TIDMSTP
RNS Number : 5270H
Stenprop Limited
04 December 2020
STENPROP LIMITED
(Registered in Guernsey with registration number 64865)
LSE share code: STP JSE share code: STP
ISIN: GG00BFWMR296
4 December 2020
STENPROP REPORTS STRONG HALF YEAR RESULTS DRIVEN BY CONTINUED
TENANT DEMAND FOR MULTI-LET INDUSTRIAL
Stenprop Limited ("Stenprop" or the "Company"), the UK multi-let
industrial property company, announces results for the six months
to 30 September 2020 which show continued progress towards the
Company's goal of being a specialist UK multi-let industrial
("MLI") REIT by March 2022, as well as a strong performance during
the period under review.
Commenting on the results Paul Arenson, CEO of Stenprop, said:
"This is a strong set of results for the Company which we have
delivered against the uncertain backdrop of the COVID-19 pandemic.
Leasing activity was robust with occupancy levels and rents
increasing quarter on quarter for the period. Our ability to market
space through our web-based portals and to enter into leases online
was a key factor in delivering these results. Even at the peak of
the lockdown we were able to quickly capture demand through our
proprietary industrials.co.uk platform and Smart Leases and utilise
the real time data it affords. This level of data analysis flagged
the post lockdown spike in occupier demand and was an important
early indicator in giving us the confidence to recommence our UK
MLI investment programme.
As a result, our portfolio transition strategy remains on track
with a number of acquisitions seeing us surpass five million sq ft
of UK MLI for the first time during the period and on target to a
75% weighting by the financial year end. In addition, we completed
the disposal of a German retail park at a healthy premium to book
value and expect further German retail asset disposals in the
coming months. This progress and the Company's performance have
given us the confidence to both maintain our fully covered dividend
for the first half of the year and confirm guidance, for the first
time, of a similar level of dividend for the next six month
period."
Operational Highlights: high rent collection with robust
occupier demand driving rental and occupancy growth
-- Rent collection for the period remained strong at 90% across
the portfolio as at 30 September 2020.
-- 18% average uplift in MLI passing rents driven by continued
strong leasing momentum with 119 new lettings/lease renewals at an
average lease term of 3.8 years, generating GBP2.3 million of
rental income per annum.
-- MLI occupancy up 2.2% to 93.3% (March 2020: 91.1%) with total occupancy at 94.4%.
-- Notable increases in traffic through our industrials.co.uk
website resulted in a 30+% increase in direct leasing calls and
total average weekly leasing calls up approximately 100% compared
to 2019.
-- Five MLI estates acquired in the six-month period for an
aggregate purchase price of GBP40.0 million, generating an
additional GBP2.5 million of rental income per annum. A further
three estates completed post period end for GBP20.2 million,
generating an additional GBP1.4 million of rental income per
annum.
-- MLI portfolio surpassed five million sq ft for the first
time, growing the portfolio value to GBP360.5 million, up from
GBP291.6 million at the same time last year and representing 62.8%
(2019: 44.6%) of the total property portfolio by value with a
target of 75% by the end of the financial year.
-- Recycling of assets on track with the sale of the Neuc lln
Carrée retail park in Berlin at a sale price EUR27.0 million, 15.4%
ahead of the year end valuation. Further German sales expected in
the second half of the financial year.
Financial Highlights: continued balance sheet strength
-- 4.4% increase in diluted IFRS net asset value per share to
GBP1.43 (31 March 2020: GBP1.37).
-- 4.3% growth in EPRA Net Tangible Assets ('NTA') per share to
GBP1.44 (31 March 2020: GBP1.38) driven by an asset management led
uplift in property values, with like-for-like total portfolio
valuation growth of 4.4%.
-- Diluted IFRS EPS was 8.38 pence (2019: 4.59 pence). Adjusted
EPS was 3.40 pence (2019: 3.41 pence).
-- Strong balance sheet with cash and cash equivalents of
GBP51.1 million, including free cash of approximately GBP40
million.
-- Group LTV was 36.6% (March 2020: 40.8%), falling to 29.6%
when applying free cash (March 2020: 27.7%). Significant headroom
exists for both interest cover and LTV loan covenants.
Maintenance of fully covered dividend
-- Fully covered dividend maintained at 3.375 pence per share
for the six months ended 30 September 2020. A scrip alternative
will be offered, which the directors intend to match through the
buyback of shares.
Six months Six months
ended ended
30 September 30 September
2020 2019
---------------------------------- ------------- -------------
Statement of comprehensive income
---------------------------------- ------------- -------------
Dividend per share 3.375p 3.375p
Diluted IFRS earnings per share 8.38p 4.59p
Adjusted earnings per share(1) 3.40p 3.41p
EPRA earnings per share 3.30p 3.41p
Net rental income GBP15.0m GBP15.8m
---------------------------------- ------------- -------------
As at As at
30 September 31 March
2020 2020
--------------------------------------------------------- ------------- -------------
Statement of financial position
--------------------------------------------------------- ------------- -------------
Portfolio valuation (incl. JV) GBP574.1m GBP532.6m
Like-for-Like(2) portfolio valuation increase for period +4.4% +2.8%
(6 months) (12 months)
MLI portfolio percentage 62.8% 58.0%
Diluted IFRS NAV per share GBP1.43 GBP1.37
EPRA NTA per share(3) GBP1.44 GBP1.38
Loan-to-value(4) 36.6% 40.8%
Loan-to-value including free cash 29.6% 27.7%
--------------------------------------------------------- ------------- -------------
1. See note 5 for reconciliation to IFRS earnings per share (and
for all future references in this report to IFRS/EPRA earnings).
Adjusted earnings per share was previously named 'Diluted adjusted
EPRA earnings per share'.
2. Adjusted for sales and acquisitions in period.
3. See note 6 for reconciliation to IFRS NAV per share (and for
all future references in this report to IFRS/EPRA NTA). EPRA NTA
assumes that entities buy and sell assets, thereby crystallising
certain levels of unavoidable deferred tax liabilities where assets
are held for sale.
4. Loan-to-value (LTV) ratio means total borrowings to gross
property valuation.
For further information:
Stenprop Limited:
+44(0)20 3918 6600
Paul Arenson ( paul.arenson@stenprop.com )
Julian Carey ( julian.carey@stenprop.com )
James Beaumont ( james.beaumont@stenprop.com )
Numis Securities Limited (Financial Adviser):
+44(0)20 7260 1000
Hugh Jonathan
Vicki Paine
FTI Consulting (PR Adviser):
+ 44(0)20 3727 1000
Richard Sunderland
Richard Gotla
Neel Bose
Stenprop@fticonsulting.com
Java Capital
+ 27 (0)11 722 3050
(JSE sponsor)
About Stenprop:
Stenprop is a UK REIT listed on the LSE and the JSE. The
objective of the Company is to deliver sustainable growing income
to its investors. Stenprop's investment policy is to invest in a
diversified portfolio of UK multi-let industrial (MLI) properties
with the strategic goal of becoming the leading MLI business in the
UK. For further information, go to www.stenprop.com .
Operating and financial review
Resilient performance in the face of Coronavirus for the six
months ended 30 September 2020.
Overview
Stenprop continued to perform well over the six months to 30
September 2020, regardless of the considerable changes we have seen
in how we live and work as a result of the COVID-19 pandemic. These
changes rapidly accelerated the adoption of e-commerce sales and
distribution channels, with communications technology allowing
businesses to operate remotely. Throughout these uncertain times,
the MLI asset class remains, or has arguably become, more
attractive to businesses and has resulted in increased tenant
demand, reduced vacancy and rental growth over the period.
This strong demand, the diversity of our occupier base and the
proactive approach we have taken in supporting our customers has
allowed us to achieve a rent collection rate of 90% for the
period.
Furthermore, we have not needed government funding or had to
furlough staff. Since the start of our financial year, we have
recruited seven additional staff members as part of the build out
of our operational platform, including in our customer engagement
team, to provide the necessary support to our customers. Our team
has been working remotely in an efficient manner since the start of
the pandemic and we have been able to continue to market space
digitally and transact online through our industrials.co.uk
platform and via Smart Leases, accelerating the adoption of this
important area of growth for our business.
The business remains in strong financial shape, with substantial
cash balances and sustained progress on the transition into a 100%
MLI company. We have maintained a covered dividend of 3.375 pence
per share and have seen strong valuation increases across the
portfolio. Cash balances have been held at appropriate levels to
provide liquidity in case of further uncertainty whilst also
allowing us to focus on growing our MLI portfolio, with GBP40.0
million of acquisitions during the period and a further GBP20.2
million acquired post period end. The MLI portfolio now comprises
over 5 million sq ft and represents 62.8% of the total portfolio at
30 September 2020, rising to 64.1% by the post period end.
The board considers it appropriate to give guidance on the
likely level of the final dividend. Based on the current financial
and operating performance, Stenprop plans to pay a further final
dividend of 3.375 pence per share. This would result in a total
dividend for the year ending 31 March 2021 of 6.75 pence per share
(31 March 2020: 6.75 pence). The board is satisfied that, once
collections return to normal, this level of dividend should be
covered by sustainable, property-related earnings. Subject to no
significant further deterioration to the conditions affecting the
wider economy, the strong cash position of the business affords
Stenprop the ability to pay this dividend and, even if uncovered,
the directors are confident that this position would only be
temporary.
At the end of the period under review, we completed the sale of
one of our Berlin daily needs retail centres (Neucölln Carrée) for
EUR27.0 million, reflecting a EUR3.6 million premium to the
year-end valuation. The sales of our other German retail properties
are all progressing well and we anticipate reporting further
completions by the end of the current financial year.
Continued strong performance from our MLI portfolio
We have seen a continued strong performance from the MLI
portfolio, both occupationally and from a rental perspective. After
the UK came out of the first lockdown, we experienced a significant
and sustained increase in tenant demand, which drove occupancy up
to 93.3% at the end of the period, from 91.1% at 31 March 2020. We
continue to capture rental reversions with like-for-like passing
rent increasing 5.2% over the previous 12 months and year-on-year
growth in ERVs of 4.2%.
Our rent collection statistics have clearly demonstrated the
resilience of the MLI asset class while at the same time also
highlighting the benefits of the diversity our customer base
affords. Quarterly rents, which comprise approximately 60% of our
MLI income, have seen collection rates of over 90% in the six-month
period. Collection rates for monthly rents have been trending
between 85-90%. It has been encouraging to note that the rate of
collections has been improving as we have progressed through the
pandemic with rents coming in earlier with each passing invoice
period.
We have experienced strong leasing activity over the period,
much of which has originated from businesses seeking to meet
requirements for growing, or new e-commerce operations. We have
seen significant benefits from our customer engagement managers,
who have proved invaluable during the pandemic crisis in keeping in
touch with our customers and facilitating transactions. Our
industrials.co.uk website has seen notable increases in traffic and
there has been a 30+% increase in both quarters in direct leasing
calls as a result. So far in 2020, our average weekly leasing calls
are up approximately 100% when compared to 2019.
Over the six months to 30 September 2020, we completed the
following leasing activities:
-- 83 new lettings and 36 lease renewals generating GBP2.27
million of contractual rental income over 329,245 sq ft.
-- 18% average uplift on the previous passing rent on new
lettings and 17% on lease renewals. The average rental incentives
for the six-month period on all new lettings and renewals was 2.7
months on an average lease term of 3.8 years.
-- As at 30 September 2020, the average passing rent of the
portfolio was GBP5.34 per sq ft, compared to an estimated rental
value of GBP5.87 per sq ft. This reflects a 9.9% premium to the
average passing rent, illustrating the reversion available to
capture within the portfolio.
-- We have also supported several customers requiring more space
during the pandemic, most notably in the second quarter at
Coningsby Business Park in Peterborough, where we let an additional
28,300 sq ft to two existing customers.
-- We completed a 10-year lease renewal at one of our urban
logistics properties in Sheffield for GBP260,000 per annum,
representing an uplift of 4% on the previous passing rent and
resulting in a 10% increase in valuation to GBP3.4 million.
During the six-month period, we acquired five estates for an
aggregate purchase price of GBP40.0 million. The five estates
comprise 479,746 sq ft with an average occupancy rate of 94% and 54
tenants and provide Stenprop with an additional GBP2.5 million of
annual rental income, averaging GBP5.55 per sq ft. After the period
end, we acquired three further estates for an aggregate purchase
price of GBP20.2 million, details of which can be found in the
subsequent events section below. The pipeline for future MLI
acquisitions is much stronger than it was during 2019 and the first
half of 2020, with a significant increase in available
opportunities. The increased pipeline of opportunities has been
coupled with significant additional appetite for industrial
property as investors seek a safe haven for their capital outside
of other traditional investment asset classes, such as retail and
office.
Industrials operating platform
During the period, we launched a new CRM system that collates,
processes and manages our sales and marketing information across
the Industrials platform. This delivered significant improvements
in customer service and process efficiencies. It has enabled us to
deploy more sophisticated and informative business intelligence
tools, which are delivering significant insight to management,
helping with decision making and business planning. For example,
the sales enquiry data we are now collecting on a daily basis
enabled the management team to identify early signs of the strong
recovery that MLI experienced after the first Coronavirus lockdown.
This gave us the confidence to reactivate our investment programme
sooner than would otherwise have been the case, thereby securing
GBP40 million of transactions in the three months to September 2020
at attractive pricing levels.
We have seen further significant uptake of our digital Smart
Lease, which has enabled Stenprop not only to continue leasing
space throughout the pandemic, but also to capture spikes in tenant
demand due to the significantly shorter transaction times versus
traditional leasing methods. Much of the reduction in vacancy we
have seen in the portfolio over the period relates to our ability
to let large numbers of smaller units more quickly, something which
historically would have been significantly constrained by time and
relative cost.
Looking forward, we have several enhancements planned for the
platform during the course of 2021, including the deployment of a
new ERP ('enterprise resource planning') system, further marketing
innovations and a new forecasting and budgeting tool. These
technological changes will be complemented by further investment in
our Industrials team, where we are seeking to put in place
additional expertise across a range of areas including customer
relationship management, product development and operations, with a
view to delivering on our core platform goals of enhancing
efficiency and growing revenue. Our investment in the platform is
designed to allow the business to scale up significantly in future
at small incremental cost.
The non-industrial portfolio
Non-MLI properties comprise an office building in Guernsey known
as Trafalgar Court, a portfolio of four care homes in Germany (held
as a joint venture), two daily needs shopping centres in Central
Berlin, five retail warehouses (let to a bike and ski business)
also in Germany, and a leisure complex in Switzerland. All of these
assets are scheduled for sale by March 2022, with the German retail
assets all currently under offer and earmarked for disposal by the
end of this financial year.
