REG-AEW UK REIT plc AEW UK REIT plc: Half Yearly Results
28/11/2019 07:05
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AEW UK REIT plc (AEWU)
AEW UK REIT plc: Half Yearly Results
28-Nov-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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28 November 2019
AEW UK REIT PLC (the "Company")
Interim Report and Financial Statements
for the six months ended 30 September 2019
Financial Highlights
Unaudited Net Asset Value ("NAV") of £147.55 million and of 97.36 pence
per share ("pps") as at 30 September 2019 (31 March 2019: £149.46
● million and 98.61 pps).
Operating profit before fair value changes of £7.26 million for the
● period (six months ended 30 September 2018: £6.86 million).
Profit Before Tax ("PBT") of £4.16 million and 2.74 pps (six months
ended 30 September 2018: £11.68 million and 7.71 pps). PBT includes a
£2.41 million loss arising from changes to fair value of the investment
● properties in the period (six months ended 30 September 2018: gain of
£5.65 million). This change explains the significant fall in PBT for the
period.
Unadjusted EPRA Earnings Per Share ("EPRA EPS") for the period of 4.37
pps (six months ended 30 September 2018: 4.10 pps). See below for the
● calculation of EPRA EPS.
Total dividends of 4.00 pps have been declared for the period (six
● months ended 30 September 2018: 4.00 pps).
Shareholder Total Return for the period of 5.50% (six months ended 30
● September 2018: 3.56%).
The price of the Company's Ordinary Shares on the Main Market of the
London Stock Exchange was 93.90 pps as at 30 September 2019 (31 March
● 2019: 92.80 pps).
As at 30 September 2019, the Company had drawn £50.00 million (31 March
2019: £50.00 million) of a £60.00 million (31 March 2019: £60.00
million) term credit facility with the Royal Bank of Scotland
● International Limited ('RBSi') and was geared to 25.50% of the portfolio
valuation (31 March 2019: 25.30%).
The Company held cash balances totalling £2.01 million as at 30
● September 2019 (31 March 2019: £2.13 million). Under the terms of its
loan facility, the Company can draw a further £1.64 million (31 March
2019: £2.31 million) up to the maximum 35% loan to NAV at drawdown.
Property Highlights
As at 30 September 2019, the Company's property portfolio had a fair
value of £196.05 million across 35 properties (31 March 2019: £197.61
● million across 35 properties) and a historical cost of £197.02 million
(31 March 2019: £196.86 million).
As at 30 September 2019, the Company's property portfolio had an EPRA
● vacancy rate of 3.96% (31 March 2019: 2.99%).
Rental income generated during the period was £8.78 million (six months
ended 30 September 2018: £8.46 million). The number of tenants as at 30
● September 2019 was 92 (31 March 2019: 95).
EPRA Net Initial Yield ("EPRA NIY") of 7.45% as at 30 September 2019 (31
● March 2019: 7.62%).
Weighted Average Unexpired Lease Term ("WAULT") of 4.33 years to break
● and 5.82 years to expiry (31 March 2019: 4.87 years to break and 6.10
years to expiry). See below for definition and relevance to strategy.
Chairman's Statement
Overview
I am pleased to present the unaudited interim results of the Company for
the six month period from 1 April 2019 to 30 September 2019. As at 30
September 2019, the Company has established a diversified portfolio of 35
commercial investment properties throughout the UK with a value of £196.05
million. On a like-for-like basis, the portfolio valuation decreased by
0.79% over the six months.
The Company achieved EPRA EPS of 4.37 pps for the period, which represents
a dividend cover of 109.3%, having paid dividends of 4.00 pps in relation
to the period. This is an improvement on the EPRA EPS reported for the
year ended 31 March 2019, which produced a dividend cover of 100.9% and
reflects the success of key asset management transactions which have
boosted rental income and maintained a vacancy rate below 4% by Estimated
Rental Value ("ERV") over the six months to September 2019. The portfolio
has a short WAULT of 4.33 years to break and 5.82 years to expiry, which
we anticipate will provide the opportunity to add further value through an
active approach to asset management.
The Company's share price was 93.90 pps as at 30 September 2019,
representing a 3.55% discount to NAV. Over the six month period, the
Company generated a shareholder total return of 5.50% and a NAV total
return of 2.79%.
Financial Results
6 month 12 month
6 month
period from period from
period from
1 April 2019 1 April 2018
1 April 2018
to 30 to 31
to 30
September March
September 2018
2019 2019
(unaudited)
(unaudited) (audited)
Operating Profit before fair 7,264 6,859 13,524
value changes (£'000)
Operating Profit (£'000) 4,901 12,334 17,226
PBT (£'000)* 4,159 11,678 15,544
EPRA EPS (basic and diluted) 4.37 4.10 8.07
(pence)
Ongoing Charges (%) 1.34 1.26 1.40
NAV per share (pence) 97.36 100.06 98.61
EPRA NAV per share (pence) 97.32 100.06 98.51
*PBT includes a £2.41 million loss arising from changes to fair value of
the investment properties in the period (six months ended 30 September
2018: gain of £5.65 million). This change explains the significant fall in
PBT for the period.
Financing
The Company has a £60.00 million loan facility, of which it had drawn a
balance of £50.00 million as at 30 September 2019 (31 March 2019: £60.00
million facility; £50.00 million drawn), producing a gearing of 25.50% (31
March 2019: 25.30%) loan to property valuation.
The unexpired term of the facility was 4.1 years as at 30 September 2019
(31 March 2019: 4.6 years). The loan incurs interest at 3 month LIBOR
+1.4%, which equated to an all-in rate of 2.17% as at 30 September 2019
(31 March 2019: 2.32%). The Company is protected from a significant rise
in interest rates as it currently has effective interest rate caps with a
combined notional value of £36.51 million (31 March 2019: £36.51 million),
with £26.51 million capped at 2.50% and £10.00 million capped at 2.00%,
resulting in the loan being 73% hedged (31 March 2019: 73%). These
interest rate caps are effective until 19 October 2020. The Company has
entered into additional interest rate caps on a notional value of £46.51
million at 2.00% covering the extension period of the loan from 20 October
2020 to 19 October 2023.
On 9 October 2019, the Company announced that it had completed an
amendment to its loan facility, increasing the loan to NAV covenant from
45% to 55% (subject to certain conditions). There are no changes to the
margin currently charged under the facility.
The long term gearing target remains 25% or less, however the Company can
borrow up to 35% of Gross Asset Value ("GAV") in advance of an expected
capital raise or asset disposal. The Board and Investment Manager will
continue to monitor the level of gearing and may adjust the target gearing
according to the Company's circumstances and perceived risk levels.
Dividends
The Company has continued to deliver on its target of paying dividends of
8.00 pps per annum. During the period, the Company declared and paid two
quarterly dividends of 2.00 pps, in line with its target.
On 18 October 2019, the Board declared an interim dividend of 2.00 pps in
respect of the period from 1 July 2019 to 30 September 2019. This interim
dividend will be paid on 29 November 2019 to shareholders on the register
as at 1 November 2019.
The Directors will declare dividends taking into account the current level
of the Company's earnings and the Directors' view on the outlook for
sustainable recurring earnings. As such, the level of dividends paid may
increase or decrease from the current annual dividend of 8.00 pps. Based
on the current profile of the portfolio, the Company expects to pay an
annualised dividend of 8.00 pps in respect of the year ending 31 March
2020, subject to market conditions.
