of the Group's
rental income in the period (30 September 2018: three tenants, 31
March 2018: three tenants) and are therefore considered major
customers. The contribution of the major customer to rental income
was GBP836,000 (30 September 2017: GBP636,000, GBP581,000 and
GBP277,175, 31 March 2018: GBP1,342,000, GBP1,269,000 and
GBP1,043,000).
19. Related party transactions
Fees payable to the Directors, save where the Company determines
otherwise, are satisfied in ordinary shares acquired at market
value, such ordinary shares are acquired on the open market without
a new issue of shares on behalf of the Directors by the Company's
broker. Any ordinary shares acquired by the Directors pursuant to
these arrangements shall be subject to the terms of the Lock-in
Deed.
Fees of GBP67,000 were payable to the Directors in respect of
the period (30 September 2017: GBP77,000, 31 March 2018:
GBP142,000). At 30 September 2018, the amount of GBP18,000 was due
to the Directors (30 September 2017: GBP16,000, 31 March 2018:
GBP18,000).
During the period, the Directors purchased and held at the
period end the following number of ordinary shares:
Number of shares 30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
------------------ ----------- ------------- ------------- ----------
Stephen Hubbard
(Chairman) Purchased 9,968 60,437 71,057
==================
Held 81,025 60,437 71,057
============================== ============= ============= ==========
Colin Smith Purchased 6,853 108,378 160,681
==================
Held 167,534 108,378 160,681
============================== ============= ============= ==========
John Cartwright Purchased 8,835 29,551 38,030
==================
Held 46,865 29,551 38,030
============================== ============= ============= ==========
Jan Etherden Purchased 7,428 23,886 30,838
==================
Held 38,266 23,886 30,838
============================== ============= ============= ==========
On 16 October 2018, Stephen Hubbard purchased a further 30,000
ordinary shares in the Company's equity raise.
A fee of GBP804,000 was payable to the Investment Advisor in
respect of the period (30 September 2017: GBP640,000, 31 March
2018: GBP1,387,000). At 30 September 2018, GBP141,000 was due to
the Investment Advisor (30 September 2017: GBPNil, 31 March 2018,
GBP125,000).
On 27 January 2017, 50,000 redeemable preference shares of
GBP1.00 were issued to a former Director of the Company at par.
These shares were subsequently redeemed at par and cancelled on 22
February 2017.
20. Consolidated entities
The Company owns 100% of the equity shares of all subsidiaries
listed below and has the power to appoint and remove the majority
of the Board of Directors of those subsidiaries. The relevant
activities of the below subsidiaries are determined by the
respective Directors based on simple majority votes. Therefore, the
Directors of the Group have concluded that the Group has control
over all these entities and all these entities have been
consolidated within this set of condensed financial statements.
Country of
Name of Entity Principal activity Incorporation Ownership
----------------------- --------------------- ---------------- ----------
LXi Property Holdings
1 Limited Property Investment UK 100%
LXi Property Holdings
2 Limited Property Investment UK 100%
LXi Property Holdings
3 Limited Property Investment UK 100%
Alco 1 Limited Property Investment UK 100%
FPI Co 219 Limited Property Investment UK 100%
FPI Co 222 Limited Property Investment UK 100%
FPI Co 223 Limited Property Investment UK 100%
----------------------- --------------------- ---------------- ----------
The registered office for all subsidiaries is Mermaid House, 2
Puddle Dock, London, England, EC4V 3DB.
The Company also owns 100% of the equity shares of a number of
other subsidiaries which hold no assets, carry on no activity and
are in the process of being wound up.
21. Financial risk management
The Group is exposed to market risk, interest rate risk, credit
risk and liquidity risk in the current and future periods. The
Board of Directors oversees the management of these risks. The
policies of the Directors for managing each of these risks are
summarised below.
-- Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The Group has reduced the interest rate risk on its external
borrowing by fixing the rate of interest payable.
-- Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group will be exposed to credit
risk on both its leasing activities and financing activities,
including deposits with banks and financial institutions.
Credit risk related to financial instruments and cash
deposits
One of the principal credit risks of the Group arises with the
banks and financial institutions. The Board of Directors believes
that the credit risk on short term deposits and current account
cash balances is limited because of low counterparty risk, the
counterparties being banks with high credit ratings.
All financial assets are regularly monitored. The maximum
exposure to credit risk at the reporting date is the carrying value
of financial assets disclosed below.
-- Liquidity risk
The Group manages its liquidity and funding risks by considering
cash flow forecasts and ensuring sufficient cash balances are held
within the Group to meet future needs. Prudent liquidity risk
management implies maintaining sufficient cash and marketable
securities, the availability of financing through appropriate and
adequate credit lines, and the ability of customers to settle
obligations within normal terms of credit. The Group ensures,
through forecasting of capital requirements, that adequate cash is
available.
