REG - Alternative Inc REIT - Results for the half year ended 31 December 2022
06/03/2023 07:00
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RNS Number : 9239R Alternative Income REIT PLC 06 March 2023
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6 March 2023
Alternative Income REIT plc
(the "Company" or the "Group")
INTERIM REPORT AND FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER
2022
Resilient portfolio providing secure, inflation-linked long-term income
Remain on track to deliver target annual dividend of at least 5.7 pence per
share for the financial year ending 30 June 2023
The Board of Directors of Alternative Income REIT plc (ticker: AIRE), the
owner of a diversified portfolio of UK commercial property assets
predominantly let on long leases with index-linked rent reviews, is pleased to
announce its interim report and financial statements for the half year ended
31 December 2022.
Simon Bennett, Non-Executive Chairman of Alternative Income REIT plc,
comments:
"The half year results reflect the resilience of the Company's portfolio, and
the Company remains on track to deliver the Board's previously announced
target annual dividend of at least 5.7 pence per share(1) ("pps"), which is
expected to be fully covered.
Whilst not immune from the headwinds affecting the UK and wider global economy
at the present time, 96% of the Group's portfolio benefits from index-linked
rent reviews. Combining this with a strong balance sheet, modest overheads and
low fixed borrowing costs until 2025, helps ensure the Company is well
positioned to ride-out successfully the current economic storm and to continue
to deliver attractive, secure and progressive income to our shareholders."
Financial Highlights
At 31 December 2022 (the 'Period End')
31 December 2022 30 June 2022
(unaudited) (audited) Change
Net Asset Value ('NAV') £67.9 million £77.6 million -12.5%
NAV per share 84.34p 96.40p -12.5%
Share price 66.70p 82.10p -18.8%
Share price discount to NAV (A) 20.9% 14.8% +6.1%
Investment property fair value (based on external valuation) £107.4 million £117.9 million -8.9%
Loan to gross asset value ('GAV') (A) 36.8% 33.7%
Loan facility (2) £41.0 million £41.0 million -
( )
For the half year ended 31 December 2022 (the 'Period')
2022 2021 Change
(unaudited) (unaudited)
EPRA earnings per share ('EPS') (A) 3.45p 3.28p +5.2%
Adjusted EPS (A) 3.35p 2.79p +20.1%
Dividend cover (A) 121.8% 107.3% +14.5%
Dividends per share 2.75p 2.60p +5.8%
Dividend yield (annual) (A) 8.3% 7.6% +0.7%
Operating profit (including gain on sale of investment property but excluding £3.5 million £3.4 million +2.9%
fair value changes)
(Loss)/profit before tax (£7.3 million) £6.2 million -217.3%
EPS (loss)/profit (9.08p) 7.74p -217.3%
Share price total return (A) -15.4% +5.8%
NAV total return (A) -9.6% +9.7%
Annualised gross passing rent (A) £7.5 million £6.6 million +13.6%
Ongoing charges (A) 1.42% 1.44% -2 bps
· The NAV decreased in aggregate by £9.7 million to £67.9 million,
equivalent to 84.34pps as at 31 December 2022 (30 June 2022: £77.6 million,
equivalent to 96.40pps). The majority of the decrease is due to a £10.1
million reduction in the fair value of the investment properties impacted by
upward yield movement across the wider real estate sector, driven primarily
from rises in interest rates and inflation during 2022.
· Dividends in respect of the Period totalled 2.75pps, a 5.8% increase
on the first six months to 31 December 2021 and in line with the Board's
target annual dividend of at least 5.7pps(1), which is expected to be fully
covered. Dividends in respect of the period were covered 121.8% by earnings.
· EPS amounted to a loss of 9.08pps for the Period (half year ended 31
December 2021: profit of 7.74p). The majority of this arose from the £10.1
million reduction in the fair value of the investment properties in the
Period.
· The Group's loan matures in October 2025 and is fixed at a weighted
average interest cost of 3.19%. The loan continues to have significant
headroom to the lender's loan to value covenant of 60% and remains comfortably
within the Group's stated borrowing limit of not exceeding 40% of GAV
(measured at drawdown).
(A) Considered to be an Alternative Performance Measure. Further details can
be found at the end of this section and full calculations are set out
following the financial statements.
(1) This is a target only and not a profit forecast. There can be no assurance
that the target will be met and it should not be taken as an indicator of the
Company's expected or actual results.
(2) The loan facility at 31 December 2022 of £41.0 million (30 June 2022:
same) is with Canada Life Investments, matures on 20 October 2025 and has a
weighted average interest cost of 3.19%.
Operational Highlights
At the Group's Period End of 31 December 2022:
· The Group's property portfolio had a fair value of £107.4 million
across 19 properties (30 June 2022: £117.9 million across 19 properties).
There were no property transactions in the Period.
· The EPRA Net Initial Yield (A) ('NIY') increased to 6.5% at 31
December 2022 (30 June 2022: 5.7%).
· 96% of the Group's income is inflation linked to the Retail Price
Index ('RPI') or the Consumer Price Index ('CPI').
· The assets were fully let at the Period End and throughout the
Period.
· The weighted average unexpired lease term ('WAULT') at the Period End
was 17.0 years to the earlier of break and expiry (30 June 2022:17.5 years)
and 18.8 years to expiry (30 June 2022: 19.4 years).
Income and expense during the Period
· Rent recognised during the Period was £3.9 million (half year to 31
December 2021: £3.7 million), of which £0.2 million (31 December 2021: £0.3
million) was accrued debtors for the combination of minimum uplifts and
rent-free period. The number of tenants at the half year was 21 (31 December
2021: 20).
· All of the rent due in 2022 has been collected.
· The portfolio had annualised gross passing rent(A) of £7.5 million
across 19 properties (31 December 2021: £6.6 million across 18 properties),
increasing by 13.6% due to the acquisition of Volvo, Slough in Q1 2022 and
various rent reviews during the 12 months to 31 December 2022.
· A total of 7 rent reviews took place during the Period with a
combined uplift of £247,000 representing an average of 8.38% growth in
contracted rent across those properties affected and 3.43% across the
portfolio.
· Ongoing charges at the Period end was 1.42% a slight decrease from the
comparable prior period.
· The Group received £825,000 in the Period, in full and final
settlement of litigation to recover costs incurred on work to replace
defective cladding on the Travelodge Hotel, Swindon. This one-off receipt has
been proportionally allocated as £606,000 to capital, as a reduction in
acquisition costs and £219,000 to revenue, as other property income. Further
detail is contained in Note 15.3 of the financial statements.
Post balance sheet highlights
· On 1 February 2023, the Board declared an interim dividend of
1.375pps in respect of the quarter ended 31 December 2022. This was paid on 24
February 2023 to shareholders on the register as at 10 February 2023. The
ex-dividend date was 9 February 2023.
· A lease renewal for a further 5 years from 14 January 2023 has been
agreed with Pets at Home for the Group's unit in Droitwich. Negotiations are
in progress with Mears Group, in respect of Bramall Court, Salford, to change
the use of the property from student accommodation to social housing, whilst
entering a nomination agreement with Salford City Council.
· Over the six month period to 30 June 2023, 26% of the Group's income
will be reviewed (five annual index-linked rent reviews and three periodic
index-linked rent reviews (5 years since the previous reviews)).
ENQUIRIES
Alternative Income REIT plc
Simon Bennett - Chairman via H/Advisors Maitland below
M7 Real Estate Ltd +44 (0)20 3657 5500
Richard Croft
Panmure Gordon (UK) Limited +44 (0)20 7886 2500
Alex Collins
Tom Scrivens
Chloe Ponsonby
H/Advisors Maitland (Communications Adviser) +44(0) 7747 113 930
James Benjamin Aire-maitland@h-advisors.global (mailto:Aire-maitland@h-advisors.global)
The Company's LEI is 213800MPBIJS12Q88F71.
Further information on Alternative Income REIT plc is available at
www.alternativeincomereit.com (http://www.alternativeincomereit.com/) (3)
NOTES
Alternative Income REIT plc aims to generate a sustainable, secure and
attractive income return for shareholders from a diversified portfolio of UK
property investments, predominately in alternative and specialist sectors. The
majority of the assets in the Group's portfolio are let on long leases which
contain inflation linked rent review provisions.
The Company's investment adviser is M7 Real Estate Limited ("M7"). M7 is a
leading specialist in the pan-European, regional, multi-tenanted real estate
market. The company has 225 employees in 14 countries and territories. The
team manages over 590 properties with a value of circa €5.9 billion.
(3) Neither the content of the Company's website, nor the content on any
website accessible from hyperlinks on its website or any other website, is
incorporated into, or forms part of, this announcement nor, unless previously
published on a Regulatory Information Service, should any such content be
relied upon in reaching a decision as to whether or not to acquire, continue
to hold, or dispose of, securities in the Company.
Chairman's Statement
Overview
I am pleased to present the unaudited half-yearly report of Alternative Income
REIT plc (the "Company") together with its subsidiaries (the "Group") for the
half year ended 31 December 2022.
During the period under review the real estate sector as a whole has seen an
upward movement in property yields, which therefore results in a downward
movement in valuations. The Company's portfolio was not immune to this adverse
movement and for the half year ended 31 December 2022 the Group's net asset
value showed a fall of £9.7 million to £67.9 million (30 June 2022: £77.6
million). That said, the portfolio has shown some resilience as the valuation
fall has, in the main part, been materially lower than the benchmark property
indices and the Company's peer group.
Whilst not immune from the headwinds affecting the UK economy at the present
time, 96% of the Group's portfolio benefits from index-linked rent reviews.
Combining this with a strong balance sheet, modest overheads and low fixed
borrowing costs until 2025, helps ensure the Company is well positioned to
ride-out successfully the current economic storm and to continue to deliver
attractive, secure and progressive income to our shareholders.
Dividends & Earnings
The Company declared interim dividends of 2.75pps in respect of the half year
ended 31 December 2022, an increase of 5.8% on the dividends declared for the
half year ended 31 December 2021 of 2.60pps. Dividends declared for the Period
are in line with the Board's target annual dividend of at least 5.7pps(1),
which is expected to be fully covered.