The following shows the dividend paid (in pps) in relation to each quarter
from the Company's inception:
Quarter ended 2015 2016 2017
January 2.00 2.00
April 2.00 2.00
July 2.00 2.00
October 1.50 2.00 2.00
Quarter ended 2017 2018 2019
March 2.00 2.00
June 2.00 2.00
September 2.00 2.00
December *1.33 2.00
*Note that the Company changed its quarter end dates starting in December
2017 and the dividend payment of 1.33 pps relates to the two month period
from 1 November 2017 to 31 December 2017.
Outlook
The Board and the Investment Manager are pleased with the strong income
returns delivered to shareholders to date. Based on annualised dividend
payments of 8.00 pps, the Company delivered a dividend yield of 8.52% as
at 30 September 2019.
The Company was fully invested at the start of the period and achieved
returns during the period which fully covered its dividend payments. The
Board expects this level of returns to continue, based on the projected
income from the portfolio which had a NIY of 7.45% and a Reversionary
Yield of 7.82% as at 30 September 2019.
In the wider political and economic environment, the country is preparing
for a general election on 12 December 2019. The outcome of this should
provide better clarity to the ongoing Brexit debate, for which the
deadline to reach an agreement with the EU has been pushed back to 31
January 2020. It is hoped that the coming months will see an end to the
continued uncertainty which has hampered the investment markets.
Looking forward, our focus remains on continuing to grow the Company as
part of the 12 month share-issuance programme, closing on 28 February
2020, as set out in the Company's Prospectus, subject to market
conditions. Subject to future fund raising, the Investment Manager will
focus on finding further acquisitions which will deliver an attractive
return as part of a well-diversified portfolio. There will be a
continuation vote at the AGM of the Company to be held in 2020, under the
provisions of the Articles, at which the Board will propose an ordinary
resolution that the Company continue its business as presently
constituted.
Board Composition
James Hyslop retired from the Board at the AGM on 12 September 2019. The
Board expresses its appreciation for his valuable contribution to the
Company since its IPO in 2015. The Board will instigate a search for a
replacement independent non-executive Director at an appropriate time.
Mark Burton
Chairman
27 November 2019
Key Performance Indicators
KPI AND DEFINITION
RELEVANCE TO STRATEGY PERFORMANCE
1. EPRA NIY*
Annualised rental income The NIY is in line with the
based on the cash rents Company's target dividend
passing at the balance yield meaning that, after 7.45%
sheet date, less costs, the Company should
non-recoverable property have the ability to meet its at 30 September
expense, divided by the target dividend through 2019 (31 March
market value of the property income. 2019: 7.62%).
property, increased with
(estimated) purchasers'
costs.
2. True Equivalent Yield
A True Equivalent Yield
The average weighted profile in line with the
return a property will Company's target dividend 7.93%
produce according to the yield shows that, after
present income and costs, the Company should at 30 September
estimated rental value have the ability to meet its 2019 (31 March
assumptions, assuming the proposed dividend through 2019: 7.94%).
income is received property income.
quarterly in advance.
A Reversionary Yield profile
that is in line with an
3. Reversionary Yield Initial Yield profile shows 7.82%
a potentially sustainable
The expected return the income stream that can be at 30 September
property will provide once used to meet dividends past 2019 (31 March
rack rented. the expiry of a property's 2019: 7.75%).
current leasing
arrangements.
The Investment Manager
believes that current market
conditions present an
opportunity whereby assets
4. WAULT to expiry with a shorter unexpired
lease term are often
The average lease term mispriced. It is also the 5.82 years
remaining to expiry across Investment Manager's view
the portfolio, weighted by that a shorter WAULT is at 30 September
contracted rent. useful for active asset 2019 (31 March
management as it allows the 2019: 6.10 years).
Investment Manager to engage
in direct negotiation with
tenants rather than via
rent-review mechanisms.
The Investment Manager
believes that current market
conditions present an
opportunity whereby assets
5. WAULT to break with a shorter unexpired
lease term are often
The average lease term mispriced. It is also the 4.33 years
remaining to break, across Investment Manager's view
the portfolio weighted by that a shorter WAULT is at 30 September
contracted rent. useful for active asset 2019 (31 March
management as it allows the 2019: 4.87 years).
Investment Manager to engage
in direct negotiation with
tenants rather than via
rent-review mechanisms.
6. NAV The change in NAV reflects £147.55 million
the Company's ability to
NAV is the value of an grow the portfolio and add at 30 September
entity's assets minus the value to it throughout the 2019 (31 March
value of its liabilities. life cycle of its assets. 2019: £149.46
million).
The Company utilises
7. Leverage (Loan to borrowings to enhance
property valuation) returns over the medium 25.50%
term. Borrowings will not
The proportion of the exceed 35% of GAV (measured at 30 September
property portfolio that is at drawdown) with a long 2019 (31 March
funded by borrowings. term target of 25% or less 2019: 25.30%).
of GAV.
The Company's aim is to
8. Vacant ERV minimise vacancy of the
properties. A low level of
The space in the property structural vacancy provides 3.96%
portfolio which is an opportunity for the
currently unlet, as a Company to capture rental at 30 September
percentage of the total uplifts and manage the mix 2019 (31 March
ERV of the portfolio. of tenants within a 2019: 2.99%).
property.
4.00 pps
for the six months
9. Dividend to 30 September
The dividend reflects the 2019.
Dividends declared in Company's ability to deliver
relation to the year. The a sustainable income stream This supports an
Company targets a dividend from its portfolio. annualised target
of 8.00 pps per annum. of 8.00 pps (six
months to 30
September 2018:
4.00 pps).
The Ongoing Charges ratio
provides a measure of total
10. Ongoing Charges costs associated with
managing and operating the 1.34%
The ratio of total Company, which includes the
administration and management fees due to the for the six months
operating costs expressed Investment Manager. This to 30 September
as a percentage of average measure is to provide 2019 (six months
NAV throughout the period. investors with a clear to 30 September
picture of operational costs 2018: 1.26%).
involved in running the
Company.
11. PBT
£4.16 million
PBT is a profitability The PBT is an indication of
measure which considers the Company's financial for the six months
the Company's profit performance for the period to 30 September
including fair value in which its strategy is 2019 (six months
changes before the payment exercised. to 30 September
of income tax. 2018: £11.68
million).
12. Shareholder Total
Return 5.50%
This reflects the return
The percentage change in seen by shareholders on for the six months
the share price assuming their shareholdings through to 30 September
dividends are reinvested share price movements and 2019 (six months
to purchase additional dividends received. to 30 September
Ordinary Shares. 2018: 3.56%).
13. EPRA EPS
Earnings from core
operational activities. A 4.37 pps
key measure of a company's
underlying operating This reflects the Company's for the six months
results from its property ability to generate earnings to 30 September
rental business and an from the portfolio which 2019 (six months
indication of the extent underpins dividends. to 30 September
to which current dividend 2018: 4.10 pps).
payments are supported by
earnings. See note 7.
* For the current and comparative reporting dates, the calculation of NIY
has been revised to use EPRA methodology to bring consistency with
disclosures made elsewhere in the Interim Report and Financial Statements.
The difference in output is considered immaterial.
Investment Manager's Report
Market Outlook
The portfolio, now increasingly mature, is offering us numerous
opportunities to undertake asset management initiatives which provide
various potential routes to add value. Despite the backdrop of ongoing
political uncertainty, the Company remains confident in its ability to
deliver on its objectives. The value of our assets has remained robust,
particularly in the office and industrial sectors, where assets have
either been acquired at conservative levels or provide exciting value-add
opportunities. There has been some loss of value in retail assets, in line
with the structural changes that we are seeing across the retail sector.