Rent collections in the period under review were unaffected in
Guernsey where we collected 100% of rents invoiced. Over the summer
we settled a 1 July 2020 rent review at GBP36.50 per sq ft,
reflecting a 0.7% uplift and delivering additional rental income of
GBP21,700 per annum. We also completed a lease renewal on a small
office suite at an annual rent of GBP9,423 per annum, reflecting a
4.7% uplift on previous passing rent.
In Germany, where rents are invoiced monthly, we achieved
collection rates of just under 90% in April and May, which
subsequently rose to an average of 98% for the second quarter,
ending September at 99%. Rent collections at our Care Homes
portfolio were 100% over the period. At the start of November,
Germany entered a month-long 'lockdown light', shutting
restaurants, bars, gyms and entertainment venues, whilst leaving
open schools, shops and workplaces. As with the UK, we await
developments to see whether restrictions are lifted at the start of
December.
Our property in Switzerland is let to a gym and wellness centre,
which, after two months of closure due to COVID-19, reopened for
business on 11 May 2020. We agreed a temporary deferral of 50% of
rents to support the tenant, after which collections retuned to
100% from the month of September onwards.
At the end of the period we completed the sale of Neucölln
Carrée retail park in Berlin at a sale price of EUR27.0 million,
15.4% ahead of the year-end valuation and generated net sales
proceeds after costs, tax and debt repayments of just over EUR15
million. The sales of the two remaining Berlin daily needs centres
and five retail warehouses (let to a bike and ski business) are
progressing well.
Transition plan update
Stenprop continues to deliver on its plan to transition the
portfolio to 100% MLI by March 2022, with the aim of becoming the
UK's leading MLI business. As at 30 September 2020, MLI represented
62.8% of the property portfolio, an increase from 52% a year
earlier. As at the date of signing these accounts, the MLI
percentage had risen to 64.1% as a result of post period end
transactions. We are targeting 76% MLI by 31 March 2021, following
the sale of our German retail portfolio and further acquisitions of
GBP30.0 million of UK MLI.
We have made strong progress against our plan in the period,
with the acquisition of five MLI estates for an aggregate purchase
price of GBP40.0 million and the first disposal of our German
retail assets. Following a quiet first quarter during which we
preserved capital in the face of a national lockdown, and made only
one acquisition, we then transacted four acquisitions in the second
quarter of 2020, having identified an opportunity to move quickly
at a time of continued market uncertainty on the back of strong
demand-side data emanating from the Industrials platform. We are
confident that these acquisitions will look increasingly attractive
as a long term solution to COVID-19 emerges and investors see
market conditions starting to return to normal.
Reducing leverage to below 40% was a key component of the first
phase of our transition and, having achieved this in March 2020,
the board of directors believe that operating at this level remains
an appropriate strategy.
Environmental, social, and governance update
We have seen an increasing awareness in the market place
regarding responsible investment and management within business
practises. It is now widely accepted that Environmental, Social
& Governance ("ESG") factors are integrated into an
organisation's strategy focusing on the most material issues, with
a range of ESG metrics collected and reported on. Complementing
these are ESG policies which are accessible to all. In 2020, we
created an ESG policy to describe the application of responsible
investment and management into our day to day processes including
origination, due diligence, approval, asset and operational
management and reporting.
Stenprop is committed to establishing a broad set of
environmental, social and governance initiatives. We have been
developing our ESG strategy over the course of 2020 in partnership
with a specialist sustainability consultancy firm, Carbon
Intelligence. This has involved undertaking a detailed materiality
assessment, engagement with stakeholders from across the
organisation and developing a number of targets. An ESG steering
group will be accountable for the delivery of the strategy and will
ensure the fundamentals of the ESG policy are an integral part of
the Group's ethos. With the ESG policy finalised and strategy
nearing completion, we aim to align with a number of reporting
frameworks in 2021 onwards, starting with the European Public Real
Estate Association ('EPRA') best practice sustainability award and
carbon emissions data, while continuing to communicate and evolve
our ESG vision.
Financial review
Earnings
For the six months to 30 September 2020, basic earnings
attributable to ordinary shareholders rose significantly to GBP24.0
million (2019: GBP13.2 million), equating to 8.38 pence on a
diluted IFRS EPS basis (2019: 4.59 pence). The increase was driven
by strong valuation uplifts in the period.
Net rental income from the MLI portfolio rose 17.1% to GBP9.6
million, representing 64% of total net rental income (2019: GBP8.2
million; 52%), with total net rental income at GBP15.0 million for
the period, slightly down on the GBP15.8 million reported for the
same period last year.
The period to 30 September 2020 has seen rental income
collection rates of approximately 90% across the portfolio.
Net rental income is presented after provision for expected
credit losses. Provisions of GBP1.5 million were made for expected
losses related to the six month period under review, compared with
GBP0.5 million for the same period last year, the increase being
due to the impact of the Covid-19 pandemic. The total aggregate
provision for expected credit losses stood at GBP2.5 million as at
30 September 2020 (31 March 2020: GBP1.0 million). Net management
fee income totalled GBP0.7 million compared with GBP0.4 million a
year earlier.
Operating expenses were GBP4.8 million (2019: GBP4.6 million).
This included approximately GBP0.5 million of costs in relation to
the ERP operating platform project. The implementation of this
platform is a key part of our strategy and will deliver a unified
system which can scale efficiently as Stenprop grows its MLI
operating business, improving efficiencies and capturing economies
of scale.
In accordance with reporting standards widely adopted across the
real estate industry in Europe, the directors feel it is
appropriate and useful, in addition to providing the IFRS disclosed
earnings, to also disclose EPRA earnings and adjusted earnings (in
previous reports referred to as 'diluted adjusted EPRA earnings').
Adjusted earnings attributable to shareholders were GBP9.7 million
(2019: GBP9.8 million). The adjusted EPS was 3.40 pence (2019: 3.41
pence).
Stenprop has considered the adoption of further EPRA metrics and
in line with best practice believes it useful to disclose the EPRA
cost ratio (including direct vacancy costs). The EPRA cost ratio
includes all administrative and operating expenses in the IFRS
statements (including share of joint ventures) and for the period
ended 30 September 2020 was 38.8% (2019: 38.9%). However, the
directors do not believe that this cost ratio is representative of
where the business will be in the future, as the envisaged cost
savings from our operating platform are not yet being maximised.
This arises from the fact that we continue to invest in the
platform and are still transitioning towards having a 100% MLI
portfolio, at which point we will begin to see the benefits flow
through. We are investing now to grow a platform capable of dealing
with bigger volumes and servicing a much larger portfolio with
small incremental costs.
Dividends
On 2 December 2020, the directors declared an interim dividend
of 3.375 pence per share (2019: 3.375 pence per share). The
dividend is fully covered by adjusted earnings of 3.40 pence per
share. Part of the distribution will be a Property Income
Distribution (known as a PID) which, subject to certain exemptions,
will attract UK withholding tax. The directors intend to offer
shareholders the option to receive all or part of their dividend
entitlement by way of a scrip issue of Stenprop ordinary shares or
in cash. A further announcement informing shareholders of the
salient dates and tax treatment will be released in due course.
In respect of this dividend, given the Company's share price
which stands at a discount relative to net asset value, the
directors intend to match any scrip scheme take up through the
buyback of shares to mitigate the dilutive effect that would
otherwise occur from the issuance of ordinary shares.
Net asset value
Driven by a GBP20.9 million increase in the portfolio valuation,
IFRS basic and diluted net asset value ('NAV') per share grew 4.4%
and 4.3% to GBP1.44 and GBP1.43 respectively as at 30 September
2020 (31 March 2020: GBP1.38 and GBP1.37 respectively).
Following the October 2019 update to EPRA's Best Practices
Recommendations Guidelines, Stenprop has adopted EPRA Net Tangible
Assets ('NTA') as our reporting measure, replacing our previously
reported EPRA net asset value. This measure assumes that entities
buy and sell assets, thereby crystallising certain levels of
unavoidable deferred tax liabilities.
The EPRA NTA metric is aligned with IFRS NAV in that it includes
deferred tax liabilities with regards to properties classified as
held for sale. The EPRA NTA per share at 30 September 2020 was
GBP1.44. This represents a 4.3% increase on the EPRA NTA per share
of GBP1.38 at 31 March 2020. A reconciliation of this change is
shown in note 6 to the accounts.
Portfolio valuation
Including the Group's share of joint ventures, its investment
properties were valued at GBP574.1 million at 30 September 2020 (31
March 2020: GBP532.6 million), of which GBP101.1 million were
classified as assets held for sale (31 March 2020: GBP109.1
million). As at the period end, assets held for sale consisted of
two Berlin daily needs retail centres (anchored by strong food
retailers), five German retail warehouses (let to a bike and ski
business) and the sole remaining Swiss property (let to a wellness
centre/health club). On a like-for-like basis, excluding the impact
of additions and disposals in the period, the valuation of the
portfolio since year end increased by 4.4%, of which 0.6% resulted
from currency movements.
Market Net initial
value yield
Portfolio Annualised
30 September by market gross rental (weighted Voids by
Combined portfolio 2020 value Property Area income average) area
(including share
of joint ventures) (GBP'000) (%) (number) (sq m) (GBP'000) (%) (%)
----------------------------- -------------- ---------- ---------- -------- ------------- ----------- --------
Investment properties
UK multi-let industrials 360,510 62.8 75 465,122 26,107 6.34 6.7
UK non-multi-let industrials 77,250 13.5 6 32,399 6,076 7.12 0.1
----------------------------- -------------- ---------- ---------- -------- ------------- ----------- --------
Subtotal 437,760 76.3 81 497,521 32,183 6.48 6.2
Assets held for sale
Germany 86,765 15.1 7 38,725 4,582 4.53 1.3
Switzerland 14,347 2.5 1 6,974 1,043 5.34 0.0
----------------------------- -------------- ---------- ---------- -------- ------------- ----------- --------
Total - wholly owned 538,872 93.9 89 543,220 37,808 6.14 5.8
----------------------------- -------------- ---------- ---------- -------- ------------- ----------- --------
Share of joint ventures 35,271 6.1 4 19,330 2,551 6.13 0.0
----------------------------- -------------- ---------- ---------- -------- ------------- ----------- --------
Total 574,143 100.0 93 562,550 40,359 6.14 5.6
----------------------------- -------------- ---------- ---------- -------- ------------- ----------- --------
United Kingdom: MLI and urban logistics portfolio
The UK MLI portfolio was independently valued at GBP360.5
million and represents 62.8% of the total portfolio. On a
like-for-like basis, after excluding the five MLI estates acquired
in the six-month period to 30 September 2020, the valuation of the
UK portfolio increased by GBP11.4 million, or 3.7%, over the
valuation at 31 March 2020 (2019: 2.5%).The increase reflects the
strong income performance over the period, which is in no small
part due to the active asset management employed by the Stenprop
team over a challenging period.
Stenprop acquired five MLI estates for a purchase price of
GBP40.0 million excluding costs. These properties were
independently valued at GBP40.2 million at 30 September 2020.
The MLI portfolio now comprises 75 estates and more than five
million sq ft of lettable space.
The five urban logistics properties were valued at GBP21.1
million at the period end (March 2020: GBP21.4 million). It is the
intention to retain these industrial properties as they fit well
with our MLI strategy.
United Kingdom: other
The remaining UK investment comprises an office building known
as Trafalgar Court in Guernsey, which was valued at GBP56.2 million
against the year-end valuation of GBP57.5 million. The 2.3%
decrease broadly reflects the diminishing unexpired lease term at
the property, which still remains at 7.3 years. It is let to a
strong tenant (which has sub-let a significant portion of its
space) but is situated in an investment market underpinned by
demand for secure long income assets.
Germany
The German portfolio (excluding the Care Homes portfolio) was
classified as held for sale in the financial statements. All seven
properties are either under offer or in legals and have therefore
been valued at sale price. Given the advanced state of the sales,
associated selling costs have been provided. The two remaining
Berlin daily need retail centres are valued at EUR68.3 million, an
increase of EUR11.1 million, or 19%, on the valuation at 31 March
2020.
The five retail warehouse properties let to a bike and ski
business were valued at EUR27.0 million, an increase of EUR1.0
million from the valuation at 31 March 2020.
The sale of the Neucölln Carrée retail park in Berlin completed
on 30 September 2020 having been notarised on 15 July 2020. The
disposal price of EUR27.0 million reflected a EUR3.6 million
premium (15.4%) to the 31 March 2020 book value.
Switzerland
The final Swiss property, Lugano, which is held for sale, was
independently valued at CHF17.0 million (March 2020: CHF17.0
million).
Joint ventures
The Care Homes portfolio in Germany, comprising four care homes,
was independently valued at EUR39.0 million, a decrease of 3.0% on
the 31 March 2020 valuation of EUR40.2 million.
Debt
The acquisition of the five MLI estates was completed from free
cash reserves and no new debt was drawn in the period. The disposal
of the Neucölln Carrée retail park in Berlin resulted in a
reduction of associated debt of
GBP8.2 million (EUR9.0 million).
We are in the process of refinancing the recent MLI acquisitions
(including the acquisitions completed post period end, further
detailed in the subsequent events note below). The debt will be
added to an existing facility maturing in February 2024 and, given
the current low interest rate environment, we anticipate completing
this at an attractive level of pricing. The drawdown is expected to
generate approximately GBP22 million of proceeds that will be used
to acquire further MLI estates as we progress into 2021.
The Group considers it appropriate to maintain its level of
borrowings at no more than 40% of its gross asset value. Reductions
to this level of borrowing may be considered by the directors after
taking into account prevailing market conditions and after
consideration of an appropriate level of gearing for the asset
class.
The value of the property portfolio as at 30 September 2020,
including the Group's share of joint venture properties and assets
held for sale, was GBP574.1 million. Senior bank debt at the same
date was GBP210.0 million, resulting in an average loan-to-value
ratio of 36.6% (31 March 2020: 40.8%). Cash reserves, including
cash held in liquidity funds, totalled GBP51.1 million at 30
September 2020 and included free cash of GBP40.0 million.
When free cash is included in this measure, our overall LTV was
29.6%.
The rolling credit facility provided by Investec Bank Plc to
bridge the potential funding gap between property acquisitions and
sales matures in April 2021. The facility was not utilised in the
six-month period and was undrawn as at 30 September 2020.
The weighted average debt maturity stood at 2.3 years at 30
September 2020 compared with 2.7 years at 31 March 2020. Excluding
the Swiss property at Lugano, which is designated as held for sale,
annual amortisation payments are GBP0.7 million (31 March 2020:
GBP0.7 million) and the all-in contracted weighted average cost of
debt was 2.51% at the period end, compared with 2.62% at 31 March
2020.