As set out in Note 8 to the Condensed Consolidated Financial Statements, these
dividends were well-covered by both EPRA Earnings(A) of 3.45pps (31 December
2021: 3.28pps), and the Group's Adjusted EPS(A) (representing cash) of 3.35pps
(31 December 2021: 2.79pps).
Financing
At 31 December 2022, the Group had fully utilised its £41.0 million loan
facility with Canada Life Investments. The weighted average interest cost of
the Group's facility is 3.19% and the loan is repayable on 20 October 2025.
If repayment is made prior to this date, and the corresponding Gilt rate is
lower than the contracted rate of interest, then the loan terms provide for an
early redemption fee, which at 31 December 2022 would have been a £nil cost
(31 December 2021: £2,551,803).
Environmental, Social and Governance ("ESG")
The Board recognises the importance of ESG to sustainable investment and to
the wider business and investor community. In order to meet these
expectations, the Group's Investment Adviser has adopted a number of
strategies to maintain a conscientious approach to ESG in respect of the
Group's property portfolio. With increasing energy costs there has been a
renewed focus on sustainability and the Board will continue to maintain its
focus on this and seek opportunities, wherever possible to reduce the Group's
carbon footprint.
Future Growth and Outlook
Investment performance in the foreseeable future may be impacted by the
headwinds currently effecting the UK and wider global economy which is
experiencing high levels of inflation and low growth, with the UK economy
teetering on the brink of a potential recession.
The Group's portfolio of 19 investment properties is resilient and continues
to provide long-dated high-yielding rental income. Consequently, the Board
remains confident, subject to any tenant defaults, that the Company continues
to be on track to deliver its target annual dividend of at least 5.7pps(1) for
the year ending 30 June 2023. This dividend is expected to be fully covered
and takes account of the fact that over the six month period to 30 June 2023,
26% of the Group's income will be reviewed (five annual index-linked rent
reviews and three periodic index-linked rent reviews (5 years since the
previous reviews)). Over the next 12-month financial period, 63% of the
Group's income will be reviewed (45% annual index-linked rent reviews, 16%
periodic index-linked rent reviews, namely 5 years since the previous reviews
with 2% on fixed uplifts).
I would like to thank our shareholders, my fellow Directors, the Investment
Adviser and our other advisers and service providers who have provided
professional support and services to the Group during the Period.
Finally, I would like to thank Alan Sippetts, my predecessor as Chairman, for
his contribution to the success of the Company in recent years.
Simon Bennett
Chairman
6 March 2023
Key Performance Indicators ('KPIs')
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE
1. Net Initial Yield ('NIY') (A) The NIY is an indicator of the ability of the Company to meet its target 6.47%
dividend after adjusting for the impacts of leverage and deducting operating
Annualised rental income based on the cash rents passing at the balance sheet costs. at 31 December 2022
date, less non-recoverable property operating expenses, divided by the market
value of the property, increased with purchasers' costs estimated by the
Group's External Valuers.
(30 June 2022: 5.70%; 31 December 2021: 5.71%)
2. Weighted Average Unexpired Lease Term ('WAULT') to break and expiry The WAULT is a key measure of the quality of the portfolio. Long leases 17.0 years to break and 18.8 years to expiry
underpin the security of our future income.
The average lease term remaining to expiry across the portfolio, weighted by at 31 December 2022
contracted rent.
(30 June 2022: 17.5 years to break and 19.4 years to expiry; 31 December 2021:
18.1 years to break and 20.2 years to expiry)
3. Net Asset Value ('NAV') per share (4) Provides stakeholders with the most relevant information on the fair value of £67.90 million/ 84.34pps
the assets and liabilities of the Group.
NAV is the value of an entity's assets minus the value of its liabilities. at 31 December 2022
(30 June 2022: £77.60 million, 96.40pps and 31 December 2021: £72.75
million, 90.38pps)
4. Dividend per share The Company seeks to deliver a sustainable income stream from its portfolio, 2.75pps
which it distributes as dividends.
Dividends declared in relation to the period are in line with the stated for the half year ended 31 December 2022
dividend target as set out in the Prospectus at IPO. The Company targets a
dividend of 5.50 pence per Ordinary Share per annum once fully invested and
leveraged(1).
(year ended 30 June 2022: 5.50pps; half year ended 31 December 2021: 2.60pps)
5. Adjusted EPS (A) This reflects the Company's ability to generate earnings from the portfolio 3.35pps
which underpins dividends.
Adjusted EPS from core operational activities, as adjusted for non-cash items. for the half year ended 31 December 2022
A key measure of a company's underlying operating results from its property
rental business and an indication of the extent to which current dividend
payments are supported by earnings. See Note 7 to the Consolidated Condensed
Financial Statements. (year ended 30 June 2022: 5.57pps; half year to 31 December 2021: 2.79pps)
6. Leverage (Loan-to-GAV) (A) The Group utilises borrowings to enhance returns over the medium term. 36.78%
Borrowings will not exceed 40% of GAV (measured at drawdown).
The proportion of the Group's assets that is funded by borrowings. at 31 December 2022
(30 June 2022: 33.69% and 31 December 2021: 35.22%)
EPRA Performance Measures
( )
Detailed below is a summary table showing EPRA performance measures (which are
all alternative performance measures) of the Group.
MEASURE AND DEFINITION PURPOSE PERFORMANCE
EPRA NIY (5) A comparable measure for portfolio valuations. This measure should make it 6.47%
easier for investors to judge themselves, how the valuation of two portfolios
Annualised rental income based on the cash rents passing at the balance sheet compare. at 31 December 2022
date, less non-recoverable property operating expenses, divided by the market
value of the property, increased with (estimated) purchasers' costs.
(30 June 2022: 5.70% and 31 December 2021: 5.72%)
EPRA 'Topped-Up' NIY (5) A comparable measure for portfolio valuations. This measure should make it 7.08%
easier for investors to judge themselves, how the valuation of two portfolios
This measure incorporates an adjustment to the EPRA NIY in respect of the compare. at 31 December 2022
expiration of rent-free periods (or other unexpired lease incentives such as
discounted rent periods and step rents). (30 June 2022: 6.41% and 31 December 2021: 6.68%)
EPRA NAV (4) Makes adjustments to IFRS NAV to provide stakeholders with the most relevant £67.90 million/ 84.34pps
information on the fair value of the assets and liabilities within a real
Net asset value adjusted to include properties and other investment interests estate investment company with a long-term investment strategy. at 31 December 2022
at fair value and to exclude certain items not expected to crystallise in a
long-term investment property business.
(30 June 2022: £77.60 million, 96.40pps and 31 December 2021: 72.75 million,
90.38pps)
EPRA Net Reinstatement Value (4) A measure that highlights the value of net assets on a long-term basis. £74.88 million/ 93.02pps
The EPRA NRV adds back the purchasers' costs deducted from the EPRA NAV and EPRA NRV for the half year ended 31 December 2022
deducts the break cost of bank borrowings.
(30 June 2022: £84.78 million/105.31pps and 31 December 2021: £77.20
million/95.91pps)
EPRA Net Tangible Assets (4) A measure that assumes entities buy and sell assets, thereby crystallising £67.90 million/ 84.34pps
certain levels of deferred tax liability. The Group has UK REIT status and as
The EPRA NTA deducts the break cost of bank borrowings from the EPRA NAV. such no deferred tax is required to be recognised in the accounts. EPRA NTA for the half year ended 31 December 2022
As break costs were nil at the period end, the EPRA NTA is the same as the (30 June 2022: £77.11 million/95.79pps and 31 December 2021: £70.20
EPRA NAV. million/87.21pps)
EPRA Net Disposal Value (4) A measure that shows the shareholder value if assets and liabilities are not £67.90 million/ 84.34pps
held until maturity.
The EPRA NDV deducts the break cost of bank borrowings from the EPRA NAV. EPRA NDV for the half year ended 31 December 2022
(30 June 2022: £77.11 million/95.79pps and 31 December 2021: £70.20
million/87.21pps)
EPRA Earnings/EPS (4) A key measure of a company's underlying operating results and an indication of £2.78 million/ 3.45pps
the extent to which current dividend payments are supported by earnings.
Earnings from operational activities. EPRA earnings for the half year ended 31 December 2022
(30 June 2022: £5.05 million/ 6.27pps and 31 December 2021: £2.64 million/
3.28pps)
EPRA Vacancy (5) A 'pure' percentage measure of investment property space that is vacant, based 0.00%
on ERV.
Estimated Rental Value ('ERV') of vacant space divided by ERV of the whole EPRA vacancy as at 31 December 2022
portfolio.
(30 June 2022: 0.00% and 31 December 2021: 0.60%)
EPRA Cost Ratio (5) A key measure to enable meaningful measurement of the changes in a company's 15.17%
operating costs.
Administrative and operating costs (including and excluding costs of direct EPRA Cost Ratio as at 31 December 2022. The ratio is the same both including
vacancy) divided by gross rental income. and excluding the vacancy costs.
(30 June 2022: 13.79% and 31 December 2021: 10.27%)
(4) The reconciliation of this APM is set out in Note 8 of the Notes to the
Condensed Consolidated Financial Statements.
(5) The reconciliation of this APM is set out in the EPRA Performance Measures
Calculations section following the Notes to the Condensed Consolidated
Financial Statements.
Investment Adviser's Report
Market Outlook
UK Economic Outlook
The outlook for the UK economy has improved since the beginning of the year
and many economists are now predicting that interest rates may now be at, or
close to, their peak.
The February 2023 Bank of England base rate increase to 4% was the 10(th)
consecutive hike in as many Monetary Policy Committee meetings and took rates
to a 14-year high with a cumulative rise of 3.9%. This represents the fastest
and largest rise in rates since the late 1980s and is a response to the
fastest and largest rise in inflation since the early 1980s. Expectations are
that any further rises are likely to be more measured 0.25% increases rather
than the 0.5% hikes to which we have recently become accustomed although
Capital Economics forecast that lingering domestic inflation pressures will
force the Bank to keep interest rates at their peak for all of 2023 before
falling to circa. 3.7% by the end of 2024. The impact on commercial property
of this rapid change in the interest rate environment is considered further
below.
