REG - Alternative Inc REIT - Results for the half year ended 31 December 2023
27/02/2024 07:00
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RNS Number : 5237E Alternative Income REIT PLC 27 February 2024
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27 February 2024
Alternative Income REIT plc
(the "Company" or the "Group")
INTERIM REPORT AND FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 31 DECEMBER
2023 (the "Period")
On track to deliver target annual dividend of at least 5.9 pence per share for
the financial year ending 30 June 2024
Resilient portfolio well placed to continue to provide secure, index-linked
income with the potential for capital growth
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 2023 (the Period).
Simon Bennett, Non-Executive Chairman of Alternative Income REIT plc,
comments:
"The Group completed the disposal of its hotel in Glasgow, generating
proceeds of £7.5 million in August 2023, representing a 7.9% premium to its
fair value as at 30 June 2023, and in December 2023 we completed the
acquisition of the Virgin Active in Ockley Road, Streatham for £5.5 million
(gross of acquisition costs). The Group is looking into reinvesting the
remaining proceeds in another property in Q1 2024.
The Board has set an annual dividend target of at least 5.9 pence per share
(A) ("pps") for the year ending 30 June 2024 (year ended 30 June 2023:
5.7pps), which is expected to be fully covered, subject to the reinvestment of
the Glasgow sale proceeds as anticipated and the continued collection of
rent from the Group's property portfolio as it falls due.
The Group's contracted annualised rent grew by 2.9% in the Period
predominantly because of the index-linked rent reviews in Birmingham, Salford,
Sittingbourne, Brough and Solihull, and after taking account of the rent-free
incentive period for Pets at Home in Droitwich. Nearly all the leases within
the portfolio are index-linked (95.8%), with 35.9% of this rental income
reviewed annually.
At 31 December 2023, the Group owned 19 properties valued at £103.3 million
(30 June 2023: £107.0 million). On a like-for-like basis, the Company's
property values decreased by £1.9 million or 1.9%. The largest falls in value
were in the residential, leisure and retail warehouse sectors.
At 31 December 2023, the Group's unaudited Net Asset Value was £65.7 million,
or 81.62pps (30 June 2023: £67.8 million, or 84.16pps), representing a 3.0%
decrease over the Period. When combined with the two interim dividends paid in
the Period of 3.35pps, this produced an unaudited NAV total return for the
Period of 1.0%. Conversely, following a substantial narrowing of the discount,
the share price increased substantially by 10.5% to 71.50pps and the share
price total return for the Period was 15.7%.
The Group's portfolio is relatively insulated from market fluctuations,
benefiting from being 100% let and with 100% collection of rent due. In
addition, the Group benefits from low fixed borrowing costs. Combining these
factors provides a secure and growing rental income stream.
The Board remains confident that the Company is well-positioned for the
future, with a portfolio that continues to deliver secure, index-linked income
and has the potential for capital growth as the property market recovers."
Financial Highlights
At 31 December 2023 (the "Period End")
31 December 2023 30 June 2023
(unaudited) (audited) Change
Net Asset Value ('NAV') £65.7 million £67.8 million - 3.0%
NAV per share 81.62p 84.16p - 3.0%
Share price per share 71.50p 64.70p + 10.5%
Share price discount to NAV (B) 12.4% 23.1% - 10.7%
Investment property fair value (based on external valuation) £103.3 million (D) £107.0 million (D) - 3.5%
Loan to gross asset value ('GAV') (B C) 37.5% 36.8%
Loan facility (C) £41.0 million £41.0 million -
( )
For the half year ended 31 December (the "Period")
2023 2022 Change
(unaudited) (unaudited)
EPRA earnings per share ('EPS') (B) 2.75p 3.45p - 20.3%
Adjusted EPS (B) 2.96p 3.35p - 11.6%
Total dividends per share 2.85p 2.75p + 3.6%
Dividend cover (B) 103.9% 121.8% -17.9%
Dividend yield (annualised) (B) 8.3% 8.3%
Operating profit (including gain on sale of investment property but excluding £3.5 million £3.5 million -
fair value changes)
Profit/(loss) before tax £0.6 million (£7.3 million) + 108.8%
EPS/(loss per share) 0.80p (9.08p) + 108.8%
Share price total return (B) 15.69% (15.4%)
NAV total return (B) 0.96% (9.6%)
Annualised gross passing rent £7.7 million £7.5 million + 2.7%
Ongoing charges (annualised) (B) 1.46% 1.42% + 4 bps
· The NAV decreased in aggregate by £2.1 million to £65.7 million,
equivalent to 81.62pps as of 31 December 2023. The decrease was primarily due
to the £1.9 million (1.9%) reduction in the fair value of the investment
properties which were impacted by the upward yield movement seen across the
wider UK real estate sector, driven primarily by increases in interest rates
and inflation during the year.
· Dividends declared in respect of the Period totalled 2.85pps, a 3.6%
increase compared to half year ended 31 December 2022 and in line with the
Board's target annual dividend of at least 5.9pps (A), which is expected to be
fully covered. Dividends in respect of the Period were covered 103.9% by
earnings.
· Dividend yield (B) of 8.3% is unchanged when compared to the prior
Period reflecting the increase of both the dividend and the share price.
· The Company's share price of 71.5p at the Period end represents a 10.5%
increase during the Period, reflecting the substantial narrowing of the
Company's discount (to NAV) from 23.1% to 12.4%.
· EPS amounted to a profit of 0.80pps for the Period. The increase is
largely due to a £7.9 million improvement in the fair value of the investment
properties.
· The Group's loan matures in October 2025 and is fixed at a weighted
average interest cost of 3.19%. Loan to GAV of 37.5% and interest cover ratio
of 571% gives significant headroom on the lender's loan to value covenant of
60% and an interest cover covenant of 250%.
(A) 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.
(B) 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.
(C) The loan facility at 31 December 2023 of £41 million (30 June 2023: same)
is with Canada Life Investments, matures on 20 October 2025 and has a weighted
average interest cost of 3.19%.
(D) On a like-for-like basis, the fair value of the properties decreased by
£1.9 million or 1.9% during the Period.
Operational Highlights
At the Group's Period End of 31 December 2023:
· The Group's property portfolio had a fair value of £103.3 million
across 19 properties (30 June 2023: £107.0 million across 19 properties).
· Completion of the disposal of a hotel in Glasgow for £7.5
million in August 2023 at a 7.9% premium to its fair value.