The following table details the Group's liquidity analysis in
respect of its financial assets and liabilities:
3-12 1-5 > 5
< 3 months months years years Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- ----------- -------- ------- -------- -----------
At 30 September 2018 (unaudited)
Financial assets
Trade and other receivables
(Note 10) 3,110 - - - 3,110
Total cash at bank (Note
11) 11,818 - - - 11,818
---------------------------------- ----------- -------- ------- -------- -----------
14,928 - - - 14,928
================================== =========== ======== ======= ======== ===========
Financial liabilities
Bank borrowings (Note 13) 93,321 - - - 93,321
Interest payable on bank
borrowings 689 2,066 11,020 16,070 29,845
Trade and other payables
(Note 12) 4,843 - - - 4,843
----------------------------------
98,853 2,066 11,020 16,070 128,009
================================== =========== ======== ======= ======== ===========
At 30 September 2017 (unaudited)
Financial assets
Trade and other receivables
(Note 10) 886 - - - 886
Total cash at bank (Note
11) 43,075 - - - 43,075
---------------------------------- ----------- -------- ------- -------- -----------
43,961 - - - 43,961
================================== =========== ======== ======= ======== ===========
Financial liabilities
Bank borrowings (Note 13) - - - 45,000 45,000
Interest payable on bank
borrowings 403 1,209 6,446 11,024 19,082
Trade and other payables
(Note 12) 3,032 - - - 3,032
---------------------------------- ----------- -------- ------- -------- -----------
3,435 1,209 6,446 56,024 67,114
================================== =========== ======== ======= ======== ===========
At 31 March 2018 (audited)
Financial assets
Trade and other receivables
(Note 10) 2,125 - - - 2,125
Total cash at bank (Note
10) 48,663 - - - 48,663
---------------------------------- ----------- -------- ------- -------- -----------
50,788 - - - 50,788
================================== =========== ======== ======= ======== ===========
Financial liabilities
Bank borrowings (Note 13) - - - 95,000 95,000
Interest payable on bank
borrowings 694 2,060 13,776 14,508 31,038
Trade and other payables
(Note 12) 3,259 - - - 3,259
----------------------------------
3,953 2,060 13,776 109,508 129,297
================================== =========== ======== ======= ======== ===========
-- Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital
structure to reduce the cost of capital.
The Group considers proceeds from share issuance, bank
borrowings and retained earnings as capital. The Group's policy on
borrowing is as set out below:
o The level of borrowing will be on a prudent basis for the
asset class and will seek to achieve a low cost of funds, whilst
maintaining flexibility in the underlying security requirements and
structure of the Group.
o The Board intends to maintain a conservative level of
aggregate borrowings with a medium term maximum target of 35% of
the Group's gross assets.
22. Capital commitments
At 30 September 2018 the Group had capital commitments of
GBP10.39 million (30 September 2017: GBP15.31 million, 31 March
2018: GBP21.65 million) in relation to the cost to complete its
forward funded pre-let development assets. All commitments fall due
for settlement within one year from the date of this report.
23. Contingent liabilities
At 30 September 2018 the Group had no contingent liabilities
relating to acquisitions where contracts had been exchanged but
substantial conditions to completion remained outstanding (30
September 2017: GBP47.90 million, 31 March 2018: GBP17.33 million).
All contingent liabilities are expected to fall due for settlement
within one year from the date of this report.
24. Earnings per share
Earnings per share is calculated by dividing profit for the
period attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares in issue during the
period. Amounts shown below are both basic and diluted measures as
there were no dilutive instruments in issue throughout the current
or comparative periods.
Period from
Six months 21 December Period from
ended 30 2016 to 30 21 December
September September 2016 to 31
2018 2017 March 2018
(unaudited) (unaudited)(1) (audited)(2)
GBP000 GBP000 GBP000
---------------------------- ------------ --------------- -------------
Earnings 17,136 9,684 20,966
============================ ============ =============== =============
Weighted average number
of ordinary shares 196,881,707 104,585,387 138,615,909
---------------------------- ------------ --------------- -------------
Earnings per share
("EPS") (pence) 8.70 9.26 15.12
============================ ============ =============== =============
Adjustments to remove:
Change in fair value
of investment property
(Note 8) (8,721) (8,501) (15,056)
Gain on disposal of
investment property
(Note 8) (2,910) - (91)
---------------------------- ------------ --------------- -------------
EPRA earnings 5,505 1,183 5,819
============================ ============ =============== =============
Weighted average number
of ordinary shares 196,881,707 104,585,387 138,615,909
---------------------------- ------------ --------------- -------------
EPRA EPS (pence) 2.80 1.13 4.20
============================ ============ =============== =============
Adjustments to include:
Licence fees receivable
(Note 8) 740 373 1,188
Adjusted earnings before
realised gain on disposal
of investment property 6,245 1,556 7,007
============================ ============ =============== =============
Weighted average number
of ordinary shares 196,881,707 104,585,387 138,615,909
---------------------------- ------------ --------------- -------------
Adjusted EPS (pence) 3.17 1.49 5.05
============================ ============ =============== =============
Adjusted EPS is a performance measure used by the Board to
assess the Company's dividend payments. The metric adjusts EPRA
earnings to include licence fees receivable from developers.