It remains a matter of debate as to whether the economy is currently in
recession with the National Institute of Economic and Social Research
forecasting mild growth of 0.2% in 2023 and the economy therefore avoiding a
technical recession. In contrast, the Bank of England are still predicting a
shallow but protracted recession, with a 1% contraction over five quarters,
highlighting that most of the drag from higher interest rates has yet to be
felt. However, the IMF have recently weighed in with a more gloomy prediction
- that Britain will be the only leading economy to suffer a contraction this
year.
The significant increase in energy prices as a consequence of the Ukraine war
and the emergence of the global economy from the Covid pandemic is now
reversing with petrol prices approximately 25% lower than at their peak and
average household bills predicted by both The Resolution Foundation and
Cornwall Insight to fall below the government's £2,500 p.a. price cap by the
summer.
The principal risks to the UK economy appear to be from the squeeze on
disposable income, as a result of the increases in the cost of living, and the
speed with which inflation will fall. Low-income households are estimated to
have seen their disposable income fall by nearly 20% since the onset of Covid
according to the National Institute of Economic and Social Research. With
respect to inflation, the latest forecasts from the Bank of England have
inflation falling from 10.5% to 3.9% by the end of this year, and to 1.4% by
the end of 2024, albeit the Bank note that the "risks to inflation are skewed
significantly to the upside".
However, the Bank of England's Financial Policy Committee in its most recent
assessment judges that "households are more resilient now than in the run-up
to the global financial crisis (GFC) in 2007 and that households are, in
aggregate, less indebted compared to the peak that preceded the GFC.
UK Real Estate Outlook
The challenging economic circumstances in the UK are unsurprisingly impacting
the commercial property sector and particularly the investment market at the
present time. The occupier market will inevitably also be influenced by any
recession although the extent of this will, of course, depend upon the length
and depth of any period of economic decline.
Inflation and rising interest rates have brought about an increase in property
yields as investors seek an appropriate yield gap between the risk-free rate
and commercial property returns. Lower, and less certain expectations about
future rental growth also add to pressure on the lowest yields, with the
greatest impact seen so far on the industrial and warehouse sector. The
ongoing yield shift has reduced values and returns for property investors
particularly those with debt for whom the cost is increasing although not
necessarily until expiration of their debt term.
In their outlook for the UK Real Estate Market in 2023, CBRE reached five key
conclusions.
· First, that real estate prices will stabilise in 2023. They
suggest that the spread over gilt yields going forward will be tighter than in
the last decade. CBRE argue that as a result of quantitative easing,
implemented after the Global Financial Crisis, the spread between commercial
real estate yields and those of UK government bonds was abnormally high in a
historical context.
· Income returns, rather than capital growth, will drive commercial
real estate returns in the year ahead. The financial performance of occupiers
and the success of asset management initiatives will be key.
· The performance of other asset classes relative to real estate
will affect investor demand particularly as institutions seek to rebalance
portfolios as a consequence of the changes in investment performance and
outlook in 2022.
· Transaction volumes will fall although the impact of this will be
limited on established portfolios.
· Finally, CBRE forecast that the debt market will remain resilient
as UK real estate is less leveraged than in the Global Financial Crisis.
However, CBRE note that higher debt costs, together with lower asset values,
will pose challenges for investors that need to refinance this year and that
will inevitably lead to forced, or at least "lender-led", sales particularly
by highly leveraged investors and those owning sub-prime assets particularly.
In some of the first analysis of actual transactions in 2023, it has been
reported that capital values declined by 0.4% across all UK commercial
property in January 2023 according to the latest CBRE Monthly Index. On a
sector specific basis, CBRE report that the decline was higher for the
Industrial sector across the UK at -0.7% whereas Retail Warehouse sector
posted a fall of only -0.2% along with positive rental growth of 0.3% in the
month.
In our opinion, as a further consideration, we see no let-up in the value
placed by both occupiers and investors on assets and portfolios meeting
sustainability criteria as global warming is increasingly being seen to impact
upon our climate. Furthermore, more mandatory disclosure requirements are to
be introduced in the UK and high energy prices will incentivise investment by
reducing the payback period of energy saving measures.
It is worth noting that the fall in the share price of UK REITs in 2022 was
some time ahead of the subsequent fall in values in the conventionally traded
property market. Investors will be looking to see if an improvement in listed
property prices acts again as an indicator of change in market traded values.
Portfolio Activity
The following asset management initiatives were undertaken during the Period:
· Rent Reviews: A total of 7 rent reviews took place during the
Period with a combined uplift of £247,330 representing an average of 8.38%
growth in contracted rent across those properties affected and 3.43% across
the portfolio.
· Travelodge, Swindon: Litigation, lodged with the Court on 12
November 2021, in respect of cladding replacement works carried out by the
Group to the top floors of the asset, was concluded with the £825,000
settlement received in the Period.
The following asset management initiatives were undertaken between the half
year and the date of this report:
· A lease renewal for a further 5 years from 14 January 2023 has
been agreed with Pets at Home and is currently being documented.
· Negotiations are in progress with Mears Group, in respect of
Bramall Court, Salford, to change the use of the property from student
accommodation to social housing, whilst entering a nomination agreement with
Salford City Council.
NAV Movements
Half year ended Half year ended Year ended
31 December 2022 31 December 2021 30 June 2022
Pence per share £ million Pence per £ million Pence per £ million
share share
NAV as at beginning of period/ year 96.40 77.60 85.58 68.89 85.58 68.89
Change in fair value of investment property (12.53) (10.09) 4.34 3.49 9.97 8.02
Income earned for the period/year 5.41 4.36 4.75 3.83 9.81 7.90
Gain on sale of property - - 0.12 0.10 0.12 0.10
Finance costs for the period/year (0.88) (0.71) (0.88) (0.71) (1.77) (1.42)
Other expenses for the period/year (1.08) (0.86) (0.59) (0.48) (1.77) (1.43)
Dividends paid during the period/year (2.98) (2.40) (2.94) (2.37) (5.54) (4.46)
NAV as at the end of the year 84.34 67.90 90.38 72.75 96.40 77.60
Valuation
At 31 December 2022 the Group owned 19 assets (30 June 2022: 19 assets). The
19 properties held for the Period were valued at £107.4 million at 31
December 2022 (30 June 2022: £117.9 million).
Summary by Sector at 31 December 2022
Annualised
gross
Market Occupancy WAULT to passing
Number of Valuation Value by ERV break rent ERV ERV
Sector Properties (£m) (%) (%) (years) (£m) (£m) (%)
Industrial 4 24.0 22.3% 100.0% 23.3 1.55 1.56 22.3%
Hotel 3 20.7 19.3% 100.0% 13.4 1.69 1.45 20.7%
Healthcare 3 17.9 16.7% 100.0% 26.0 1.17 1.10 15.7%
Automotive & Petroleum 3 15.3 14.2% 100.0% 13.4 1.04 0.99 14.1%
Student Accommodation 1 12.0 11.2% 100.0% 18.6 0.73 0.67 9.6%
Leisure 2 5.4 5.0% 100.0% 6.8 0.42 0.39 5.5%
Power Station 1 4.8 4.5% 100.0% 9.2 0.33 0.33 4.8%
Retail 1 5.4 5.0% 100.0% 4.5 0.40 0.38 5.4%
Education 1 1.9 1.8% 100.0% 21.1 0.13 0.12 1.9%
Total/Average 19 107.4 100.0% 100.0% 17.0 7.46 6.99 100.0%
Summary by Geographical Area at 31 December 2022
Annualised
gross
Market Occupancy WAULT to passing
Geographical Number of Valuation Value by ERV break rent ERV ERV
Area Properties (£m) (%) (%) (years) (£m) (£m) (%)
West Midlands 4 26.1 24.3% 100.0% 11.9 1.91 1.85 26.5%
The North West & Merseyside 2 23.1 21.5% 100.0% 34.6 1.30 1.23 17.6%
Rest of South East 5 22.2 20.7% 100.0% 10.9 1.43 1.34 19.2%
South West 2 12.7 11.9% 100.0% 22.0 0.87 0.81 11.7%
Yorkshire and the Humber 2 6.2 5.7% 100.0% 19.2 0.44 0.42 6.0%
Scotland 1 6.9 6.5% 100.0% 13.7 0.76 0.61 8.7%
London 2 5.4 5.0% 100.0% 6.8 0.42 0.39 5.6%
Eastern 1 4.8 4.4% 100.0% 9.2 0.33 0.34 4.7%
Total/Average 19 107.4 100.0% 100.0% 17.0 7.46 6.99 100.0%
Top Ten Occupiers at 31 December 2022
Tenant Property Annualised gross passing rent (£'000) % of Portfolio Total Annualised gross passing rental
Jupiter Hotels Ltd Mercure City Hotel, Glasgow 761 10.2%
Mears Group Plc Bramall Court, Salford 735 9.8%
Prime Life Ltd Lyndon Croft Care Centre, Solihull and Westerlands Care Village, Brough 729 9.8%
Meridian Steel Ltd Grazebrook Industrial Estate, Dudley and Provincial Park, Sheffield 716 9.6%
Premier Inn Hotels Ltd Premier Inn, Camberley 504 6.8%
Motorpoint Ltd Motorpoint, Birmingham 500 6.7%
Handsale Ltd Silver Trees, Bristol 438 5.9%
Travelodge Hotels Ltd Duke House, Swindon 403 5.4%
Hoddesdon Energy Ltd Hoddesdon Energy, Hoddesdon 333 4.5%
Pure Gym Ltd Pure Gym, London 287 3.8%
Top Ten Total 5,406 72.5%
Lease Expiry Portfolio at 31 December 2022 - to the earlier of break or lease
expiry
Year Expiring passing rent pa (£'000) Cumulative (£'000)
2023 131 131
2024 50 181
2025 97 278
2026 - 278
2027 1,003 1,280
2028 262 1,542
2029 272 1,815
2030 - 1,815
2031 - 1,815
2032 863 2,678
2033 540 3,218
2034 - 3,218
2035 - 3,218
2036 761 3,979
2037 781 4,761
2038 - 4,761
2039+ 2,701 7,462
Interim Management Report and 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 half year of the financial year are set out in
the Chairman's Statement and the Investment Adviser's Report above.