As previously reported, and in addition to the refinancing of
the recent MLI acquisitions, we have also been investigating
refinancing a large part of our existing MLI portfolio on a
seven-year term with institutional lenders. We approached a number
of potential lenders and received positive responses with
attractive terms offered by those keen to increase their exposure
in the sector. Whilst the market continues to move as a result of
the pandemic uncertainty, we expect to secure an all-in interest
rate of under 2% (currently 3.19%) on the GBP66.5 million tranche
of debt. Completion of this process is expected by the end of the
calendar year and will extend our overall debt maturity to
approximately 3.8 years, whilst also reducing our overall cost of
debt. Our debt maturity profile will further improve following the
sale of the German properties. As at 30 September 2020, these seven
properties had a loan maturity of approximately 1.2 years, having
been kept deliberately short in recognition of our intention to
dispose of these assets.
Stenprop maintains significant headroom cover on both its
interest cover and LTV loan covenants. Loan facilities subject to
LTV covenants allow for an average 34% reduction in values. Loan
facilities subject to debt service cover ratio covenants allow for
an average reduction in net rents of 64%. Stenprop continues to
enjoy an open and supportive relationship with its lenders.
The Group mitigates interest rate risk through the use of
derivative instruments such as interest rate swaps or interest rate
caps in respect of at least 75% of its interest rate exposure.
Foreign exchange
At 30 September 2020, approximately 23.9% of Stenprop's net
asset value and 16.8% of its net rental income are denominated in
euros. As we progress the German property sales, targeted for 31
March 2021, the impact of the GBP:EUR exchange rate will decrease.
At the start of April 2020, the GBP:EUR rate was GBP1.00:EUR1.1249.
The euro subsequently strengthened and the exchange rate at 30
September 2020 was GBP1.00:EUR1.0978.
Stenprop matches the currency of borrowings to the underlying
asset. Where the timing and amount of a liability has been
determined, and where it will be met from the proceeds of a sale,
which is also known in terms of timing and amount, the currency
risk is managed through hedging instruments.
Board appointments and changes to board committees
On 4 November 2020, Stenprop announced that it had further
strengthened its board of directors (the 'Board') with the
appointments of Richard Smith, chief executive officer of The Unite
Group plc, and Louisa Bell, the former UK country manager of Avis
Budget Group International, as independent non-executive directors.
They bring with them a range of complementary expertise and
experience in operational management and business transformation as
well as leadership in the real estate and transport industries.
On 2 December 2020, various changes to the composition of the
Board committees were made. Louisa Bell was appointed to the audit
and risk committee, the remuneration committee and the social and
ethics committee. Richard Smith was appointed to the audit and risk
committee and the remuneration committee. Richard Grant stood down
from the audit and risk committee and the social and ethics
committee. Patsy Watson was appointed to the social and ethics
committee. Finally, Julian Carey, Managing Director, and James
Wakelin, Head of debt and special projects, were appointed as
executive members to the social and ethics committee whilst Sarah
Bellilchi stood down from the committee. Following these changes,
the composition of the committees is as follows:
Audit and risk committee: Phil Holland (chair), Paul Miller,
Louisa Bell and Richard Smith
Remuneration committee: Paul Miller (chair), Richard Grant, Phil
Holland, Louisa Bell and Richard Smith
Nomination committee: Richard Grant (chair), Paul Miller, Phil
Holland and Patsy Watson
Social and ethics committee: Phil Holland (chair), Patsy Watson,
Louisa Bell, Julian Carey and James Wakelin
With the appointments of Richard and Louisa and the changes to
the Board committees membership described above, Stenprop is now
fully compliant with the provisions of the UK Corporate Governance
Code and the King IV Report on Corporate Governance for South
Africa in terms of the composition of the Board and its committees
and the balance of independent and non-independent directors on the
Board.
Subsequent events
MLI assets to the value of GBP20.2 million have been acquired
since the reporting date. On 10 November 2020 and 13 November 2020
respectively, Stenprop acquired two separate industrial estates
known as Mandale in Durham for GBP11.2 million and Phoenix
Industrial Estate in West Bromwich for GBP2.8 million. On 3
December 2020, an industrial estate known as The Levels, Capital
Business Park in Cardiff was acquired for GBP6.2m.
Conclusion
In the period under review, Stenprop has delivered solid results
and maintained a covered dividend of 3.375 pence per share. Our
balance sheet remains strong and we have proven to be well
positioned to deal with recent challenges. We have focused on
assisting our customers and are evolving our management platform,
which, even in its embryonic stages, has proved exceptionally
useful in navigating the recent disruption. As stated above, based
on current expectations Stenprop is guiding to pay a further final
dividend of 3.375p per share, maintaining the full year dividend at
6.75p per share.
Outlook
The MLI sector has displayed its strength over the last six
months and we have seen a material increase in demand from a new
and ever diversifying occupier base. The pandemic has accelerated
the adoption of e-commerce and the importance of regional
distribution channels, which are served well by businesses
operating within MLI property. Our own MLI portfolio has
experienced increased tenant demand, reduced vacancy, as well as
growth in rental values. We have been further encouraged by the
high levels of rent collections, which have been trending towards
90%.
We are pleased that the sales of our remaining German properties
are progressing well. These sales will generate significant net
proceeds for further MLI acquisitions whilst also providing
substantial cash reserves should we experience prolonged market
uncertainty. During the period, we have acquired GBP40 million of
MLI estates and a further GBP20.2 million in the post period
end.
We remain on track to achieve our goal of transitioning the
portfolio to 75% MLI by the end of the financial year, although we
are monitoring current external events closely and recognise that
significant uncertainty will continue. We are also executing on the
opportunity to refinance some of our short-term debt on the MLI
portfolio onto a longer-term facility at significantly lower rates.
Debt maturity will further extend following the sale of our German
held for sale assets.
The current low interest rate environment is likely to remain
for some considerable time, which will favour high yielding assets
with sustainable and growing rental flows. Notwithstanding the
recent positive news regarding a vaccine, we are very aware of the
continued threat from the pandemic and the additional uncertainty
regarding Brexit. We approach the second half of the year with
cautious optimism and take comfort from the fact that we have a
strong balance sheet, a clearly defined growth strategy in a
resilient asset class and a strong team who are working hard to
deliver our goals.
Statement of directors' responsibilities
Statement of principal risks and uncertainties
Stenprop is a listed property investment company with a
diversified portfolio of commercial property currently located in
the United Kingdom and Germany and with one property in
Switzerland. Its principal risks are therefore related to the
commercial property market in general and its investment
properties. Other risks faced by the Group include strategy,
financial, operational, and emerging risks. The audit and risk
committee assists the board with its responsibilities for managing
risk. The principal risks currently facing the business are
described in more detail under the heading 'risk management' within
the Company's annual report for the year ended 31 March 2020. The
Group's principal risks and uncertainties have not changed
materially since the date of the annual report.
Statement of going concern
At the date of signing these condensed consolidated financial
statements, the Group has positive operating cash flow forecasts
and positive net assets. Management have carefully assessed the
impact of the market uncertainties arising from both Brexit and the
COVID-19 pandemic, on the entity's net assets, liquidity and
ability to continue as a going concern for the foreseeable future.
Given the current market conditions and negative economic outlook,
management applied prudent assumptions to the Group's cash flow
forecast, debt refinancing and loan covenant sensitivities for the
18 months to 31 March 2022. The test concluded that the Group would
have positive liquid assets and be able to meet its obligations as
they fall due.
In light of this review and the significant liquid assets held
by the Group, management are satisfied that the Group has access to
adequate resources to continue in operational existence for a
period of at least 12 months from the date of these condensed
consolidated financial statements.
The directors believe that it is therefore appropriate to
prepare the accounts on a going concern basis.
Statement of directors' responsibilities in respect of the
interim report
The directors confirm that to the best of their knowledge:
i. the condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 'Interim Financial
Reporting';
ii. the operating and financial review together with the
statement of principal risks and uncertainties above include a fair
review of the information required by the Disclosure Guidance and
Transparency Rules ('DTR') 4.2.7R, being an indication of important
events that have occurred during the first six months of the
financial year, a description of principal risks and uncertainties
for the remaining six months of the year, and their impact on the
condensed set of consolidated interim financial statements; and
iii. the operating and financial review together with the
condensed set of consolidated interim financial statements include
a fair review of the information required by DTR 4.2.8R, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Group during
that period, and any changes in the related party transactions
described in the last annual report that could do so.
The financial statements are published on the Company's website,
Stenprop.com. A list of the current directors of Stenprop can be
found on the Company's website. Legislation in Guernsey governing
the preparation and dissemination of the interim financial
statements may differ from legislation in other jurisdictions.
Approved by the board on 3 December 2020 and signed on its
behalf:
Paul Arenson
Chief Executive Officer
James Beaumont
Chief Financial Officer
Independent review report to Stenprop Limited
Introduction
We have been engaged by the Group to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 September 2020 which comprises 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 statement of cash flows and the related explanatory
notes.
We have read the other information contained in the half-yearly
financial 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 half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the listing requirements of the Johannesburg Stock Exchange and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority. As disclosed in note 1, the annual
financial statements of the group are prepared in accordance with
International Financial Reporting Standards (IFRSs) as issued by
the International Accounting Standards Board ("IASB"), the
financial reporting guides issued by the Accounting Practices
Committee of the South African Institute of Chartered Accountants
(the "SAICA Reporting Guides") and the financial reporting
pronouncements issued by the Financial Reporting Standards Council
of South Africa (the "FRSC Pronouncements"). The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting", as issued by the IASB,
the Johannesburg Stock Exchange Listings Requirements and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the 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 half-yearly financial report for the six months ended 30
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, as issued by
the IASB, the Johannesburg Stock Exchange Listings Requirements and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of the Johannesburg Stock Exchange Listings Requirements
and 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.
BDO LLP
Chartered Accountants
55 Baker Street
London W1U 7EU
United Kingdom
3 December 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2020
30 September 30 September
2020 (unaudited) 2019 (unaudited)
Note GBP'000 GBP'000
-------------------------------------------------------- ---- ----------------- -----------------
Continuing operations
----------------- -----------------
Revenue 21,122 21,065
Property expenses (6,073) (5,259)
================= -----------------
Net rental income 3 15,049 15,806
-------------------------------------------------------- ---- ----------------- -----------------
Management fee income 706 440
Operating costs 4 (4,752) (4,557)
-------------------------------------------------------- ---- ----------------- -----------------
Net operating income 11,003 11,689
-------------------------------------------------------- ---- ----------------- -----------------
Fair value gain on investment properties 8 18,651 4,804
Gain/(loss) on disposal of property 78 (119)
(Loss)/income from joint ventures (721) 1,320
Net foreign exchange gain/(loss) 66 (68)
-------------------------------------------------------- ---- ----------------- -----------------
Profit from operations 29,077 17,626
-------------------------------------------------------- ---- ----------------- -----------------
Net loss from fair value of derivative financial
instruments (814) (953)
Interest income 212 223
Finance costs (3,039) (3,471)
-------------------------------------------------------- ---- ----------------- -----------------
Profit for the period before taxation 25,436 13,425
-------------------------------------------------------- ---- ----------------- -----------------
Tax expense (1,669) (435)
-------------------------------------------------------- ---- ----------------- -----------------
Profit for the period from continuing operations 23,767 12,990
-------------------------------------------------------- ---- ----------------- -----------------
Discontinued operations
Gain/(loss) for the period from discontinued operations 10 199 (49)
-------------------------------------------------------- ---- ----------------- -----------------
Profit for the period 23,966 12,941
-------------------------------------------------------- ---- ----------------- -----------------
Profit attributable to:
Equity holders 23,972 13,157
Non-controlling interest derived from continuing
operations (6) (216)
Other comprehensive income
Items that may be reclassified subsequently to profit
or loss:
Foreign currency translation reserve 1,968 4,860
-------------------------------------------------------- ---- ----------------- -----------------
Total comprehensive income for the period 25,934 17,801
-------------------------------------------------------- ---- ----------------- -----------------
Total comprehensive income attributable to:
----------------- -----------------
Equity holders 25,940 18,017
Non-controlling interest (6) (216)
================= -----------------
Earnings per share Pence Pence
From continuing operations
EPS 5 8.38 4.67
-------------------------------------------------------- ---- ----------------- -----------------
Diluted EPS 5 8.31 4.61
-------------------------------------------------------- ---- ----------------- -----------------
From continuing and discontinued operations
EPS 5 8.45 4.65
-------------------------------------------------------- ---- ----------------- -----------------
Diluted EPS 5 8.38 4.59
-------------------------------------------------------- ---- ----------------- -----------------
Condensed consolidated statement of financial position
as at 30 September 2020
30 September 31 March
2020 (unaudited) 2020 (audited)
Note GBP'000 GBP'000
------------------------------------------------------- ---- ----------------- ---------------
ASSETS
Non-current assets
Investment properties 8 437,760 387,761
Investment in joint ventures 9 115 781
Investment in joint ventures bond 9 15,665 15,336
Other debtors 12 13,334 13,523
Right-of-use asset 390 491
------------------------------------------------------- ---- ----------------- ---------------
467,264 417,892
------------------------------------------------------- ---- ----------------- ---------------
Current assets
Cash and cash equivalents 40,982 84,453
Trade and other receivables 12 10,359 8,249
Other investments 8,000 -
Assets classified as held for sale 10 104,741 111,857
------------------------------------------------------- ---- ----------------- ---------------
164,082 204,559
------------------------------------------------------- ---- ----------------- ---------------
Total assets 631,346 622,451
------------------------------------------------------- ---- ----------------- ---------------
LIABILITIES
Current liabilities
Bank loans 11 4,420 -
Taxes payable 2,095 7,241
Derivative financial instruments 51 -
Accounts payable and accruals 18,459 16,689
Provisions 906 3,179
Lease liability 327 302
Liabilities directly associated with assets classified
as held for sale 10 42,122 47,310
------------------------------------------------------- ---- ----------------- ---------------
68,380 74,721
------------------------------------------------------- ---- ----------------- ---------------
Non-current liabilities
Bank loans 11 150,033 154,171
Derivative financial instruments 2,890 2,001
Lease liability 143 222
------------------------------------------------------- ---- ----------------- ---------------
153,066 156,394
------------------------------------------------------- ---- ----------------- ---------------
Total liabilities 221,446 231,115
------------------------------------------------------- ---- ----------------- ---------------
Net assets 409,900 391,336
------------------------------------------------------- ---- ----------------- ---------------
EQUITY
Capital and reserves
Share capital and share premium 322,993 322,993
Equity reserve (12,327) (14,360)
Retained earnings 72,123 57,490
Foreign currency translation reserve 27,086 25,118
------------------------------------------------------- ---- ----------------- ---------------
Total equity attributable to equity shareholders 409,875 391,241
------------------------------------------------------- ---- ----------------- ---------------
Non-controlling interest 25 95
------------------------------------------------------- ---- ----------------- ---------------
Total equity 409,900 391,336
------------------------------------------------------- ---- ----------------- ---------------
GBP GBP
Net asset value per share 6 1.44 1.38
Diluted net asset value per share 6 1.43 1.37
------------------------------------------------------- ---- ----------------- ---------------
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2020 (unaudited)
Foreign
Share capital currency Attributable Non-controlling
