REG-AEW UK REIT plc AEW UK REIT plc: Half-yearly Results
15/11/2018 07:05
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AEW UK REIT plc (AEWU)
AEW UK REIT plc: Half-yearly Results
15-Nov-2018 / 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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AEW UK REIT PLC
Interim Report and Financial Statements
for the six months ended 30 September 2018
Financial Highlights
Unaudited Net Asset Value ('NAV') of £151.65 million and 100.06 pence
● per share as at 30 September 2018 (31 March 2018: £146.03 million and
96.36 pence per share).
● Operating profit before fair value changes of £6.86 million for the
period (six months to 31 October 2017: £4.96 million).
Unadjusted profit before tax ('PBT') of £11.68 million and 7.71 pence
● per share for the period (six months to 31 October 2017: £6.99 million
and 5.60 pence per share).
● EPRA Earnings Per Share ('EPRA EPS') for the period were 4.10 pence (six
months to 31 October 2017: 3.73 pence). See below for more details.
● Total dividends of 4.00 pence per share have been declared for the
period (six months to 31 October 2017: 4.00 pence per share).
Total shareholder return for the period was 3.56% (six months to 31
● October 2017: 5.17%). See below for more details.
NAV total return for the period was 7.99% (six months to 31 October
● 2017: 6.06%). See below for definition.
The price of the Company's Ordinary Shares on the Main Market of the
● London Stock Exchange was 95.01 pence per share as at 30 September 2018
(31 March 2018: 95.60 pence per share).
As at 30 September 2018, the Company had a £60.00 million (31 March
● 2018: £60.00 million) term credit facility with The Royal Bank of
Scotland International Limited ('RBSI') and was geared to 25.84% of the
Gross Asset Value (31 March 2018: 26.00%).
Since the period end, the Company has extended the term of its loan
● facility with RBSI by three years up to 22 October 2023.
The Company held cash balances totalling £8.15 million as at 30
● September 2018 (31 March 2018: £4.71 million), of which £7.40 million
(31 March 2018: £3.57 million) was held for the purpose of capital
acquisitions.
Property Highlights
As at 30 September 2018, the Company's property portfolio had a fair
value of £193.53 million (31 March 2018: £192.34 million) and a
historical cost (including purchase costs and capital expenditure) of
● £191.92 million (31 March 2018: £196.64 million), representing an
increase of £1.61 million (31 March 2018: decrease of £4.30 million), or
0.84% (31 March 2018: decrease of 2.19%).
The majority of assets that have been acquired are fully let and the
● portfolio had a vacancy rate of 3.27% as at 30 September 2018 (31 March
2018: 7.10%).
Rental income generated in the period was £8.46 million (six months to
● 31 October 2017: £6.50 million). The number of tenants as at 30
September 2018 was 95 (31 March 2018: 104).
Average portfolio Net Initial Yield of 7.90% (31 March 2018: 7.74%). See
● below for more details.
Weighted average unexpired lease term ('WAULT') of 5.00 years (31 March
● 2018: 5.08 years) to break and 6.18 years (31 March 2018: 6.16 years) to
expiry. See below for more details.
Chairman's Statement
Overview
I am pleased to present the unaudited interim results of the Company for
the six month period from 1 April 2018 to 30 September 2018. As at 30
September 2018, the Company had established a diversified portfolio of 36
commercial investment properties throughout the UK with a value of £193.53
million. On a like-for-like basis, the portfolio valuation increased by
3.10% over the six months.
At the start of the period, the Company was fully invested. As such, the
key focus has been on demonstrating the portfolio's ability to deliver
income returns to support the Company's dividend target. Dividends of 4.00
pence per share have been declared in relation to the six month period, in
line with the target of 8.00 pence per share per annum. These dividends
were fully covered by EPRA EPS, which were 4.10 pence, reflecting the
high-yielding nature of the portfolio. The Directors believe that this
level of earnings can be sustained over the coming quarters, based on the
portfolio's current leasing profile and expectations of lease renewals and
rent reviews.
Towards the end of 2017 and at the beginning of 2018, the Company deployed
the proceeds of the most recent capital raise in October 2017. From the
date of the share issue and up to 31 March 2018, the Company made seven
acquisitions totalling £49.72 million, which fully utilised the capital
raised, as well as an additional £17.50 million of debt. These
acquisitions provided a boost to earnings during this reporting period, as
the seven assets had a combined Net Initial Yield equating to 9.1% on the
purchase price and generated a combined rental income of £2.41 million or
1.59 pence per share to bring our EPRA earnings back in line with the
dividend target, having been diluted following the capital raise.
An important factor in achieving such returns from high yielding new
investments has been the Investment Manager's implementation of the
Company's Investment Strategy through a robust stock selection process.
However, active asset management has also played a key role in maximising
returns and value from the existing portfolio. The vacancy rate has fallen
from 7.10% at 31 March 2018 to 3.27% as at 30 September 2018, partly as a
result of new lettings during the period. The most notable of these were
the letting of Orion House in Oxford at a contracted rent of £179,410 per
annum and the letting of Third Floor, Bath Street, Glasgow at a contracted
rent of £88,608 per annum. Lease renewals have also been completed at
First Floor, Queen Square, Bristol, increasing the contracted rent from
£66,623 to £94,500 per annum and at Cedar House, Gloucester, increasing
contracted rent from £300,000 to £321,000 per annum.
The other contributor to the fall in vacancy rate has been the Company's
divestment of largely vacant premises. The Company disposed of Floors 1-9,
Pearl House, Nottingham, in April 2018, retaining the fully let ground
floor accommodation. Further to this, 18-36 Chapel Walk, Sheffield, was
sold in August 2018 with the fully let adjoining units, 11-15 Fargate,
Sheffield, being retained. This brought in combined gross disposal
proceeds of £4.55 million and eliminated c. 26% of the vacant Estimated
Rental Value ('ERV') as at 31 March 2018. The Company will benefit from
lower void costs and the sales proceeds contributed to £7.40 million cash
available for investment as at 30 September 2018, allowing the potential
to further enhance earnings in future, should appropriate opportunities
arise.
The Company's share price was 95.01 pence per share as at 30 September
2018, representing a 5.05% discount to NAV. The share price has been
trading at a discount to NAV since 30 June 2018, having reached a peak for
the period at 99.40 pence per share, or a 3.15% premium to NAV, on 9 May
2018. Over the six month period, the Company generated a shareholder total
return of 3.56% and a NAV Total Return of 7.99%.
Financial Results
6 month 6 month
period from period from 11 month
1 April 2018 to 30 1 May 2017 to 31 period from
September 2018 October 2017
(unaudited) (unaudited) 1 May 2017 to 31
March 2018
£'000 £'000 (audited) £'000
Operating Profit
before fair value 6,859 4,960 9,601
changes (£'000)
Operating Profit 12,334 7,297 10,472
(£'000)
Profit after Tax 11,678 6,989 9,820
(£'000)
Earnings Per Share
(basic and diluted) 7.71 5.60 7.17
(pence)
EPRA Earnings Per
Share (basic and 4.10 3.73 6.56
diluted) (pence)
Ongoing Charges (%) 1.26 1.30 1.24
Net Asset Value per 100.06 97.80 96.36
share (pence)
EPRA Net Asset Value 100.06 97.78 96.34
per share (pence)
Financing
There were no drawdowns or repayments of the loan facility during the
period and the Company's loan balance remained at £50.00 million as at 30
September 2018 (31 October 2017: £32.50 million; 31 March 2018: £50.00
million), producing a gearing of 25.84% (31 October 2017: 22.0%; 31 March
2018: 26.00%). The amount available under the facility was £60.00 million
as at 30 September 2018 (31 October 2017: £40.00 million; 31 March 2018:
£60.00 million).
The unexpired term of the facility was 2.1 years as at 30 September 2018
(31 October 2017: 3.0 years; 31 March 2018: 2.6 years) Since the period
end, the Company has extended the term of the facility by three years up
to 22 October 2023, to mitigate the financing risk ahead of Brexit. The
margin remains unchanged, and this attractively priced facility is
accretive to the Company's performance.
The loan attracted interest at 3 month LIBOR +1.4%, which equated to an
all-in rate of 2.16% as at 30 September 2018 (31 October 2017: 1.69%; 31
March 2018: 2.11%). 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 October 2017: £26.51 million; 31 March 2018: £36.50
million), resulting in the loan being 73% hedged (31 October 2017: 82%; 31
March 2018: 73%).