The principal risks and uncertainties of the Company are set out in the Annual
Report and Financial Statements for the year ended 30 June 2022 (the '2022
Annual Report') on pages 24 to 29 and in Note 18. Having reviewed these at the
half-yearly meeting, the Board considers the principal risks to be unchanged
at the period end, with the Board's perception of heightened uncertainty for
many factors (for example changes to interest rates, inflation and costs, and
probable UK recession) remaining.
Risks faced by the Company include, but are not limited to, tenant default,
portfolio concentration, property defects, the rate of inflation, the property
market, property valuation, illiquid investments, environment, breach of
borrowing covenants, failure of service providers, dependence on the
Investment Adviser, ability to meet objectives, Group REIT status, political
and macroeconomic events, disclosure risk, regulatory change(including in
relation to climate change).
The Board is of the opinion that these principal risks are equally applicable
to the remaining six months of the Group's financial year, as they were to the
six months being reported on.
Related Party Transactions
There have been no changes to the related parties shown in Note 20 of the 2022
Annual Report that could have a material effect on the financial position or
performance of the Company or Group. Amounts payable to the Investment Adviser
in the six months being reported are shown in the unaudited Condensed
Consolidated Statement of Comprehensive Income.
Going Concern
This report has been prepared on a going concern basis. Note 2 sets out the
Board's considerations in coming to this conclusion.
Directors' Responsibility Statement
The Directors confirm that to the best of our knowledge:
· the condensed consolidated set of financial statements has been
prepared in accordance with the UK-adopted IAS 34 'Interim Financial
Reporting';
· 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 consolidated of
financial statements; and a description of the principal risks and
uncertainties for the remaining half 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 financial year and that have materially affected the financial position or
performance of the Company during that period; and any changes in the related
party transactions described in the 2022 Annual Report that could do so.
As at the date of this report the Directors of the Company are Simon Bennett,
Stephanie Eastment and Adam Smith all of whom are non-executive Directors.
For and on behalf of the Board
Simon Bennett
Chairman
6 March 2023
Condensed Consolidated Statement of Comprehensive Income
For the half year ended 31 December 2022
Half year ended Half year ended Year
31 December 31 December ended
2022 (unaudited) 2021 (unaudited) 30 June
2022
(audited)
Notes £'000 £'000 £'000
Income
Rental and other income 3 4,350 3,826 7,901
Property operating (expense)/ income 4 (357) 48 (330)
Net rental and other income 3,993 3,874 7,571
Other operating expenses 4 (499) (526) (1,101)
Operating profit before fair value change 3,494 3,348 6,470
Change in fair value of investment properties 10 (10,088) 3,494 8,023
Gain on disposal of investment property 10 - 97 96
Operating (loss)/ profit (6,594) 6,939 14,589
Finance expense 6 (714) (711) (1,423)
(Loss)/ profit before tax (7,308) 6,228 13,166
Taxation 7 - - -
(Loss)/ profit and total comprehensive income attributable to shareholders (7,308) 6,228 13,166
(Loss)/ earnings per share (pence) 8 (9.08p) 7.74p 16.36p
(basic and diluted)
EPRA EPS (pence) 8 3.45p 3.28p 6.27p
(basic and diluted)
Adjusted EPS (pence) 8 3.35p 2.79p 5.57p
(basic and diluted)
All items in the above statement are derived from continuing operations. The
accompanying notes 1 to 19 form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Financial Position
As at 31 December 2022
As at As at As at
31 December 2022 31 December 30 June
(unaudited) 2021 (unaudited) 2022
(audited)
Notes £'000 £'000 £'000
Assets
Non-current Assets
Investment properties 10 104,430 105,220 115,124
104,430 105,220 115,124
Current Assets
Receivables and prepayments 11 4,185 8,962 4,034
Cash and cash equivalents 2,854 2,243 2,542
7,039 11,205 6,576
Total Assets 111,469 116,425 121,700
Liabilities
Non-current Liabilities:
Interest bearing loans and borrowings 13 (40,672) (40,568) (40,620)
Lease obligations 14 (282) (317) (299)
(40,954) (40,885) (40,919)
Current Liabilities
Payables and accrued expenses 12 (2,585) (2,749) (3,146)
Lease obligations 14 (34) (37) (36)
(2,619) (2,786) (3,182)
Total Liabilities (43,573) (43,671) (44,101)
Net Assets 67,896 72,754 77,599
Equity
Share capital 17 805 805 805
Capital reserve 75,417 75,417 75,417
(Deficit)/ retained earnings (8,326) (3,468) 1,377
Total equity 67,896 72,754 77,599
Net Asset Value per share (pence) 8 84.34p 90.38p 96.40p
The accompanying notes 1 to 19 form an integral part of these Condensed
Consolidated Financial Statements.
The financial statements were approved by the Board of Directors on 2 March
2023 and were signed on its behalf by:
Simon Bennett
Chairman
Company number: 10727886
Condensed Consolidated Statement of Changes in Equity
For the half year ended 31 December 2022
Share Capital Retained earnings Total
capital reserve equity
Notes £'000 £'000 £'000 £'000
For the half year ended
31 December 2022 (unaudited)
Balance as at 30 June 2022 805 75,417 1,377 77,599
Total comprehensive loss - - (7,308) (7,308)
Dividends declared 9 - - (2,395) (2,395)
Balance as at 31 December 2022 805 75,417 (8,326) 67,896
For the half year ended
31 December 2021 (unaudited)
Balance as at 30 June 2021 805 75,417 (7,329) 68,893
Total comprehensive income - - 6,228 6,228
Dividends declared 9 - - (2,367) (2,367)
Balance as at 31 December 2021 805 75,417 (3,468) 72,754
For the year ended 30 June 2022 (audited)
Balance as at 30 June 2021 805 75,417 (7,329) 68,893
Total comprehensive income - - 13,166 13,166
Dividends declared 9 - - (4,460) (4,460)
Balance as at 30 June 2022 805 75,417 1,377 77,599
The accompanying notes 1 to 19 form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Cash Flows
For the half year ended 31 December 2022
Half year ended Half year Year
31 December ended ended
2022 31 December 30 June
(unaudited) 2021 2022
(unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating activities
(Loss)/profit before tax (7,308) 6,228 13,166
Adjustment for:
Finance expenses 714 711 1,423
Gain on sale of investment property - (97) (96)
Change in fair value of investment properties 10,088 (3,494) (8,023)
Operating results before working capital changes 3,494 3,348 6,470
Change in working capital
Increase in other receivables and prepayments (151) (5,280) (352)
(Decrease)/increase in other payables and accrued expenses (561) (297) 100
Net cash from / (used in) operating activities 2,782 (2,229) 6,218
Cash flows from investing activities
Purchase of investment property - - (5,375)
Disposal of investment property - 5,397 5,396
Reduction in acquisition costs - note 15.3 606 - -
Net cash from / (used in) investing activities 606 5,397 21
Cash flows from financing activities
Finance costs paid (662) (659) (1,319)
Dividends paid (2,395) (2,362) (4,455)
Payment of lease obligations (19) (19) (38)
Net cash used in financing activities (3,076) (3,040) (5,812)
Net increase in cash and cash equivalents 312 128 427
Cash and cash equivalents at beginning of period/year 2,542 2,115 2,115
Cash and cash equivalents at end of period/ year 2,854 2,243 2,542
The accompanying notes 1 to 19 form an integral part of these Condensed
Consolidated Financial Statements.
Notes to the Condensed Consolidated Financial Statements
For the half year ended 31 December 2022
1.Corporate Information
Alternative Income REIT plc (the "Company") is a public limited company and a
closed ended Real Estate Investment Trust ('REIT') incorporated on 18 April
2017 and domiciled in the UK and registered in England and Wales. The
registered office of the Company is located at 1 King William Street, London,
United Kingdom, EC4N 7AF.
The Company's Ordinary Shares were listed on the Official List of the FCA and
admitted to trading on the Main Market of the London Stock Exchange on 6 June
2017.
2. Accounting policies
2.1 Basis of preparation
These condensed consolidated interim financial statements for the half year
ended 31 December 2022 have been prepared in accordance with International
Accounting Standard ('IAS') 34 'Interim Financial Reporting'. They do not
include all the information required for annual financial statements and
should be read in conjunction with the Group's last annual consolidated
financial statements for the year ended 30 June 2022 (the '2022 Annual
Financial Report').
These condensed consolidated financial statements have been prepared under the
historical cost convention, except for investment properties that have been
measured at fair value. The condensed consolidated financial statements are
presented in Sterling, which is the Group's presentational and functional
currency, and all values are rounded to the nearest thousand pounds, except
where otherwise shown.
The financial information in this report does not constitute statutory
accounts within the meaning of sections 434-436 of the Companies Act 2006 and
has not been audited nor reviewed by the Company's auditor. The financial
information for the year ended 30 June 2022 has been extracted from the
published accounts that have been delivered to the Registrar of Companies, and
the report of the auditor was unqualified and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
Basis of consolidation
The condensed consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries (the 'Group'). Subsidiaries are
the entities controlled by the Company, being Alternative Income Limited and
Alternative Income REIT Holdco Limited. IFRS 10 outlines the requirements for
the preparation of consolidated financial statements, requiring an entity to
consolidate the results of all investees it is considered to control. Control
exists where an entity is exposed to variable returns and has the ability to
affect those returns through its power over the investee.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation. Accounting policies of the subsidiaries are consistent with the
policies adopted by the Company.