and share Equity Retained translation to equity interest
premium reserve earnings reserve shareholders Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------- -------- --------- ------------ ------------- --------------- ------------
Balance at 1 April
2020 322,993 (14,360) 57,490 25,118 391,241 95 391,336
Profit for the year - - 23,972 - 23,972 (70) 23,902
Total other
comprehensive
income for the period - - - 1,968 1,968 - 1,968
Equity-settled
share-based
payments - 205 211 - 416 - 416
Repurchase of own
shares - (2,246) - - (2,246) - (2,246)
Ordinary dividends - 4,074 (9,550) - (5,476) - (5,476)
---------------------- ------------- -------- --------- ------------ ------------- --------------- ------------
Balance at 30
September
2020 322,993 (12,327) 72,123 27,086 409,875 25 409,900
---------------------- ------------- -------- --------- ------------ ------------- --------------- ------------
Balance at 1 April
2019 322,993 (15,708) 60,952 21,014 389,251 2,969 392,220
Profit for the year - - 13,157 - 13,157 (129) 13,028
Total other
comprehensive
income for the period - - - 4,860 4,860 - 4,860
Equity-settled
share-based
payments - 630 - - 630 - 630
Repurchase of own
shares - (2,715) - - (2,715) - (2,715)
Deferred tax on
share-based
payment transactions - - 43 - 43 - 43
Ordinary dividends - 2,819 (9,478) - (6,659) - (6,659)
---------------------- ------------- -------- --------- ------------ ------------- --------------- ------------
Balance at 30
September
2019 322,993 (14,974) 64,674 25,874 398,567 2,840 401,407
---------------------- ------------- -------- --------- ------------ ------------- --------------- ------------
Condensed consolidated statement of cash flows
for the six months ended 30 September 2020
30 September 30 September
2020 (unaudited) 2019 (unaudited)
Note GBP'000 GBP'000
-------------------------------------------------------------------------- ---- ----------------- -----------------
Operating activities
Profit from operations from continuing operations 29,077 17,626
Profit from operations from discontinued operations 319 32
-------------------------------------------------------------------------- ---- ----------------- -----------------
29,396 17,658
Depreciation 136 114
Increase in fair value of investment property (18,637) (4,883)
(Gain)/loss on disposal of property (92) 119
Loss/(income) from joint ventures 721 (1,319)
Management fee expenses 38 -
Share-based payments 416 630
Profit on disposal of subsidiaries (134) -
Exchange rate (gain)/loss (66) 68
Increase in trade and other receivables (1,969) (656)
Increase/(decrease) in trade and other payables 126 (1,861)
-------------------------------------------------------------------------- ---- ----------------- -----------------
Cash generated by operations 9,935 9,870
Interest paid (2,595) (2,988)
Interest received 113 870
Net tax paid (183) (509)
-------------------------------------------------------------------------- ---- ----------------- -----------------
Net cash from operating activities 7,270 7,243
-------------------------------------------------------------------------- ---- ----------------- -----------------
Contributed by: Continuing operations 7,073 6,959
Discontinued operations 197 284
Investing activities
Purchase of investment property 8 (41,871) (25,644)
Capital expenditure 8 (296) (5,389)
Proceeds on disposal of investment property, net
of selling costs 23,624 3,531
Tax paid on disposal of property (7,199) -
Receipt of loans advanced under the Share Purchase
Plan 345 -
Other investment - Cash and short-maturity bonds
on call (8,000) -
-------------------------------------------------------------------------- ---- ----------------- -----------------
Net cash used in investing activities (33,397) (27,502)
-------------------------------------------------------------------------- ---- ----------------- -----------------
Financing activities
Dividends paid (5,447) (6,136)
Withholding tax on dividends paid - (295)
Repayment of borrowings (8,266) (4,740)
Lease payments (116) (145)
Repurchase of shares (2,246) (2,715)
Financing fees paid (79) (229)
-------------------------------------------------------------------------- ---- ----------------- -----------------
Net cash used in financing activities (16,154) (14,260)
-------------------------------------------------------------------------- ---- ----------------- -----------------
Net decrease in cash and cash equivalents (42,281) (34,519)
Effect of foreign exchange (losses)/gains (201) 222
Cash and cash equivalents at beginning of the period 85,588 59,219
-------------------------------------------------------------------------- ---- ----------------- -----------------
Cash and cash equivalents at end of the period 43,106 24,922
-------------------------------------------------------------------------- ---- ----------------- -----------------
Contributed by: Continuing operations 40,982 21,012
Discontinued operations and assets held for
sale 2,124 3,910
-------------------------------------------------------------------------- ---- ----------------- -----------------
Funds totalling GBP6.5 million were restricted at 30 September
2020 (2019: GBP4.9 million).
Notes to the condensed consolidated interim financial
statements
1 Basis of preparation
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards
('IFRS') as issued by the International Accounting Standards Board
('IASB'). These unaudited condensed consolidated interim financial
statements for the six months ended 30 September 2020 have been
prepared in accordance with IAS 34 'Interim Financial Reporting',
the JSE Listings Requirements, the Disclosure and Transparency
Rules of the UK's FCA, applicable Guernsey law, the financial
reporting guides issued by the Accounting Practices Committee of
the South African Institute of Chartered Accountants (the 'SAICA
Reporting Guides') and the financial reporting pronouncements
issued by the Financial Reporting Standards Council of South Africa
(the 'FRSC Pronouncements').
These condensed consolidated interim financial statements have
been reviewed, not audited. The auditor's review opinion is
included in this report.
These condensed consolidated financial statements have been
prepared by, and are the responsibility of, the directors of
Stenprop.
The accounting policies and methods of computation are
consistent with those applied in the preparation of the annual
financial statements for the year ended 31 March 2020, which were
audited and reported on by the Group's external auditor. The
consolidated annual financial statements for the year ended 31
March 2020 are available on the Company's website:
stenprop.com.
The condensed consolidated financial statements are presented in
GBP (Pounds Sterling).
Going concern
At the date of signing these condensed consolidated financial
statements, the Group has positive operating cash flow forecasts
and positive net assets. Management have carefully assessed the
impact of the market uncertainties arising from both Brexit and the
outbreak of the COVID-19 pandemic, on the Group's net assets,
liquidity and ability to continue as a going concern for the
foreseeable future. Given the current market conditions and
negative economic outlook, management applied prudent assumptions
to the Group's cash flow forecast for the 18 months to 31 March
2022, including a 25% deterioration in rental income cash receipts
until March 2021 for the UK and German portfolio and 50% for the
Swiss portfolio, after which it is assumed that rental receipts
will return to normal levels. The test concluded that even in this
scenario the Group would have positive liquid assets and be able to
meet its obligations as they fall due.
Debt refinancing and sensitivities to loan covenants were
assessed in detail, as well as the Company's REIT obligations.
Despite the disruption to the economy caused by COVID-19,
management do not expect the risk of default to have increased.
Lenders have been guided by the government to take a pragmatic view
and to consider prepayment possibilities, equity cures and waivers
of covenants so that borrowers who do breach their covenants as a
direct link to the pandemic should not automatically trigger a
default event. While our projections indicate we will remain within
our limits and not breach covenants, there is additional assurance
that banks are heavily encouraged to adopt this pragmatic approach.
In addition, the Group maintains strong relationships with our
facility providers and currently have significant headroom for both
interest cover and LTV loan covenants. Notwithstanding this
assumption, the Group would have cash resources available, even
after considering the respective downside scenarios above, to be
utilised to cure covenant breaches if they crystallise and should
the lenders take a hard stance, against government advice. It is
further worth noting that the loans are not cross-collateralised
and accordingly if certain banks do act aggressively, the Group
would continue to operate with the remaining portfolio of assets if
any foreclosure events were to arise.
In light of this review and the significant liquid assets,
management are satisfied that the Group has access to adequate
resources to continue in operational existence for a period of at
least 12 months from the date of these condensed consolidated
financial statements.
The directors believe that it is therefore appropriate to
prepare the accounts on a going concern basis.
Adoption of new and revised standards
In the current period, no new or revised standards and
interpretations have been adopted.
No other standards or interpretations not yet effective are
expected to have a material impact on these condensed consolidated
financial statements of the Group.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of condensed consolidated financial statements,
in accordance with IFRS, requires the use of certain critical
accounting estimates. It also requires management to exercise
judgement in the process of applying the Group's accounting
policies. Although the estimates are based on management's best
knowledge of the amount, events or actions, actual results may
ultimately differ from those estimates. The key assumptions
concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next reporting period, are discussed
below.
Key sources of estimation uncertainty
Valuation of the property portfolio
The Group's investment properties are stated at estimated fair
value, determined by directors, based on an independent external
appraisal, with the exception of the seven German properties
classified as held for sale, which are based on the sale prices.
The valuation of the Group's property portfolio is inherently
subjective due to a number of factors including the individual
nature of each property, its location, expectation of future
rentals and the discount yield applied to those cash flows. This
has been particularly relevant in light of the market uncertainty
due to both Brexit and the COVID-19 crisis, both of which have been
carefully considered. As a result, the valuations placed on the
property portfolio are subject to a degree of uncertainty and are
made on the basis of assumptions that may not prove to be accurate,
particularly in years of volatility or low transaction flow in the
market. The estimated market value may differ from the price at
which the Group's assets could be sold at a particular time, since
actual selling prices are negotiated between willing buyers and
sellers. As a result, if the assumptions prove to be false, actual
results of operations and realisation of net assets could differ
from the estimates set forth in these condensed consolidated
financial statements, and the difference could be significant.
Further details can be found in note 8.
The Group currently has a number of continental European
investment properties as assets held for sale. Due to the same
reasons mentioned above that the COVID-19 crisis has caused, the
valuations of assets held for sale are also subject to a degree of
valuation uncertainty and as such a key source of estimation
uncertainty. Further information on assets held for sale can be
found in note 10.
2 Operating segments
The Group is focused on real estate investment in
well-developed, large economies with established real estate
markets. The investment portfolio is geographically diversified
across the United Kingdom, Germany and Switzerland, with a further
sub-division within the UK between multi-let industrial ('MLI') and
non-MLI. Each segment derives its revenue from the rental of
investment properties in the respective geographical regions.
Relevant financial information is set out below:
i) Information about reportable segments
Continuing Discontinued
operations operations
------------------------------------- ---------------------------------------- ------------ --------
UK multi-let UK non-multi-let
industrial industrial Germany Switzerland Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ---------------- -------- ------------ --------
For the period ended 30 September
2020 (unaudited)
Rental income 11,627 3,002 2,961 - 17,590
Tenant recharges 1,825 541 847 - 3,213
Other income 235 - 46 - 281
Direct property costs (4,132) (550) (1,391) - (6,073)
------------------------------------- ------------ ---------------- -------- ------------ --------
Net rental income 9,555 2,993 2,463 - 15,011
------------------------------------- ------------ ---------------- -------- ------------ --------
Fair value movement of investment
properties 9,433 (1,560) 10,764 - 18,637
Net (loss)/gain from fair value of
financial liabilities (765) - 125 - (640)
(Loss)/gain on disposal of property - (9) 101 - 92
Loss from joint ventures - - (721) - (721)
Finance costs (2,205) (454) (378) - (3,037)
Operating costs (114) (51) (230) - (395)
Net foreign exchange loss - - (12) - (12)
Interest income - - 169 - 169
Profit from discontinued operations
(see note 10) - - - 199 199
Tax credit/(expense) - 102 (1,821) - (1,719)
------------------------------------- ------------ ---------------- -------- ------------ --------
Total profit per reportable segment 15,904 1,021 10,460 199 27,584
------------------------------------- ------------ ---------------- -------- ------------ --------
As at 30 September 2020 (unaudited)
Investment properties 360,510 77,250 - - 437,760
Investment in joint ventures - - 114 - 114
Investment in joint venture bonds - - 15,665 - 15,665
Cash and cash equivalents 11,569 3,314 17,054 - 31,937
Other 8,635 418 13,903 - 22,956
Assets classified as held for sale
(see note 10) - - 89,487 15,254 104,741
------------------------------------- ------------ ---------------- -------- ------------ --------
Total assets 380,714 80,982 136,223 15,254 613,173
------------------------------------- ------------ ---------------- -------- ------------ --------
Borrowings - bank loans 122,076 32,377 - - 154,453
Other 16,485 2,278 2,294 - 21,057
Liabilities directly associated with
assets classified as held for sale
(see note 10) - - 36,008 6,114 42,122
------------------------------------- ------------ ---------------- -------- ------------ --------
Total liabilities 138,561 34,655 38,302 6,114 217,632
------------------------------------- ------------ ---------------- -------- ------------ --------
Continuing Discontinued
operations operations
------------------------------------- ----------------------------------- ------------ --------
UK non-
UK multi-let multi-let
industrial industrial Germany Switzerland Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ----------- -------- ------------ --------
For the period ended 30 September
2019 (unaudited)
Rental income 9,398 3,327 5,560 - 18,285
Tenant recharges 1,601 176 780 - 2,557
Other income 94 7 85 - 186
Direct property costs (2,914) (229) (2,116) - (5,259)
------------------------------------- ------------ ----------- -------- ------------ --------
Net rental income 8,179 3,281 4,309 - 15,769
------------------------------------- ------------ ----------- -------- ------------ --------
Fair value movement of investment
properties 2,834 210 1,760 - 4,804
Net (loss)/gain from fair value of
financial liabilities (983) 57 (27) - (953)
Loss on disposal of property - (102) (17) - (119)
Income from joint ventures - - 1,315 - 1,315
Finance costs (1,715) (793) (946) - (3,454)
Operating costs (240) 93 (408) - (555)
Net foreign exchange loss - - (60) - (60)
Interest income 5 16 174 - 195
Loss from discontinued operations
(see note 10) - - - (49) (49)
Tax (expense)/credit (9) 58 (598) - (549)
------------------------------------- ------------ ----------- -------- ------------ --------
Total profit/(loss) per reportable
segment 8,071 2,820 5,502 (49) 16,344
------------------------------------- ------------ ----------- -------- ------------ --------
As at 31 March 2020 (audited)
Investment properties 308,951 78,810 - - 387,761
Investment in joint ventures - - 15,335 - 15,335
Investment in joint ventures bond - - 781 - 781
Cash and cash equivalents 13,585 3,078 11,815 - 28,478
Other 5,855 792 14,305 - 20,952
Assets classified as held for sale
(see note 10) - - 96,605 15,252 111,857
------------------------------------- ------------ ----------- -------- ------------ --------
Total assets 328,391 82,680 138,841 15,252 565,164
------------------------------------- ------------ ----------- -------- ------------ --------
Borrowings - bank loans 121,841 32,330 - - 154,171
Other 12,946 2,801 9,600 - 25,347
Liabilities directly associated with
assets classified as held for sale
(see note 10) - - 41,039 6,271 47,310
------------------------------------- ------------ ----------- -------- ------------ --------
Total liabilities 134,787 35,131 50,639 6,271 226,828
------------------------------------- ------------ ----------- -------- ------------ --------
ii) Reconciliation of reportable segment profit or loss
30 September 30 September
2020 (unaudited) 2019 (unaudited)
GBP'000 GBP'000
-------------------------------------------------------- ----------------- -----------------
Rental income
Net rental income for reported segments 15,011 15,769
Profit or loss
Fair value movement of investment properties 18,637 4,804
Net loss from fair value of financial liabilities (640) (953)
Gain/(loss) on disposal of property 92 (119)
(Loss)/income from joint ventures (721) 1,315
Finance costs (3,037) (3,454)
Operating costs (395) (555)
Net foreign exchange loss (12) (60)
Interest income 169 195
Gain/(loss) for the period from discontinued operations
(see note 10) 199 (49)
Tax expense (1,719) (549)
-------------------------------------------------------- ----------------- -----------------
Total profit per reportable segments 27,584 16,344
-------------------------------------------------------- ----------------- -----------------
Other profit or loss - unallocated amounts
Management fee income 706 440
Other income 38 38
Income from joint ventures - 6
Interest income 43 23
Finance costs (2) (12)
Tax, legal and professional fees (338) (400)
Audit fees (135) (142)
Administration fees (121) (79)
Non-executive directors' costs (114) (112)
Staff remuneration costs (2,333) (2,379)
ERP project expenses (455) -
Other operating costs (861) (892)
Net loss from fair value of financial liabilities (174) -
Net foreign exchange gain/(loss) 78 (8)
Tax credit 50 114
-------------------------------------------------------- ----------------- -----------------
Consolidated profit for the period 23,966 12,941
-------------------------------------------------------- ----------------- -----------------
Unallocated profit or loss amounts relate to management fee
income and central costs incurred by the Group.