· Acquisition of the Virgin Active in Ockley Road, Streatham for £5.5
million (gross of acquisition costs) in December 2023, the proceeds of which
are expected to be reinvested in another property during Q1 2024.
· EPRA Net Initial Yield (A) ('NIY') reached 6.9% (30 June 2023: 6.6%).
· 95.8% of the Group's income is index-linked to the Retail Price Index
('RPI') or the Consumer Price Index ('CPI'); 35.9% is reviewed annually.
· The assets were 100% let at the Period End and throughout the Period.
· he weighted average unexpired lease term ('WAULT') at the Period End
was 16.6 years to the earlier of break and expiry (30 June 2023:17.0 years)
and 18.5 years to expiry (30 June 2023: 18.9 years).
Income and expense during the Period
· Rent recognised during the Period was £3.5 million (half year to 31
December 2022: £3.9 million), of which £0.2 million (31 December 2022: £0.3
million) related to accrued debtors for the combination of minimum uplifts and
rent-free period. The slight decline in rent recognised is predominantly
accounted for by the timing difference between the sale of the Glasgow hotel
in August 2023 and the re-investment of part of the proceeds in Virgin Active
in Streatham, which was completed in December 2023. The number of tenants at
the half year was 22 (31 December 2022: 21).
· All of the rent due during the Period has been collected.
· The portfolio had annualised gross passing rent of £7.7 million
across 19 properties (31 December 2022: £7.5 million across 19 properties).
· Ongoing charges (annualised) at the Period end was 1.46% a slight
increase from the comparable prior period (31 December 2022: 1.42%).
Post balance sheet highlights
· On 6 February 2024, the Board declared an interim dividend of
1.425pps in respect of the quarter ended 31 December 2023. This will be paid
on 1 March 2024 to shareholders on the register at 16 February 2024. The
ex-dividend date was 15 February 2024.
· As explained in the Chairman's Statement, the Board has undertaken a
review of the Group's investment advisory arrangements. This review included
proposals from select third party investment managers with the relevant
property expertise. Following this, on 26 February 2024 the Board approved the
appointment of Martley Capital Real Estate Investment Management Limited
(Martley Capital) as the Group's Investment Adviser, subject to final
regulatory approvals. The Martley Capital Group (of which Martley Capital is a
subsidiary) launched in December 2023 as a new venture whereby key members of
the current advisory team at M7 Real Estate will continue to service the Group
as part of the Martley Capital team. The appointment of Martley Capital was by
way of a deed of novation of the Group's investment advisory agreement (and
subsequent minor changes thereto) leaving the parties on substantially the
same terms and at an unchanged fee.
· In the next six-month period to 30 June 2024, 18.8% of the Group's
income will be reviewed (four annual index-linked rent reviews and two
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
Jane Blore
Panmure Gordon (UK) Limited +44 (0)20 7886 2500
Alex Collins
Tom Scrivens
H/Advisors Maitland (Communications Adviser) +44(0) 7747 113 930
James Benjamin Aire-maitland@h-advisors.global (mailto:Aire-maitland@h-advisors.global)
Rachel Cohen
The Company's LEI is 213800MPBIJS12Q88F71.
Further information on Alternative Income REIT plc is available at
www.alternativeincomereit.com (http://www.alternativeincomereit.com/) (1)
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 index linked rent review provisions.
The Company's asset manager is M7 Real Estate Limited ("M7"). M7 is a
leading specialist in the pan-European, regional, multi-tenanted real estate
market. It has over 215 employees in 14 countries and territories. The team
manages over 600 assets with a value of circa €6.9 billion (at 30 September
2023).
(1) 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 2023.
During the period under review the Company's portfolio was not immune to the
sector wide downward movement in valuations and for the half year ended 31
December 2023 the Group's net asset value fell by £2.1 million to £65.7
million (30 June 2023: £67.8 million). That said, our 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.
95.8% of the Group's portfolio benefits from index-linked rent reviews, 35.9%
on an annual basis. Combining this with a strong balance sheet, modest
overheads and low fixed borrowing costs until 2025, helps ensure that the
Company is well positioned to ride-out the current economic storm and to
continue to deliver attractive, secure and progressive income to our
shareholders. The biggest risk factor for the Group remains tenant default,
although the Group has an excellent record of rent collection in recent years.
Portfolio Performance
The fair value of the Group's property portfolio amounted to £103.3 million
across 19 properties (30 June 2023: £107.0 million across 19 properties).
On a like for like basis, the Company's property values decreased by £1.9
million or 1.8% for the half year ended 31 December 2023. The portfolio had a
net initial yield of 6.9% at 31 December 2023 (30 June 2023: 6.6%), and a
WAULT to the first break of 16.6 years (30 June 2023: 17.0 years) and a WAULT
to expiry of 18.5 years (30 June 2023: 18.9 years).
Property Transactions
On 8 August 2023, the Company completed the sale of the Mercure City Hotel,
Ingram Street, Glasgow, for a total consideration of £7.5 million to the
current tenant, S Hotels & Resorts (UK) Limited. This property represented
6.5% of the Group's portfolio capital valuation at 30 June 2023. The disposal
represented a 7.9% premium above the book value at 30 June 2023 and a net exit
yield of 8.9%. The sale proceeds are being reinvested, firstly, through the
acquisition of the Virgin Active in Ockley Road, Streatham for £5.5 million
(gross of acquisition costs) with the transaction completed on 18 December
2023 and the Group is looking to reinvest the remaining proceeds in another
property by the end of March 2024.
Dividends & Earnings
The Company declared increased interim dividends totalling 2.85pps in respect
of the half year ended 31 December 2023 (half year ended 31 December 2022:
2.75pps). Dividends declared for the Period are in line with the Board's
target annual dividend of at least 5.9pps (A), which is expected to be fully
covered.
As set out in Note 8 to the Condensed Consolidated Financial Statements, these
dividends were marginally uncovered by the Group's EPRA Earnings (B) of
2.75pps (31 December 2022: 3.45pps), but were well covered by the Group's
Adjusted EPS (B) (representing cash) of 2.96pps (31 December 2022: 3.35pps).
All dividends were paid as Property Income Distributions.
Financing
At 31 December 2023, the Group had fully utilised its £41 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.
Discount
The discount of the Company's share price to NAV at 31 December 2023 reduced
to 12.4% from 23.1% at 30 June 2023. The Board monitored the discount level
throughout the Period and has the requisite authority from shareholders to
both issue and buy back shares.