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 annualised
dividends of 8.00 pence per share per annum. During the period, the
Company has declared and paid two quarterly dividends of two pence per
Ordinary Share, exactly in line with its target.
On 22 October 2018, the Board declared an interim dividend of two pence
per Ordinary Share in respect of the period from 1 July 2018 to 30
September 2018. This interim dividend will be paid on 30 November 2018 to
shareholders on the register as at 2 November 2018.
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 pence per
share. Based on current market conditions and expected returns on its
rental business, the Company expects to pay an annualised dividend of 8.00
pence per share in respect of the year ending 31 March 2019 and for the
interim period ending 30 September 2019.
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 pence per share, the Company delivered a dividend yield
of 8.42% as at 30 September 2018.
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 Net Initial Yield of 7.90% and a
Reversionary Yield of 7.71% as at 30 September 2018.
Whilst the vacancy rate has been reduced significantly during the period,
to 3.27% as at 30 September 2018, there is still further value to be
gained through asset management initiatives in the short term. The
portfolio has a WAULT of 5.00 years to break and 6.18 years to expiry and
those lease events arising in the near future will provide the opportunity
to increase and extend income streams from certain assets. A balance of
£7.40 million cash for investment as at 30 September 2018 will allow the
Company to take advantage of opportunities for acquisitions or capex
projects, which could also enhance income streams and add value to the
portfolio.
In the wider economic environment, Britain's exit from the European Union
('EU') is approaching and by the end of 2018 it should be clear whether
this is to be with or without a trade deal. Whilst the general opinion is
that a "no deal" scenario would have a negative impact on the property
market, it is hoped that some clarity will make it easier for businesses
to plan and invest, regardless of the outcome. We consider the portfolio
to be defensively positioned in the event of a no deal Brexit, with no
exposure to London offices - the sector most likely to be negatively
impacted. The Company's investment is primarily focussed on strong,
regional centres and exposure is well diversified both geographically and
by sector, which serves to mitigate risk.
Looking forward, our focus remains on continuing to grow the Company with
share issues as part of a 12-month share issuance programme, subject to
market conditions. The Investment Manager will focus on finding further
acquisitions which will deliver an attractive return as part of a
well-diversified portfolio.
Mark Burton
Chairman
14 November 2018
Key Performance Indicators
KPI AND DEFINITION
RELEVANCE TO STRATEGY PERFORMANCE
1. Net Initial Yield
The Net Initial Yield is in
A representation to the line with the Company's
investor of what their target dividend yield meaning
initial net yield would that, after costs, the 7.90%
be at a predetermined Company should have the
purchase price after ability to meet its target at 30 September
taking account of all dividend through property 2018 (31 March
associated costs. E.g. income. 2018: 7.74%).
void costs and rent free
periods
2. True Equivalent Yield
An Equivalent Yield profile
The average weighted in line with the Company's
return a property will target dividend yield shows 7.92%
produce according to the that, after costs, the
present income and Company should have the at 30 September
estimated rental value ability to meet its proposed 2018 (31 March
assumptions, assuming the dividend through property 2018: 8.20%).
income is received income.
quarterly in advance.
A Reversionary Yield profile
3. Reversionary Yield that is in line with an 7.71%
Initial Yield profile shows a
The expected return the potentially sustainable at 30 September
property will provide income stream that can be 2018 (31 March
once rack rented. used to meet dividends past 2018: 8.03%).
the expiry of a property's
current leasing arrangements.
The Investment Manager
believes that current market
conditions present an
4. Weighted Average opportunity whereby assets
Unexpired Lease Term to with a shorter unexpired
expiry lease term are often
mispriced. It is also the 6.18 years
The average lease term Investment Manager's view
remaining to expiry that a shorter WAULT is at 30 September
across the portfolio, useful for active asset 2018 (31 March
weighted by contracted management as it allows the 2018: 6.16 years).
rent. 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
5. Weighted Average opportunity whereby assets
Unexpired Lease Term to with a shorter unexpired
break lease term are often
mispriced. It is also the 5.00 years
The average lease term Investment Manager's view
remaining to break, that a shorter WAULT is at 30 September
across the portfolio useful for active asset 2018 (31 March
weighted by contracted management as it allows the 2018: 5.08 years).
rent. Investment Manager to engage
in direct negotiation with
tenants rather than via rent
review mechanisms.
6. NAV The NAV reflects the £151.65 million
Company's ability to grow the
NAV is the value of an portfolio and add value to it at 30 September
entity's assets minus the throughout the life cycle of 2018 (31 March
value of its liabilities. its assets. 2018: £146.03
million).
The Company utilises
7. Leverage (Loan to GAV) borrowings to enhance returns
over the medium term. 25.84%
The proportion of the Borrowings will not exceed
property portfolio that 35% of GAV (measured at at 30 September
is funded by borrowings. drawdown) with a long term 2018 (31 March
target of 25% or less of GAV. 2018: 26.00%).
8. Vacant ERV The Company's aim is to
minimise vacancy of the
The space in the property properties. A low level of 3.27%
portfolio which is structural vacancy provides
currently unlet, as a an opportunity for the at 30 September
percentage of the total Company to capture rental 2018 (31 March
ERV of the portfolio. uplifts and manage the mix of 2018: 7.10%).
tenants within a property.
4.00 pence per
share
9. Dividend for the six months
to 30 September
Dividend declared in The dividend reflects the 2018.
relation to the year. The Company's ability to deliver
Company targets a a sustainable income stream This supports an
dividend of 8.00 pence from its portfolio. annualised target
per Ordinary Share per of 8.00 pence per
annum. share (six months
to 31 October
2017: 4.00 pence
per share).
The Ongoing Charges ratio
provides a measure of total
10. Ongoing Charges costs associated with
managing and operating the 1.26%
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 measure is to provide 2018 (six months
average NAV throughout investors with a clear to 31 October
the period. picture of operational costs 2017: 1.30%).
involved in running the
Company.
11. Profit Before Tax £11.68 million
PBT is a profitability The PBT is an indication of for the six months
measure which considers the Company's financial to 30 September
the Company's profit performance for the period in 2018 (six months
before the payment of which its strategy is to 31 October
income tax. exercised. 2017: £6.99
million).
12. Total Shareholder
Return 3.56%
The percentage change in This reflects the return seen for the six months
the share price assuming by shareholders on their to 30 September
dividends are reinvested shareholdings. 2018 (six months
to purchase additional to 31 October
Ordinary Shares. 2017: 5.17%).
13. EPRA EPS
Earnings from core
operational activities. A 4.10 pence per
key measure of a share
company's underlying This reflects the Company's
operating results from ability to generate earnings for the six months
its property rental from the portfolio which to 30 September
business and an underpins dividends. 2018 (six months
indication of the extent to 31 October
to which current dividend 2017: 3.73 pence
payments are supported by per share).
earnings. See note 7.
Investment Manager's Report
MARKET OUTLOOK
UK Economic Outlook
A spell of adverse weather conditions, "the Beast from the East",
contributed to a temporary dip in output in the first quarter of 2018.
Momentum has recovered and GDP growth is expected to have bounced back to
0.4% for Q2 2018, which saw a rise in consumer spending encouraged by a
summer heatwave, the royal wedding and the football World Cup.
Unemployment has also remained at its lowest level since the mid-1970s.
This Q2 performance encouraged the Monetary Policy Committee (the "MPC")
to vote to increase interest rates from 0.50% to 0.75% in August 2018.
This is after rates were increased by 0.25% in November 2017, and came
despite concerns about the economic impact if the UK leaves the EU without
a trade deal.
The Bank of England governor, Mark Carney, suggested that there would be a
further increase in interest rates if economic growth continued to
recover, however it was also signalled that there could be a reversal in
sentiment in the event of a disorderly Brexit.
The longer term outlook remains uncertain as global economic growth has
begun to soften with tariff wars between the US and China having an
impact. Although UK unemployment has remained low, wage growth has
struggled to keep up with inflation and real wage growth was only 0.1% for
the three months to 30 June 2018.