New standards, amendments and interpretations
Standards effective from 1 July 2022
The Group has applied the following new standards and amendments in this set
of condensed consolidated financial statements:
• Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS
37) (effective 1 January 2022)
• Annual Improvements to IFRS Standards 2018-2020 (effective 1 January
2022)
• Property, Plant and Equipment: Proceeds before intended use
(Amendments to IAS 16) (effective 1 January 2022)
• Reference to the Conceptual Framework (Amendments to IFRS 3)
(effective 1 January 2022)
The new standards and amendments listed above did not have any impact on the
amounts recognised in prior periods and are not expected to significantly
affect the current or future periods.
Forthcoming requirements
The following are new standards, interpretations and amendments, which are not
yet effective, and have not been early adopted in this financial information,
that will or may have an effect on the Group's future financial statements:
• Amendments to IAS 1 which clarifies the criteria used to determine
whether liabilities are classified as current or non-current (effective 1
January 2024). These amendments clarify that current or non-current
classification is based on whether an entity has a right at the end of the
reporting period to defer settlement of the liability for at least twelve
months after the reporting period. The amendment is not expected to have an
impact on the presentation or classification of the liabilities in the Group
based on rights that are in existence at the end of the reporting period.
There are other new standards and amendments to standards and interpretations
which have been issued that are effective in future accounting periods, and
which the Group has decided not to adopt early. None of these are expected to
have a material impact on the condensed consolidated financial statements of
the Group.
Certain new accounting standards and interpretations have been published that
are not mandatory for annual periods beginning after 1 July 2022 and early
application is permitted; however the Group has not early adopted the new or
amended standards in preparing these condensed consolidated financial
statements:
• Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12) (effective 1 January 2023)
• IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance
Contracts (effective 1 January 2023)
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2) (effective 1 January 2023)
• Definition of Accounting Estimates (Amendments to IAS 8) (effective 1
January 2023)
• Initial Application of IFRS 17 and IFRS 9 - Comparative Information
(Amendments to IFRS 17) (effective 1 January 2023)
• Classification of liabilities as current or non-current (Amendments to
IAS 1) (effective 1 January 2024)
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
(effective 1 January 2024)
• Non-current Liabilities with Covenants (Amendments to IAS 1)
(effective 1 January 2024)
• Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture (Amendments to IFRS 10 and IAS 28) (Optional)
These standards, amendments or interpretations are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
2.2 Significant accounting judgements and estimates
The condensed consolidated financial statements have been prepared on the
basis of the accounting policies, significant judgements, estimates and key
assumptions as set out in the notes to the 2022 Annual Financial Report, and
are expected to be applied consistently for the year ending 30 June 2023.
No changes have been made to the Group's accounting policies as a result of
the amendments and interpretations which became effective in the period as
they do not have a material impact on the Group. Full details can be found in
the 2022 Annual Financial Report.
2.3 Segmental information
Each property held by the Group is reported to the chief operating decision
maker. In the case of the Group, the chief operating decision maker is
considered to be the Board of Directors. The review process for segmental
information includes the monitoring of key performance indicators applicable
across all properties. These key performance indicators include Net Asset
Value, Earnings per Share and valuation of properties. All asset cost and
rental allocations are also reported by property. The internal financial
reports received by the Directors cover the Group and all its properties and
do not differ from amounts reported in the financial statements. The Directors
have considered that each property has similar economic characteristics and
have therefore aggregated the portfolio into one reportable segment under the
provisions of IFRS 8.
2.4 Going concern
The condensed consolidated financial statements have been prepared on a going
concern basis.
The robust financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the financial statements and the
accompanying notes.
The Investment Adviser on behalf of the Board has projected the Group's cash
flows for the period up to 30 September 2023, challenging and sensitising
inputs and assumptions to ensure that the cash forecast reflects a realistic
outcome given the uncertainties associated with the current economic
environment. The scenarios applied were designed to be severe but plausible,
and to take account of the availability of mitigating actions that could be
taken to avoid or reduce the impact or probability of the underlying risks.
The Group's debt of £41 million does not mature until 2025 and the Group has
reported full compliance with its loan covenants to date. Based on cash flow
projections, the Directors expect the Group to continue to remain compliant.
The headroom of the loan to value covenant is significant and any reduction in
property values that would cause a breach would be significantly more than any
reduction currently envisaged.
Based on the above, the Board believes that the Group has the ability and
adequate resources to continue in operational existence for the foreseeable
future, being at least twelve months from the date of approval of the
financial statements.
New standards, amendments and interpretations
Standards effective from 1 July 2022
The Group has applied the following new standards and amendments in this set
of condensed consolidated financial statements:
• Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS
37) (effective 1 January 2022)
• Annual Improvements to IFRS Standards 2018-2020 (effective 1 January
2022)
• Property, Plant and Equipment: Proceeds before intended use
(Amendments to IAS 16) (effective 1 January 2022)
• Reference to the Conceptual Framework (Amendments to IFRS 3)
(effective 1 January 2022)
The new standards and amendments listed above did not have any impact on the
amounts recognised in prior periods and are not expected to significantly
affect the current or future periods.
Forthcoming requirements
The following are new standards, interpretations and amendments, which are not
yet effective, and have not been early adopted in this financial information,
that will or may have an effect on the Group's future financial statements:
• Amendments to IAS 1 which clarifies the criteria used to determine
whether liabilities are classified as current or non-current (effective 1
January 2024). These amendments clarify that current or non-current
classification is based on whether an entity has a right at the end of the
reporting period to defer settlement of the liability for at least twelve
months after the reporting period. The amendment is not expected to have an
impact on the presentation or classification of the liabilities in the Group
based on rights that are in existence at the end of the reporting period.
There are other new standards and amendments to standards and interpretations
which have been issued that are effective in future accounting periods, and
which the Group has decided not to adopt early. None of these are expected to
have a material impact on the condensed consolidated financial statements of
the Group.
Certain new accounting standards and interpretations have been published that
are not mandatory for annual periods beginning after 1 July 2022 and early
application is permitted; however the Group has not early adopted the new or
amended standards in preparing these condensed consolidated financial
statements:
• Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12) (effective 1 January 2023)
• IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance
Contracts (effective 1 January 2023)
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2) (effective 1 January 2023)
• Definition of Accounting Estimates (Amendments to IAS 8) (effective 1
January 2023)
• Initial Application of IFRS 17 and IFRS 9 - Comparative Information
(Amendments to IFRS 17) (effective 1 January 2023)
• Classification of liabilities as current or non-current (Amendments to
IAS 1) (effective 1 January 2024)
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
(effective 1 January 2024)
• Non-current Liabilities with Covenants (Amendments to IAS 1)
(effective 1 January 2024)
• Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture (Amendments to IFRS 10 and IAS 28) (Optional)
These standards, amendments or interpretations are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
2.2
Significant accounting judgements and estimates
The condensed consolidated financial statements have been prepared on the
basis of the accounting policies, significant judgements, estimates and key
assumptions as set out in the notes to the 2022 Annual Financial Report, and
are expected to be applied consistently for the year ending 30 June 2023.
No changes have been made to the Group's accounting policies as a result of
the amendments and interpretations which became effective in the period as
they do not have a material impact on the Group. Full details can be found in
the 2022 Annual Financial Report.
2.3
Segmental information
Each property held by the Group is reported to the chief operating decision
maker. In the case of the Group, the chief operating decision maker is
considered to be the Board of Directors. The review process for segmental
information includes the monitoring of key performance indicators applicable
across all properties. These key performance indicators include Net Asset
Value, Earnings per Share and valuation of properties. All asset cost and
rental allocations are also reported by property. The internal financial
reports received by the Directors cover the Group and all its properties and
do not differ from amounts reported in the financial statements. The Directors
have considered that each property has similar economic characteristics and
have therefore aggregated the portfolio into one reportable segment under the
provisions of IFRS 8.
2.4
Going concern
The condensed consolidated financial statements have been prepared on a going
concern basis.
The robust financial position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the financial statements and the
accompanying notes.
The Investment Adviser on behalf of the Board has projected the Group's cash
flows for the period up to 30 September 2023, challenging and sensitising
inputs and assumptions to ensure that the cash forecast reflects a realistic
outcome given the uncertainties associated with the current economic
environment. The scenarios applied were designed to be severe but plausible,
and to take account of the availability of mitigating actions that could be
taken to avoid or reduce the impact or probability of the underlying risks.
The Group's debt of £41 million does not mature until 2025 and the Group has
reported full compliance with its loan covenants to date. Based on cash flow
projections, the Directors expect the Group to continue to remain compliant.
The headroom of the loan to value covenant is significant and any reduction in
property values that would cause a breach would be significantly more than any
reduction currently envisaged.
Based on the above, the Board believes that the Group has the ability and
adequate resources to continue in operational existence for the foreseeable
future, being at least twelve months from the date of approval of the
financial statements.
3. Rental and other income
Half year ended Half year ended Year
31 December 31 December ended
2022 2021 30 June
(unaudited) (unaudited) 2022
(audited)
£'000 £'000 £'000
Gross rental income 3,696 3,484 7,036
Spreading of minimum contracted future - rent indexation 209 291 541
Spreading of tenant incentives - rent free periods (49) (44) (73)
Other property income 223 - 1
Gross rental income (adjusted) 4,079 3,731 7,505
Service charges and direct recharges (see note 4) 271 95 396
Total rental and other income 4,350 3,826 7,901
All rental, service charges and direct recharges and other income are derived
from the United Kingdom.
Other property income for the half year ended 31 December 2022 mainly relates
to the allocation to revenue of £219,000 arising from a settlement of the
litigation in respect of replacement of defective cladding for Travelodge,
Swindon. Further detail is provided in Note 15.3.