Change of Investment Adviser
The Board has undertaken a review of the Group's investment advisory
arrangements. This review included proposals from select third party
investment managers with the relevant property expertise. Following this, on
26 February 2024 the Board approved the appointment of Martley Capital Real
Estate Investment Management Limited (Martley Capital) as the Group's
Investment Adviser, subject to final regulatory approvals. The Martley Capital
Group (of which Martley Capital is a subsidiary) launched in December 2023 as
a new venture whereby key members of the current advisory team at M7 Real
Estate will continue to service the Group as part of the Martley Capital team.
The appointment of Martley Capital was by way of a deed of novation of the
Group's investment advisory agreement (and subsequent minor changes thereto)
leaving the parties on substantially the same terms and at an unchanged fee.
Since their appointment to the role in May 2020, M7 have played a valuable
supporting role as the Company has undergone significant transition from its
original Investment Manager and Board who led the IPO in 2017. The current
Board of Directors wishes to express its gratitude to M7 for their service to
the Company and look forward to working with Martley Capital.
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 strategies to
maintain a conscientious approach to ESG in respect of the Group's property
portfolio. During 2023, the Group focused on sustainability and following
consultations with its occupiers, 11 EPCs have been improved from their
previous levels. The Board will continue to maintain its focus on this area
and will continue to seek opportunities to reduce the Group's carbon
footprint.
Future Growth and Outlook
The Board remains confident that the Company is well-positioned for the
future, with a resilient portfolio well-placed to continue to provide secure,
index-linked income with the potential for capital growth.
The Board has set an annual dividend target of at least 5.9 pence per share
(A) ("pps") for the year ending 30 June 2024 (year ended 30 June 2023:
5.7pps), which is expected to be fully covered, subject to the reinvestment of
the Glasgow sale proceeds as anticipated and the continued collection of
rent from the Group's property portfolio as it falls due. During the next 6
months until the end of the financial year, approximately 18.8% of the Group's
income will be subject to rent reviews, 15.7% as annual index-linked rent
reviews and the remaining 3.1% being periodic five-yearly index-linked rent
reviews.
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.
Simon Bennett
Chairman
26 February 2024
Key Performance Indicators ('KPIs')
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE
1. Net Initial Yield ('NIY') (B) The NIY is an indicator of the ability of the Group to meet its target 6.94%
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 2023
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 2023: 6.58%; 31 December 2022: 6.47%)
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 16.6 years to break and 18.5 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 2023
contracted rent.
(30 June 2023: 17.0 years to break and 18.9 years to expiry; 31 December 2022:
17.0 years to break and 18.8 years to expiry)
3. Net Asset Value ('NAV') per share (1) Provides stakeholders with the most relevant information on the fair value of £65.70million/ 81.62pps
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 2023
(30 June 2023: £67.75 million, 84.16pps and 31 December 2022: £67.90
million, 84.34pps)
4. Dividend per share The Group seeks to deliver a sustainable income stream from its portfolio, 2.85pps
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 2023
dividend target as set out in the Prospectus at IPO. The Board's intention is
to ensure an increasing dividend in line with the Company's Investment
Objective. A target dividend for the year ended 30 June 2024 has been set at
5.9 pence per Ordinary Share. (year ended 30 June 2023: 6.045pps; half year ended 31 December 2022: 2.75pps)
5. Adjusted EPS (B) This reflects the Group's ability to generate earnings from the portfolio 2.96pps
which underpins dividends.
Adjusted EPS from core operational activities, as adjusted for non-cash items. for the half year ended 31 December 2023
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 8 to the Condensed Consolidated
Financial Statements. (year ended 30 June 2023: 6.43pps; half year to 31 December 2022: 3.35pps)
6. Leverage (Loan-to-GAV) (B) The Group utilises borrowings to enhance returns over the medium term. 37.49%
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 2023
(30 June 2023: 36.76% and 31 December 2022: 36.78%)
(B) 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.
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 (1) A comparable measure for portfolio valuations. This measure should make it 6.94%
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 2023
date, less non-recoverable property operating expenses, divided by the market
value of the property, increased with (estimated) purchasers' costs.
(30 June 2023: 6.58% and 31 December 2022: 6.47%)
EPRA 'Topped-Up' NIY (1) A comparable measure for portfolio valuations. This measure should make it 7.31%
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 2023
expiration of rent-free periods (or other unexpired lease incentives such as
discounted rent periods and step rents). (30 June 2023: 7.08% and 31 December 2022: 7.08%)
EPRA NAV (2) Makes adjustments to IFRS NAV to provide stakeholders with the most relevant £65.70million/ 81.62pps
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 2023
at fair value and to exclude certain items not expected to crystallise in a
long-term investment property business.
(30 June 2023: £67.75million, 84.16pps and 31 December 2022: 67.90 million,
84.34pps)
EPRA Net Reinstatement Value (2) A measure that highlights the value of net assets on a long-term basis. £72.42 million/ 89.96pps
The EPRA NRV adds back the purchasers' costs deducted from the EPRA NAV and EPRA NRV for the half year ended 31 December 2023
deducts the break cost of bank borrowings.
(30 June 2023: £74.71 million/92.80pps and 31 December 2022: £74.88
million/93.02pps)
EPRA Net Tangible Assets (2) A measure that assumes entities buy and sell assets, thereby crystallising £65.70million/ 81.62pps
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 2023
As break costs were nil at the period end, the EPRA NTA is the same as the (30 June 2023: £67.75 million/84.16pps and 31 December 2022: £67.90
EPRA NAV. million/84.34pps)
EPRA Net Disposal Value (2) A measure that shows the shareholder value if assets and liabilities are not £65.70million/ 81.62pps
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 2023
(30 June 2023: £67.75 million/84.16 pps and 31 December 2022: £67.90
million/84.34pps)
EPRA Earnings/EPS (2) A key measure of a company's underlying operating results and an indication of £2.21 million/ 2.75pps
the extent to which current dividend payments are supported by earnings.
Earnings from operational activities. EPRA earnings for the half year ended 31 December 2023
(30 June 2023: £5.43 million/ 6.75 pps and 31 December 2022: £2.78
million/3.45pps)
EPRA Vacancy (1) 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 2023
portfolio.
(30 June 2023: 0.00% and 31 December 2022: 0.00%)
EPRA Cost Ratio (1) A key measure to enable meaningful measurement of the changes in a company's 16.35%
operating costs.