One of the key sources of uncertainty remains that of Brexit and the
possibility of the UK leaving the EU without a trade deal. This is a very
real possibility after European Council President, Donald Tusk, rejected
Theresa May's proposals at an EU summit in September 2018. Although the
Irish border issue remains a stumbling block, it is hoped that the outlook
will become clearer during the remaining months of 2018. The EU had been
considering a special summit in November 2018 to agree the terms of the
UK's withdrawal, however a lack of progress during September and October
2018 could mean that December 2018 will be the final opportunity to reach
an agreement. If the UK government cannot deliver a Brexit deal, the
possibility of a general election could also bring about further
uncertainty in terms of political leadership and policy.
However, against this mixed economic outlook, UK property continues to
perform well.
UK Real Estate Outlook
The UK commercial property market continues to perform strongly, driven by
an annual income return of over 5% for the year to June 2018 (IPD). The
yield gap between property and the risk-free rate has remained well above
the long-run average during 2018 and the upswing in the property cycle has
been extended by a prolonged period of low interest rates and the weight
of investment. Although official interest rates were raised during August
2018, expectations are that upward pressure on property yields is not
imminent.
The lack of clarity regarding the Brexit terms remains a major concern for
the market however, it is generally acknowledged that any impact would be
felt most strongly in the office sector, particularly in the City of
London. The results of negotiations during the remainder of 2018 should
give more clarity as to the final outcome however, we have seen a
weakening in investment activity across the market as a whole so far in
2018, compared with the comparative period of 2017. We are seeing notable
polarisation between performance delivered by the sectors, with
industrials delivering higher total returns and the retail market
continuing to struggle with poor sales and numerous company voluntary
arrangements ('CVA's).
Sector Outlook
Industrial
The industrial sector continues to outperform other sectors, delivering
total returns of 5.1% for Q2 2018 (IPD), and represents the largest
proportion of our portfolio with 44% of the valuation and 43% of the total
passing rental income. The strong performance is in part due to retailers
investing heavily in their supply chains to meet logistics demands but is
also as a result of a lack of any significant development activity
undertaken in smaller units during the current cycle. As tenant demand is
increasing there is limited supply of stock and this is leading to rental
growth in strong locations across the country.
Rental growth in the industrial sector has been witnessed in the Company's
portfolio with our average industrial Estimated Rental Value ('ERV')
increasing from £3.47 per sq ft to £3.53 per sq ft over the six months
ended 30 September 2018. Rental growth, either at or above expectations,
has been crystallised at units in Runcorn and Wakefield, where lease
renewals and new lettings have been achieved at rents higher than ERV. We
expect to see continued growth in the industrial sector, both in terms of
income and capital value, and are seeing attractive opportunities for
acquisitions.
Offices
Total returns for the offices sector were 1.6% for Q2 2018 (IPD), with
Central London Offices outperforming offices in the rest of the UK. We
expect office rents outside London to remain stable in the coming years,
as development in most cities has already peaked. Higher residential
values and the relaxation of planning controls mean that many towns and
cities are losing both office and industrial space. For this reason, our
stock selection process often focuses on locations where purchase values
are well below that of surrounding residential uses, as well as focussing
on locations with high levels of tenant demand.
Our office holding, the second largest with 22% of portfolio valuation,
has provided opportunities for asset management initiatives to drive
rental value as well as achieve permitted residential consents to improve
assets' residual value and ensure downside protection. During the six
months ended 30 September 2018, notable lettings were made at Glasgow,
Oxford and Gloucester, contributing an additional c. £289,000 contracted
rent and helping to increase the valuation of the Company's office
portfolio by 9.75% on a like-for-like basis.
Alternatives
There has been a recent trend towards non-mainstream sectors, as investors
seek to benefit from greater diversification as well as accessing
long-term income trends. The alternatives sector achieved total returns of
2.6% for Q2 2018 (IPD). Indeed, we have taken advantage of opportunities
to invest in the alternative sectors at attractive levels of pricing. Two
of the Company's most recent acquisitions, being a large secure parking
facility in Corby, and a leisure park in Dagenham, acquired in February
and March 2018 respectively, provide accretive levels of income as well as
capital growth potential. We expect the alternatives sector to grow
further as investors seek long income or higher yields. It is a sector in
which we have significant expertise and will continue to seek
opportunities.
Retail
Structural issues have been seen most notably in the retail sector where a
number of administrations, CVA's and store rationalisations by occupiers
have turned investor sentiment against the sector and this is reflected in
total returns of just 0.5% for Q2 2018 (IPD). The Company has defensively
positioned its retail acquisitions to take account of recent trends and
our retail assets are located in town and city centres with large
catchment populations and in many cases are supported by strong
alternative use values and asset management options. As a result, our
income streams to date have not been significantly impacted by CVAs.
Financial Results
Net rental income earned from the portfolio for the six months ended 30
September 2018 was £7.83 million (six months ended 31 October 2017: £5.86
million; 11 months ended 31 March 2018: £11.22 million), contributing to
an operating profit before fair value changes and disposals of £6.86
million (six months ended 31 October 2017: £4.96 million; 11 months ended
31 March 2018: £9.60 million).
The portfolio has seen a gain of £5.65 million in fair value of investment
property over the period (six months ended 31 October 2017: £2.48 million;
11 months ended 31 March 2018: £1.01 million).
The Company reported a loss on disposal of investment properties of £0.18
million (six months ended 31 October 2017: £0.22 million; 11 months ended
31 March 2018: £0.22 million), which relates to the disposals of Floors
1-9, Pearl House, Nottingham and 18-36, Chapel Walk, Sheffield.
Administrative expenses, which include the Investment Manager's fee and
other costs attributable to the running of the Company, were £0.97 million
for the six month period (six months ended 31 October 2017: £0.90 million;
11 months ended 31 March 2018: £1.62 million).
The Company incurred finance costs of £0.66 million during the period (six
months ended 31 October 2017: £0.31 million; 11 months ended 31 March
2018: £0.65 million).
The total profit before tax for the period of £11.68 million (six months
ended 31 October 2017: £6.99 million; 11 months ended 31 March 2018: £9.82
million) equates to a basic earnings per share of 7.71 pence (six months
ended 31 October 2017: 5.60 pence; 11 months ended 31 March 2018: 7.17
pence).
The Company's NAV as at 30 September 2018 was £151.65 million or 100.06
pence per share ('pps') (31 October 2017: £148.22 million or 97.80 pence
per share; 31 March 2018: £146.03 million or 96.36 pence per share). This
is an increase of 3.70 pps or 3.84% over the six months, with the
underlying movement in NAV set out in the table below:
Pence per share £ million
NAV at 1 April 2018 96.36 146.03
Change in fair value of investment property 3.73 5.65
Change in fair value of derivatives (0.01) (0.02)
Loss on disposal of investment property (0.12) (0.18)
Income earned for the period 5.58 8.46
Expenses and net finance costs for the period (1.48) (2.23)
Dividends paid (4.00) (6.06)
NAV at 30 September 2018 100.06 151.65
EPRA earnings per share for the six month period were 4.10 pps which,
based on dividends paid of 4.00 pps, reflects a dividend cover of 102.50%.
Financing
As at 30 September 2018, the Company had utilised £50.00 million (31 March
2018: £50.00 million) of an available £60.00 million (31 March 2018:
£60.00 million) credit facility with RBSI, maturing in October 2020.
Gearing as at 30 September 2018 was 25.84% (Loan to GAV) (March 2018:
26.00%). The loan attracts interest at LIBOR + 1.4% (31 March 2018: LIBOR
+ 1.4%). To mitigate the interest rate risk that arises as a result of
entering into a variable rate linked loan, the Company holds interest rate
caps on £36.51 million (31 March 2018: £36.51 million) of the loan at
strike rates of 2.5% on £26.51 million and 2.0% on £10.00 million (31
March 2018: 2.5% on £26.51 million and 2.0% on £10 million), meaning that
the loan is 73% hedged (31 March 2018: 73%).
On 22 October 2018, the Company extended the term of the loan facility by
three years up to 22 October 2023. The Company has also entered into
additional interest rate caps on a notional value of £46.51 million,
effective from 20 October 2020 to 19 October 2023. The interest rate is
capped at 2.00% per annum. The Company paid a premium of £512,000.
Portfolio Activity
There were no acquisitions made during the period. The following part
disposals were made during the period:
• Pearl Assurance House was purchased by the Company in May 2016 for
£8.15 million. On 5 April 2018, the Company completed the sale of its
office accommodation for gross proceeds of £3.65 million. The sale
comprised the first to ninth floors, a ground floor reception and car
parking spaces, providing a total area of 41,262 sq ft.