4. Operating expenses
Half year Half year Year
ended ended ended
31 December 31 December 30 June
2022
2022 2021
(audited)
(unaudited) (unaudited)
£'000 £'000 £'000
Service charges and direct recharges (see note 3) 271 95 396
Property operating expenses 80 54 136
Reversal of provision for impairment of trade receivables * 6 (197) (202)
Property operating expenses/(income) 357 (48) 330
Operating costs **/*** 210 270 588
Investment management fee 191 180 368
Directors' remuneration (note 5) *** 55 43 82
Auditor remuneration 43 33 63
Other operating expenses 499 526 1,101
Total operating expenses 856 478 1,431
Total operating expenses (excluding service charges and direct recharges) 585 383 1,035
*Reversal of provision for impairment of trade receivables has been reclassed
from other operating expenses to property operating (income)/expenses for the
half year ended 31 December 2021.
**Included in the operating costs for the year ended 30 June 2022 is £1,250
of fees paid to Stephanie Eastment for due diligence incurred in advance of
her appointment as a Director.
***Tax and social security costs have been reclassed from operating costs to
directors' remuneration for the half year ended 31 December 2021.
Half year ended Half year ended Year
31 December 2022 31 December 2021 ended
(unaudited) (unaudited) 30 June
2022
(audited)
£'000 £'000 £'000
Audit
Statutory audit of Annual Report and Accounts 38 28 53
Statutory audit of Subsidiary Accounts 5 5 10
Total fees due to auditor 43 33 63
Moore Kingston Smith LLP has not provided any non-audit services to the Group.
5. Directors' remuneration
Half year ended Half year ended Year
31 December 2022 31 December 2021 ended
(unaudited) (unaudited) 30 June
2022
(audited)
£'000 £'000 £'000
Directors' fees 50 39 75
Tax and social security * 5 4 7
Total directors remuneration 55 43 82
*Tax and social security has been reclassed from operating costs to directors
remuneration for the half year ended 31 December 2021.
The Group had no employees during the period/ year.
6. Finance expenses
Half year ended Half year ended Year
31 December 2022 31 December 2021 ended
(unaudited) (unaudited) 30 June
2022
(audited)
£'000 £'000 £'000
Interest payable on loan 653 653 1,307
Amortisation of loan arrangement fee (note 13) 52 52 104
Other finance costs 9 6 12
Total 714 711 1,423
7. Taxation
Half year ended Half year ended Year
31 December 2022 (unaudited) 31 December 2021 (unaudited) ended
30 June
2022
(audited)
£'000 £'000 £'000
Tax charge comprises:
Analysis of tax charge in the period
(Loss)/profit before tax (7,308) 6,228 13,166
Theoretical tax charge at UK corporation average tax rate of 20.50% (31 (1,498)
December 21 and 30 June 2022: 19.00%)
1,183 2,502
Effects of tax-exempt items under REIT regime 1,498 (1,183) (2,502)
Total - - -
The Group maintained its REIT status and as such, no deferred tax asset or
liability has been recognised in the current period.
Factors that may affect future tax charges
Due to the Group's status as a REIT and the intention to continue meeting the
conditions required to retain approval as a REIT in the foreseeable future,
the Group has not provided deferred tax on any capital gains or losses arising
on the revaluation or disposal of investments.
8. (Loss)/ earnings per share (EPS) and Net Asset Value (NAV) per share
Half year ended Half year ended Year
31 December 2022 (unaudited) 31 December 2021 (unaudited) ended
30 June
2022
(audited)
(Loss)/ earnings per share:
Total comprehensive (loss)/ income (£'000) (7,308) 6,228 13,166
Weighted average number of shares (number) 80,500,000 80,500,000 80,500,000
(Loss)/ earnings per share (basic and diluted) (9.08p) 7.74p 16.36p
EPRA EPS:
Total comprehensive (loss)/ income (£'000) (7,308) 6,228 13,166
Adjustment to total comprehensive (loss)/ income:
Change in fair value of investment properties (£'000) 10,088 (3,494) (8,023)
Gain on disposal of investment property (£'000) - (97) (96)
EPRA earnings (basic and diluted) (£'000) 2,780 2,637 5,047
EPRA EPS (basic and diluted) 3.45p 3.28p 6.27p
Adjusted EPS:
EPRA earnings (basic and diluted) (£'000) - as above 2,780 2,637 5,047
Adjustments:
Rental income recognised in respect of guaranteed fixed rental uplifts (209) (291) (541)
(£'000) (Note 3)
Rental income recognised in respect of rent free periods (£'000) (Note 3) 49 44 73
Amortisation of loan arrangement fee (£'000) (Note 6) 52 52 104
Write-off of receivables 16 - 4
Reversal of provision for impairment of trade receivables (Note 4) 6 (197) (202)
Adjusted earnings (basic and diluted) (£'000) 2,694 2,245 4,485
Adjusted EPS (basic and diluted)** 3.35p 2.79p 5.57p
** Adjusted EPS is a measure used by the Board to assess the level of the
Group's dividend payments. This metric adjusts EPRA earnings for non-cash
items in arriving at an adjusted EPS as supported by cash flows.
Earnings per share are calculated by dividing profit/(loss) for the
period/year attributable to ordinary equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the period/year.
Half year ended Half year ended Year
31 December 31 December ended
2022 (unaudited) 2021 (unaudited) 30 June
2022
(audited)
NAV per share:
Net assets (£'000) 67,896 72,754 77,599
Ordinary Shares (Number) 80,500,000 80,500,000 80,500,000
NAV per share 84.34p 90.38p 96.40p
EPRA NAV and EPRA NNNAV (refer to Glossary) are equal to the NAV presented in
the Condensed Consolidated Statement of Financial Position under IFRS and
there are no adjusting items. Accordingly, a reconciliation between these
measures does not need to be provided.
EPRA Net Reinvestment Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net
Disposal Value (NDV)
EPRA NRV EPRA NTA and EPRA NDV
At 31 December 2022
Net assets value (£'000) 67,896 67,896
Purchasers' cost (£'000) 6,983 -
Break cost on bank borrowings (£'000) - -
74,879 67,896
Ordinary Shares (Number) 80,500,000 80,500,000
Per share measure 93.02p 84.34p
EPRA NRV EPRA NTA and EPRA NDV
At 31 December 2021
Net assets value (£'000) 72,754 72,754
Purchasers' cost (£'000) 7,002 -
Break cost on bank borrowings (£'000) (2,552) (2,552)
77,204 70,202
80,500,000 80,500,000
Ordinary Shares (Number)
Per share measure 95.91p 87.21p
EPRA NRV EPRA NTA and EPRA NDV
At 30 June 2022
Net assets value (£'000) 77,599 77,599
Purchasers' cost (£'000) 7,664 -
Break cost on bank borrowings (£'000) (486) (486)
84,777 77,113
Ordinary Shares (Number) 80,500,000 80,500,000
Per share measure 105.31p 95.79p
9. Dividends
All dividends are interim dividends
Half year ended Half year ended Year ended
31 Dec 2022
31 Dec 2021
30 Jun
(unaudited) (unaudited)
2022
(audited)
Quarter Ended Dividend £'000 £'000 £'000
Rate
Dividends in respect of year ended 30 June 2021
4th dividend 30 Jun 2021 1.640p - 1,320 1,320
Dividends in respect of year ended 30 June 2022
1st dividend 30 Sep 2021 1.300p - 1,047 1,047
2nd dividend 31 Dec 2021 1.300p - - 1,046
3rd dividend 31 Mar 2022 1.300p - - 1,047
4th dividend 30 Jun 2022 1.600p 1, 288 - -
Dividends in respect of year ending 30 June 2023
1st dividend 30 Sep 2022 1.375p 1,107 - -
Total dividends paid 2,395 2,367 4,460
4th dividend for quarter ended 30 Jun 2021 1.640p - (1,320) (1,320)
2nd dividend for quarter ended 31 Dec 2021 1.300p - 1,047 -
4th dividend for quarter ended 30 Jun 2022 1.600p (1,288) - 1,288
2nd dividend for quarter ended 31 Dec 2022 1.375p 1,107 - -
Total dividends payable in respect of the period/year 2,214 2,094 4,428
Total dividends payable in respect of the period/year 2.75p 2.60p 5.50p
Dividends declared after the period/year end are not included in the Condensed
Consolidated Financial Statements as a liability.
Dividends paid as shown in the Condensed Consolidated Statement of Cash Flows
amount to £2,395,000 (31 December 2021: £2,367.000 and 30 June 2022:
£4,460,000), any difference to the amount disclosed above is due to
withholding tax.
10. Investment properties
Half year Half year ended 31 December 2021 (unaudited) Year ended 30 June
ended 2022
31 December
(audited)
2022
(unaudited)
Investment Investment Total Total Total
properties
properties
freehold
leasehold
£'000 £'000 £'000 £'000 £'000
UK Investment properties
At the beginning of the period/year 80,980 36,925 117,905 109,230 109,230
Acquisitions - - - - 5,375
Reduction in acquisition costs - see note 15.3 (606) - (606) - -
Disposals (5,300) (5,300)
Change in value of investment properties (7,449) (2,425) (9,874) 3,800 8,600
Valuation provided by Knight Frank LLP 72,925 34,500 107,425 107,730 117,905
Adjustment to fair value for minimum rent indexation of lease income (note 10) (3,367) (2,956) (3,177)
Adjustment for lease obligation 372 446 396
Total investment properties 104,430 105,220 115,124
Change in fair value of investment properties
Change in fair value before adjustments for lease incentives and lease (9,874) 3,800 8,600
obligations
Movement in lease obligations (24) (59) (109)
Adjustment to spreading of contracted future rent indexation and tenant (190) (247) (468)
incentives
(10,088) 3,494 8,023
There were no disposals of properties in the period being reported. The
property known as Audi, Huddersfield was disposed of in August 2021 for £5.5
million as shown in the reconciliation below of the gain recognised on
disposal through the Condensed Consolidated Statement of Comprehensive Income
and the realised gain on disposal in the period/ year; the latter includes
changes in fair value of the investment property and minimum rent indexation
spreading recognised in previous periods.
Half year ended Half year ended Year ended
31 December 2022 (unaudited) 31 December 2021 (unaudited) 30 June
2022
(audited)
£'000 £'000 £'000
Gross proceeds on disposal - 5,500 5,500
Selling costs - (103) (104)
Net proceeds on disposal - 5,397 5,396
Carrying value - (5,300) (5,300)
Gain on disposal of investment property - 97 96
Valuation of investment properties
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 Group'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 yield applicable to those cash flows.