iii) Reconciliation of reportable segment financial position
31 March
2020
30 September
2020 (unaudited) (audited)
GBP'000 GBP'000
-------------------------------------------------------------- ----------------- ----------
Assets
Investment properties 437,760 387,761
Investment in joint venture 114 780
Investment in joint ventures bond 15,665 15,336
Cash and cash equivalents 31,937 28,478
Other 22,956 20,952
Assets classified as held for sale (see note 10) 104,741 111,857
-------------------------------------------------------------- ----------------- ----------
Total assets per reportable segments 613,173 565,164
-------------------------------------------------------------- ----------------- ----------
Other assets - unallocated amounts
Investment in joint ventures 1 1
Cash and cash equivalents 9,045 55,976
Other 9,127 1,310
-------------------------------------------------------------- ----------------- ----------
Total assets per consolidated statement of financial position 631,346 622,451
-------------------------------------------------------------- ----------------- ----------
Liabilities
Borrowings - bank loans 154,453 154,171
Other 21,057 25,347
Liabilities directly associated with assets classified as
held for sale (see note 10) 42,122 47,310
-------------------------------------------------------------- ----------------- ----------
Total liabilities per reportable segments 217,632 226,828
-------------------------------------------------------------- ----------------- ----------
Other liabilities - unallocated amounts
Other 3,814 4,287
-------------------------------------------------------------- ----------------- ----------
Total liabilities per consolidated statement of financial
position 221,446 231,115
-------------------------------------------------------------- ----------------- ----------
3 Net rental Income
30 September 30 September
2020 (unaudited) 2019 (unaudited)
GBP'000 GBP'000
--------------------------------------------- ----------------- -----------------
Rental income 18,130 18,884
Tenant recharges 3,262 2,444
Other income 319 224
Discontinued operations adjustment (note 10) (589) (487)
--------------------------------------------- ----------------- -----------------
Revenue 21,122 21,065
Direct property costs (6,411) (5,600)
Discontinued operations adjustment (note 10) 338 341
--------------------------------------------- ----------------- -----------------
Property expenses (6,073) (5,259)
--------------------------------------------- ----------------- -----------------
Total net rental income 15,049 15,806
--------------------------------------------- ----------------- -----------------
4 Operating costs
30 September 30 September
2020 (unaudited) 2019 (unaudited)
GBP'000 GBP'000
--------------------------------------------- ----------------- -----------------
Tax, legal and professional fees 612 713
Audit fees 103 109
Interim review fees 35 30
Administration fees 163 267
Investment advisory fees 69 161
Non-executive directors' costs 114 112
Staff remuneration costs 1,916 1,749
Share-based payments 416 630
ERP project expenses 299 -
ERP impairment 156 -
Depreciation 136 -
Corporate costs 312 343
IT costs 256 320
Other operating costs 231 238
Discontinued operations adjustment (note 10) (66) (114)
--------------------------------------------- ----------------- -----------------
4,752 4,557
--------------------------------------------- ----------------- -----------------
Share-based payments of GBP416,000 (2019: GBP630,000) relate to
the equity-settled incentive schemes operated by the Group. As at
30 September 2020, the Group's equity reserve held GBP2.8 million
(31 March 2020: GBP2.7 million) in relation to the schemes after
the exercise of options at fair value of GBP48,000 (2019:
GBP224,000) during the period.
5 Earnings per ordinary share
30 September 30 September
2020 (unaudited) 2019 (unaudited)
GBP'000 GBP'000
--------------------------------------------------------------- ----------------- -----------------
Reconciliation of profit for the period to adjusted EPRA(1)
earnings
Earnings per statement of comprehensive income attributable
to shareholders 23,972 13,157
Adjustment to exclude (gain)/loss from discontinued operations (199) 49
--------------------------------------------------------------- ----------------- -----------------
Earnings per statement of comprehensive income from continuing
operations attributable
to shareholders 23,773 13,206
--------------------------------------------------------------- ----------------- -----------------
Earnings per statement of comprehensive income attributable
to shareholders 23,972 13,157
Adjustments to calculate EPRA earnings, exclude:
Changes in fair value of investment properties (18,637) (4,799)
Changes in fair value of financial instruments 814 1,001
Deferred tax in respect of EPRA adjustments 413 759
Impairment of intangibles 156 -
Loss on disposal of properties 1,484 119
Adjustments above in respect of joint ventures:
Changes in fair value of investment properties 1,436 (884)
Changes in fair value of financial instruments (145) 266
Deferred tax in respect of EPRA adjustments (66) 144
--------------------------------------------------------------- ----------------- -----------------
EPRA earnings attributable to shareholders 9,427 9,763
--------------------------------------------------------------- ----------------- -----------------
Further adjustments to arrive at adjusted earnings:
Costs associated with the ERP implementation 299 -
--------------------------------------------------------------- ----------------- -----------------
Adjusted earnings attributable to shareholders(2) 9,726 9,763
--------------------------------------------------------------- ----------------- -----------------
Weighted average number of shares in issue (excluding treasury
shares) 283,540,296 282,798,778
Share-based payment award 2,477,023 3,869,130
--------------------------------------------------------------- ----------------- -----------------
Diluted weighted average number of shares in issue 286,017,319 286,667,908
--------------------------------------------------------------- ----------------- -----------------
Earnings per share from continuing operations pence pence
--------------------------------------------------------------- ----------------- -----------------
EPS 8.38 4.67
Diluted EPS 8.31 4.61
--------------------------------------------------------------- ----------------- -----------------
Earnings per share pence pence
EPS 8.45 4.65
Diluted EPS 8.38 4.59
EPRA EPS 3.30 3.41
Adjusted EPS 3.40 3.41
--------------------------------------------------------------- ----------------- -----------------
As at 30 September 2020, the Company held 14,397,479 treasury
shares (2019: 15,830,040 and 31 March 2020: 15,830,040).
1. The European Public Real Estate Association (EPRA) issued the
Best Practices Recommendations policy in October 2019, which
provides guidelines for performance measures relevant to real
estate companies. Their recommended reporting standards are widely
applied across this market, aiming to bring consistency and
transparency to the sector. The EPRA earnings measure is intended
to show the level of recurring earnings from core operational
activities with the purpose of highlighting the Group's underlying
operating results from its property rental business and an
indication of the extent to which current dividend payments are
supported by earnings. The measure excludes unrealised changes in
the value of investment properties, gains or losses on the disposal
of properties and other items to provide additional information on
the Group's underlying operational performance. The measure is
considered to accurately capture the long-term strategy of the
Group, and is an indication of the sustainability of dividend
payments.
2. As described in the EPRA Best Practice Recommendations policy
issued in October 2019, should companies wish to make other
adjustments to arrive at an underlying performance measure, they
should do that below 'EPRA earnings' and use a different name for
that measure. 'Adjusted EPS' is a measure that excludes items
considered not to be in the ordinary course of business or other
exceptional items that do not necessarily provide an accurate
picture of the Group's underlying operational performance.
Costs associated with the ERP implementation
Stenprop is implementing a new enterprise resource planning
(ERP) and customer engagement (CE) software program to help
streamline and grow the business. Significant non-recurring costs
will be incurred during the implementation phase before the systems
go live.
The ERP implementation expense is related to a one-off project
and is anticipated to complete over approximately 12 months and
accordingly has been adjusted for as a 'company-specific
adjustment'.
Headline earnings per share
The JSE listings requirements require the calculation of
headline earnings and disclosure of a detailed reconciliation of
headline earnings to the earnings numbers used in the calculation
of basic earnings per share in accordance with the requirements of
IAS 33 - Earnings per Share. Disclosure of headline earnings is not
a requirement of IFRS.
30 September 30 September
2020 (unaudited) 2019 (unaudited)
Reconciliation of profit for the period to headline earnings GBP'000 GBP'000
------------------------------------------------------------- ----------------- -----------------
Earnings per statement of comprehensive income attributable
to shareholders 23,972 13,157
------------------------------------------------------------- ----------------- -----------------
Adjustments to calculate headline earnings, exclude:
Changes in fair value of investment properties (18,637) (4,799)
Deferred tax in respect of headline earnings adjustments 391 778
Impairment of intangibles 156 -
Loss on disposal of properties 1,484 119
Adjustments above in respect of joint ventures:
Changes in fair value of investment properties 1,436 (884)
Deferred tax (65) 182
------------------------------------------------------------- ----------------- -----------------
Headline earnings attributable to shareholders 8,737 8,553
------------------------------------------------------------- ----------------- -----------------
Earnings per share pence pence
------------------------------------------------------------- ----------------- -----------------
Headline EPS 3.08 3.02
Diluted headline EPS 3.05 2.98
------------------------------------------------------------- ----------------- -----------------
6 Net asset value metrics per share - reconciliations and
bridge
In October 2019, EPRA published new best practice
recommendations for financial disclosures by public real estate
companies. Three new measures of net asset value were introduced
namely: EPRA net tangible assets (NTA), EPRA net reinvestment value
(NRV) and EPRA net disposal value (NDV). These recommendations are
effective for accounting periods starting on 1 January 2020 and
have been adopted by the Group in reporting these interim
results.
Stenprop consider EPRA NTA to be the most relevant measure of
the three EPRA NAVs to report on and will act as the a key net
asset value measure going forward. The EPRA NTA metric is aligned
with IFRS NAV in that it includes deferred tax liabilities with
regards to properties classified as held for sale. A reconciliation
of the three new EPRA NAV metrics from IFRS NAV is shown in the
table below. The previously reported EPRA NAV has also been
included for comparative purposes.
As at 30 September 2020 (unaudited)
Previously
New reported
NAV EPRA NAV measures measure
----------------------------------------- ----------- ------------------------------------- -----------
IFRS EPRA NRV EPRA NTA EPRA NDV EPRA NAV
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Net assets attributable to equity
shareholders 409,875 409,875 409,875 409,875 409,875
Adjustments:
Derivative financial instruments - 2,941 2,941 - 2,941
Deferred tax in relation to fair
value of investment property and
financial instruments(1) - 4,987 - - 4,987
Adjustments above in respect of joint
ventures - 748 748 - 748
Purchaser's costs(2) - 37,270 - - -
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Net assets used in per share calculation 409,875 455,821 413,564 409,875 418,551
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Number of shares in issue (excluding
treasury shares)(3) 284,377,696 284,377,696 284,377,696 284,377,696 284,377,696
Share-based payment award 2,477,023 2,477,023 2,477,023 2,477,023 2,477,023
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Diluted number of shares in issue 286,854,719 286,854,719 286,854,719 286,854,719 286,854,719
----------------------------------------- ----------- ----------- ----------- ----------- -----------
IFRS EPRA NRV EPRA NTA EPRA NDV EPRA NAV
Net asset value per share GBP GBP GBP GBP GBP
------------------------------------ ---- -------- -------- -------- --------
Basic net asset value per share 1.44 - - - -
Net asset value per share (diluted) 1.43 1.59 1.44 1.43 1.46
------------------------------------ ---- -------- -------- -------- --------
As at 31 March 2020 (audited)
Previously
New reported
NAV EPRA NAV measures measure
----------------------------------------- ----------- ------------------------------------- -----------
IFRS EPRA NRV EPRA NTA EPRA NDV EPRA NAV
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Net assets attributable to equity
shareholders 391,241 391,241 391,241 391,241 391,241
Adjustments:
Derivative financial instruments - 2,001 2,001 - 2,001
Deferred tax in relation to fair
value of investment property and
financial instruments(1) - 3,782 - - 3,782
Adjustments above in respect of joint
ventures - 1,921 1,921 - 1,921
Purchaser's costs(2) - 34,961 - - -
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Net assets used in per share calculation 391,241 433,906 395,163 391,241 398,945
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Number of shares in issue (excluding
treasury shares)(3) 282,945,135 282,945,135 282,945,135 282,945,135 282,945,135
Share-based payment award 3,522,208 3,522,208 3,522,208 3,522,208 3,522,208
----------------------------------------- ----------- ----------- ----------- ----------- -----------
Diluted number of shares in issue 286,467,343 286,467,343 286,467,343 286,467,343 286,467,343
----------------------------------------- ----------- ----------- ----------- ----------- -----------
IFRS EPRA NRV EPRA NTA EPRA NDV EPRA NAV
Net asset value per share GBP GBP GBP GBP GBP
------------------------------------ ---- -------- -------- -------- --------
Basic net asset value per share 1.38 - - - -
Net asset value per share (diluted) 1.37 1.51 1.38 1.37 1.39
------------------------------------ ---- -------- -------- -------- --------
1. The Group's deferred tax in relation to the fair value of
investment properties and financial instruments relates solely to
those properties in the German portfolio included in assets held
for sale which comprise 14.8% of the portfolio with a fair value of
GBP84.6 million (March 2020: GBP94.8 million (17.8%)). No deferred
tax was excluded from EPRA NTA in relation to this deferred tax as
the deferred tax will be crystallised on sale of these properties
in the short term.