The Company has retained the ground floor accommodation in the busy city
centre location, totalling 28,432 sq ft, let to national retail operators
including Costa Coffee, Poundland and Lakeland. The retained element
provides a Net Initial Yield of 9.63% as at 30 September 2018, based on
its valuation of £5.20 million.
• On 6 August 2018, the Company completed the sale of 18-36, Chapel
Walk, Sheffield for gross proceeds of £0.90 million. The units sold
were 47.10% vacant by floor area. The Company has retained the fully
let adjacent units 11/15 Fargate, totalling 5,495 sq ft.
Asset Management
We undertake active asset management to achieve rental growth, let vacant
space and enhance value through initiatives such as refurbishments. During
the period, key asset management initiatives have included:
• Orion House, Oxford - In August 2018, the Company completed the
letting of Orion House, Eastpoint Business Park, Oxford, to Genesis
Cancer Care UK Limited. The lease is for a term of 25 years, at a rent
of £179,410 per annum. There are five-yearly, upward only rent reviews
linked to the Retail Price Index ('RPI') measure of inflation and the
tenant benefits from a 12 month rent free period, followed by six
years at half rent. The valuation of the property increased by 22.7%
over the period, largely thanks to this transaction.
• 225 Bath Street, Glasgow - In July 2018, the Company completed the
letting of Third Floor East, 225 Bath Street, Glasgow, to
International Correspondence Schools Limited. The lease is for a term
of five years, with a tenant break option at the end of the third
year, at a rent of £88,608 per annum. The tenant benefits from a ten
month rent free period. Over the six months, the valuation of the
property fell by 7.50%, despite the letting, which largely reflects
the difficult local market conditions.
• Cedar House, Gloucester - In June 2018, the Company completed a lease
renewal to the Secretary of State for Communities and Local Government
at its Cedar House office building in Gloucester. The property was
acquired in December 2017 with the expectation of achieving a new
three year lease at the passing rent of £300,000 per annum and this
has been significantly exceeded with a 10 year lease at a rent of
£321,000 per annum. No rent free incentive was offered to the tenant.
As a result of this asset management initiative, the value of the
building has risen by 20.3% over the six months.
• 40 Queen Square, Bristol - In June 2018, the Company completed a
reversionary lease renewal with tenant Ramboll Whitbybird Ltd. A ten
year lease was signed to commence at the expiry of the tenant's
current lease in November, although the tenant has the option to break
at the end of the fifth year. The letting at a rent of £94,500 per
annum proved a new high rental tone for unrefurbished space within the
building at £23.00 per sq ft, as compared to a passing rent of £16.84
per sq ft. This represents an increase in rental income of 37% and the
property saw an overall valuation uplift over the period of 13.08%.
The property's valuation as at 30 September 2018 is 68.05% higher than
its price at acquisition in December 2015.
• Diamond Business Park, Wakefield - During June 2018, a new letting was
completed at Diamond Business Park, Wakefield which was acquired by
the Company in February 2018. Unit 7, totalling c. 13,700 sq ft, has
been let to Wow Interiors Yorkshire Ltd for a six year term with
tenant break options in years 2 and 4. Stepped rental increases have
been agreed so that, if the tenant remains in occupation for the full
term, the average rent received equates to £3.30 per sq ft as compared
to an ERV of £3.00 per sq ft. The value of the building rose by 5.39%
over the six month period.
• Sarus Court, Runcorn - During the quarter the Investment Manager
documented two rent reviews with CJ Services, its largest tenant at
Sarus Court, Runcorn. The rent reviews at Units 1 and 2 date back to
January 2017 and result in a combined rate of £5.25 per sq ft net
effective. This supports a headline rent of c. £5.75 per sq ft which
is £0.25 ahead of the property's ERV at the time of the letting. The
property has seen an increase in valuation of 6.38% over the period.
• Commercial Road, Portsmouth - the Company has completed a ten year
lease renewal with Greggs Plc at its retail property located on
Commercial Road, Portsmouth. The new rent of £20,500 per annum exceeds
the unit's ERV at the time of letting by 11%. Greggs have been in
occupation of the unit for ten years and have the option to break the
lease after five years. Over the six months, the property's valuation
fell by 4.24%, which reflects the general sentiment in the retail
sector.
Summary by Sector as at 30 September 2018
Gross
Passing
Occupancy WAULT to Rental
by
Number of Valuation Area ERV break Income ERV
Sector Properties (£m) ('000 (%) (years) (£m) (£m)
sq ft)
Standard 5 25.95 169 99.9 3.8 2.78 2.16
Retail
Retail 2 9.35 69 100.0 4.9 0.84 0.78
Warehouse
Office 6 43.40 287 88.5 4.2 3.24 4.09
Industrial 20 84.88 2,160 98.9 5.1 7.28 7.62
Other 3 29.95 165 100.0 6.2 2.82 2.34
Total 36 193.53 2,850 96.7 5.0 16.96 16.99
Summary by Geographical Area as at 30 September 2018
Gross
Passing
Occupancy WAULT to Rental
Number of Valuation Area by ERV break Income ERV
Geographical Properties (£m) ('000 (%) (years) (£m) (£m)
Area sq ft)
Rest of 1 11.45 72 100.0 12.1 0.97 0.84
London
South East 5 30.20 195 97.0 4.3 2.58 2.47
South West 3 23.40 125 100.0 4.3 1.73 1.75
Eastern 5 22.63 345 100.0 3.7 1.83 2.02
West Midlands 4 17.85 397 100.0 4.2 1.69 1.70
East Midlands 2 18.08 81 100.0 3.5 1.85 1.40
North West 5 16.35 315 99.8 4.7 1.47 1.35
Yorkshire and 8 29.60 858 97.2 3.8 2.86 3.01
Humberside
Wales 2 14.72 376 100.0 10.6 1.25 1.29
Scotland 1 9.25 86 65.8 2.8 0.73 1.16
Total 36 193.53 2,850 96.7 5.0 16.96 16.99
Sector and Geographical Allocation by Market Value as at 30 September 2018
Sector Allocation
Sector %
Standard Retail 13
Retail Warehouse 5
Offices 23
Industrial 44
Other 15
Geographical Allocation
Geographical %
Rest of London 6
South East 16
South West 12
Eastern 12
West Midlands 9
East Midlands 9
North West 8
Yorkshire & Humberside 15
Wales 8
Scotland 5
Properties by Market Value
Market Value
Property Sector Region Range (£m)
1 2 Geddington Road, Corby Other (Sui East Midlands 10.0-15.0
Generis)
2 40 Queen Square, Bristol Offices South West 10.0-15.0
Eastpoint Business Park,
3 Oxford 10.0-15.0
Offices South East
London East Leisure Park,
4 Dagenham 10.0-15.0
Other (Leisure) Rest of London
5 225 Bath Street, Glasgow Offices Scotland 7.5-10.0
Above Bar Street,
6 Southampton 7.5-10.0
Standard Retail South East
Gresford Industrial
7 Estate, Wrexham 7.5-10.0
Industrial Wales
Apollo Business Park,
8 Basildon 5.0-7.5
Industrial Eastern
9 Barnstaple Retail Park Retail Warehouse South West 5.0-7.5
Commercial Road,
10 Portsmouth 5.0-7.5
Standard Retail South East
The Company's top ten properties listed above comprise 49.0% of the total
value of the portfolio.