However, this has been mitigated by the portfolio's light exposure to the
sector and also by valuation gains in other parts of the portfolio.
Despite our positive outlook for the portfolio, we are conscious of the
opportunity to limit downside risk in an uncertain macro environment and,
with this in mind, we have recently taken a number of steps to reduce risk
associated with the Company's debt facility, details of these are set out
below.
Financial Results
The Company's NAV as at 30 September 2019 was £147.55 million or 97.36 pps
(31 March 2019: £149.46 million or 98.61 pps). This is a decrease of 1.25
pps or 1.27% over the six months. EPRA EPS for the six month period was
4.37 pps which, based on dividends paid of 4.00 pps, reflects a dividend
cover of 109.3%.
Financing
As at 30 September 2019, the Company had a £60.0 million loan facility
with RBSi, in place until October 2023, the details of which are presented
below:
30 September 2019 31 March 2019
Facility £60.00 million £60.00 million
Drawn £50.00 million £50.00 million
Gearing (Loan to Property 25.50% 25.30%
Value)
Gearing (Loan to NAV) 33.89% 33.45%
Interest rate 2.17% all-in (LIBOR + 2.32% all-in (LIBOR +
1.4%) 1.4%)
Notional Value of Loan Balance 73.02% 73.02%
Hedged
On 9 October 2019, the Company announced that it had completed an
amendment to its loan facility to increase the hard loan to NAV covenant
from 45% to 55% (subject to certain conditions), although the target
gearing remains as set out in the Prospectus. There are no changes to the
margin currently charged under the facility.
The Company has not made any acquisitions or disposals during the period.
The following tables illustrate the composition of the portfolio in
relation to its properties, tenants and income streams:
Summary by Sector as at 30 September 2019
Gross
Knight
Frank Occupancy WAULT to Passing
Area ERV
Number of Valuation by ERV break Rental
Income
Sector Properties (£m) ('000 (%) (years) (£m) (£m)
sq ft)
Industrial 20 93.93 2,335 99.4 4.1 7.55 8.37
Office 6 44.35 287 88.8 2.8 3.42 4.30
Other 3 30.02 165 100.0 5.6 2.82 2.33
Standard 5 21.65 169 92.1 3.8 1.94 2.00
Retail
Retail 1 6.10 51 100.0 4.5 0.61 0.51
Warehouse
Total 35 196.05 3,007 96.0 4.3 16.34 17.51
Summary by Geographical Area as at 30 September 2019
Gross
Knight WAULT
Frank Occupancy to Passing
Number of Area ERV
Valuation by ERV break Rental
Income
Geographical Properties (£m) ('000 (%) (years) (£m) (£m)
Area sq ft)
Yorkshire and 8 34.80 1,028 98.5 2.8 2.63 3.38
Humberside
South East 5 28.65 195 89.7 3.5 2.05 2.42
Eastern 5 23.20 345 100.00 3.5 1.90 2.11
South West 3 22.05 125 100.00 3.3 1.73 1.77
West Midlands 4 19.00 397 100.00 3.2 1.69 1.83
East Midlands 2 17.62 81 100.00 2.5 1.85 1.47
North West 4 15.40 302 100.00 3.7 1.45 1.33
Wales 2 14.73 376 100.00 9.6 1.25 1.29
Greater London 1 12.00 72 100.00 12.1 0.96 0.75
Scotland 1 8.60 86 65.8 1.8 0.83 1.16
Total 35 196.05 3,007 96.0 4.3 16.34 17.51
Sector and Geographical Allocation by Market Value as at 30 September 2019
Sector Allocation
Sector %
Standard Retail 11
Retail Warehouse 3
Offices 23
Industrial 48
Other 15
Geographical Allocation
Geographical %
Greater London 6
South East 15
South West 11
Eastern 12
West Midlands 10
East Midlands 9
North West 8
Yorkshire & Humberside 18
Wales 7
Scotland 4
Properties by Market Value
Market Value
Property Sector Region Range (£m)
1 2 Geddington Road, Corby Other (Car East Midlands 10.0-15.0
parking)
2 40 Queen Square, Bristol Offices South West 10.0-15.0
3 London East Leisure Park, Other (Leisure) Greater London 10.0-15.0
Dagenham
4 Eastpoint Business Park, Offices South East 10.0-15.0
Oxford
5 Gresford Industrial Estate, Industrial Wales 7.5-10.0
Wrexham
6 225 Bath Street, Glasgow Offices Scotland 7.5-10.0
7 Lockwood Court, Leeds Industrial Yorkshire and 5.0-7.5
Humberside
Langthwaite Grange Yorkshire and
8 Industrial Estate, South Industrial Humberside 5.0-7.5
Kirkby
9 Above Bar Street, Standard Retail South East 5.0-7.5
Southampton
10 Storeys Bar Road, Industrial Eastern 5.0-7.5
Peterborough
The Company's top ten properties listed above comprise 48.0% of the total
value of the portfolio.
Market Value
Property Sector Region Range (£m)
11 Sarus Court Industrial Industrial North West 5.0-7.5
Estate, Runcorn
12 Barnstaple Retail Park Retail Warehouse South West 5.0-7.5
13 Sandford House, Solihull Offices West Midlands 5.0-7.5
14 Apollo Business Park, Industrial Eastern 5.0-7.5
Basildon
15 Euroway Trading Estate, Industrial Yorkshire and 5.0-7.5
Bradford Humberside
16 Brockhurst Crescent, Industrial West Midlands 5.0-7.5
Walsall
17 Odeon Cinema, Southend Other (Leisure) Eastern 5.0-7.5
18 Oak Park, Droitwich Industrial West Midlands 5.0-7.5
Commercial Road, Portsmouth Standard Retail South East 5.0-7.5
19
20 Diamond Business Park, Industrial Yorkshire and <5.0
Wakefield Humberside
21 Pearl Assurance House, Standard Retail East Midlands <5.0
Nottingham
22 Excel 95, Deeside Industrial Wales <5.0
23 Walkers Lane, St Helens Industrial North West <5.0
24 Cedar House, Gloucester Offices South West <5.0
25 Bank Hey Street, Blackpool Standard Retail North West <5.0
26 Brightside Lane, Sheffield Industrial Yorkshire and <5.0
Humberside
Bessemer Road, Basingstoke Industrial South East <5.0
27
Yorkshire and
Magham Road, Rotherham Industrial Humberside <5.0
28
29 Pipps Hill Industrial Industrial Eastern <5.0
Estate, Basildon
30 Eagle Road, Redditch Industrial West Midlands <5.0
31 Vantage Point, Hemel Offices Eastern <5.0
Hempstead
Clarke Road, Milton Keynes Industrial South East <5.0
32
33 Knowles Lane, Bradford Industrial Yorkshire and <5.0
Humberside
34 Moorside Road, Salford Industrial North West <5.0
35 Fargate and Chapel Walk, Standard Retail Yorkshire and <5.0
Sheffield Humberside
Tenancy Profile
Top Ten Tenants by Passing Rent
% of
Portfolio
Passing Total
Rental Passing
Income Rental
Tenant Sector Property (£'000) Income
1 GEFCO UK Limited Logistics 2 Geddington Road, 1,320 8.1
Corby
2 Plastipak UK Manufacturing Gresford Industrial 883 5.4
Limited Estate, Wrexham
The Secretary of Sandford House,
3 State Government Body Solihull and Cedar 832 5.1
House, Gloucester
Ardagh Glass Langthwaite
4 Limited Manufacturing Industrial Estate, 676 4.1
South Kirkby
5 Mecca Bingo Leisure London East Leisure 625 3.8
Limited Park, Dagenham
6 Egbert H Taylor & Manufacturing Oak Park, Droitwich 620 3.8
Company Limited
7 Odeon Cinemas Leisure Odeon Cinema, 535 3.3
Southend
Barnstaple Retail
8 Sports Direct Retail Park and Bank Hey 525 3.2
Street, Blackpool
Wyndeham Storeys Bar Road,
9 Peterborough Manufacturing Peterborough 525 3.2
Limited
Advance Supply Euroway Trading
10 Chain (BFD) Logistics Estate, Bradford 428 2.6
Limited
The Company's top ten tenants, listed above, represent 42.6% of the total
passing rental income of the portfolio.