2. EPRA NTA and EPRA NDV reflect IFRS values which are net of
purchaser's costs. Any purchaser's costs deducted from the market
value, are added back when calculating EPRA NRV.
3. As at 30 September 2020, the Company held 14,397,479 treasury
shares (31 March 2020: 15,830,040). Refer to note 7.
7 Share capital
Authorised
1,000,000,000 ordinary shares with a par value of EUR0.000001258
each
31 March
2020
30 September
2020 (unaudited) (audited)
Issued share capital (no. shares) (no. shares)
-------------------------------- ----------------- --------------
Opening balance 298,775,175 298,775,175
-------------------------------- ----------------- --------------
Closing number of shares issued 298,775,175 298,775,175
-------------------------------- ----------------- --------------
Authorised share capital GBP'000 GBP'000
-------------------------------------- ------- -------
Share capital 1 1
Share premium 325,223 325,223
Less: acquisition/transaction costs (2,231) (2,231)
-------------------------------------- ------- -------
Total share capital and share premium 322,993 322,993
-------------------------------------- ------- -------
There were no changes made to the number of authorised shares of
the Company during the period under review. Stenprop Limited has
one class of share. All shares rank equally and are fully paid.
The Company has 298,775,175 (31 March 2020: 298,775,175)
ordinary shares in issue at 30 September 2020.
On 12 June 2020, the Company announced a final dividend of 3.375
pence per share in respect of the six months to 31 March 2020. On
13 August 2020, the Company announced a take-up of the scrip
dividend representing 1.10% of the issued share capital and
3,301,265 shares were subsequently issued from treasury shares on
14 August 2020.
As at 30 September 2020, the Company held 14,397,479 treasury
shares (31 March 2020: 15,830,040). In the period the shareholders
were offered the option to receive either a scrip dividend by way
of an issue of Stenprop treasury shares, or a cash dividend. Given
the Company's share price, which is at a discount relative to NAV,
the directors matched the scrip alternative through share purchases
to mitigate the dilutive effect that would otherwise have occurred
through the issuance of new ordinary shares.
31 March
2020
30 September
2020 (unaudited) (audited)
Treasury shares (no. shares) (no. shares)
--------------------------------------------------------- ----------------- --------------
Opening balance 15,830,040 16,028,050
Issue of scrip dividend shares (3,301,265) (4,153,945)
Market buy-back of shares at an average price of GBP1.17
per share (31 March 2020: GBP1.15) 1,915,937 4,153,945
Exercised shares from the Deferred Share Bonus Plan (47,233) (198,010)
--------------------------------------------------------- ----------------- --------------
Closing number of treasury shares 14,397,479 15,830,040
--------------------------------------------------------- ----------------- --------------
On 1 October 2020, a further 1,385,328 shares were bought back
on the market for GBP1.17 per share. This brought the total number
of shares bought back in the period to 3,301,265; equal to the
total number of shares issued as a scrip dividend in the period.
At
1 October 2020, the total number of treasury shares held is
15,782,807.
8 Investment property
The consolidated fair value of investment properties at 30
September 2020 was GBP437.8 million (31 March 2020: GBP387.8
million). This excludes an amount of GBP14.3 million (31 March
2020: GBP14.3 million) for the last remaining Swiss property (31
March 2020: one Swiss property) and GBP86.8 million (31 March 2020:
GBP94.8 million) for the remaining seven German properties (31
March 2020: eight German properties) which have been classified as
held for sale. With the exemption of the seven German properties,
the carrying amount of investment property is the fair value of the
property as determined by registered independent appraisers having
an appropriate recognised professional qualification and recent
experience in the location and category of the properties being
valued ('valuers'). The seven properties located in Germany,
classified as held for sale are all in advanced stages of sale, and
the fair values have accordingly been determined by the directors
based on the sale prices.
The fair value of each of the properties for the period ended 30
September 2020, with the exception of the seven properties located
in Germany, which have been classified as held for sale (discussed
in detail in note 10), was assessed by the valuers in accordance
with the Royal Institution of Chartered Surveyors ('RICS')
standards and IFRS 13. Valuers are qualified for purposes of
providing valuations in accordance with the 'Appraisal and
Valuation Manual' published by RICS.
The valuation of the Group's property portfolio is inherently
subjective due to a number of factors including the individual
nature of each property, its location, expectation of future
rentals and the discount yield applied to those cash flows. As a
result, the valuations placed on the property portfolio are subject
to a degree of uncertainty and are made on the basis of assumptions
that may not prove to be accurate, particularly in years of
volatility or low transaction flow in the market. The estimated
market value may differ from the price at which the Group's assets
could be sold at a particular time, since actual selling prices are
negotiated between willing buyers and sellers. As a result, if the
assumptions prove to be different, actual results of operations and
realisation of net assets could differ from the estimates set forth
in these financial statements, and the difference could be
significant.
The valuations performed by the independent external valuers are
reviewed internally by senior management. This includes discussions
of the assumptions used by the external valuers, as well as a
review of the resulting valuations.
Discussions regarding the valuation process and results are held
between senior management and the external valuers on a biannual
basis. The audit and risk committee reviews the valuation results
and, provided the committee is satisfied with the results,
recommends them to the board for approval.
The valuation techniques used are consistent with IFRS 13 and
use significant 'unobservable' inputs. Investment properties are
all at level 3 in the fair value hierarchy and valuations represent
the highest and best use of the properties. There have been no
changes in valuation techniques since the prior year and no
transfers between the fair value hierarchy levels in the current or
prior year.
There are interrelationships between all these unobservable
inputs as they are determined by market conditions. An increase in
more than one unobservable input would magnify the impact on the
valuation. The impact on the valuation would be mitigated by the
interrelationship of two unobservable inputs moving in opposite
directions e.g. an increase in rent may be offset by an increase in
yield, resulting in no net impact on the valuation. Expected
vacancy rates may impact the yield with higher vacancy rates
resulting in higher yield. All revenue is derived from the
underlying tenancies given on the investment properties.
With the exception of six (31 March 2020: two) recently acquired
MLI properties, all investment properties are mortgaged, details of
which can be seen in note 11. As at the date of signing this
report, there are no restrictions on the realisability of any of
the underlying investment properties, nor on the remittance of
income and disposal proceeds.
The key unobservable inputs used in the valuation of the Group's
investment properties at 30 September 2020 are detailed in the
table below:
Market Market
value Portfolio Annualised rent
gross Net initial Voids range
30 September by market rental yield by per
(weighted
2020 value Properties Area income average) area month
Combined portfolio (including
share of jointly controlled (sq (GBP/sq
entities) (unaudited) (GBP'000) (%) (number) m) (GBP'000) (%) (%) m)
------------------------------ -------------- ----------- ---------- ------- ----------- ----------- ------ ---------
Investment properties
UK multi-let industrials 360,510 62.8 75 465,122 26,107 6.34 6.7 2.6-8.3
UK non-multi-let industrials 77,250 13.5 6 32,399 6,076 7.12 0.1 3.0-34.4
------------------------------ -------------- ----------- ---------- ------- ----------- ----------- ------ ---------
Subtotal 437,760 76.3 81 497,521 32,183 6.48 6.2 -
Assets held for sale
Germany 86,765 15.1 7 38,725 4,582 4.53 1.3 5.0-13.8
Switzerland 14,347 2.5 1 6,974 1,043 5.34 - 12.5
------------------------------ -------------- ----------- ---------- ------- ----------- ----------- ------ ---------
Total - wholly owned 538,872 93.9 89 543,220 37,808 6.14 5.8 -
------------------------------ -------------- ----------- ---------- ------- ----------- ----------- ------ ---------
Share of joint ventures 35,271 6.1 4 19,330 2,551 6.13 - 7.8-14.3
------------------------------ -------------- ----------- ---------- ------- ----------- ----------- ------ ---------
Total 574,143 100 93 562,550 40,359 6.14 5.6 -
------------------------------ -------------- ----------- ---------- ------- ----------- ----------- ------ ---------
30 September 2020 31 March 2020
(unaudited) (audited)
---------------------------------- ------------------------------- --------------------------------
Assets Total - Assets Total -
Investment held for wholly Investment held for wholly
property sale owned property sale owned
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- --------- -------- ---------- --------- ---------
Opening balance 387,761 109,076 496,837 562,815 16,160 578,975
Acquisitions 41,871 - 41,871 41,160 - 41,160
Capitalised expenditure 255 41 296 6,456 6,847 13,303
Transfers to assets held for
sale - - - (230,467) 230,467 -
Disposals - (21,315) (21,315) (3,650) (142,661) (146,311)
Net fair value gain on investment
property 7,873 10,764 18,637 4,937 (6,678) (1,741)
Foreign exchange movement
in foreign operations - 2,546 2,546 6,510 4,941 11,451
---------------------------------- ---------- --------- -------- ---------- --------- ---------
Closing balance 437,760 101,112 538,872 387,761 109,076 496,837
---------------------------------- ---------- --------- -------- ---------- --------- ---------
9 Investment in joint ventures
Details of the Group's joint ventures at the end of the
reporting period are as follows:
Principal % equity owned
Name Place of incorporation activity by subsidiary
---------------------------------------- ----------------------- ------------------- --------------
Luxembourg incorporated entities with
registered address:
231, Val des Bons Malades, L-2121
Luxembourg
Elysion S.A. Luxembourg Holding company 50
Elysion Braunschweig S.a.r.l Luxembourg Property company 50
Elysion Dessau S.a.r.l Luxembourg Property company 50
Elysion Kappeln S.a.r.l Luxembourg Property company 50
Elysion Winzlar S.a.r.l Luxembourg Property company 50
---------------------------------------- ----------------------- ------------------- --------------
Republic of Ireland incorporated entity
with registered address:
18f Main Street, Dundrum, Dublin 14
Republic of
Ardale Industrials Limited Ireland Management company 50
---------------------------------------- ----------------------- ------------------- --------------
Elysion S.A.
Stenprop owns 100% of the shares and shareholder loans in
Bernina Property Holdings Limited ('Bernina'), the results and
financial position of which is included within these condensed
consolidated financial statements. Bernina in turn owns 50% of the
issued share capital and 100% of the bonds of Elysion S.A., a
company incorporated in Luxembourg, which is the beneficial owner
of the Care Home portfolio. The remaining 50% of Elysion S.A. is
owned by a joint venture partner who manages the portfolio.
The acquired bonds have attracted, and continue to attract, a
10% compounded interest rate since inception in 2007 and have
limited recourse to compartment assets within Elysion S.A., with
the proceeds made available to subsidiaries in the joint venture
for real estate investment in Care Homes. All costs and expenses
incurred by the Elysion S.A. compartment are deducted or withheld
from any payment of principal or interest. The fair value has been
determined based on the net assets of the compartment which would
be available to settle the outstanding bond and which is
intrinsically linked to the fair value of the investment property.
Further details on the estimates and assumptions used in
determining the fair value of investment property can be found in
note 8.
Summarised consolidated financial information in respect of the
Group's joint ventures is set out below. Where applicable, these
represent the consolidated results of the respective holding
companies.
Elysion
S.A. Other Total
As at 30 September 2020 (unaudited) GBP'000 GBP'000 GBP'000
--------------------------------------------------------- -------- -------- --------
Investment property 35,526 - 35,525
Cash and cash equivalents 938 - 938
Current assets 26 12 38
--------------------------------------------------------- -------- -------- --------
Assets 36,490 12 36,502
Bank loans (18,467) - (18,467)
Bond (15,665) - (15,665)
Deferred tax (1,380) - (1,380)
Financial liability (628) - (628)
Current liabilities (122) (9) (131)
--------------------------------------------------------- -------- -------- --------
Liabilities (36,262) (9) (36,271)
Net assets of joint ventures 228 3 231
--------------------------------------------------------- -------- -------- --------
Group's investment in joint venture bond 15,665 - 15,665
--------------------------------------------------------- -------- -------- --------
Group's share of joint ventures' net assets 114 1 115
--------------------------------------------------------- -------- -------- --------
Revenue 1,268 - 1,268
Finance (907) - (907)
Net fair value loss (1,646) - (1,646)
Tax expense (75) - (75)
--------------------------------------------------------- -------- -------- --------
Loss from and total comprehensive income from continuing
operations (1,360) - (1,360)
--------------------------------------------------------- -------- -------- --------
Elysion
S.A. Other Total
As at 31 March 2020 (audited) GBP'000 GBP'000 GBP'000
----------------------------------------------------------- -------- -------- --------
Investment property 35,737 - 35,737
Fixed assets 227 - 227
Cash and cash equivalents 543 10 553
Current assets 42 2 44
----------------------------------------------------------- -------- -------- --------
Assets 36,549 12 36,561
Bank loans (18,364) - (18,364)
Bond (14,557) - (14,557)
Deferred tax (1,330) - (1,330)
Financial liability (591) - (591)
Current liabilities (148) (9) (157)
----------------------------------------------------------- -------- -------- --------
Liabilities (34,990) (9) (34,999)
Net assets of joint ventures 1,559 3 1,562
----------------------------------------------------------- -------- -------- --------
Group's investment in joint venture bond 15,336 - 15,336
----------------------------------------------------------- -------- -------- --------
Group's share of joint ventures' net assets 780 1 781
----------------------------------------------------------- -------- -------- --------
Revenue 2,472 15 2,487
Finance (2,193) (12) (2,205)
Net fair value gains 674 - 674
Tax expense (231) (2) (233)
----------------------------------------------------------- -------- -------- --------
Profit from and total comprehensive income from continuing
operations 722 1 723
----------------------------------------------------------- -------- -------- --------
10 Assets held for sale and discontinued operations
Management considers the one remaining Swiss property (31 March
2020: one) and seven properties located in Germany
(31 March 2020: eight) to meet the conditions relating to assets
held for sale, as per IFRS 5: Non-current Assets Held for Sale and
Discontinued Operations. The properties are expected to be disposed
of during the next 12 months. The Swiss property at Lugano, which
is valued at 30 September 2020 at CHF17.0 million (GBP14.3 million)
(31 March 2020: CHF17.0 million (GBP14.3 million)), is classified
as held for sale. Although the sale may not complete within 12
months, Stenprop is committed to the disposal of the asset in line
with its strategy to exit the Swiss market. Accordingly, Stenprop
has disclosed the asset as held for sale. The fair value of Lugano
has been determined by a third-party valuer, JLL.