Administrative and operating costs (including and excluding costs of direct EPRA Cost Ratio as at 31 December 2023. The ratio is the same both including
vacancy) divided by gross rental income. and excluding the vacancy costs.
(30 June 2023: 15.23% and 31 December 2022: 15.17%)
(1) The reconciliation of this APM is set out in the EPRA Performance Measures
Calculations section following the Notes to the Condensed Consolidated
Financial Statements.
(2) The reconciliation of this APM is set out in Note 8 of the Notes to the
Condensed Consolidated Financial Statements.
Investment Adviser's Report
Market Outlook
UK Economic Outlook
Despite lingering inflation concerns, the UK economic outlook has cautiously
brightened since June, with interest rate stability replacing rapid hikes and
energy prices easing, offering hope for a moderate, inflation-dampened
recovery.
The August 2023 Bank of England base rate increase to 5.25% was the 14(th)
consecutive hike in as many Monetary Policy Committee meetings and took rates
to a 15-year high with a cumulative interest rate rise of 5.15%. 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.
The outlook for 2024 is unclear, as the Bank of England attempts to navigate
both high inflation and a potential recession, with decisions further
influenced by global currents in the background. Financial markets anticipate
a potential trajectory towards cuts in the latter half, potentially reaching
as low as 4% by year-end, while the Bank of England itself has adopted a
cautious approach, opting not to commit to a specific timeline, but
emphasising the likelihood of sustained high rates "for a prolonged period".
The impact on commercial property of this rapid change in the interest rate
environment is considered further below.
Some consider the UK to have narrowly avoided recession in 2023 based on the
third quarter data, particularly the International Monetary Fund (IMF) and the
Office for Budget Responsibility (OBR). Others, including the Bank of England,
remain more cautious and emphasise the need to wait for the fourth quarter
data before reaching a definitive conclusion.
As of 1 January 2024, the UK energy price cap rose by 5% to £1,928 per year.
However, this still marks a significant drop from the October 2022 cap that
would have been almost £1,600 higher. While bills remain roughly 51% higher
than winter 2021/22 levels, there's cautious optimism due to falling wholesale
prices, with predictions of a £100 drop in the price cap later this year.
After peaking at 191.5p/litre in July 2022, UK petrol prices plummeted to a
low of 143.6p/litre in August 2023, only to climb back to around 158p/litre by
January 2024, still 10% above pre-pandemic levels. Overall, the UK's energy
price landscape remains fluid, balancing recent decreases with ongoing
concerns about future affordability.
The principal risks to the UK economy appear to be from continued high
inflation, which while trending downwards, could still dent consumer
confidence and business investment. After plunging 2.2% in the first half of
2023, UK disposable income eked out a modest 0.3% gain in the second half,
offering a glimmer of hope amidst ongoing cost-of-living pressures. The Bank
of England's latest inflation forecasts for 2024 offer further hope,
predicting a dramatic decline from the 11.1% peak in October 2022 and estimate
inflation will slide to 3.0% by Q1 2025, and even further to 2.3% by Q1 2026.
UK Real Estate Outlook
The year 2024 unfolds with a challenging economic backdrop, casting a shadow
over the UK's commercial property landscape. The initial ripples of rising
inflation and interest rates have disturbed the investment market,
particularly impacting income returns and asset values. While the occupier
market remains less immediately affected, it too will eventually feel the
unwelcome embrace of any potential recession. In the investment arena, lower
rental growth expectations and the shift towards income-driven returns have
put pressure on yields, especially in sectors like industrials and warehouses.
This has translated into reduced value and return for property investors,
particularly those burdened with debt facing increased servicing costs.
While 2023 offered glimpses of stabilisation, 2024 promises a more active
transformation for the UK's commercial property market, guided by CBRE's
insightful 2024 outlook. The key conclusions of which included:
· Narrowing Yield Gaps: The abnormally widespread between property
yields and government bonds, a hangover from post-crisis quantitative easing,
will tighten this year. CBRE predicts a measured market, prioritising capital
preservation and secure income.
· Income Reigns Supreme: The pursuit of capital growth takes a back
seat as investors shift focus towards maximising rental income. Skilful asset
management, optimising rental streams, will become a key differentiator for
success.
· Portfolio Realignment: As other asset classes shift performance,
expect institutions to strategically adjust their holdings. CBRE foresees a
dynamic year of portfolio rebalancing, driven by a search for optimal
risk-adjusted returns.
· A Calmer Deal Flow: Transaction volumes are expected to decline,
reflecting a cautious market. However, this slowdown's impact will be muted
for established portfolios, which should offer relative stability amidst the
changing tide.
· Debt Market Resilience: Despite lower asset values, CBRE maintains
that the UK real estate market, currently less leveraged than in 2008, will
demonstrate continued debt market resilience. However, refinancing will
present challenges for some, potentially leading to forced sales, particularly
for highly leveraged investors or those holding sub-prime assets.
2023's first half saw UK real estate take a rough tumble, whilst the second
half witnessed a softer landing. Capital values across all sectors dipped
3.9%, led by a 9% plunge in industrial and warehouse sectors due to dampened
rental growth expectations. Retail found some footing, while offices continued
to face downward pressure. London bucked the trend with more subdued declines,
while Northern England felt the bite most acutely. As 2024 dawns, the market
hangs in a delicate balance, stabilised but still wary of the headwinds
blowing from the challenging economic environment.
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.
While UK REITs took a tumble in 2022, they are now showing signs of bouncing
back. Since October 2023, the FTSE 350 REIT index, a key marker for the
sector, has climbed roughly 10%. This upswing likely stems from easing
interest rates, improving rental growth in specific sectors, and cautious
optimism that the economic slump might be nearing its end. Investors will be
considering that improvements in listed property prices may act 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 five rent reviews took place during the
Period with a combined uplift of £197,401 representing an average of 8.87%
growth in contracted rent across those properties affected and 2.90% across
the portfolio, on a like-for-like basis.
· Negotiations are in progress with many of the tenants including
Meridian Steel, Hoddesdon Energy, Dore Metals and BGEN in respect of lease
regears and renewals. The Company, worked with occupiers, to improve the
environmental sustainability of the portfolio and carried out three EPCs,
improving the weighted average for the fund to C52 at no capital cost to the
Company.
The following asset management initiatives were undertaken between the half
year and the date of this report:
· The rent review for the care home in Bristol was completed at
£473,906 per annum reflecting an increase of 4%.