Asset Management
Knowles Lane, Bradford - in September 2019, the Company settled a rent
review back-dated to September 2018 at this industrial property. The
review documents a new passing rent of £182,500, representing a 14%
increase on the previous rent and which was also ahead of the valuer's ERV
at the date of signing.
Bessemer Road, Basingstoke - in September 2019, a lease extension for a
term of six months was completed with HFC Prestige Manufacturing in
Basingstoke. Due to the short extension period, a rental level was agreed
46% ahead of the previous passing rent.
Lease Expiry Profile
Approximately £3.36 million of the Company's current contracted income
stream is subject to an expiry or break within the 12 month period
commencing 1 October 2019. Of this £3.36 million, £940,000 (28%) is
already subject to an agreed renewal in principle, either at or above the
current level of passing rent. In respect of a further £1.52 million
(45%), the Investment Manager is currently engaged in active renewal
discussions where tenants are expected to remain in occupation subject to
agreeing final lease terms. The Investment Manager expects to engage
further tenants in renewal discussion throughout the period. To date,
tenants that have served notice to vacate within this period and have made
clear that they intend to do so amount to c.£71,000 (2%).
AEW UK Investment Management LLP
27 November 2019
Interim Management Report & Directors' Responsibility Statement
Interim Management Report
The important events that have occurred during the period under review,
the key factors influencing the financial statements and the principal
risks and uncertainties for the remaining six months of the financial year
are set out in the Chairman's Statement and the Investment Manager's
Report above.
The principal risks facing the Company are unchanged since the date of the
Annual Report and Financial Statements for the year ended 31 March 2019
and continue to be as set out in that report on pages 29 to 34 and Note 20
to the Financial Statements on pages 92 to 95.
Risks faced by the Company include, but are not limited to: property
market, property valuation, tenant default, asset management initiatives,
due diligence, fall in rental rates, breach of borrowing covenants,
interest rate rises, availability and cost of debt, use of service
providers, dependence on the Investment Manager, ability to meet
objectives, Company REIT status, political/economic risks, market price
risk, real estate risk, credit risk and liquidity risk.
Responsibility Statement
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the
EU;
• the interim management report includes a fair review of the
information required by:
a. DTR 4.2.7R, being an indication of important events that have occurred
during the first six months of the financial year and their impact on
the condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of the
year; and
b. 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
entity during that period; and any changes in the related party
transactions described in the last annual report that could do so.
On behalf of the Board
Mark Burton
Chairman
27 November 2019
Independent Review Report to AEW UK REIT plc
Conclusion
We have been engaged by the Company to review the condensed set of
financial statements in the Interim Report & Financial Statements for the
six months ended 30 September 2019 which comprises the Condensed Statement
of Comprehensive Income, Condensed Statement of Changes in Equity,
Condensed Statement of Financial Position, Condensed Statement of Cash
Flows and the related explanatory notes.
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 2019 are not
prepared, in all material respects, in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU and the DTR of the UK's Financial
Conduct Authority (the "FCA").
Scope of review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued by
the Auditing Practices Board for use in the UK. 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. We read the
other information contained in the Interim Report & Financial Statements
and consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
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.
The impact of uncertainties due to the UK exiting the European Union on
our review
Uncertainties related to the effects of Brexit are relevant to
understanding our review of the condensed financial statements. Brexit is
one of the most significant economic events for the UK, and at the date of
this report its effects are subject to unprecedented levels of uncertainty
of outcomes, with the full range of possible effects unknown. An interim
review cannot be expected to predict the
unknowable factors or all possible future implications for a company and
this is particularly the case in relation to Brexit.
Directors' responsibilities
The Interim Report & Financial Statements is the responsibility of, and
has been approved by, the Directors. The Directors are responsible for
preparing the Interim Report & Financial Statements in accordance with the
DTR of the FCA.
The annual financial statements of the Company are prepared in accordance
with International Financial Reporting Standards as adopted by the EU. The
Directors are responsible for preparing the condensed set of financial
statements included in the Interim Report & Financial Statements in
accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the Interim Report & Financial
Statements based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of
our engagement to assist the Company in meeting the requirements of the
DTR of the FCA. Our review has been undertaken so that we might state to
the Company those matters we are required to state to it in this report
and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Henry Todd
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
27 November 2019
Financial Statements
Condensed Statement of Comprehensive Income
for the six months ended 30 September 2019
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Income
Rental and other income 3 8,777 8,459 17,183
Property operating 4 (509) (630) (1,462)
expenses
Net rental and other 8,268 7,829 15,721
income
Other operating expenses 4 (1,004) (970) (2,197)
Operating profit before 7,264 6,859 13,524
fair value changes
Change in fair value of 9 (2,407) 5,653 4,184
investment properties
Gain/(loss) on disposal 9 44 (178) (482)
of investment properties
Operating profit 4,901 12,334 17,226
Finance expense 5 (742) (656) (1,682)
Profit before tax 4,159 11,678 15,544
Taxation 6 - - -
Profit after tax 4,159 11,678 15,544
Other comprehensive - - -
income
Total comprehensive 4,159 11,678 15,544
income for the period
Earnings per share
(pence per share) (basic 7 2.74 7.71 10.26
and diluted)
The notes below form an integral part of these condensed financial
statements.
Condensed Statement of Changes in Equity
for the six months ended 30 September 2019
Total capital
Capital
Share and reserves
For the period 1 April Share reserve and
2019 to premium attributable to
capital retained
account owners of
earnings
the Company
30 September 2019 Notes £'000 £'000 £'000 £'000
(unaudited)
Balance as at 1 April 1,515 49,770 98,171 149,456
2019
Total comprehensive - - 4,159 4,159
income
Dividends paid 8 - - (6,062) (6,062)
Balance as at 30 1,515 49,770 96,268 147,553
September 2019
Total capital
Capital
Share and reserves
For the period 1 April Share reserve and
2018 to premium attributable to
capital retained
account owners of
earnings
the Company
30 September 2018 Notes £'000 £'000 £'000 £'000
(unaudited)
Balance at 1 April 2018 1,515 49,768 94,751 146,034
Total comprehensive - - 11,678 11,678
income
Share issue costs - 3 - 3
Dividends paid 8 - - (6,062) (6,062)
Balance as at 30 1,515 49,771 100,367 151,653
September 2018
Total capital
Capital
Share and reserves
Share reserve and
premium attributable to
capital retained
account owners of
earnings
the Company
For the year ended 31 Notes £'000 £'000 £'000 £'000
March 2019 (audited)
Balance at 1 April 2018 1,515 49,768 94,751 146,034
Total comprehensive - - 15,544 15,544
income
Share issue costs - 2 - 2
Dividends paid 8 - - (12,124) (12,124)
Balance as at 31 March 1,515 49,770 98,171 149,456
2019
The notes below form an integral part of these condensed financial
statements.