The seven properties located in Germany, classified as held for
sale are all in advanced stages of sale, and the fair values have
accordingly been determined by the directors based on the sale
prices. Given the advanced state of the sales, associated selling
costs have been provided.
All non--current assets, and the Swiss disposal group,
classified as held for sale are disclosed at their fair value.
The fair value of these properties, and their comparatives are
shown in the table below along with associated assets and
liabilities:
31 March
2020
30 September
2020 (unaudited) (audited)
GBP'000 GBP'000
---------------------------------------------------------- ----------------- -----------
Investment properties (see note 8) 101,112 109,076
Cash and cash equivalents 2,124 1,135
Trade and other receivables (see note 12) 1,505 1,646
---------------------------------------------------------- ----------------- -----------
Assets classified as held for sale 104,741 111,857
---------------------------------------------------------- ----------------- -----------
Bank loans 35,852 43,177
Derivative financial instruments (see note 11) - 134
Deferred tax 4,198 3,782
Tax credit (650) (611)
Accounts payable and accruals 2,722 828
---------------------------------------------------------- ----------------- -----------
Liabilities directly associated with assets classified as
held for sale 42,122 47,310
---------------------------------------------------------- ----------------- -----------
The Swiss property is the only asset recognised as a
discontinued operation as the Swiss segment is a disposal group. In
the prior period, the entire Swiss segment (one property) was
recognised as a discontinued operation in accordance with IFRS
5.32. The results of the discontinued operation were as
follows:
30 September 30 September
2020 (unaudited) 2019 (unaudited)
Discontinued operations GBP'000 GBP'000
-------------------------------------------------------- ----------------- -----------------
Rental income 589 487
Property expenses (338) (341)
-------------------------------------------------------- ----------------- -----------------
Net rental income 251 146
-------------------------------------------------------- ----------------- -----------------
Profit on disposal of subsidiaries 134 -
Operating costs (66) (114)
-------------------------------------------------------- ----------------- -----------------
Profit from operations 319 32
-------------------------------------------------------- ----------------- -----------------
Finance costs (36) (36)
-------------------------------------------------------- ----------------- -----------------
Gain/(loss) for the period before taxation 283 (4)
-------------------------------------------------------- ----------------- -----------------
Current tax (84) (45)
-------------------------------------------------------- ----------------- -----------------
Gain/(loss) for the period from discontinued operations 199 (49)
-------------------------------------------------------- ----------------- -----------------
Disposals
On 30 September 2020, the Group disposed of its property,
Neucölln Carrée retail park, in Berlin, Germany held in Isabel
Properties B.V. for EUR27.0 million.
Prior year disposals
On 21 June 2019, the Group disposed of its Hemel Hempstead
property in Davemount Properties Limited for GBP1.9 million. On 19
August 2019, the Group disposed of its Walsall property in
Davemount Properties Limited for GBP1.7 million.
On 19 July 2018, the Group disposed of seven properties in
Switzerland. As part of the agreements entered into for the sale of
these Swiss properties, all of which were sold to the same buyer,
Stenprop provided a guarantee for obligations and liabilities of
each of the selling entities. The maximum amount of the guarantee
is CHF6.0 million, which lasts until all obligations under the sale
agreements have been fulfilled, with a backstop date of 31 July
2028. As at the date of signing these accounts, there had not been
any claim under the guarantee.
11 Borrowings
31 March
2020
30 September
2020 (unaudited) (audited)
GBP'000 GBP'000
----------------------------------------------------------- ----------------- -----------
Opening balance 154,171 245,090
New loans - 24,668
Repayment of borrowings - (2,000)
Amortisation of loans - (134)
Capitalised borrowing costs (36) (919)
Amortisation of transaction fees 318 623
Foreign exchange movement in foreign operations - 4,098
Adjustment for liabilities directly associated with assets
classified as held for sale - (117,255)
----------------------------------------------------------- ----------------- -----------
Total borrowings 154,453 154,171
----------------------------------------------------------- ----------------- -----------
Amount due for settlement within 12 months 4,420 -
Amount due for settlement between one to three years 89,204 93,468
Amount due for settlement between three to five years 60,829 60,703
----------------------------------------------------------- ----------------- -----------
Total borrowings 154,453 154,171
----------------------------------------------------------- ----------------- -----------
Non-current liabilities
Bank loans 150,033 154,171
----------------------------------------------------------- ----------------- -----------
Total non-current loans and borrowings 150,033 154,171
----------------------------------------------------------- ----------------- -----------
Current liabilities
Bank loans 4,420 -
----------------------------------------------------------- ----------------- -----------
Total current loans and borrowings 4,420 -
----------------------------------------------------------- ----------------- -----------
Total loans and borrowings 154,453 154,171
----------------------------------------------------------- ----------------- -----------
The facilities are secured by legal charges over the properties
to which they correspond. There is no cross-collateralisation of
the facilities. The terms and conditions of outstanding loans are
as follows:
Carrying value
Nominal value *
------------ ---- ---------- ---------- -------- ----------- ------------------------- -------------------------
31 March 31 March
Loan 2020 2020
30 September 30 September
2020 2020
interest Maturity (unaudited) (audited) (unaudited) (audited)
Note Amortising rate Currency date GBP'000 GBP'000 GBP'000 GBP'000
------------ ---- ---------- ---------- -------- ----------- ------------ ----------- ------------ -----------
United
Kingdom
LIBOR
LPE Limited No +2.00% GBP 31/03/2022 28,000 28,000 27,893 27,857
LIBOR
GGP1 Limited No +2.25% GBP 26/05/2021 4,500 4,500 4,484 4,472
Industrials LIBOR
UK LP No +2.25% GBP 02/06/2022 61,484 61,484 61,311 61,259
Stenprop
Industrials LIBOR
4 Limited No +2.00% GBP 14/11/2024 34,879 34,879 34,329 34,255
Stenprop
Industrials LIBOR
6 Limited No +2.00% GBP 01/02/2024 26,840 26,840 26,500 26,448
------------ ---- ---------- ---------- -------- ----------- ------------ ----------- ------------ -----------
Switzerland
Kantone Three-month
Holdings LIBOR rolling
Limited 1 Yes +1.15% CHF facility 6,478 6,513 6,478 6,513
------------ ---- ---------- ---------- -------- ----------- ------------ ----------- ------------ -----------
Germany
Euribor
Century BV 1 No +1.55% EUR 31/12/2022 7,551 7,369 7,509 7,319
Euribor
Century 2 BV 1 No +1.55% EUR 31/12/2022 3,927 3,832 3,903 3,804
Isabel
Properties Euribor
BV 1 No +2.32% EUR 30/12/2021 - 8,001 - 8,001
Stenprop Euribor
Hermann Ltd 1 No +1.13% EUR 30/06/2021 8,590 8,383 8,580 8,383
Stenprop
Victoria Euribor
Ltd 1 No +1.28% EUR 28/02/2021 9,382 9,157 9,382 9,157
------------ ---- ---------- ---------- -------- ----------- ------------ ----------- ------------ -----------
191,631 198,958 190,369 197,468
------------ ---- ---------- ---------- -------- ----------- ------------ ----------- ------------ -----------
* The difference between the nominal and the carrying value
represents unamortised facility costs.
1. Excluding the Switzerland and German loans, which are
classified as liabilities held for sale, the total carrying value
of loans at 30 September 2020 is GBP154.5 million as detailed in
total borrowings.
12 Trade and other receivables
31 March
2020
30 September
2020 (unaudited) (audited)
Non-current receivables GBP'000 GBP'000
------------------------------ ----------------- -----------
Other debtors 13,334 13,523
------------------------------ ----------------- -----------
Total non-current receivables 13,334 13,523
------------------------------ ----------------- -----------
Non-current other debtors includes GBP12.08 million (31 March
2020: GBP12.27 million) of loans advanced under the Share Purchase
Plan and GBP1.0 million (31 March 2020: GBP1.0 million) advanced on
30 March 2017 to purchase one million Stenprop shares in the market
by Ferryman Capital Partners Limited, a company in which Warren
Lawlor, previously a non-executive director, has a one-third
beneficial interest. Part of the loans are denominated in EUR and
are therefore subject to foreign exchange movements.
The loans have been assessed for an expected credit loss under
IFRS 9. The analysis shows that due to the full recourse nature of
the loans, secured against the shares issued and underlying assets
of the borrowers, loss given default is currently estimated at
GBPnil. There has been no perceived significant increase in credit
risk and we have not recognised a 12-month expected credit loss on
these loans.
31 March
2020
30 September
2020 (unaudited) (audited)
Current receivables GBP'000 GBP'000
--------------------------------------- ----------------- -----------
Accounts receivable 7,281 4,225
Loss allowance on accounts receivables (2,254) (976)
Lease incentives 1,813 2,545
Loss allowance on lease incentives (223) -
Other receivables 4,025 2,610
Prepayments 1,222 1,491
Transfer to assets held for sale (1,505) (1,646)
--------------------------------------- ----------------- -----------
Total current receivables 10,359 8,249
--------------------------------------- ----------------- -----------
30 September 2020 31 March 2020
(unaudited) (audited)
--------------------------- -------------------------------------- --------------------------------------
Accounts Loss Net Accounts Loss Net
receivables allowance receivables receivables allowance receivables
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------------ ---------- ------------ ------------ ---------- ------------
Not yet due 705 - 705 554 - 554
1-30 days overdue 1,473 (35) 1,438 2,182 (169) 2,013
31-60 days overdue 2,019 (143) 1,876 279 (1) 278
61-90 days overdue 395 (331) 64 258 (198) 60
91-120 days overdue 344 (301) 43 224 (148) 76
More than 120 days overdue 2,345 (1,444) 901 728 (460) 268
--------------------------- ------------ ---------- ------------ ------------ ---------- ------------
Total 7,281 (2,254) 5,027 4,225 (976) 3,249
--------------------------- ------------ ---------- ------------ ------------ ---------- ------------
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables. To measure expected credit losses
on a collective basis, trade receivables are grouped based on
shared credit risk characteristics and the days overdue.
The expected loss rates on accounts receivables and lease
incentives are based on the Group's historical credit losses
experienced over the current period. The historical loss rates are
then adjusted for current and forward-looking information on
macroeconomic factors like local lockdowns in response to COVID-19
restrictions and international trade following Brexit that affect
the Group's customers.
13 Financial risk management
The fair value measurement for the Group's financial assets and
financial liabilities are categorised into different levels in the
fair value hierarchy. The different levels have been defined as
follows:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Group can access at the
measurement date.
Level 2: inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices). The fair
values of the Group's secured loan facilities and derivative
financial instruments are included in Level 2.
Level 3: unobservable inputs for the asset or liability. The
fair value of the Group's investment properties is included in
Level 3. Valuations represent the highest and best use of the
properties.
The Group recognises transfers between levels of the fair value
hierarchy as of the end of the reporting period during which the
transfer has occurred. There were no transfers between levels for
the period ended 30 September 2020.
The fair value of all other financial assets and liabilities is
not materially different from their carrying value in the financial
statements.
The Group's financial risk management objectives and policies
are consistent with those disclosed in the audited consolidated
financial statements for the year ended 31 March 2020.
14 Related party transactions
Parties are considered related if one party has control, joint
control or significant influence over the other party in making
financial and operating decisions. Transactions with related
parties are made on terms equivalent to those that prevail in an
arm's length transaction.
There have been no material changes in the related party
transactions described in the Annual Report for the year ended 31
March 2020. Transactions with key management personnel are
materially consistent with those described in note 8 of the 2020
Annual Report, including details of the bonuses approved on 10 June
2020 in respect of the year ended 31 March 2020.
There have been no material changes to the loans provided to
directors to purchase Stenprop shares under the Share Purchase
Plan. Further details of this plan can be found in note 20 of the
2020 Annual Report.
Information regarding the transactions and balances with joint
venture parties can be found in note 18 of the 2020 Annual
Report.
There are no other related party transactions that occurred
during the period under review.
Ultimate controlling party
The directors do not consider there to be an ultimate
controlling party.
15 Events after the reporting period
(i) Declaration of dividend
On 2 December 2020, the directors declared an interim dividend
of 3.375 pence per share (2019: 3.375 pence per share). The
directors intend to offer shareholders the option to receive all or
part of their dividend entitlement by way of a scrip issue of
Stenprop treasury shares or in cash. An announcement containing
details of the dividend, the timetable and the scrip dividend terms
is anticipated to be made on 17 December 2020. It is expected that
shares will commence trading ex-dividend on 20 January 2021 on the
JSE and on 21 January 2021 on the LSE. The record date for the
dividend is expected to be 22 January 2021 and the dividend payment
date 12 February 2021.
(ii) COVID-19
The UK, German and Swiss markets are currently seeing rising
rates of COVID-19 infections. Governments are applying varying
degrees of restrictions on their residents based on local infection
rates. Since 30 September 2020, the English, Scottish and Welsh
Governments have implemented periods of restrictions and national
lockdowns of varying length. We closely monitor our portfolio for
any potential impact a local lockdown may have on our customers.
Our asset managers engage directly with our customers to understand
the cash flow implications to their business and ability for them
to pay their rent. The Group continues to monitor government policy
changes on a daily basis.
(iii) Brexit
We are confident that our MLI customer base is relatively
resilient to the United Kingdom leaving the European Union with no
trade deal. Our customers are largely made up of local businesses
across the country servicing their local communities. In general,
they are not the big single let occupiers reliant on import or
export supply chains. However, not agreeing a trade deal with the
European Union could result in a contraction of the United Kingdom
economy as a whole which would generally be negative for all
businesses.
(iv) Acquisitions
MLI assets to the value of GBP20.2 million have been acquired
since the reporting date. On 10 November 2020 and 13 November 2020
respectively, Stenprop acquired two separate industrial estates
known as Mandale in Durham for GBP11.2 million and Phoenix
Industrial Estate in West Bromwich for GBP2.8 million. On 3
December 2020, an industrial estate known as The Levels, Capital
Business Park in Cardiff was acquired for GBP6.2m.
Alternative performance measures
Stenprop considers several Alternative Performance Measures
('APMs') important to improve the transparency and relevance of our
published results, as well as the comparability of our results with
other listed European real estate companies.