Market Value
Property Sector Region Range (£m)
Euroway Trading Estate, Yorkshire and
11 Bradford Humberside
Industrial 5.0-7.5
Langthwaite Grange
12 Industrial Estate, South Yorkshire and 5.0-7.5
Kirkby Humberside
Industrial
13 Oak Park, Droitwich Industrial West Midlands 5.0-7.5
14 Odeon Cinema, Southend Other (Leisure) Eastern 5.0-7.5
Pearl Assurance House,
15 Nottingham 5.0-7.5
Standard Retail East Midlands
Sarus Court Industrial
16 Estate, Runcorn 5.0-7.5
Industrial North West
Storeys Bar Road,
17 Peterborough 5.0-7.5
Industrial Eastern
18 Bank Hey Street, Blackpool Standard Retail North West <5.0
Yorkshire and
Humberside <5.0
19 Brightside Lane, Sheffield Industrial
Brockhurst Crescent,
20 Walsall <5.0
Industrial West Midlands
21 Cedar House, Gloucester Offices South West <5.0
22 Clarke Road, Milton Keynes Industrial South East <5.0
Diamond Business Park, Yorkshire and
23 Wakefield Humberside <5.0
Industrial
24 Eagle Road, Redditch Industrial West Midlands <5.0
25 Excel 95, Deeside Industrial Wales <5.0
Fargate and Chapel Walk, Yorkshire and
26 Sheffield Humberside <5.0
Standard Retail
Yorkshire and
Humberside <5.0
27 Knowles Lane, Bradford Industrial
Yorkshire and
Humberside <5.0
28 Magham Road, Rotherham Industrial
29 Moorside Road, Salford Industrial North West <5.0
Pipps Hill Industrial
30 Estate, Basildon <5.0
Industrial Eastern
31 Sandford House, Solihull Offices West Midlands <5.0
Yorkshire and <5.0
32 Stoneferry Retail Park, Retail Warehouse Humberside
Hull
Vantage Point, Hemel
33 Hempstead <5.0
Offices Eastern
34 Waggon Road, Mossley Industrial North West <5.0
35 Walkers Lane, St. Helens Industrial North West <5.0
36 Wella Warehouse, Industrial South East <5.0
Basingstoke
Top Ten Tenants
% of
Portfolio
Passing Total
Rental Passing
Income Rental
Tenant Property (£'000) Income
1 GEFCO UK Limited 2 Geddington Road, Corby 1,320 7.8
2 Plastipak UK Limited Gresford Industrial Estate, 883 5.2
Wrexham
3 The Secretary of State Sandford House, Solihull and 832 4.9
Cedar House, Gloucester
4 Ardagh Glass Limited Langthwaite Industrial Estate, 676 4.0
South Kirkby
5 Mecca Bingo Limited London East Leisure Park, 625 3.7
Dagenham
Egbert H Taylor &
6 Company Limited 620 3.7
Oak Park, Droitwich
7 Odeon Cinemas Odeon Cinema, Southend 535 3.2
8 Sports Direct Barnstaple Retail Park and 525 3.1
Bank Hey Street, Blackpool
9 Wyndeham Peterborough Storeys Bar Road, Peterborough 525 3.1
Limited
10 Advance Supply Chain Euroway Trading Estate, 428 2.5
(BFD) Limited Bradford
The Company's top ten tenants, listed above, represent 41.2% of the total
passing rental income of the portfolio.
Principal Risks and Uncertainties
The principal risks and uncertainties the Company faces are described in
detail on pages 36 to 39 of the 2018 Annual Report, and are summarised
below.
The Board considers that the principal risks and uncertainties as
presented in the 2018 Annual Report were unchanged during the period.
REAL ESTATE RISKS
• A property market recession or deterioration in the property market
could, inter alia (i) cause the Company to realise its investments at
lower valuations; (ii) delay the timings of the Company's
realisations.
• Properties are inherently difficult to value. There may be a material
adverse effect on the Company's profitability, the NAV and the share
price where properties are sold that were previously materially
overstated or understated.
• Failure by tenants to pay rental obligations would reduce income and
the ability of the Company to pay dividends.
• Cost overruns from asset management initiatives may have a material
adverse effect on the Company's profitability, the NAV and the share
price.
• Due diligence may not identify all the risks and liabilities in
respect of an acquisition.
• A fall in rental rates may have a material adverse effect on the
Company's profitability, the NAV and the share price.
FINANCIAL RISKS
• Material adverse changes in valuations and net income may lead to
breaches in the Loan to Value ('LTV') and interest cover ratio
covenants of the Company's loan facility.
• The Company is subject to the risk of rising LIBOR rates on its
borrowings. Increases in LIBOR may adversely affect the Company's
ability to pay dividends.
• The Company has a credit facility with RBSI which expires in 2023. In
the event that RBSI do not renew the facility, the Company may have to
sell assets in order to repay the outstanding loan.
CORPORATE RISKS
• The Company has no employees and is reliant upon the performance of
third party service providers. Failure by any service provider could
have a detrimental impact on the operations of the Company.
• The Company is dependent on the continuance of the Investment Manager.
• Poor relative total return performance may lead to an adverse
reputational impact that affects the Company's ability to raise new
capital.
TAXATION RISKS
• The Company has a UK REIT status that provides a tax-efficient
corporate structure. Any change to the tax status or in UK legislation
could impact the Company's ability to achieve its investment
objectives and provide attractive returns to Shareholders.
POLITICAL / ECONOMIC RISK
• Following the vote to leave the EU in the June 2016 referendum,
uncertainty remains surrounding the EU exit process and timing. There
could be further political and economic events that adversely impact
the Company's performance.
Responsibility Statement of the Directors in Respect of the Interim
Financial Report
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 of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed 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 of the Disclosure Guidance and Transparency Rules, 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.
A list of the Directors is maintained on the AEW UK REIT plc website at
1 www.aewukreit.com
Mark Burton
Chairman
14 November 2018
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 half-yearly financial report for the six
months ended 30 September 2018 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 2018 is not
prepared, in all material respects, in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU and the Disclosure Guidance and
Transparency Rules (the 'DTR') of the UK's Financial Conduct Authority
(the 'UK 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 half-yearly financial report 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.
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 DTR of the UK
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 half-yearly financial report 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 half-yearly financial report
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 UK 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.
Bill Holland
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
14 November 2018
Financial Statements
Condensed Statement of Comprehensive Income
for the six months ended 30 September 2018
Period from Period from Period from
1 April 2018 1 May 2017 to 1 May 2017
to to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)*
Notes £'000 £'000 £'000
Income
Rental and other income 3 8,459 6,496 12,330
Property operating 4 (630) (641) (1,106)
expenses
Net rental and other 7,829 5,855 11,224
income
Other operating expenses 4 (970) (895) (1,623)
Operating profit before 6,859 4,960 9,601
fair value changes
Change in fair value of 9 5,653 2,480 1,014
investment properties
Loss on disposal of 9 (178) (216) (216)
investment properties
Profit on disposal of 9 - 73 73
investments
Operating profit 12,334 7,297 10,472
Finance expense 5 (656) (308) (652)
Profit before tax 11,678 6,989 9,820
Taxation 6 - - -
Profit after tax 11,678 6,989 9,820
Other comprehensive income - - -
Total comprehensive income 11,678 6,989 9,820
for the period
Earnings per share (pence
per share) (basic and 7 7.71 5.60 7.17
diluted)
The notes below form an integral part of these condensed financial
statements.
* Although not required by IAS 34, the comparative figures for the
preceding full reporting period and related notes have been included on a
voluntary basis.
Condensed Statement of Changes in Equity
for the six months ended 30 September 2018
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained owners of
For the period 1 capital account earnings the Company
April 2018 to
30 September 2018 Notes £'000 £'000 £'000 £'000
(unaudited)
Balance as at 1 April 1,515 49,768 94,751 146,034
2018
Total comprehensive - - 11,678 11,678
income
Share issue costs 17 - 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 and reserves
Share reserve and attributable to
Share premium retained owners of
For the period 1 May capital account earnings the Company
2017 to
31 October 2017 Notes £'000 £'000 £'000 £'000
(unaudited)
Balance at 1 May 2017 1,236 22,514 94,924 118,674
Total comprehensive - - 6,989 6,989
income
Ordinary shares 16,17 279 27,771 - 28,050
issued
Share issue costs 17 - (546) - (546)
Dividends paid 8 - - (4,946) (4,946)
Balance as at 31 1,515 49,739 96,967 148,221
October 2017
Total capital
Capital and reserves
Share reserve and attributable
to
Share premium retained owners of
For the 11 month period capital account earnings the Company*
1 May 2017 to 31 March
2018 (audited) Notes £'000 £'000 £'000 £'000
Balance at 1 May 2017 1,236 22,514 94,924 118,674
Total comprehensive - - 9,820 9,820
income
Ordinary shares issued 16,17 279 27,771 - 28,050
Share issue costs 17 - (517) - (517)
Dividends paid 8 - - (9,993) (9,993)
Balance as at 31 March 1,515 49,768 94,751 146,034
2018
The notes below form an integral part of these condensed financial
statements.
* Although not required by IAS 34, the comparative figures for the
preceding full reporting period and related notes have been included on a
voluntary basis.