The Group's accounting policy for licence fees receivable is to
recognise them as a discount to the cost of the investment
property, however the Board considers these returns an important
component of the Group's performance and key to underpinning the
Company's dividend targets and payment.
1 Reported Adjusted EPS for the period ended 30 September 2017
did not include licence fees that were accrued but not received.
The Board considers that a more appropriate basis to recognise the
licence fee, in line with the Company's peer group, is over the
period of development to which it relates and therefore the
comparative has been updated to reflect this.
2 Reported Adjusted EPS for the period ended 31 March 2018
included realised gains on disposal of investment property in the
period. The Board considers that as this capital is reinvested and
not distributed it is not appropriate to consider when assessing
the Company's dividend payment and therefore the comparative has
been updated to reflect this.
25. Net asset value per share
Net asset value per share is calculated by dividing the
consolidated net assets attributable to ordinary equity holders of
the Company by the number of ordinary shares outstanding at the
reporting date. Amounts shown below are both basic and diluted
measures as there were no dilutive instruments in issue throughout
the current or comparative periods.
At 30 September At 30 September At 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
------------------------------- ---------------- ---------------- ------------
Net asset value ("NAV") 222,471 145,071 211,981
=============================== ================ ================ ============
Number of ordinary shares 196,881,707 138,150,000 196,881,707
------------------------------- ---------------- ---------------- ------------
NAV per share (pence) 113.00 105.01 107.67
=============================== ================ ================ ============
Adjustments to calculate EPRA - - -
NAV
------------------------------- ---------------- ---------------- ------------
EPRA NAV 222,471 145,071 211,981
=============================== ================ ================ ============
Number of ordinary shares 196,881,707 138,150,000 196,881,707
------------------------------- ---------------- ---------------- ------------
EPRA NAV per share (pence) 113.00 105.01 107.67
=============================== ================ ================ ============
26. Post balance sheet events
On 11 October 2018 the Company closed an equity raise raising
gross proceeds of GBP175.25 million subject to issue costs of
GBP3.51 million and subsequently on 16 October 2018 issued
155,443,165 new ordinary shares.
On 24 October 2018 the Company announced the following
acquisitions:
-- Forward funding the pre-let development of a Travelodge
budget hotel at Edinburgh Park, Edinburgh for GBP6.6 million,
reflecting a 5.4% NIY on an unbroken 25 year lease from completion
of the building works, with five yearly CPI linked rent reviews
-- Forward funding the pre-let development of a Lidl and B&M
discount foodstore to be built at Cowdenbeath, East Fife, for
GBP8.5 million, reflecting a 6.0% NIY on a 25 year lease from
completion of the building works, with five yearly CPI linked rent
reviews
-- Jurys Inn hotel in Plymouth for GBP30 million, reflecting a
5.7% NIY with an unbroken 24 year unexpired lease term, with five
yearly uncapped RPI linked rent reviews
-- BCA car storage facility in Corby, Northamptonshire for GBP60
million, reflecting a 5.25% NIY, rising to 6% at the next rent
review in three years' time, with an unbroken 18 year unexpired
lease term, with five yearly uncapped RPI linked rent reviews
-- The Range discount store in Carlisle for GBP4.3 million,
reflecting a 6% NIY with an unbroken 20 year unexpired lease term
with fixed five yearly rental uplifts of 2% p.a.
On 13 November 2018 the Company announced the following
acquisitions:
-- A portfolio of five geographically diversified Travelodge
budget hotels for a combined total consideration of GBP45 million,
reflecting a 5.8% NIY with a WAULT to first break of 24 years, each
benefiting from five yearly uncapped RPI linked rent reviews
-- An industrial facility in Newbury fully let to Snell Advanced
Media Limited, and guaranteed by its parent Belden Inc., for
GBP17.2 million, reflecting a 5.5% NIY with a 17 year unexpired
lease term, with five yearly RPI linked rent reviews
On 13 November 2018 the Group announced that it had agreed a new
15 year debt facility with Scottish Widows of GBP75 million at a
1.55% margin p.a. to gear the net equity proceeds and enhance
investor returns.
The Investment Advisor is under offer/in solicitors' hands on a
number of additional assets to ensure deployment of the debt
proceeds in short order from the date of drawdown.
27. Controlling parties
At 30 September 2018 there was no ultimate controlling party of
the Group.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FMMZMRRDGRZM
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