NAV Movements
Half year ended Half year ended Year ended
31 December 2023 31 December 2022 30 June 2023
Pence per share £ million Pence per £ million Pence per £ million
share share
NAV at beginning of period/ year 84.16 67.75 96.40 77.60 96.40 77.60
Change in fair value of investment property (2.70) (2.17) (12.53) (10.09) (13.26) (10.67)
Income earned for the period/year 4.64 3.73 5.41 4.36 10.76 8.66
Gain on sale of property 0.75 0.60 - - - -
Finance costs for the period/year (0.88) (0.71) (0.88) (0.71) (1.77) (1.43)
Other expenses for the period/year (1.01) (0.81) (1.08) (0.86) (2.24) (1.80)
Dividends paid during the period/year (3.34) (2.69) (2.98) (2.40) (5.73) (4.61)
NAV at the end of the year 81.62 65.70 84.34 67.90 84.16 67.75
Valuation
At 31 December 2023 the Group owned 19 assets (30 June 2023: 19 assets) valued
at £103.3 million at 31 December 2023 (30 June 2023: £107.0 million).
Summary by Sector at 31 December 2023
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 24.6 23.8 100.0 22.8 1.77 1.63 23.8
Hotel 2 13.0 12.6 100.0 13.5 0.93 0.84 12.3
Healthcare 3 17.6 17.0 100.0 25.0 1.21 1.13 16.5
Automotive & Petroleum 3 14.9 14.4 100.0 12.5 1.12 0.99 14.5
Student Accommodation 1 11.4 11.1 100.0 17.6 0.79 0.67 9.8
Leisure 3 10.3 10.0 100.0 8.5 0.98 0.75 10.9
Power Station 1 4.6 4.5 100.0 8.2 0.33 0.33 4.8
Retail 1 5.0 4.8 100.0 5.2 0.38 0.38 5.5
Education 1 1.9 1.8 100.0 20.1 0.14 0.13 1.9
Total/Average 19 103.3 100.0 100.0 16.6 7.65 6.85 100.0
Summary by Geographical Area at 31 December 2023
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 25.5 24.7 100.0 11.4 2.00 1.87 27.4
The North West & Merseyside 2 22.7 21.9 100.0 33.3 1.52 1.23 18.0
Rest of South East 5 21.7 21.0 100.0 9.7 1.48 1.38 20.1
South West 2 12.4 12.0 100.0 22.4 0.89 0.84 12.3
Yorkshire and the Humber 2 6.1 5.9 100.0 18.2 0.45 0.44 6.4
London 3 10.3 10.0 100.0 8.5 0.98 0.75 10.9
Eastern 1 4.6 4.5 100.0 8.2 0.33 0.33 4.9
Total/Average 19 103.3 100.0 100.00 16.6 7.65 6.84 100.0
Top Ten Occupiers at 31 December 2023
Tenant Property Annualised gross passing rent (£'000) % of Portfolio Total Annualised gross passing rental
Mears Group Plc Bramall Court, Salford 793 10.4%
Prime Life Ltd Prime Life Care Home, Brough and Solihull 754 9.9%
Meridian Steel Ltd Grazebrook Industrial Estate, Dudley and Sheffield 744 9.7%
Motorpoint Ltd Motorpoint, Birmingham 568 7.4%
Virgin Active Virgin Active, Streatham 536 7.0%
Premier Inn Hotels Ltd Premier Inn, Camberley 504 6.6%
Handsale Ltd Silver Trees, Bristol 456 6.0%
Travelodge Hotels Ltd Duke House, Swindon 403 5.3%
Hoddesdon Energy Ltd Hoddesdon Energy, Hoddesdon 333 4.3%
Biffa Waste Services Ltd Pocket Nook Industrial Estate, St Helens 314 4.1%
Top Ten Total 5,405 70.7%
Lease Expiry Portfolio at 31 December 2023 - to the earlier of break or lease
expiry
Year Expiring passing rent pa (£'000) Cumulative (£'000)
2024 64 64
2025 145 209
2026 - 209
2027 1,031 1,240
2028 420 1,660
2029 272 1,932
2030 - 1,932
2031 - 1,932
2032 863 2,795
2033 614 3,409
2034 536 3,946
2035 - 3,945
2036 - 3,946
2037 849 4,795
2038 - 4,795
2039+ 2,850 7,645
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 2023 (the '2023
Annual Report') on pages 24 to 30 and in Note 18. Having reviewed these, the
Board has separated out the risk that refinancing of the Company's loan could
not be achieved at acceptable terms and rates. This enhanced the clarity of
the risk register and reflects the Board's due consideration of this item.
Notwithstanding this, the Board considers the Company's 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 a probable recession in the UK) 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 (including the inability to
obtain new borrowings on acceptable terms and rates), Group REIT status,
political and macroeconomic events, disclosure risk, and regulatory change
(including in relation to climate change). The Board takes account of emerging
risks, including climate change, as part of its risk management assessment.
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 2023
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 2023 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
26 February 2024
Condensed Consolidated Statement of Comprehensive Income
For the half year ended 31 December 2023
Half year ended Half year ended Year
31 December 31 December ended
2023 2022 (unaudited) 30 June
(unaudited) 2023
(audited)
Notes £'000 £'000 £'000
Income
Rental and other income 3 3,735 4,350 8,660
Property operating expense 4 (302) (357) (755)
Net rental and other income 3,433 3,993 7,905
Other operating expenses 4 (510) (499) (1,049)
Operating profit before fair value change and gain on sale 2,923 3,494 6,856
Change in fair value of investment properties 10 (2,169) (10,088) (10,671)
Gain on disposal of investment property 10 598 - -
Operating profit/ (loss) 1,352 (6,594) (3,815)
Finance expenses 6 (709) (714) (1,425)
Profit/ (loss) before tax 643 (7,308) (5,240)
Taxation 7 - - -
Profit/ (loss) and total comprehensive income/ (loss) attributable to 643 (7,308) (5,240)
shareholders
Earnings/ (loss) per share (basic and diluted) 8 0.80p (9.08p) (6.51p)
8 2.75p 3.45p 6.75p
EPRA EPS (basic and diluted)
Adjusted EPS (basic and diluted) 8 2.96p 3.35p 6.43p
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
For the half year ended 31 December 2023
As at As at As at
31 December 2023 31 December 30 June
(unaudited) 2022 2023
(audited)
(unaudited)
Notes £'000 £'000 £'000
Assets
Non-current Assets
Investment properties 10 99,896 104,430 103,847
Current Assets
Receivables and prepayments 11 6,603 4,185 4,193
Cash and cash equivalents 2,877 2,854 3,484
9,480 7,039 7,677
Total Assets 109,376 111,469 111,524
Liabilities
Non-current Liabilities
Interest bearing loans and borrowings 13 (40,776) (40,672) (40,724)
Lease obligations 14 - (282) (266)
(40,776) (40,954) (40,990)
Current Liabilities
Payables and accrued expenses 12 (2,900) (2,585) (2,751)
Lease obligations 14 - (34) (33)
(2,900) (2,619) (2,784)
Total Liabilities (43,676) (43,573) (43,774)
Net Assets 65,700 67,896 67,750
Equity
Share capital 17 805 805 805
Capital reserve 75,417 75,417 75,417
Retained deficit (10,522) (8,326) (8,472)
Total Equity 65,700 67,896 67,750
Net Asset Value per share (basic and diluted) 8 81.62p 84.34p 84.16p
The accompanying notes 1 to 19 form part of these Condensed Consolidated
Financial
Statements.