Condensed Statement of Financial Position
as at 30 September 2018
As at As at As at
30 September 31 October 2017 31 March
2018 2018
(unaudited) (unaudited)* (audited)
Notes £'000 £'000 £'000
Assets
Non-Current Assets
Investment property 9 192,519 147,030 187,751
192,519 147,030 187,751
Current Assets
Investment property held for 9 - - 3,650
sale
Receivables and prepayments 10 3,394 2,204 2,938
Other financial assets held 11 9 24 26
at fair value
Cash and cash equivalents 8,145 34,537 4,711
11,548 36,765 11,325
Total assets 204,067 183,795 199,076
Non-Current Liabilities
Interest bearing loans and 12 (49,714) (32,259) (49,643)
borrowings
Finance lease obligations 14 (573) (591) (573)
(50,287) (32,850) (50,216)
Current Liabilities
Payables and accrued 13 (2,080) (2,677) (2,779)
expenses
Finance lease obligations 14 (47) (47) (47)
(2,127) (2,724) (2,826)
Total Liabilities (52,414) (35,574) (53,042)
Net Assets 151,653 148,221 146,034
Equity
Share capital 16 1,515 1,515 1,515
Share premium account 17 49,771 49,739 49,768
Capital reserve and retained 100,367 96,967 94,751
earnings
Total capital and reserves
attributable to equity 151,653 148,221 146,034
holders of the Company
Net Asset Value per share 7 100.06 97.80 96.36
(pence per share)
The financial statements were approved by the Board of Directors on 14
November 2018 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 consolidated
financial statements.
* Although not required by IAS 34, the comparative figures for the
previous interim period and related notes have been included on a
voluntary basis.
Condensed Statement of Cash Flows
for the six months ended 30 September 2018
Period from Period from Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March 2018
2018 2017
(unaudited) (unaudited) (audited)*
£'000 £'000 £'000
Cash flows from operating
activities
Operating profit 12,334 7,297 10,472
Adjustment for non-cash
items:
Gain from change in fair
value of investment (5,653) (2,480) (1,014)
property
Loss on disposal of 178 216 216
investment property
Profit on disposal of - (73) (73)
investments
Decrease/(increase) in
other receivables and 455 666 (701)
prepayments
Decrease in other payables (385) (1,178) (409)
and accrued expenses
Net cash generated from 6,019 4,448 8,491
operating activities
Cash flows from investing
activities
Purchase of investment (506) (17,939) (63,896)
property
Disposal of investment 4,508 10,858 10,856
property
Disposal of investments - 7,667 7,667
Net cash generated
from/(used in) investing 4,002 586 (45,373)
activities
Cash flows from financing
activities
Proceeds from issue of - 28,050 28,050
ordinary share capital
Share issue costs (31) (453) (483)
Loan draw down - 3,490 20,990
Loan arrangement fees - - (166)
Finance costs (494) (291) (458)
Dividends paid (6,062) (4,946) (9,993)
Net cash (used
in)/generated from (6,587) 25,850 37,940
financing activities
Net increase in cash and 3,434 30,884 1,058
cash equivalents
Cash and cash equivalents 4,711 3,653 3,653
at start of the period
Cash and cash equivalents 8,145 34,537 4,711
at end of the period
The notes below form an integral part of these condensed financial
statements.
* Although not required by IAS 34, the comparative figures for the
preceding full reporting period and related notes have been included on a
voluntary basis.
Notes to the Condensed Financial Statements
for the six months ended 30 September 2018
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 11 month period ended 31 March 2018
does not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The auditors 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 11 month period ended 31 March 2018. 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 14 November 2018.
The comparative figures disclosed in the condensed unaudited financial
statements and related notes have been presented for both the six month
period ended 31 October 2017 and 11 month period ended 31 March 2018 and
as at 31 October 2017 and 31 March 2018.
Although not required by IAS 34, the comparative figures as at 31 October
2017 for the Condensed Statement of Financial Position and for the 11
month period ended 31 March 2018 for the Condensed Statement of
Comprehensive Income, Condensed Statement of Changes in Equity and
Condensed Statement of Cash Flows and related notes have been included on
a voluntary basis.
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
January 2018, which have been considered and applied. These being:
* IFRS 7 (Financial Instruments: Disclosures) which will require
considerations around additional hedge accounting disclosures in the
annual report; and
* IFRS 9 (Financial Instruments). This standard has replaced IAS 39
Financial Instruments and contains two primary measurement categories for
financial assets, the effect to the Company's current accounting policies
covering the measurement of financial instruments and the estimation of
impairment is immaterial; and
* IFRS 15 (Revenue from Contracts with Customers) issued in May 2014 and
applies to an annual reporting period beginning on or after 1 January
2018, the Company's revenue primarily relates to property rental income
which is outside the scope of IFRS 15.
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 after 1 April 2018 or later periods. The following are
the most relevant to the Company and their impact on the financial
statements:
* IFRS 16 (Leases) issued in January 2016 and is effective for annual
periods beginning on or after 1 January 2019.
The impact of the adoption of new accounting standards issued and becoming
effective for accounting periods beginning on or after 1 April 2018 has
been considered and is not considered to be significant. The IFRS 16
disclosure requirements will be considered in due course.
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 principle 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 11 month period
ended 31 March 2018 except for the changes as detailed in note 2.1.
3. Revenue
Period from Period from Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Gross rental income received 8,456 6,495 12,330
Other property income 3 1 -
Total rental and other income 8,459 6,496 12,330
Rent receivable under the terms of the leases is adjusted for the effect
of any incentives agreed.
4. Expenses
Period from Period from Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Property operating expenses 630 641 1,106
Other operating expenses
Investment management fee 648 519 989
Auditor remuneration 43 41 88
Operating costs 226 292 462
Directors' remuneration 53 43 84
Total other operating expenses 970 895 1,623
Total operating expenses 1,600 1,536 2,729
5. Finance expense
Period from Period from Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest payable on loan 540 268 540
borrowings
Amortisation of loan 71 41 79
arrangement fee
Agency fee payable on loan 2 (10) (11)
borrowings
Commitment fee payable on 26 2 20
loan borrowings
639 301 628
Change in fair value of 17 7 24
interest rate derivatives
Total 656 308 652
6. Taxation
Period from Period from Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total tax charge
- - -
Analysis of charge in the
period
Profit before tax 11,678 6,989 9,820
Theoretical tax at UK
corporation tax standard
rate of 19% (31 October 2,219 1,328 1,866
2017: 19%; 31 March 2018:
19%)
Adjusted for:
Exempt REIT income (1,178) (884) (1,700)
Non taxable investment (1,041) (444) (166)
gains
Total - - -
7. Earnings per share and NAV per share
Period from Period from Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Earnings per share
Total comprehensive income 11,678 6,989 9,820
(£'000)
Weighted average number of 151,558,251 124,860,772 136,894,561
shares
Earnings per share (basic 7.71 5.60 7.17
and diluted) (pence)
EPRA earnings per share:
11,678 6,989 9,820
Total comprehensive income
(£'000)
Adjustment to total
comprehensive income:
Change in fair value of (5,653) (2,480) (1,014)
investment property (£'000)
Loss on disposal of 178 216 216
investment property (£'000)
Profit on disposal of - (73) (73)
investments (£'000)
Change in fair value of
interest rate derivatives 17 7 24
(£'000)
Total EPRA Earnings (£'000) 6,220 4,659 8,973
EPRA earnings per share
(basic and 4.10 3.73 6.56
diluted) (pence)
NAV per share:
Net assets (£'000) 151,653 148,221 146,034
Ordinary Shares 151,558,251 151,558,251 151,558,251
NAV per share (pence) 100.06 97.80 96.36
EPRA NAV per share:
Net assets (£'000) 151,653 148,221 146,034
Adjustments to net assets:
Other financial assets held (9) (24) (26)
at fair value (£'000)
EPRA NAV (£'000) 151,644 148,197 146,008
EPRA NAV per share (pence) 100.06 97.78 96.34
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 2018,
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 Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Per Ordinary Share £'000 £'000 £'000
Fourth interim dividend paid
in respect of the period 1 3,031 - -
January 2018 to 31 March
2018 at 2.00p
First interim dividend paid
in respect of the period 1 3,031 - -
April 2018 to 30 June 2018
at 2.00p
Fourth interim dividend paid
in respect of the period 1 - 2,473 2,473
February 2017 to 30 April
2017 at 2.00p
First interim dividend paid
in respect of the period 1 - 2,473 2,473
May 2017 to 31 July 2017 at
2.00p
Second interim dividend paid
in respect of the period 1 - - 3,031
August 2017 to 31 October
2017 at 2.00p
Third interim dividend paid
in respect of the period 1 - - 2,016
November 2017 to 31 December
2017 at 2.00p
Total dividends paid during
the period 6,062 4,946 9,993
Second interim dividend
declared in respect of the 3,031 - -
period 1 July 2018 to 30
September 2018 at 2.00p*
Fourth interim dividend
declared in respect of the (3,031) - -
period 1 January 2018 to 31
March 2018 at 2.00p
Second interim dividend
declared in respect of the - 2,473 -
period 1 August 2017 to 31
October 2017 at 2.00p**
Fourth interim dividend
declared in respect of the - - 3,031
period 1 January 2018 to 31
March 2018 at 2.00p***
Fourth interim dividend
declared in respect of the - (2,473) (2,473)
period 1 February 2017 to 30
April 2017 at 2.00p
Total dividends in respect 6,062 4,946 10,551
of the period
* Dividends declared after the period end are not included in the
financial statements as a liability as at period end 30 September 2018.