Condensed Statement of Financial Position
as at 30 September 2019
As at
As at As at
30 September
30 September 2019 31 March 2019
(unaudited) 2018
(audited)
(unaudited)
Notes £'000 £'000 £'000
Assets
Non-Current Assets
Investment property 9 193,979 192,519 196,129
193,979 192,519 196,129
Current Assets
Receivables and 10 7,621 3,394 4,469
prepayments
Other financial assets 11 58 9 162
held at fair value
Cash and cash 2,012 8,145 2,131
equivalents
9,691 11,548 6,762
Total assets 203,670 204,067 202,891
Non-Current Liabilities
Interest bearing loans 12 (49,528) (49,714) (49,476)
and borrowings
Finance lease 14 (636) (573) (636)
obligations
(50,164) (50,287) (50,112)
Current Liabilities
Payables and accrued 13 (5,905) (2,080) (3,275)
expenses
Finance lease 14 (48) (47) 48
obligations
(5,953) (2,127) (3,323)
Total Liabilities (56,117) (52,414) (53,435)
Net Assets 147,553 151,653 149,456
Equity
Share capital 1,515 1,515 1,515
Share premium account 49,770 49,771 49,770
Capital reserve and 96,268 100,367 98,171
retained earnings
Total capital and
reserves attributable 147,553 151,653 149,456
to equity holders of
the Company
Net Asset Value per 7 97.36 100.06 98.61
share (pps)
The financial statements were approved by the Board of Directors on 27
November 2019 and were signed on its behalf by:
Mark Burton
Chairman
AEW UK REIT plc
Company number: 09522515
The notes below form an integral part of these condensed financial
statements.
Condensed Statement of Cash Flows
for the six months ended 30 September 2019
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating
activities
Profit after tax 4,159 11,678 15,544
Adjustment for non-cash items:
Finance expenses 742 656 1,682
Loss/(gain) from change in
fair value of investment 2,407 (5,653) (4,184)
property
Realised (gain)/loss on
disposal of investment (44) 178 482
property
Increase in other receivables (3,152) (455) (1,318)
and prepayments
Increase/(decrease) in other 2,640 (385) 587
payables and accrued expenses
Net cash generated from 6,752 6,019 12,793
operating activities
Cash flows from investing
activities
Additions to investment (257) (506) (7,945)
property
Proceeds from disposal of 44 4,508 6,629
investment property
Net cash (used in)/generated (213) 4,002 (1,316)
from investing activities
Cash flows from financing
activities
Share issue costs - (31) (32)
Loan arrangement fees - - (294)
Premiums on interest rate caps - - (531)
Finance costs (596) (494) (1,076)
Dividends paid (6,062) (6,062) (12,124)
Net cash used in financing (6,658) (6,587) (14,057)
activities
Net (decrease)/increase in (119) 3,434 (2,580)
cash and cash equivalents
Cash and cash equivalents at 2,131 4,711 4,711
start of the period/year
Cash and cash equivalents at 2,012 8,145 2,131
end of the period/year
The notes below form an integral part of these condensed financial
statements.
Notes to the Condensed Financial Statements
for the six months ended 30 September 2019
1. Corporate information
AEW UK REIT plc (the 'Company') is a closed ended Real Estate Investment
Trust ('REIT') incorporated on 1 April 2015 and domiciled in the UK.
The comparative information for the year ended 31 March 2019 does not
constitute statutory accounts as defined in section 434 of the Companies
Act 2006. The auditor reported on those accounts. Its report was
unqualified and did not contain a statement under section 498(2) or (3) of
the Companies Act 2006.
2. Accounting policies
2.1 Basis of preparation
These interim condensed unaudited financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by the
EU, and should be read in conjunction with the Company's last financial
statements for the year ended 31 March 2019. These condensed unaudited
financial statements do not include all information required for a
complete set of financial statements proposed in accordance with IFRS as
adopted by the EU ('EU IFRS'). However, selected explanatory notes have
been included to explain events and transactions that are significant in
understanding changes in the Company's financial position and performance
since the last financial statements. A review of the interim financial
information has been performed by the Independent Auditor of the Company
for issue on 27 November 2019.
The comparative figures disclosed in the condensed unaudited financial
statements and related notes have been presented for both the six month
period ended 30 September 2018 and year ended 31 March 2019 and as at 30
September 2018 and 31 March 2019.
These condensed unaudited financial statements have been prepared under
the historical-cost convention, except for investment property and
interest rate derivatives that have been measured at fair value. The
condensed unaudited financial statements are presented in Sterling and all
values are rounded to the nearest thousand pounds (£'000), except when
otherwise indicated.
The Company is exempt by virtue of section 402 of the Companies Act 2006
from the requirement to prepare group financial statements. These
financial statements present information solely about the Company as an
individual undertaking.
New standards, amendments and interpretations
There were a number of new standards and amendments to existing standards
which are required for the Company's accounting periods beginning after 1
April 2019, which have been considered and applied. These being:
• IFRS 16, Leases. In January 2016, the IASB published the final version
of IFRS 16 Leases. IFRS specifies how an IFRS reporter will recognise,
measure, present and disclose leasing arrangements. The accounting for
lessors did not significantly change. For finance lease obligations,
the Company is already carrying a right of use asset at fair value so
treatment remains in line with prior years in that regard.
• Amendments to IFRS 9 - Prepayment Features with Negative Compensation.
This seeks to enable companies to measure at amortised cost some
prepayable financial assets with negative compensation.
• IFRIC 23, Uncertainty over Income Tax Treatments. This seeks to
clarify the application of recognition and measurement requirements in
IAS 12, Income Taxes, when there is uncertainty over income tax
treatment.
• Amendments to IAS 28 Long Term interests in Associates and Joint
Ventures. This seeks to clarify the impact of expected credit loss
model in IFRS 9 on any long-term interests in an associate or joint
venture to which the equity method is not applied but that, in
substance, form part of the net investment in associate or joint
venture.
• Amendments to IAS 19 Plan Amendment, Curtailment or Settlement. This
seeks to clarify when an entity is required to determine the current
service cost and net interest for the remainder of the period after a
plan amendment, curtailment or settlement.
The Company has applied the new standards and there has been no impact on
the financial statements.
There are a number of new standards and amendments to existing standards
which have been published and are mandatory for the Company's accounting
periods beginning on or after 1 April 2020 or later. The following are the
most relevant to the Company and their impact on the financial statements
is as follows:
• Definition of Material - amendments to IAS 1 and IAS 8.
• Annual improvements to IFRS 2015-2017 Cycle: amendments to IFRS 3
Business Combinations, IFRS 11 Joint Arrangements.
The impact of the adoption of new accounting standards issued and becoming
effective for accounting periods beginning on or after 1 April 2020 has
been considered and is not considered to be significant.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IAS 34 requires
the Directors of the Company to make judgements, estimates and assumptions
that affect the reported amounts recognised in the financial statements.
However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the
asset or liability in the future.
i) Valuation of investment property
The Company's investment property is held at fair value as determined by
the independent valuer on the basis of fair value in accordance with the
internationally accepted Royal Institution of Chartered Surveyors ('RICS')
Appraisal and Valuation Standards.
2.3 Segmental information
In accordance with IFRS 8, the Company is organised into one main
operating segment being investment in property and property
related-investments in the UK.