The Condensed Consolidated Financial Statements were approved by the Board of
Directors on 26 February 2024 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 2023
Share Capital Retained deficit Total
capital reserve equity
Notes £'000 £'000 £'000 £'000
For the half year ended
31 December 2023 (unaudited)
Balance at 30 June 2023 805 75,417 (8,472) 67,750
Total comprehensive income - - 643 643
Dividends paid 9 - - (2,693) (2,693)
Balance at 31 December 2023 805 75,417 (10,522) 65,700
For the half year ended
31 December 2022 (unaudited)
Balance at 30 June 2022 805 75,417 1,377 77,599
Total comprehensive loss - - (7,308) (7,308)
Dividends paid 9 - - (2,395) (2,395)
Balance at 31 December 2022 805 75,417 (8,326) 67,896
For the year ended 30 June 2022 (audited)
Balance at 30 June 2022 805 75,417 1,377 77,599
Total comprehensive loss - - (5,240) (5,240)
Dividends declared 9 - - (4,609) (4,609)
Balance at 30 June 2023 805 75,417 (8,472) 67,750
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 2023
Half year ended Half year Year
31 December ended ended
2023 31 December 30 June
(unaudited) 2022 2023
(unaudited) (audited)
Notes £'000 £'000 £'000
Cash flows from operating activities
Profit/(loss) before tax 643 (7,308) (5,240)
Adjustment for:
Finance expenses 6 709 714 1,425
Gain on disposal of investment property 10 (598) - -
Change in fair value of investment properties 10 2,169 10,088 10,671
Operating results before working capital changes 2,923 3,494 6,856
Change in working capital
Increase in other receivables and prepayments (2,410) (151) (159)
Increase/(decrease) in other payables and accrued expenses 149 (561) (312)
Net cash generated from operating activities 662 2,782 6,385
Cash flows from investing activities
Purchase of investment property 10 (5,304) - -
Disposal of investment property 10 7,382 - -
Reduction in acquisition costs 10 - 606 606
Net cash generated from investing activities 2,078 606 606
Cash flows from financing activities
Finance costs paid (654) (662) (1,321)
Dividends paid 9 (2,693) (2,395) (4,692)
Payment of lease obligations - (19) (36)
Net cash used in financing activities (3,347) (3,076) (6,049)
Net (decrease)/increase in cash and cash equivalents (607) 312 942
Cash and cash equivalents at beginning of period/year 3,484 2,542 2,542
Cash and cash equivalents at end of period/ year 2,877 2,854 3,484
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 2023
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 2023 have been prepared in accordance with International
Accounting Standard ('IAS') 34 'Interim Financial Reporting'. These 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 2023 (the '2023 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 section 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 2023 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 2023
• Certain new accounting standards and interpretations have been
published that are not mandatory for annual periods beginning after 1 July
2023 and early application is permitted; however, the Group has not early
adopted the new or amended standards in preparing these condensed consolidated
financial statements:
• 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) (effective date
deferred indefinitely).
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.
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 2023 Annual Financial Report, and
are expected to be applied consistently for the year ending 30 June 2024.
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 2023 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 31 March 2025, 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. A
longer-term projection covering the period to 30 June 2027 had also been
carried out to ascertain the impact of the refinancing and future leasing
assumptions on the Group's cash flow. 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 £41m 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 2023
• Certain new accounting standards and interpretations have been
published that are not mandatory for annual periods beginning after 1 July
2023 and early application is permitted; however, the Group has not early
adopted the new or amended standards in preparing these condensed consolidated
financial statements:
• 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) (effective date
deferred indefinitely).
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.
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 2023 Annual Financial Report, and
are expected to be applied consistently for the year ending 30 June 2024.
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 2023 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 31 March 2025, 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. A
longer-term projection covering the period to 30 June 2027 had also been
carried out to ascertain the impact of the refinancing and future leasing
assumptions on the Group's cash flow. 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 £41m 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
2023 2022 30 June
(unaudited) (unaudited) 2023
(audited)
£'000 £'000 £'000
Gross rental income 3,691 3,696 7,429
Spreading of minimum contracted future rent-indexation (138) 209 423
Spreading of tenant incentives - rent free periods (61) (49) (58)
Other property income 2 223 294
Gross rental income (adjusted) 3,494 4079 8,088
Service charges and direct recharges (see note 4) 241 271 572
Total rental and other income 3,735 4,350 8,660
All rental, service charges and direct recharges and other income are derived
from the United Kingdom.
Other property income for the half year to 31 December 2022 and the year to 30
June 2023 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
2023
2023 2022
(audited)
(unaudited) (unaudited)
£'000 £'000 £'000
Property operating expenses 61 80 177
Service charges and direct recharges (note 3) 241 271 572
Provision for impairment of trade receivables - 6 6
Property operating expenses 302 357 755
Investment advisory fee 180 191 371
Auditor's remuneration 41 43 87
Operating costs 233 210 481
Directors' remuneration (note 5) 56 55 110
Other operating expenses 510 499 1,049
Total operating expenses 812 856 1,804
Total operating expenses (excluding service charges and direct recharges) 571 585 1,232
Half year ended Half year ended Year
31 December 2023 31 December 2022 ended
(unaudited) (unaudited) 30 June
2023
(audited)
£'000 £'000 £'000
Audit
Statutory audit of Annual Report and Accounts 36 38 76*
Statutory audit of Subsidiary Accounts 5 5 11
Total fees due to auditor 41 43 87
*Includes £6,000 fees relating to fiscal year ended 30 June 2022.