** Dividends declared after the period end are not included in the
financial statements as a liability as at period end 31 October 2017.
*** Dividends declared after the period end are not included in the
financial statements as a liability as at period end 31 March 2018.
9. Investments
9.a) Investment property
Period from 1 April 2018 to
30 September 2018 (unaudited)
Period from Period
from
1 May 2017 1 May
2017
to 31 to 31
October March
Investment Investment 2017 2018
properties properties (unaudited) (audited)
freehold leasehold Total Total Total
£'000 £'000 £'000 £'000 £'000
UK Investment
property
As at beginning of 155,517 36,825 192,342 137,820 137,820
period
Purchases in the 121 30 151 18,309 64,186
period
Disposals in the (4,628) - (4,628) (11,050) (11,050)
period
Revaluation of
investment 3,520 2,145 5,665 2,706 1,386
property
Valuation provided 154,530 39,000 193,530 147,785 192,342
by Knight Frank
Adjustment for (1,631) (1,393) (1,561)
rent free debtor
Adjustment for
finance lease 620 638 620
obligations
Total Investment 192,519 147,030 191,401
property
Classified as:
Investment 192,519 147,030 187,751
properties
Investment
properties held - - 3,650
for sale
192,519 147,030 191,401
Change in fair
value of
investment
property
Change in fair
value before 5,665 2,706 1,386
adjustments for
lease incentives
Adjustment for
movement in the
period:
in value for rent (12) (306) (452)
free debtor
in value for rent
free guarantee - 80 80
debtor
5,653 2,480 1,014
Loss on disposal
of the investment
property
Net proceeds from
disposals of
investment 4,508 10,858 10,856
property during
the period
Cost of disposal (4,628) (11,050) (11,050)
Lease incentives
amortised in (58) (24) (22)
current period
Loss on disposal
of investment (178) (216) (216)
property
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) Investment
Period from Period from Period from
1 April 2018 1 May 2017 1 May 2017
to 30 September to 31 October to 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Total Total Total
£'000 £'000 £'000
Investment in AEW UK Core
Property Fund
As at beginning of period - 7,594 7,594
Disposals in the period - (7,594) (7,594)
Total Investment in AEW UK - - -
Core Property Fund
Profit on disposal of the
investment in AEW UK Core
Property Fund
Proceeds from disposals of - 7,667 7,667
investments during the period
Cost of disposal - (7,594) (7,594)
Profit on disposal of - 73 73
investments
Valuation of investments
Investments in collective investment schemes are stated at NAV with any
resulting gain or loss recognised in profit or loss. Fair value is
assessed by the Directors based on the best available information.
As at 30 September 2018, the Company had no investment in the AEW UK Core
Property Fund.
9.c) Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy for
non-current assets:
30 September 2018
Significant Significant
Quoted prices in observable unobservable
active markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
£'000 £'000 £'000 £'000
Assets measured at fair
value
Investment property - - 192,519 192,519
- - 192,519 192,519
31 October 2017
Significant Significant
Quoted prices in observable unobservable
active markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
£'000 £'000 £'000 £'000
Assets measured at fair
value
Investment property - - 147,030 147,030
- - 147,030 147,030
31 March 2018
Significant Significant
Quoted prices in observable unobservable
active markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
£'000 £'000 £'000 £'000
Assets measured at fair
value
Investment property - - 191,401 191,401
- - 191,401 191,401
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.
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) Estimated Rental Value ('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 discount rate/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
2018
£1.00 -
Investment Income ERV £127.00
Property 193,530 capitalisation
Equivalent yield 4.23% -
12.09%
31 October 2017
£2.50 -
Investment Income ERV £160.00
Property 147,785 capitalisation
Equivalent yield 6.79% -
9.72%
31 March 2018
£1.00 -
Investment Income ERV £145.00
Property 192,342 capitalisation
Equivalent yield 3.14% -
10.72%
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.
30 September 2018
Fair value Change in ERV Change in equivalent
yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +5% -5% +5% -5%
Resulting fair value of 193,530 200,241 183,820 181,321 203,387
investment property
31 October 2017
Fair value Change in ERV Change in equivalent
yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +5% -5% +5% -5%
Resulting fair value of 147,785 154,000 141,059 139,125 156,441
investment property
31 March 2018
Fair value Change in ERV Change in equivalent
yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +5% -5% +5% -5%
Resulting fair value of
investment property 192,342 203,903 188,297 185,985
206,943
10. Receivables and prepayments
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Receivables
Rent debtor 1,283 653 1,074
Rent agent float account 184 58 81
Other receivables 221 44 179
1,688 755 1,334
Rent free debtor 1,631 1,393 1,561
3,319 2,148 2,895
Prepayments
Property related prepayments 47 30 13
Depositary services - 7 -
Listing fees 4 4 16
Other prepayments 24 15 14
75 56 43
Total 3,394 2,204 2,938
The aged debtor analysis of receivables as follows:
30 September 31 October 31 March
2018 2017 2018
£'000 £'000 £'000
Less than three months due 1,688 755 1,334
Between three and six months due - - -
Between six and twelve months due - - -
Total 1,688 755 1,334
11. Interest rate derivatives
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 26 31 31
Interest rate cap premium paid - - 19
Changes in fair value of interest rate (17) (7) (24)
derivatives
At the end of the period 9 24 26
To mitigate the interest rate risk that arises as a result of entering
into variable rate linked loans, the
Company has entered into interest rate caps. The facilities have a
combined notional value of £36.51 million with £10.00 million at a strike
rate of 2.0% and £26.51 million at a strike rate of 2.5% (31 March 2018:
£10.00 million at a strike rate of 2.0% and £26.51 million at a strike
rate of 2.5%) for the relevant period in line with the life of the loan.
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 2018 - 9 - 9
31 October 2017 - 24 - 24
31 March 2018 - 26 - 26
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 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 50,000 29,010 29,010
Bank borrowings drawn in the period - 3,490 20,990
Interest bearing loans and borrowings 50,000 32,500 50,000
Less: loan issue costs incurred (554) (400) (554)
Plus: amortised loan issue costs 268 159 197
At the end of the period 49,714 32,259 49,643
Repayable between two and five years 50,000 32,500 50,000
Bank borrowings available but undrawn 10,000 7,500 10,000
in the period
Total facility available 60,000 40,000 60,000
The Company has a £60.0 million (31 March 2018: £60.0 million) credit
facility with RBSI of which £50.0 million (31 March 2018: £50.0 million)
has been utilised as at 30 September 2018.
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 2018, the Company's gearing
was 25.84% loan to GAV (31 March 2018: 26.00%).
Under the terms of the loan facility, the Company can draw up to 35% loan
to NAV at drawdown.
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 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Deferred income 929 1,223 993
Accruals 467 532 831
Other creditors 684 922 955
Total 2,080 2,677 2,779
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 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (unaudited)
£'000 £'000 £'000
Not later than one year 47 47 47
Later than one year but not later 152 154 152
than five years
Later than five years 421 437 421
573 591 573
Total 620 638 620
15. Guarantees and commitments
Operating lease commitments - as lessor
The Company has entered into commercial property leases on its investment
property portfolio. These non-cancellable leases have a remaining term of
between zero and 24 years.