EPRA performance measures
The European Public Real Estate Association ('EPRA') provides
guidelines for alternative performance measures relevant to real
estate companies. Their recommended reporting standards are widely
applied across this market, aiming to bring consistency and
transparency to the sector. In October 2019, EPRA issued updated
best practice guidelines which are effective for accounting periods
starting on or before 1 January 2020, introducing three new net
asset value metrics: EPRA net reinstatement value, EPRA net
tangible assets and EPRA net disposal value.
The EPRA earnings measure is intended to show the level of
recurring earnings from core operational activities with the
purpose of highlighting the Group's underlying operating results
from its property rental business and provide an indication of the
extent to which current dividend payments are supported by
earnings. The measure excludes unrealised changes in the value of
investment properties, gains, or losses on the disposal of
properties and other items to provide additional information on the
Group's underlying operational performance. The measure is
considered to accurately capture the long-term strategy of the
Group and is an indication of the sustainability of dividend
payments.
The table below summarises the Group's EPRA performance
indicators, as well as the nearest IFRS measure where applicable,
and a reference to where in these results further explanation
and/or reconciliation can be found.
Nearest Reference 30 September 31 March
EPRA performance measure IFRS measure in document 2020 2020
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA cost ratio N/A N/A 35.4% 34.5%
(excluding direct vacancy costs) (34.9% at
30 September
2019)
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA cost ratio N/A Operating 38.8% 35.3%
and financial
review
(including direct vacancy costs) (38.9% at
Key measure to enable meaningful 30 September
measurement of the changes in a
company's operating costs.
2019)
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA earnings Earnings Note 5 GBP9.4 million GBP19.03
A key measure of a company's underlying million
operating results and an indication (GBP9.7
of the extent to which current dividend million
payments are supported by earnings. at
30 September
2019)
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA earnings per share Earnings Note 5 3.40p 6.65p
per share (3.41p at
30 September
2019)
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA net disposal value per share
NAV measure that assumes assets
are sold and/or liabilities are
not held until maturity. Deferred
tax, financial instruments and certain
other adjustments are calculated
as to the full extent of their liability, Diluted
including tax exposure not reflected net assets
In the Statement of financial position. per share Note 6 1.43p 1.37p
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA net reinstatement value per
share
NAV measure to highlight the value
of net assets on a long-term basis.
Fair value movements on financial Diluted
derivatives and deferred taxes are net assets
excluded. per share Note 6 1.59p 1.51p
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA net tangible assets per share
NAV measure that assumes entities
buy and sell assets, thereby crystallising Diluted
certain levels of deferred tax liability, net assets
which is included. per share Note 6 1.44p 1.38p
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA NIY
Annualised rental income based
on the cash rents passing at the
reporting date, less non-recoverable
property operating expenses, expressed
as a percentage of the market value
of property. N/A N/A 5.97% 5.95%
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA 'topped up' NIY N/A N/A 6.20% 6.33%
-------------------------------------------- -------------- --------------- -------------- --------------
EPRA vacancy rate
A 'pure' (%) measure of investment
property space that is occupied,
based on ERV. N/A N/A 4.7% 5.6%
-------------------------------------------- -------------- --------------- -------------- --------------
Like-for-like rental income growth
This measure illustrates the change
in comparable income values. N/A N/A 2.5% -
-------------------------------------------- -------------- --------------- -------------- --------------
Like-for-like rental income growth (%)
Rental income (1)
---------------------------- --------------------------------------------
30 September 30 September
2020 2019 Change Change
GBP'000 GBP'000 GBP'000 %
---------------------------- ------------ ------------ -------- ------
UK multi-let Industrial 22,300 21,200 1,100 5.2%
UK non-multi-let industrial 6,100 6,000 100 1.7%
---------------------------- ------------ ------------ -------- ------
Continuing operations 28,400 27,200 1,200 4.4%
---------------------------- ------------ ------------ -------- ------
Held for sale:
Germany 4,600 4,600 - 0.0%
Switzerland 1,000 1,300 (300) -23.1%
---------------------------- ------------ ------------ -------- ------
Subtotal 5,600 5,900 (300) -5.1%
---------------------------- ------------ ------------ -------- ------
Share of joint venture 2,600 2,600 - 0.0%
---------------------------- ------------ ------------ -------- ------
Total like-for-like 36,600 35,700 900 2.5%
---------------------------- ------------ ------------ -------- ------
Acquisitions 3,800 - 3,800 100.0%
---------------------------- ------------ ------------ -------- ------
Total 40,400 35,700 4,700 11.6%
---------------------------- ------------ ------------ -------- ------
1. Gross contractual rental income at reporting date, generated
by properties that were held by the Group for the year, excluding
properties undergoing significant development. This measure
illustrates the change in comparable income values.
A standardised rate has been used to translate the portfolio and
remove any foreign exchange impact, for purposes of this
like-for-like analysis.
Other alternative performance measures
Management use certain financial performance measures to assess
the financial and operational performance of the Group. These
alternative performance measures are not defined or specified under
IFRS or EPRA; however, management believe that they provide useful
information to readers. These non-IFRS measures may not be
comparable to similar measures presented by other companies. The
table below summarises the additional alternative performance
measures included in these results.
Nearest Reference 30 September 31 March
Other alternative performance measure IFRS measure in document 2020 2020
-------------------------------------- ------------------ --------------- -------------- -------------
Adjusted earnings Earnings Note 5 and GBP9.7 million GBP19.7
(Previously diluted adjusted EPRA operating million
earnings) and financial (GBP9.7
review million
at
30 September
2019)
-------------------------------------- ------------------ --------------- -------------- -------------
Adjusted earnings per share Earnings Note 5 and 3.40p 6.88p
(Previously diluted adjusted EPRA per share operating (3.41p at
earnings and financial 30 September
per share) review 2019)
-------------------------------------- ------------------ --------------- -------------- -------------
Operating
and financial
Cost of debt N/A review 2.51% 2.62%
-------------------------------------- ------------------ --------------- -------------- -------------
Debt maturity N/A Operating 2.3 years 2.7 years
and financial
review
-------------------------------------- ------------------ --------------- -------------- -------------
Distribution per share N/A Operating 3.375p 3.375p
and financial (11 June
review 2020)
-------------------------------------- ------------------ --------------- -------------- -------------
Free cash Cash and Operating GBP40.0 GBP70 million
cash equivalents and financial million
less restricted review
cash and
cash held
for other
purposes
-------------------------------------- ------------------ --------------- -------------- -------------
Headline earnings per share Earnings Note 5 3.08p 5.86p
per share (3.02p at
30 September
2019)
-------------------------------------- ------------------ --------------- -------------- -------------
Headline earnings per share - diluted Diluted Note 5 3.05p 5.79p
earnings (2.98p at
per share 30 September
2019)
-------------------------------------- ------------------ --------------- -------------- -------------
Operating
and financial
Loan-to-value ratio (LTV) N/A review 36.6% 40.8%
-------------------------------------- ------------------ --------------- -------------- -------------
FX rates in period
Average foreign exchange rates in the period: GBP1.00:EUR1.1160;
GBP1.00:CHF1.1919 (2019: GBP1.00:EUR1.1263; GBP1.00:CHF1.2517)
Period end foreign exchange rates: GBP1.00:EUR1.0978;
GBP1.00:CHF1.1856 (31 March 2020: GBP1.00:EUR1.1249;
GBP1.00:CHF1.1914)
Glossary
Adjusted earnings
Utilises EPRA earnings and applies further company-specific
adjustments to earnings to exclude items considered not to be in
the ordinary course of business or other exceptional items that do
not necessarily provide an accurate picture of the Group's
underlying operational performance. (Previously referred to as
Diluted adjusted EPRA Earnings).
Adjusted earnings per share
Adjusted earnings per share after considering dilutive share
options. (Previously referred to as Diluted adjusted EPRA Earnings
per share).
Cost of debt
This represents the all-in interest rate after including the
reference rate, the margin and interest rate derivative, if
applicable. The Group weighted average cost of debt is the all-in
interest rate of the Group weighted by loan size.
Debt maturity
Measured in years, the debt maturity is calculated by comparing
the reference date (e.g. period-end) to the maturity date of the
debt referred to.
Distribution per share
Total distribution per share that Stenprop makes to shareholders
in respect of the financial year. Distributions are paid twice
yearly.
EPRA
The European Public Real Estate Association.
EPRA cost ratio (including direct vacancy costs)
Administrative and operating costs expressed as a percentage of
gross rental income.
EPRA earnings
Earnings from operational activities. A key measure of the
Group's underlying operating results and an indication of the
extent to which current dividend payments are supported by
earnings.
EPRA earnings per share
Earnings from operational activities per share after considering
dilutive share options.
EPRA NDV per share
EPRA net disposal value per share after considering dilutive
share options.
EPRA net disposal value (NDV)
An EPRA NAV measure that represents the shareholders' value
under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax.
EPRA net initial yield (NIY)
Annualised rental income based on the cash rents passing at the
statement of financial position date, less non-recoverable property
operating expenses, expressed as a percentage of the market value
of property.
EPRA net reinstatement value (NRV)
An EPRA NAV measure that aims to represent the value required to
rebuild the entity. The NAV per the IFRS financial statements is
adjusted to assume that the entity never sells assets.
EPRA net tangible assets (NTA)
The NAV per the IFRS financial statements is adjusted to assume
that the entity buys and sells assets, thereby crystallising
certain levels of unavoidable deferred tax.
EPRA NRV per share
EPRA net reinstatement value per share after considering
dilutive share options.
EPRA NTA per share
EPRA net tangible assets per share after considering dilutive
share options.
EPRA 'topped up' NIY
EPRA NIY adjusted for the expiration of rent-free periods (or
other unexpired lease incentives such as discounted rent periods
and stepped rents).
EPRA triple net asset value (NNNAV) per share
EPRA NAV adjusted to include the fair value of (i) financial
instruments, (ii) debt and (iii) deferred taxes.
EPRA vacancy rate
Estimated market rental value (ERV) of vacant space divided by
ERV of the portfolio as a whole.
EPS
Earnings per share based on the weighted average number of
shares in issue
Estimated rental value (ERV)
The external valuers' opinion of the open market rent which, on
the date of valuation, could reasonably be expected to be obtained
on a new letting or rent review of a property.
Free cash
Available cash after deducting restricted cash and cash held
back for other purposes (including significant tax liabilities as
well as committed capital and operational expenditure) from cash
and cash equivalents.
Group
Stenprop, the Company, its subsidiaries and its share of joint
ventures.
Headline earnings
A method of reporting corporate earnings, as required by the JSE
listings requirements. The measure is based entirely on
operational, trading, and capital investment activities achieved
during the period. Excluded from the headline earnings figure are
profits or losses associated with the sale or termination of
discontinued operations, fixed assets or related businesses, or
from any permanent devaluation or write-off of their values.
IFRS
International Financial Reporting Standards issued by the
International Accounting Standards Board.
Interest cover
Represents the number of times net interest payable is covered
by underlying rental income (or net rental income, as
appropriate).
LIBOR
London Interbank Offered Rate, the interest rate charged by one
bank to another for lending money.
Like-for-like basis
This represents the change in a measure (such as property
valuation) for reference data that applies throughout the current
and previous periods under review.
Like-for-like rental income growth
The change in gross contractual rental income at reporting date,
generated by properties that were held by the Group for the year,
excluding properties undergoing significant development. This
measure illustrates the change in comparable income values.
Loan-to-value (LTV)
Ratio of gross debt to the aggregate value of properties.
NAV
Net asset value.
Net assets per share
NAV divided by the number of shares in issue at the period (less
treasury shares).
Occupancy rate
Estimated market rental value (ERV) of occupied space divided by
ERV of the portfolio as a whole (the inverse of EPRA vacancy
rate).
Property income distribution (PID)
As a REIT, the Group is obliged to distribute 90% of its UK
property tax-exempt profits. PIDs are profits distributed to
shareholders, which are subject to tax in the hands of the
shareholders as property income. PIDs are normally paid net of
withholding tax currently at 20%, which the REIT pays to the tax
authorities on behalf of the shareholder. Certain types of
shareholder (e.g. pension funds) are tax exempt and receive PIDs
without deduction of withholding tax. REITs also pay out normal
dividends, which are taxed in the same way as dividends received
from non-REIT companies and are not subject to withholding tax.
Real estate investment trust (REIT)
REITs are property companies that allow people and organisations
to invest in commercial property and receive benefits as if they
directly owned the properties themselves. The effect is that
taxation is moved from the corporate level to the investor level as
investors are liable for tax as if they owned the property
directly. Stenprop became a UK REIT in May 2018.
Total shareholder return
The growth in value of a shareholding over a specified period,
assuming dividends are reinvested to purchase additional units of
stock.
Treasury shares
Shares repurchased by the Company, reducing the amount of
outstanding stock on the open market.
Voids
Unlet space as a percentage of area, including voids where
refurbishment work is being carried out unless specifically
mentioned.
WAULT
Weighted average unexpired lease term, indicating the average
remaining life of the leases within our portfolio.
Corporate information
Stenprop Limited
Registered in Guernsey
Registration number 64865
LSE share code: STP
JSE share code: STP
ISIN: GG00BFWMR296
United Kingdom
Postal address of the Company
180 Great Portland Street
London
W1W 5QZ
United Kingdom
Company secretary
Sarah Bellilchi
Broker and financial adviser
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
United Kingdom
Independent auditor
BDO LLP
55 Baker Street
London
W1U 7EU
United Kingdom
Guernsey
Registered office of the Company
Stenprop Limited
(Registration number 64845)
Kingsway House
Havilland Street
St Peter Port
GY1 2QE
Guernsey
Guernsey registrars
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
GY1 1DB
Guernsey
(Correspondence address:
2nd Floor
Queensway House
Hilgrove Street
St. Helier
JE1 1ES
Jersey
Channel Islands)
South Africa
JSE sponsor
Java Capital Trustees and Sponsors
Proprietary Limited
(Registration number 2006/005780/07)
6th Floor, 1 Park Lane
Weirda Valley
Sandton, 2196
Johannesburg
South Africa
(PO Box 522606, Saxonwold, 2132)
South African corporate adviser
Java Capital Proprietary Limited
(Registration number 2012/089864/07)
6th Floor, 1 Park Lane
Weirda Valley
Sandown
Sandton, 2196
Johannesburg
South Africa
(PO Box 522606, Saxonwold, 2132)
SA transfer secretaries
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
Johannesburg
South Africa
(PO Box 61051, Marshalltown, 2107)
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END
IR FSSESDESSEEE
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December 04, 2020 02:00 ET (07:00 GMT)
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