Fair value measurement hierarchy
IFRS13 'Fair Value Measurement' specifies the fair value hierarchy and as
explained in Note 2.6 of the Company's 2022 Audited Financial Statements, the
Directors have classified the Company's property portfolio as Level 3. This
reflects the fact that inputs to the valuation are not based on observable
market data.
11. Receivables and prepayments
31 December 2022 (unaudited) 31 December 2021 (unaudited) 30 June 2022 (audited)
£'000 £'000 £'000
Receivables
Rent debtor 301 284
279
Less: Provision for impairment of trade receivables (2) (16) (11)
Other debtors* 327 5,591 244
Sub total 626 5,854 517
Spreading of minimum contracted future rent indexation 2,919 2,414 2,709
Spreading of tenant incentives - rent free periods 448 542 468
Tenant deposit asset (note 12) 118 79 118
Other prepayments 74 73 222
Total 4,185 8,962 4,034
* Other debtors at 31 December 2021 mainly represent net proceeds from the
sale of Trident Business Park, Huddersfield being held by the external lender,
Canada Life Investments.
The aged debtor analysis of receivables which are past due but not impaired is
as follows:
31 December 2022 (unaudited) 31 December 2021 (unaudited) 30 June 2022 (audited)
£'000 £'000 £'000
Less than three months due 597 5,816 515
Between three and six months due 29 38 2
Between six and twelve months due - - -
Total 626 5,854 517
12. Payables and accrued expenses
31 December 2022 (unaudited) 31 December 2021 (unaudited) 30 June
2022 (audited)
£'000 £'000 £'000
Deferred income 1,542 1,406 1,501
Other creditors 396 453 642
Accruals 269 523 576
Bank interest payable 258 258 258
Tenant deposit liability (note 11) 118 79 118
Trade creditors 2 30 51
2,585 2,749 3,146
13. Interest bearing loans and borrowings
31 December 2022 (unaudited) 31 December 2021 (unaudited) 30 June 2022 (audited)
£'000 £'000 £'000
Facility drawn at the beginning of the period/ year 41,000 41,000 41,000
Unamortised finance costs brought forward (380) (484) (484)
Amortisation of finance costs in the period/year 52 52 104
At end of period/ year 40,672 40,568 40,620
Repayable between 1 and 2 years - - -
Repayable between 2 and 5 years 41,000 41,000 41,000
Repayable in over 5 years - - -
Total at end of the period/ year 41,000 41,000 41,000
As at 31 December 2022, the Group had utilised all of its £41 million fixed
interest loan facility with Canada Life Investments and was geared at a loan
to Gross Asset Value ('GAV') of 36.78% (31 December 2021: 35.22%, 30 June
2022: 33.73%). The weighted average interest cost of the Group's facility is
3.19% and the facility is repayable on 20 October 2025.
31 December 2022 (unaudited) 31 December 2021 (unaudited) 30 June 2022 (audited)
£'000 £'000 £'000
Reconciliation to cash flows from financing activities
At beginning of the period/ year 40,620 40,516 40,516
Non-cash changes
Amortisation of loan issue costs 52 52 104
Total at end of the period/ year 40,672 40,568 40,620
14. Lease obligations
At the commencement date, the lease liability is measured at the present value
of the lease payments that are not paid on that date.
The following table analyses the minimum lease payments under non-cancellable
leases:
31 December 2022 (unaudited) 31 December 2021 (unaudited) 30 June 2022 (audited)
£'000 £'000 £'000
Within one year 50 50 50
After one year but less than five years 150 150 150
More than five years 488 538 513
Total undiscounted lease liabilities: 688 738 713
Less: Future finance charge on lease obligations (372) (384) (378)
Present value of lease liabilities: 316 354 335
Lease liabilities included in the statement of financial position:
Current 34 37 36
Non-current 282 317 299
Total: 316 354 335
15. Commitments
Operating lease commitments - as lessor
The Group has 19 commercial properties with 33 units in its investment
property portfolio as set out above. These non-cancellable leases have a
remaining term of between 1 month and 112 years, excluding ground leases.
Future minimum rentals receivable under non-cancellable operating leases as at
31 December 2022 are as follows:
31 December 31 December 30 June
2022 (unaudited) 2021 (unaudited) 2022
(audited)
£'000 £'000 £'000
Within one year 7,094 7,039 7,071
After one year, but not more than two years 6,838 7,723 7,015
After two years, but not more than three years 6,558 7,341 6,754
After three years, but not more than four years 7,023 7,279 7,011
After four years, but not more than five years 6,685 7,307 7,045
After five years, but not more than ten years 28,730 32,323 29,896
After ten years, but not more than fifteen years 24,905 26,872 25,935
More than fifteen years 52,563 56,370 55,472
Total 140,396 152,254 146,199
During the period there were no (2021: nil) material contingent rents
recognised as income.
15.2. Capital commitments
There were no capital commitments at the period end (2021: nil).
15.3. Financial commitments
In the 2022 Annual Report, it was disclosed that the Company was involved in
litigation against two parties to recover £1.1 million of costs. The costs
were incurred for work in the period September to December 2020 to replace
defective cladding elements uncovered in the external walls of the top floors
and rear lift core of the Travelodge Hotel, Swindon. The defective cladding
was installed when the property was extended in 2007 and the Company's claims
were against the architect and cladding sub-contractor involved. During the
period, the Board engaged in mediation with both parties and agreed a full and
final settlement of £825,000. Consequent to the resolution of that
litigation, the Group have no financial commitments other than those arising
from its normal business operations.
The settlement was in respect of the Group's costs to replace the defective
cladding, which had been charged to capital, and the professional fees
incurred by the Group to undertake the litigation, which had been charged to
revenue. Accordingly, the settlement has been proportionally allocated
£606,000 to capital, as a reduction in acquisition costs (see Note 10), and
£219,000 to revenue, as other property income (see Note 3).
There are no other commitments other than those shown above at the period end
(2021: nil).
16. Investments in subsidiaries
The Company has two wholly owned subsidiaries as disclosed below:
Name and company number Country of registration and incorporation Date of incorporation Principal activity Ordinary Shares
of £1 held
Alternative Income REIT Holdco Limited (Company number 11052186) England and 7 November 2017 Real Estate Company 73,158,502
Wales
Alternative Income Limited England and 4 May 2017 Real Estate Company 73,158,501
Wales
(Company number 10754641)
Alternative Income REIT plc at 31 December 2022 owns 100% controlling stake of
Alternative Income REIT Holdco Limited.
Alternative Income REIT Holdco Limited holds 100% of Alternative Income
Limited.
Both Alternative Income REIT Holdco Limited and Alternative Income Limited are
registered at 1 King William Street, London, United Kingdom, EC4N 7AF.
17. Issued share capital
Ordinary Shares issued and fully paid of 80,500,000 shares at a nominal value
of £0.01 per share. This remains unchanged for all period presented.
18. Transactions with related parties
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.
Directors
Directors of the Group are considered to be related parties. Directors'
remuneration is disclosed in note 5.
Investment Adviser
M7 Real Estate Ltd
M7 Real Estate Ltd was appointed as Investment Adviser on 14 May 2020. The
Interim Investment Advisory agreement (amended with Deed of Variation dated 21
February 2021) specifies that there were fees payable up to 30 September 2020.
From 1 October 2020, the annual management fee is calculated at a rate
equivalent of 0.50% per annum of NAV (subject to a minimum fee of £90,000 per
quarter), payable quarterly in advance. During the period 1 July 2022 to 31
December 2022, the Group incurred £191,000 of which £nil was outstanding at
period end (2021: £180,000 of which £90,000 was outstanding at period end).
19. Events after reporting date
Dividend
On 1 February 2023, the Board declared an interim dividend of 1.375p in
respect of the period from 1 October 2022 to 31 December 2022. This will be
paid on 24 February 2023 to shareholders on the register as at 10 February
2023. The ex-dividend date was 9 February 2023.
EPRA Performance Measures Calculations
EPRA Yield calculations At 31 December At 31 December 2021 At 30 June
2022 (unaudited) 2022
£'000
(unaudited) (audited)
£'000
£'000
Investment properties wholly owned:
- by Company 1,950 2,100 2,200
- by Alternative Income Limited 105,475 105,630 115,705
Total - note 10 107,425 107,730 117,905
Allowance for estimated purchasers' costs 6,983 7,002 7,665
Gross up completed property portfolio valuation B 114,408 114,732 125,570
Annualised gross passing rent 7,462 6,620 7,217
Annualised property outgoings (55) (55) (55)
Annualised net rents A 7,407 6,565 7,162
Add: notional rent expiration of rent-free periods or other lease incentives 688 1,100 893
Topped-up net annualised rent C 8,095 7,665 8,055
EPRA NIY* A/B 6.47% 5.72% 5.70%
EPRA "topped-up" NIY C/B 7.08% 6.68% 6.41%
*The NIY calculation is the same calculation as that for EPRA NIY
EPRA Cost Ratios Half year ended Half year ended Year ended
31 December 2022 31 December 30 June
(unaudited) 2021 2022
£'000
(unaudited) (audited)
£'000
£'000
Include:
EPRA Costs (including direct vacancy costs) A 585 383 1,035
- note 4
Direct vacancy costs - - -
EPRA Costs (excluding direct vacancy costs) B 585 383 1,035
Gross rental income - note 3 C 3,856 3,731 7,504
EPRA Cost Ratio A/C 15.17% 10.27% 13.79%
(including direct vacancy costs)
EPRA Cost Ratio B/C 15.17% 10.27% 13.79%
(excluding direct vacancy costs)
EPRA Vacancy rate Half year ended Half year ended Year ended
31 December 2022 31 December 30 June
(unaudited) 2021 2022
£'000
(unaudited) (audited)
£'000
£'000
Annualised potential rental value of vacant premises A - 40 -
Annualised potential rental value for the completed property portfolio B 6,998 6,609 6,987
EPRA Vacancy rate A/B 0.00% 0.60% 0.00%
Alternative Performance Measure (APM) Calculations
APMs are numerical measures of the Group's current, historical or future
performance, financial position or cash flows, other than financial measures
defined or specified in the applicable financial framework. The Group's
applicable financial framework is IFRS. The Directors assess the Group's
performance against a range of criteria which are reviewed as particularly
relevant for a closed-end REIT.