Future minimum rentals receivable under non-cancellable operating leases
as at 30 September 2018 are as follows:
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (unaudited)
£'000 £'000 £'000
Within one year 16,133 12,965 16,932
After one year but not more than 41,730 35,313 47,858
five years
More than five years 27,663 11,524 37,574
Total 85,526 59,802 102,364
During the period ended 30 September 2018, there were contingent rents
totalling £53,564 (31 October 2017: £113,953, 31 March 2018: £149,492).
16. Issued Share Capital
For the period 1 April 2018 to 30 September 2018
Number of
£'000 Ordinary Shares
Ordinary Shares issued and fully paid
At the beginning and end of the period 1,515 151,558,251
For the period 1 May 2017 to 31 October 2017
Number of
£'000 Ordinary Shares
Ordinary Shares issued and fully paid
At the beginning of the period 1,236 123,647,250
Issued on admission to trading on the London Stock 279 27,911,001
Exchange on 24 October 2017
At the end of the period 1,515 151,558,251
For the period 1 May 2017 to 31 March 2018
Number of
£'000 Ordinary Shares
Ordinary Shares issued and fully paid
At the beginning of the period 1,236 123,647,250
Issued on admission to trading on the London Stock 279 27,911,001
Exchange on 24 October 2017
At the end of the period 1,515 151,558,251
17. Share premium account
Period from Period from Period from
1 April 2018 to 1 May 2017 to 1 May 2017 to
30 September 31 October 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Balance at the beginning of 49,768 22,514 22,514
the period
Issued on admission to
trading on the London Stock - 27,771 27,771
Exchange on 24 October 2017
Share issue costs 3 (546) (517)
Balance at the end of the 49,771 49,739 49,768
period
18. 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 2018, 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 Boards of Directors.
Under the Investment Management Agreement the Investment Manager receives
a management fee which is calculated and accrued monthly at a rate
equivalent to 0.9% per annum of NAV (excluding un-invested fund raising
proceeds) and paid quarterly.
During the period 1 April 2018 to 30 September 2018, the Company incurred
£648,247 (six months ended 31 October 2017: £519,373; eleven months ended
31 March 2018: £988,612) in respect of investment management fees and
expenses of which £327,990 was outstanding at 30 September 2018 (31
October 2017: £259,276; 31 March 2018: £469,239).
19. Events after reporting date
Dividend
On 22 October 2018, the Board declared its second interim dividend of 2.00
pence per share in respect of the period from 1 July 2018 to 30 September
2018. The dividend payment will be made on 30 November 2018 to
shareholders on the register as at 2 November 2018. The ex-dividend date
was 1 November 2018.
The dividend of 2.00 pence per share was designated 1.50 pence per share
as an interim property income distribution ("PID") and 0.50 pence per
share as an interim ordinary dividend ("non-PID"). Unless shareholders
have elected to receive the PID gross, 20% tax will be deducted at source,
while the non-PID is paid gross.
Financing
On 22 October 2018, the Company extended the term of the loan facility by
three years up to 22 October 2023. Further details on the extension are
included in the Chairman's Statement above.
EPRA Unaudited Performance Measures
Detailed below is a summary table showing the EPRA performance measures of
the Company
MEASURE AND DEFINITION PURPOSE PERFORMANCE
A key measure of a £6.22 million/4.10
company's underlying pps
1. EPRA Earnings operating results and an
indication of the extent EPRA earnings for the
Earnings from operational to which current six month period
activities. dividend payments are ended 30 September
supported by earnings. 2018 (six month
period ended 31
October 2017: £4.66
million/3.73 pps)
2. EPRA NAV Makes adjustments to
IFRS NAV to provide
Net asset value adjusted to stakeholders with the
include properties and most relevant £151.64
other investment interests information on the fair million/100.06 pps
at fair value and to value of the assets and EPRA NAV as at 30
exclude certain items not liabilities within a September 2018 (At 31
expected to crystallise in true real estate March 2018: £146.01
a long-term investment investment company with million/ 96.34 pps)
property business. a long-term investment
strategy.
3. EPRA NNNAV
Makes adjustments to
EPRA NAV adjusted to EPRA NAV to provide £151.65
include the fair values of: stakeholders with the million/100.06 pps
most relevant EPRA NNNAV as at 30
(i) financial instruments; information on the September 2018
current fair value of
(ii) debt; and all the assets and (At 31 March 2018:
liabilities within a £146.03 million/96.36
(iii) deferred taxes. real estate company. pps)
4.1 EPRA Net Initial Yield
('NIY')
Annualised rental income
based on the cash rents
passing at the balance A comparable measure for 7.89%
sheet date, less portfolio valuations.
non-recoverable property This measure should make EPRA NIY
operating expenses, divided it easier for investors
by the market value of the to judge themselves, how as at 30 September
property, increased with the valuation of 2018
(estimated) purchasers' portfolio X compares
costs. with portfolio Y. (At 31 March 2018:
7.73%)
4.2 EPRA 'Topped-Up' NIY
This measure incorporates 8.06%
an adjustment to the EPRA A comparable measure for
NIY in respect of the portfolio valuations. EPRA 'Topped-Up' NIY
expiration of rent-free This measure should make
periods (or other unexpired it easier for investors as at 30 September
lease incentives such as to judge themselves, how 2018
discounted rent periods and the valuation of
step rents). portfolio X compares (At 31 March 2018:
with portfolio Y. 8.52%)
5. EPRA Vacancy
3.27%
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. 2018
(At 31 March 2018:
7.10%)
18.68%
EPRA Cost Ratio
(including direct
vacancy cost) as at
30 September 2018
6. EPRA Cost Ratio
(At 31 October 2017:
Administrative and A key measure to enable 23.60%)
operating costs (including meaningful measurement
and excluding costs of of the changes in a 14.96%
direct vacancy) divided by company's operating
gross rental income. costs.
EPRA Cost ratio
excluding direct
vacancy costs as at
30 September 2018
(At 31 October 2017:
15.54%)
Calculation of EPRA Net Initial Yield and 'topped-up' Net Initial Yield
30 September
2018
£'000
Investment property - wholly-owned 193,530
Allowance for estimated purchasers' cost 13,160
Gross up completed property portfolio valuation 206,690
Annualised cash passing rental income 16,975
Property outgoings (659)
Annualised net rents 16,316
Rent expiration of rent-free periods and fixed uplifts 345
'Topped-up' net annualised rent 16,661
EPRA Net Initial Yield 7.89%
EPRA 'topped-up' Net Initial Yield 8.06%
EPRA Net Initial Yield (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 2018, 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
2018
£'000
Annualised potential rental value of vacant premises 556
Annualised potential rental value for the completed 16,988
property portfolio
EPRA Vacancy Rate 3.27%
Calculation of EPRA Cost Ratios
30 September
2018
£'000
Administrative/operating expense per IFRS income statement 1,600
Less: Ground rent costs (25)
EPRA Costs (including direct vacancy costs) 1,575
Direct vacancy costs (314)
EPRA Costs (excluding direct vacancy costs) 1,261
Gross Rental Income 8,430
EPRA Cost Ratio (including direct vacancy costs) 18.68%
EPRA Cost Ratio (excluding direct vacancy costs) 14.96%
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.
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 2019 Year end
June 2019 Announcement of annual results
September 2019 Annual General Meeting
30 September 2019 Half-year end
November 2019 Announcement of interim results
Dividends
The following table summarises the dividends declared in relation to the
period:
£
Interim dividend for the period 1 April 2018 to 30 June 2018 3,031,165
(payment made on 31 August 2018)
Interim dividend for the period 1 July 2018 to 30 September 2018 3,031,165
(payment to be made on 30 November 2018)
Total 6,062,330
Directors
Mark Burton* (Non-executive Chairman)
James Hyslop (Non-executive Director)
Bimaljit (''Bim'') Sandhu* (Non-executive Director)
Katrina Hart* (Non-executive Director)
Registered Office
6th Floor
65 Gresham Street
London
EC2V 7NQ
Investment Manager
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 to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Depositary
Langham Hall UK LLP
5 Old Bailey
London
EC4M 7BA
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
*Independent of the Investment Manager.
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.
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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.: 6547
EQS News ID: 746151
End of Announcement EQS News Service
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