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 2023 31 December 2022 ended
(unaudited) (unaudited) 30 June
2023
(audited)
£'000 £'000 £'000
Directors' fees 51 50 99
Tax and social security 5 5 11
Total directors' remuneration 56 55 110
The Group had no employees during the period/ year.
6. Finance expenses
Half year ended Half year ended Year
31 December 2023 31 December 2022 ended
(unaudited) (unaudited) 30 June
2023
(audited)
£'000 £'000 £'000
Interest payable on loan (note 13) 653 653 1,307
Amortisation of finance costs (note 13) 52 52 104
Other finance costs 4 9 14
Total 709 714 1,425
7. Taxation
Half year ended Half year ended Year
31 December 2023 (unaudited) 31 December 2022 (unaudited) ended
30 June
2023
(audited)
£'000 £'000 £'000
Tax charge comprises:
Analysis of tax charge in the period/ year
Profit/(loss) before tax 643 (7,308) (5,240)
Theoretical tax charge/(refund) at UK corporation average tax rate of 25% (31 161 (1,498) (1,074)
December 2022 and 30 June 2023: 20.50%)
Effects of tax-exempt items under REIT regime (161) 1,498 1,074
Total - - -
The Group maintained its REIT status and as such, no deferred tax asset or
liability has been recognised in the current period/year.
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. Earnings/ (loss) per share (EPS) and Net Asset Value (NAV) per share
Half year ended Half year ended Year
31 December 2023 (unaudited) 31 December 2022 (unaudited) ended
30 June
2023
(audited)
Earnings/ (loss) per share*
Total comprehensive income/(loss) (£'000) 643 (7,308) (5,240)
Weighted average number of shares (number) 80,500,000 80,500,000 80,500,000
Earnings/ (loss) per share (basic and diluted) 0.80p (9.08p) (6.51p)
EPRA EPS (£'000):
Total comprehensive income/(loss) 643 (7,308) (5,240)
Adjustment to total comprehensive income/(loss):
Change in fair value of 2,169 10,088 10,671
investment properties
Gain on disposal of investment (598) - -
property
EPRA earnings (basic and diluted) (£'000) 2,214 2,780 5,431
EPRA EPS (basic and diluted) 2.75p 3.45p 6.75p
Adjusted EPS:
EPRA earnings (basic and diluted) (£'000) - as above 2,214 2,780 5,431
Adjustments:
Rental income recognised in respect of guaranteed fixed rental 52 (209) (423)
uplifts (£'000)
Rental income recognised in respect of rent free periods (£'000) 61 49 58
(Note 3)
Amortisation of finance costs (£'000) (Note 6) 52 52 104
Write-off of receivables - 16 16
Provision/(reversal of provision) for impairment of trade - 6 (10)
receivables (Note 4)
Adjusted earnings (basic and diluted) (£'000) 2,379 2,694 5,176
Adjusted EPS (basic and diluted)** 2.96p 3.35p 6.43p
*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/(loss) 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.
31 December 31 December 30 June
2023
2023 (unaudited) 2022 (unaudited)
(audited)
NAV per share:
Net assets (£'000) 65,700 67,896 67,750
Ordinary Shares (Number) 80,500,000 80,500,000 80,500,000
NAV per share 81.62p 84.34p 84.16p
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 2023
Net assets value (£'000) 65,700 65,700
Purchasers' cost (£'000) 6,716 -
Break cost on bank borrowings (£'000) - -
72,416 65,700
80,500,000 80,500,000
Ordinary Shares (Number)
Per share measure 89.96p 81.62p
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 30 June 2023
Net assets value (£'000) 67,750 67,750
Purchasers' cost (£'000) 6,957 -
Break cost on bank borrowings (£'000) - -
74,707 67,750
80,500,000 80,500,000
Ordinary Shares (Number)
Per share measure 92.80p 84.16p
9. Dividends
All dividends were paid as Property Income Distributions.
Half year ended Half year ended Year ended
31 December 2023
31 December 2022
30 June
(unaudited) (unaudited)
2023
(audited)
Quarter Ended Dividend £'000 £'000 £'000
Rate
Dividends in respect of year ended 30 June 2022
4th dividend 30-Jun-22 1.600p - 1,288 1,288
Dividends in respect of year ended 30 June 2023
1st dividend 30-Sep-22 1.375p - 1,107 1,107
2(nd) dividend 31-Dec-22 1.375p - - 1,107
3(rd) dividend 31-Mar-23 1.375p - - 1,107
4(th) dividend 30-Jun-23 1.920p 1,545 - -
Dividends in respect of year ending 30 June 2024
1st dividend 30-Sep-23 1.425p 1,148 - -
Total dividends paid 2,693 2,395 4,609
4th dividend for quarter ended 30-Jun-22 1.600p - (1,288) (1,288)
2nd dividend for quarter ended 31-Dec-22 1.375p - 1,107 -
4th dividend for quarter ended 30-Jun-23 1.920p (1,545) - 1,545
2nd dividend for quarter ended 31-Dec-23 1.425p 1,146 - -
Total dividends payable in respect of the period/year 2,294 2,214 4,866
Total dividends payable in respect of the period/year 2.85p 2.75p 6.045p
Dividends declared after the period/year end are not included in the Condensed
Consolidated Financial Statements as a liability.
The difference between the amount disclosed above and dividends paid as shown
in the Condensed Consolidated Statement of Cash Flows for year ended 30 June
2023 relates to withholding tax.
10. Investment properties
Freehold Leasehold Half year Half year ended 31 December 2022 (unaudited) Total Year ended 30 June
Investment Investment ended 31 December 2023 (unaudited) Total 2023
Properties
Properties
(audited) Total
£'000 £'000 £'000 £'000 £'000
UK Investment properties
At the beginning of the period/year 73,825 33,200 107,025 117,905 117,905
Acquisitions during the period/year 5,304 - 5,304 - -
Reduction in acquisition costs (note 15.3) - - - (606) (606)
Disposals during the period/year (6,784) - (6,784) - -
Change in fair value of investment properties (9,874) (10,274)
(1,245) (975) (2,220)
Valuation provided by Knight Frank LLP 107,425 107,025
71,100 32,225 103,325
Adjustment to fair value for minimum rent indexation of lease income (note 10) (3,429) (3,367) (3,542)
Adjustment for lease obligation - 372 364
Total investment properties 99,896 104,430 103,847
Change in fair value of investment properties
Change in fair value before adjustments for lease incentives and lease (2,220) (9,874) (10,274)
obligations
Movement in lease obligations (62) (24) (32)
Adjustment to spreading of contracted future rent indexation and tenant 113 (190) (365)
incentives
(2,169) (10,088) (10,671)
Disposal and acquisition of investment property
On 18 December 2023, the Group completed the acquisition of the Virgin Active
in Ockley Road, Streatham for total cost of £5.3 million (net of top up rent
of £0.19 million).