2.4 Going concern
The Directors have made an assessment of the Company's ability to continue
as a going concern and are satisfied that the Company has the resources to
continue in business for at least 12 months. Furthermore, the Directors
are not aware of any material uncertainties that may cast significant
doubt upon the Company's ability to continue as a going concern.
Therefore, the financial statements have been prepared on the going
concern basis.
2.5 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are consistent with those applied within the
Company's Annual Report and Financial Statements for the year ended 31
March 2019 except for the changes as detailed in note 2.1.
3. Revenue
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Gross rental income received 8,777 8,456 17,179
Other property income - 3 4
Total rental and other income 8,777 8,459 17,183
Rent receivable under the terms of the leases is adjusted for the effect
of any incentives agreed.
4. Expenses
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Property operating expenses 509 630 1,462
Other operating expenses
Investment management fee 665 648 1,302
Auditor remuneration 48 43 98
Operating costs 230 226 675
Directors' remuneration 61 53 122
Total other operating expenses 1,004 970 2,197
Total operating expenses 1,513 1,600 3,659
5. Finance expense
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest payable on loan 556 540 1,103
borrowings
Amortisation of loan 53 71 127
arrangement fee
Agency fee payable on loan - 2 3
borrowings
Commitment fee payable on loan 29 26 54
borrowings
638 639 1,287
Change in fair value of 104 17 395
interest rate derivatives
Total 742 656 1,682
6. Taxation
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Analysis of charge in the
period
Profit before tax 4,159 11,678 15,544
Theoretical tax at UK
corporation tax standard rate 790 2,219 2,953
of 19% (30 September 2018: 19%;
31 March 2019: 19%)
Adjusted for:
Exempt REIT income (1,239) (1,178) (2,249)
Non taxable investment 449 (1,041) (704)
losses/(gains)
Total - - -
7. Earnings per share and NAV per share
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
EPS:
Total comprehensive income 4,159 11,678 15,544
(£'000)
Weighted average number of 151,558,251 151,558,251 151,558,251
shares
EPS (basic and diluted) 2.74 7.71 10.26
(pence)
EPRA EPS:
4,159 11,678 15,544
Total comprehensive income
(£'000)
Adjustment to total
comprehensive income:
Change in fair value of 2,407 (5,653) (4,184)
investment property (£'000)
(Gain)/loss on disposal of (44) 178 482
investment property (£'000)
Change in fair value of
interest rate derivatives 104 17 395
(£'000)
Total EPRA Earnings (£'000) 6,626 6,220 12,237
EPRA EPS (basic and diluted) 4.37 4.10 8.07
(pence)
NAV per share:
Net assets (£'000) 147,553 151,653 149,456
Ordinary Shares 151,558,251 151,558,251 151,558,251
NAV per share (pence) 97.36 100.06 98.61
EPRA NAV per share:
Net assets (£'000) 147,553 151,653 149,456
Adjustments to net assets:
Other financial assets held (58) (9) (162)
at fair value (£'000)
EPRA NAV (£'000) 147,495 151,644 149,294
EPRA NAV per share (pence) 97.32 100.06 98.51
EPS amounts are calculated by dividing profit for the period attributable
to ordinary equity holders of the Company by the weighted average number
of Ordinary Shares in issue during the period. As at 30 September 2019,
EPRA NNNAV was equal to IFRS NAV and as such a reconciliation between the
two measures has not been presented.
8. Dividends paid
Period from Period from
Year ended
1 April 2019 to 1 April 2018 to
31 March
30 September 30 September
2019
2019 2018
Dividends paid during the £'000 £'000 £'000
period
Represents two/two/four
interim dividends of 2.00 pps 6,062 6,062 12,124
each
Period from Period from
1 April 2019 to 1 April 2018 to Year ended
30 September 31 October 31 March
2019 2018 2019
Dividends relating to the £'000 £'000 £'000
period
Represents two/two/four
interim dividends of 2.00 pps 6,062 6,062 12,124
each
Dividends paid during the period relate to Ordinary Shares only.
9. Investments
9.a) Investment property
Period from 1 April 2019 to
30 September 2019 (unaudited)
Period from
Year
1 April 2018 ended
to 31 31 March
September
Investment Investment 2018 2019
properties properties (unaudited) (audited)
freehold leasehold Total Total Total
£'000 £'000 £'000 £'000 £'000
UK Investment
property
As at beginning 159,080 38,525 197,605 192,342 192,342
of period
Additions in the 262 (5) 257 151 7,590
period
Disposals in the - - - (4,628) (7,053)
period
Revaluation of
investment (2,617) 805 (1,812) 5,665 4,726
property
Valuation
provided by 156,725 39,325 196,050 193,530 197,605
Knight Frank
Adjustment for (2,755) (1,631) (2,160)
rent free debtor
Adjustment for
finance lease 684 620 684
obligations*
Total Investment 193,979 192,519 196,129
property
Change in fair
value of
investment
property
Change in fair
value before (1,812) 5,665 4,726
adjustments for
lease incentives
Adjustment for
movement in the
period:
in value for rent (595) (12) (542)
free debtor
(2,407) 5,653 4,184
Gain/(loss) on
disposal of the
investment
property
Net proceeds from
disposals of
investment 44 4,508 6,629
property during
the period
Cost of disposal - (4,628) (7,053)
Lease incentives
amortised in - (58) (58)
current
period/year
Gain/(loss) on
disposal of 44 (178) (482)
investment
property
* Adjustment in respect of minimum payment under head leases separately
included as a liability within the Condensed Statement of Financial
Position.
Valuation of investment property
Valuation of investment property is performed by Knight Frank LLP, an
accredited external valuer with recognised and relevant professional
qualifications and recent experience of the location and category of the
investment property being valued.
The valuation of the Company's investment property at fair value is
determined by the external valuer on the basis of market value in
accordance with the internationally accepted RICS Valuation - Professional
Standards (incorporating the International Valuation Standards).
The determination of the fair value of investment property requires the
use of estimates such as future cash flows from assets (such as lettings,
tenants' profiles, future revenue streams, capital values of fixtures and
fittings, plant and machinery, any environmental matters and the overall
repair and condition of the property) and discount rates applicable to
those flows.
9.b) Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy for
non-current assets:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
£'000 £'000 £'000 £'000
Assets measured at fair
value
30 September 2019
Investment property - - 193,979 193,979
30 September 2018
Investment property - - 192,519 192,519
31 March 2019
Investment property - - 196,129 196,129
Explanation of the fair value hierarchy:
Level 1 - Quoted prices for an identical instrument in active markets;
Level 2 - Prices of recent transactions for identical instruments and
valuation techniques using observable market data; and
Level 3 - Valuation techniques using non-observable data.
There have been no transfers between Level 1 and Level 2 during either
period, nor have there been any transfers in or out of Level 3.
Sensitivity analysis to significant changes in unobservable inputs within
Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of the entity's
portfolios of investment properties are:
1) ERV
2) Equivalent yield
Increases/(decreases) in the ERV (per sq ft per annum) in isolation would
result in a higher/(lower) fair value measurement. Increases/(decreases)
in the yield in isolation would result in a lower/(higher) fair value
measurement.
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of the portfolio of
investment property are:
Significant
Fair value Valuation unobservable
Class £'000 technique inputs Range
30 September
2019
£0.50 -
Investment Income ERV £127.00
Property 196,050 capitalisation
Equivalent yield 5.95% -
9.69%
30 September
2018
£1.00 -
Investment Income ERV £127.00
Property 193,530 capitalisation
Equivalent yield 4.23% -
12.09%
31 March 2019
£1.00-
Investment Income ERV £127.00
Property 197,605 capitalisation
Equivalent yield 5.87% -
10.25%
Where possible, sensitivity of the fair values of Level 3 assets are
tested to changes in unobservable inputs to reasonable alternatives.
Gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy are
attributable to changes in unrealised gains or losses relating to
investment property and investments held at the end of the reporting
period.
With regards to both investment property and investments, gains and losses
for recurring fair value measurements categorised within Level 3 of the
fair value hierarchy, prior to adjustment for rent free debtor and rent
guarantee debtor, are recorded in profit and loss.
The carrying amount of the assets and liabilities, detailed within the
Condensed Statement of Financial Position, is considered to be the same as
their fair value.
The tables below sets out a sensitivity analysis for each of the key
sources of estimation uncertainty with the resulting increase/(decrease)
in the fair value of investment property.
Fair value Change in ERV Change in equivalent yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +5% -5% +5% -5%
30 September 2019 196,050 204,427 187,935 185,802 207,198
30 September 2018 193,530 200,241 183,820 181,321 203,387
31 March 2019 197,605 205,803 189,720 187,352 208,707
Fair value Change in ERV Change in equivalent yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +10% -10% +10% -10%
30 September 2019 196,050 213,858 179,153 178,444 217,351
30 September 2018 193,530 208,704 175,911 173,762 213,834
31 March 2019 197,605 215,108 181,156 179,876 219,000
10. Receivables and prepayments
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Receivables
Rent debtor 2,789 1,283 1,477
Allowance for expected credit losses (51) - (39)
Rent agent float account 1,363 184 92
Other receivables 481 221 381
4,582 1,688 1,911
Rent free debtor 2,755 1,631 2,160
Prepayments 284 75 398
Total 7,621 3,394 4,469
The aged debtor analysis of receivables as follows:
30 September 30 September 31 March
2019 2018 2019
£'000 £'000 £'000
Less than three months due 4,257 1,688 1,911
Between three and six months due 325 - -
Total 4,582 1,688 1,911
11. Interest rate derivatives
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 162 26 26
Interest rate cap premium paid - - 531
Changes in fair value of interest (104) (17) (395)
rate derivatives
At the end of the period 58 9 162
The Company is protected from a significant rise in interest rates as it
has interest rate caps with a combined notional value of £36.51 million
(31 March 2019: £36.51 million), resulting in the loan being 73% hedged
(31 March 2019: 73%). These interest rate caps are effective until 19
October 2020. In October 2018, the Company entered into additional
interest rate caps on a notional value of £46.51 million at 2.00% covering
the extension period of the loan from October 2020 to October 2023.
Fair Value hierarchy
The following table provides the fair value measurement hierarchy for
interest rate derivatives:
Assets measured at fair value
Quoted prices Significant Significant
in active observable unobservable
markets input inputs
(Level 1) (Level 2) (Level 3) Total
Valuation date £'000 £'000 £'000 £'000
30 September 2019 - 58 - 58
30 September 2018 - 9 - 9
31 March 2019 - 162 - 162
The fair value of these contracts are recorded in the Condensed Statement
of Financial Position as at the period end.
There have been no transfers between Level 1 and Level 2 during the
period, nor have there been any transfers between Level 2 and Level 3
during the period.
The carrying amount of the assets and liabilities, detailed within the
Condensed Statement of Financial Position, is considered to be the same as
their fair value.
12. Interest bearing loans and borrowings
Bank borrowings drawn
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 50,000 50,000 50,000
Bank borrowings drawn in the period - - -
Interest bearing loans and borrowings 50,000 50,000 50,000
Unamortised loan arrangement fees (472) (286) (524)
At the end of the period 49,528 49,714 49,476
Repayable between two and five years 50,000 50,000 50,000
Bank borrowings available but undrawn 10,000 10,000 10,000
in the period
Total facility available 60,000 60,000 60,000
The Company has a £60.00 million (31 March 2019: £60.00 million) credit
facility with RBSi of which £50.00 million (31 March 2019: £50.00 million)
has been utilised as at 30 September 2019.
Under the terms of the Prospectus, the Company has a target gearing of 25%
loan to GAV, but can borrow up to 35% loan to GAV in advance of a capital
raise or asset disposal. As at 30 September 2019, the Company's gearing
was 25.50% loan to property valuation (31 March 2019: 25.30%).
Under the terms of the loan facility, the Company can draw up to 35% loan
to NAV at drawdown. On 9 October 2019, the Company announced that it had
completed an amendment to its loan facility, increasing the loan to NAV
covenant from 45% to 55% (subject to certain conditions). There are no
changes to the margin currently charged under the facility.
Borrowing costs associated with the credit facility are shown as finance
costs in note 5 to these financial statements.
13. Payables and accrued expenses
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Deferred income 3,312 929 1,137
Accruals 1,037 467 1,189
Other creditors 1,556 684 949
Total 5,905 2,080 3,275
14. Finance lease obligations
Finance leases are capitalised at the lease's commencement at the present
value of the minimum lease payments. The present value of the
corresponding rental obligations are included as liabilities.
The following table analyses the minimum lease payments under
non-cancellable finance leases:
30 September 30 September 31 March
2019 2018 2019
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Not later than one year 48 47 48
Later than one year but not later than 160 152 160
five years
Later than five years 476 421 476
636 573 636
Total 684 620 684
15. Issued share capital
There was no change to the issued share capital during the period. The
number of ordinary shares in issue and fully paid remains 151,558,251 of
£0.01 each.
16. Transactions with related parties
As defined by IAS 24 Related Party Disclosures, parties are considered to
be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial or
operational decisions.
For the six months ended 30 September 2019, the Directors of the Company
are considered to be the key management personnel. Directors' remuneration
is disclosed in note 4.
The Company is party to an Investment Management Agreement with the
Investment Manager, pursuant to which the Company has appointed the
Investment Manager to provide investment management services relating to
the respective assets on a day-to-day basis in accordance with their
respective investment objectives and policies, subject to the overall
supervision and direction of the Board of Directors.
Under the Investment Management Agreement, the Investment Manager receives
a quarterly management fee which is calculated and accrued monthly at a
rate equivalent to 0.9% per annum of NAV (excluding uninvested proceeds
from fundraising).
During the period from 1 April 2019 to 30 September 2019, the Company
incurred £665,344 (six months ended 30 September 2018: £648,247) in
respect of investment management fees and expenses of which £664,962 was
outstanding at 30 September 2019 (31 March 2019: £328,323).
17. Events after reporting date
Dividend
On 18 October 2019, the Board declared its second interim dividend of 2.00
pps in respect of the period from 1 July 2019 to 30 September 2019. The
dividend payment will be made on 29 November 2019 to shareholders on the
register as at 1 November 2019. The ex-dividend date was 31 October 2019.
The dividend of 2.00 pps was designated as an interim property income
distribution ("PID"). Unless shareholders have elected to receive the PID
gross, 20% tax will be deducted at source.
Financing
On 9 October 2019, the Company announced that it had completed an
amendment to its loan facility, increasing the loan to NAV covenant from
45% to 55% (subject to certain conditions).
EPRA Performance Measures
Detailed below is a summary table showing the EPRA performance measures of
the Company. All EPRA performance measures have been calculated in line
with EPRA Best Practices Recommendations Guidelines which can be found at
1 www.epra.com.