Share Price and Net Asset Value (NAV) Total Return
Share price and NAV total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account both
capital returns and dividends paid to shareholders. Share price and NAV total
returns are monitored against FTSE EPRA Nareit UK and FTSE Small Cap,
respectively.
Share price NAV
Opening at 30 June 2022 A 82.10p 96.40p
Closing at 31 December 2022 B 66.70p 84.34p
Return C=(B/A)-1 (18.76%) (12.51%)
Dividend reinvestment * D 3.38% 2.88%
Total shareholder return C+D (15.38%) (9.63%)
Opening at 1 June 2021 A 71.00p 85.58p
Closing at 31 December 2021 B 72.20p 90.38p
Return C=(B/A)-1 1.69% 5.61%
Dividend reinvestment* D 4.15% 4.04%
Total shareholder return C+D 5.84% 9.65%
Opening at 1 June 2021 A 71.00p 85.58p
Closing at 30 June 2022 B 82.10p 96.40p
Return C=(B/A)-1 15.63% 12.64%
Dividend reinvestment* D 8.70% 9.88%
Total shareholder return C+D 24.33% 22.52%
* Share price total return involves reinvesting the net dividend in the share
price of the Company on the date on which that dividend goes ex-dividend. NAV
total return involves investing the net dividend in the NAV of the Company
with debt at fair value on the date on which that dividend goes ex-dividend.
Discount
The discount is the amount by which the share price is lower than the net
asset value per share, expressed as a percentage of the net asset value per
share.
31 December 2022 31 December 2021 30 June 2022
NAV per Ordinary share A 84.34pp 90.38p 96.40p
Share price B 66.70p 72.20p 82.10p
Discount (B-A)/A 20.92% 20.12% 14.80%
Dividend Cover
The ratio of Group's Adjusted EPS divided by the Group's dividends payable for
the relevant period/ year.
31 December 2022 31 December 2021 30 June 2022
Adjusted EPS A 3.35p 2.79 p 5.57p
Dividend per share B 2.75p 2.60p 5.50p
Dividend cover A/B 121.82% 107.31% 101.27%
Loan to GAV
Loan to GAV measures the value of loans and borrowings utilised (excluding
amounts held as restricted cash and before adjustments for issue costs)
expressed as a percentage of the Group's property portfolio (as provided by
the valuer) and the fair value of other assets.
31 December 2022 31 December 2021 30 June 2022
Borrowings (£'000) A 41,000 41,000 41,000
Total assets (£'000) B 111,469 116,425 121,700
Loan to GAV (A/B) 36.78% 35.22% 33.69%
Ongoing Charges
The ongoing charges ratio is the total for all operating costs expected to be
regularly incurred expressed as a percentage of the average quarterly NAVs of
the Group for the financial period. Note that the ratio for 31 December is
based on actual ongoing charges to 31 December and forecast ongoing charges to
the following June (shown as annualised in the below calculation).
31 December 2022 31 December 2021 30 June 2022
Other operating expenses for the half year / year (£'000) A 499 526 1,101
Ongoing charges- annualised where required (£'000) B 1,034† 1012† 1,037†
Average net assets (£'000) C 72,747 70,214 73,246
Ongoing charges ratio B/C 1.42% 1.44% 1.42%
† Non-recurring legal and professional costs have been excluded in the
annualised amount for the period/year presented.
Annualised gross passing rent
The annualised gross passing rent is the rent roll at the reporting date,
taking account of any in-place rent free incentives or step rents annualised
on a straight-line basis over the following 12-month period.
Dividend Yield
The percentage ratio of the Company's declared dividends for the financial
year (or historic declared dividends if dividends are yet to be declared for a
year) per share divided by the Company's share price at the period/year end.
31 December 2022 31 December 2021 30 June 2022
Annual dividend target/payable A 5.50p 5.50p 5.50p
Share price B 66.70p 72.20p 82.10p
Dividend yield A/B 8.2% 7.6% 6.7%
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 707 1874 or email: 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
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 80,500,000
SEDOL Number BDVK708
ISIN Number GB00BDVK7088
Ticker/TIDM AIRE
Share Prices
The Company's Ordinary Shares are traded on the Main Market of the London
Stock Exchange.
Frequency of NAV publication
The Group's NAV is released to the London Stock Exchange on a quarterly basis
and is published on the Company's website www.alternativeincomereit.com
(http://www.alternativeincomereit.com) .
Annual and Interim Reports
Copies of the Annual and Half-Yearly Reports are available from the Group's
website.
Financial Calendar 2022
30 June 2023 Year end
September 2023 Announcement of annual results
November 2023 Annual General Meeting
31 December 2023 Half year end
March 2024 Announcement of interim results
Glossary
Alternative Investment Fund Manager or AIFM or Investment Manager Langham Hall Fund Management LLP.
Company Alternative Income REIT plc.
Contracted rent The annualised rent adjusting for the inclusion of rent subject to rent-free
periods.
Earnings Per Share ('EPS') Profit for the period attributable to equity shareholders divided by the
weighted average number of Ordinary Shares in issue during the period.
EPRA European Public Real Estate Association, the industry body representing listed
companies in the real estate sector.
Equivalent Yield The internal rate of return of the cash flow from the property, assuming a
rise to Estimated Rental Value at the next review or lease expiry. No future
growth is allowed for.
Estimated Rental Value ('ERV') The external valuer's opinion as to the open market rent which, on the date of
the valuation, could reasonably be expected to be obtained on a new letting or
rent review of a property.
External Valuer An independent external valuer of a property. The Group's External Valuer is
Knight Frank LLP.
Fair value The estimated amount for which a property should exchange on the valuation
date between a willing buyer and a willing seller in an arm's length
transaction after proper marketing and where parties had each acted
knowledgeably, prudently and without compulsion.
Fair value movement An accounting adjustment to change the book value of an asset or liability to
its fair value.
FCA The Financial Conduct Authority.
Gross Asset Value ('GAV') The aggregate value of the total assets of the Group as determined in
accordance with IFRS.
IASB International Accounting Standards Board.
IFRS International financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. On 31 December 2020
EU-adopted IFRS was brought into UK law and became UK-adopted international
accounting standards, with future changes to IFRS being subject to endorsement
by the UK Endorsement Board.
Investment Adviser M7 Real Estate Limited.
IPO The admission to trading on the London Stock Exchange's Main Market of the
share capital of the Company and admission of Ordinary Shares to the premium
listing segment of the Official List on 6 June 2017.
Lease incentives Incentives offered to occupiers to enter into a lease. Typically this will be
an initial rent-free period, or a cash contribution to fit-out. Under
accounting rules the value of the lease incentive is amortised through the
Consolidated Statement of Comprehensive Income on a straight-line basis until
the lease expiry.
Net Asset Value ('NAV') Net Asset Value is the equity attributable to shareholders calculated under
IFRS.
Net Asset Value per share Equity shareholders' funds divided by the number of Ordinary Shares in issue.
Net equivalent yield Calculated by the Group's External Valuers, net equivalent yield is the
internal rate of return from an investment property, based on the gross
outlays for the purchase of a property (including purchase costs), reflecting
reversions to current market rent and items as voids and non-recoverable
expenditure but ignoring future changes in capital value. The calculation
assumes rent is received annually in arrears.
Net Initial Yield ('NIY') The initial net rental income from a property at the date of purchase,
expressed as a percentage of the gross purchase price including the costs of
purchase.
Net rental income Rental income receivable in the period after payment of ground rents and net
property outgoings.
Ordinary Shares The main type of equity capital issued by conventional Investment Companies.
Shareholders are entitled to their share of both income, in the form of
dividends paid by the Company, and any capital growth.
pps Pence per share.
REIT A Real Estate Investment Trust. A company which complies with Part 12 of the
Corporation Tax Act 2010. Subject to the continuing relevant UK REIT criteria
being met, the profits from the property business of a REIT, arising from both
income and capital gains, are exempt from corporation tax.
Reversion Increase in rent estimated by the Company's External Valuers, where the
passing rent is below the ERV.
Share price The value of a share at a point in time as quoted on a stock exchange. The
Company's Ordinary Shares are quoted on the Main Market of the London Stock
Exchange.
Weighted Average Unexpired Lease Term ('WAULT') The average lease term remaining for first break, or expiry, across the
portfolio weighted by contracted rental income (including rent-frees).
Shareholder Information
Directors
Simon Bennett (Independent non-executive Chairman)
Stephanie Eastment (Independent non-executive Director)
Adam C Smith (Non-executive Director)
Company Website
https://www.alternativeincomereit.com/ (http://www.aewukllreit.com)
Registered Office
1 King William Street
London
EC4N 7AF
AIFM
Langham Hall Fund Management LLP
1 Fleet Place
8(th) Floor
London
EC4M 7RA
Investment Adviser and Administrator ('Investment Adviser')
M7 Real Estate Limited
3(rd) Floor
The Monument Building
11 Monument Street
London
EC3R 8AF
Property Manager
Mason Owen and Partners Limited
7(th) Floor
20 Chapel Street
Liverpool
L3 9AG
Depositary
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Consultant Portfolio Manager
King Capital Consulting Limited
140a Tachbrook Street
London
SW1V 2NE
Company Secretary
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
Moore Kingston Smith LLP
Devonshire House
60 Goswell Road
Barbican
London
EC1M 7AD
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Corporate Broker
Panmure Gordon (UK) Limited
40 Gracechurch Street
London
EC3V 0BT
Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Communications Adviser
H/Advisors Maitland
3 Pancras Square
London
N1C 4AG
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. END IR UPUAWWUPWGAARecent news on Alternative Income REIT
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