MEASURE AND DEFINITION PURPOSE PERFORMANCE
A key measure of a £6.63 million/4.37
company's underlying pps
1. EPRA Earnings operating results and
an indication of the EPRA earnings for the
Earnings from operational extent to which current six month period
activities. dividend payments are ended 30 September
supported by earnings. 2019 (six month
period ended 30
September 2018: £6.22
million/4.10 pps)
2. EPRA NAV Makes adjustments to
IFRS NAV to provide
NAV adjusted to include stakeholders with the
properties and other most relevant
investment interests at fair information on the fair £147.50 million/97.32
value and to exclude certain value of the assets and pps EPRA NAV as at 30
items not expected to liabilities within a September 2019 (At 31
crystallise in a long-term true real estate March 2019: £149.29
investment property investment company with million/ 98.51 pps)
business. a long-term investment
strategy.
3. EPRA NNNAV
Makes adjustments to
EPRA NAV adjusted to include EPRA NAV to provide
the fair values of: stakeholders with the £147.55 million/97.36
most relevant pps EPRA NNNAV as at
(i) financial instruments; information on the 30 September 2019
current fair value of
(ii) debt; and all the assets and (At 31 March 2019:
liabilities within a £149.46 million/98.61
(iii) deferred taxes. real estate company. pps)
4.1 EPRA NIY
Annualised rental income
based on the cash rents
passing at the balance sheet A comparable measure 7.45%
date, less non-recoverable for portfolio
property operating expenses, valuations. This EPRA NIY
divided by the market value measure should make it
of the property, increased easier for investors to as at 30 September
with (estimated) purchasers' judge themselves, how 2019
costs. the valuation of
portfolio X compares (At 31 March 2019:
with portfolio Y. 7.62%)
4.2 EPRA 'Topped-Up' NIY
This measure incorporates an A comparable measure 8.27%
adjustment to the EPRA NIY for portfolio
in respect of the expiration valuations. This EPRA 'Topped-Up' NIY
of rent-free periods (or measure should make it
other unexpired lease easier for investors to as at 30 September
incentives such as judge themselves, how 2019
discounted rent periods and the valuation of
step rents). portfolio X compares (At 31 March 2019:
with portfolio Y. 8.58%)
5. EPRA Vacancy
3.96%
Estimated Market Rental
Value ('ERV') of vacant A "pure" (%) measure of EPRA vacancy
space divided by ERV of the investment property
whole portfolio. space that is vacant, as at 30 September
based on ERV. 2019
(At 31 March 2019:
2.99%)
16.93%
EPRA Cost Ratio
(including direct
vacancy cost) as at
6. EPRA Cost Ratio 30 September 2019
Administrative and operating A key measure to enable (At 30 September
costs (including and meaningful measurement 2018: 18.68%)
excluding costs of direct of the changes in a
vacancy) divided by gross company's operating 13.76%
rental income. costs.
EPRA Cost ratio
excluding direct
vacancy costs as at
30 September 2019
(At 30 September
2018: 14.96%)
Calculation of EPRA NIY and 'topped-up' NIY
30 September
2019
£'000
Investment property - wholly-owned 196,050
Allowance for estimated purchasers' costs 13,331
Gross up completed property portfolio valuation 209,381
Annualised cash passing rental income 16,335
Property outgoings (738)
Annualised net rents 15,597
Rent expiration of rent-free periods and fixed uplifts 1,716
'Topped-up' net annualised rent 17,313
EPRA NIY 7.45%
EPRA 'topped-up' NIY 8.27%
EPRA NIY basis of calculation
EPRA NIY is calculated as the annualised net rent, divided by the gross
value of the completed property portfolio.
The valuation of grossed up completed property portfolio is determined by
our external valuers as at 30 September 2019, plus an allowance for
estimated purchasers' costs. Estimated purchasers' costs are determined by
the relevant stamp duty liability, plus an estimate by our valuers of
agent and legal fees on notional acquisition. The net rent deduction
allowed for property outgoings is based on our valuers' assumptions on
future recurring non-recoverable revenue expenditure.
In calculating the EPRA 'topped-up' NIY, the annualised net rent is
increased by the total contracted rent from expiry of rent-free periods
and future contracted rental uplifts.
Calculation of EPRA Vacancy Rate
30 September
2019
£'000
Annualised potential rental value of vacant premises 694
Annualised potential rental value for the completed 17,512
property portfolio
EPRA Vacancy Rate 3.96%
30 September
2019
£'000
Administrative/operating expense per IFRS income statement 1,513
Less: Ground rent costs (33)
EPRA Costs (including direct vacancy costs) 1,480
Direct vacancy costs (277)
EPRA Costs (excluding direct vacancy costs) 1,203
Gross Rental Income less ground rent costs 8,744
EPRA Cost Ratio (including direct vacancy costs) 16.93%
EPRA Cost Ratio (excluding direct vacancy costs) 13.76%
Company Information
Share Register Enquiries
The register for the Ordinary Shares is maintained by Computershare
Investor Services PLC. In the event of queries regarding your holding,
please contact the Registrar on 0370 889 4069 or email:
2 web.queries@computershare.co.uk.
Changes of name and/or address must be notified in writing to the
Registrar, at the address shown below. You can check your shareholding and
find practical help on transferring shares or updating your details at
3 www.investorcentre.co.uk. Shareholders eligible to receive dividend
payments gross of tax may also download declaration forms from that
website.
Share Information
Ordinary £0.01 Shares 151,558,251
SEDOL Number BWD2415
ISIN Number GB00BWD24154
Ticker/TIDM AEWU
The Company's Ordinary Shares are traded on the Main Market of the London
Stock Exchange.
Annual and Interim Reports
Copies of the Annual and Interim Reports are available from the Company's
website: 4 www.aewukreit.com.
Provisional Financial Calendar
31 March 2020 Year end
June 2020 Announcement of annual results
September 2020 Annual General Meeting
30 September 2020 Half-year end
November 2020 Announcement of interim results
Dividends
The following table summarises the dividends declared in relation to the
period:
£
Interim dividend for the period 1 April 2019 to 30 June 2019 3,031,165
(payment made on 30 August 2019)
Interim dividend for the period 1 July 2019 to 30 September 2019 3,031,165
(payment to be made on 29 November 2019)
Total 6,062,330
Independent Directors
Mark Burton (Non-executive Chairman)
Bim Sandhu (Non-executive Director)
Katrina Hart (Non-executive Director)
Registered Office
6th Floor
65 Gresham Street
London
EC2V 7NQ
Investment Manager and AIFM
AEW UK Investment Management LLP
33 Jermyn Street
London
SW1Y 6DN
Tel: 020 7016 4880
Website: www.aewuk.co.uk
Property Manager
M J Mapp
180 Great Portland Street
London
W1W 5QZ
Corporate Broker
Liberum
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Legal Adviser
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Depositary
Langham Hall UK LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
EX4 4EP
Company Secretary
Link Company Matters Limited
6th Floor
65 Gresham Street
London
EC2V 7NQ
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Frequency of NAV publication:
The Company's NAV is released to the London Stock Exchange on a quarterly
basis and is published on the Company's website.
National Storage Mechanism
A copy of the Interim Report will be submitted shortly to the National
Storage Mechanism ('NSM') and will be available for inspection at the NSM,
which is situated at 5 www.morningstar.co.uk/uk/NSM.
LEI: 21380073LDXHV2LP5K50
══════════════════════════════════════════════════════════════════════════
ISIN: GB00BWD24154
Category Code: IR
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 32012
EQS News ID: 923461
End of Announcement EQS News Service
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