The property known as Mercure Hotel was disposed of in August 2023 for £7.5
million as shown in the reconciliation below of the gain recognised on
disposal through the Condensed Consolidated Statement of Comprehensive Income;
the gain on disposal 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 2023 (unaudited) 31 December 2022 (unaudited) 30 June
2023
(audited)
£'000 £'000 £'000
Gross proceeds on disposal 7,500 - -
Selling costs (118) - -
Net proceeds on disposal 7,382 - -
Carrying value (6,784) - -
Gain on disposal of investment property 598 - -
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 2023 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 2023 (unaudited) 31 December 2022 (unaudited) 30 June 2023 (audited)
£'000 £'000 £'000
Receivables
Trade debtors 254 301 122
Less: Provision for impairment of trade receivables (2) (2) (2)
Other debtors* 2,621 327 326
Sub total 2,873 626 446
Spreading of minimum contracted future rent indexation 3,080 2,919 3,132
Spreading of tenant incentives - rent free periods 349 448 410
Sub total 3,429 3,367 3,542
Tenant deposit asset (note 12) 118 118 118
Other prepayments 183 74 87
Sub total 301 192 205
Total 6,603 4,185 4,193
*Other debtors as at 31 December 2023 mainly represent net proceeds from the
sale of Mercure Hotel of £2,152,219 (30 June 2023: £111,955, 31 December
2022: £79,302) 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 2023 (unaudited) 31 December 2022 (unaudited) 30 June 2023 (audited)
£'000 £'000 £'000
Less than three months due 2,885 597 464
Between three and six months due (12) 29 (18)
Total 2,873 626 446
12. Payables and accrued expenses
31 December 2023 (unaudited) 31 December 2022 (unaudited) 30 June
2023 (audited)
£'000 £'000 £'000
Deferred income 1,556 1,542 1,568
Other creditors 548 396 409
Accruals 353 269 374
Loan interest payable (note 13) 258 258 258
Tenant deposit liability (note 11) 118 118 118
Trade creditors 67 2 24
2,900 2,585 2,751
13. Interest bearing loans and borrowings
31 December 2023 (unaudited) 31 December 2022 (unaudited) 30 June 2023 (audited)
£'000 £'000 £'000
Facility drawn at the beginning of the period/ year 41,000 41,000 41,000
Unamortised finance costs brought forward (276) (380) (380)
Amortisation of finance costs in the period/year 52 52 104
At end of period/ year 40,776 40,672 40,724
Repayable between 1 and 2 years 41,000 - -
Repayable between 2 and 5 years - 41,000 41,000
Total at end of the period/ year 41,000 41,000 41,000
As at 31 December 2023, 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 37.5% (31 December 2022: 36.8%, 30 June 2023:
36.8%). The 5weighted average interest cost of the Group's facility is 3.19%
and the facility is repayable on 20 October 2025. Interest expense incurred
during the period amounted to £0.65m (30 June 2023: £1.31m, 31 December
2022: £0.65m), £0.26m of which is outstanding (30 June 2023: £0.26m, 31
December 2022: £0.26m).
31 December 2023 (unaudited) 31 December 2022 30 June 2023 (audited)
(unaudited)
£'000 £'000 £'000
Reconciliation to cash flows from financing activities
At beginning of the period/ year 40,724 40,620 40,620
Non-cash changes
Amortisation of finance costs 52 52 104
Total at end of the period/ year 40,776 40,672 40,724
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 2023 31 December 2022 (unaudited) 30 June 2023 (audited)
(unaudited)
£'000 £'000 £'000
Within one year - 50 50
After one year but less than five years - 150 150
More than five years - 488 463
Total undiscounted lease liabilities - 688 663
Less: Future finance charge on lease obligations - (372) (364)
Present value of lease liabilities - 316 299
Lease liabilities included in the statement of financial position
Current - 34 33
Non-current - 282 266
Total - 316 299
The lease obligations have been released to the Condensed Consolidated
Statement of Comprehensive Income following the sale of Mercure Hotel (note
10).
15. Commitments
15.1. 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 15 months and 110 years, excluding ground leases.
Future minimum rentals receivable under non-cancellable operating leases as at
31 December 2023 are as follows:
31 December 31 December 30 June
2023 2022 (unaudited) 2023
(unaudited) (audited)
£'000 £'000 £'000
Within one year 7,449 7,094 7,179
After one year, but not more than two years 7,470 6,838 6,804
After two years, but not more than three years 7,454 6,558 6,548
After three years, but not more than four years 6,889 7,023 7,034
After four years, but not more than five years 6,456 6,685 6,416
After five years, but not more than ten years 29,947 28,730 28,307
After ten years, but not more than fifteen years 21,845 24,905 24,085
More than fifteen years 51,668 52,563 50,689
Total 139,178 140,396 137,062
There were no material contingent rents recognised as income for all period
presented.
15.2. Capital commitments
There were no capital commitments at 31 December 2023 (31 December 2022: none,
30 June 2023: none).
15.3. Financial commitments
As disclosed in the Company's 2023 Annual Report (note 15.3), the Board
engaged in mediation for the one item of litigation that it was involved in,
which resulted in a full and final settlement of £825,000 being received.
As a result, the Group have no financial commitments other than those arising
from its normal business operations, and in the year ended 30 June 2023, the
settlement was 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
(31 December 2022: nil, 30 June 2023: 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 2023 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 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, with no
fee payable from 14 May to 30 September 2020. For the six months ended 31
December 2023, the Group incurred £180,000 of which £nil was outstanding at
period end (2022: £191,000 of which £191,000 was outstanding at period end,
30 June 2023: £371,000, £nil of which is outstanding).
19. Events after reporting date
Dividend
On 6 February 2024, the Board declared an interim dividend of 1.475p in
respect of the period from 1 October 2023 to 31 December 2023. This will be
paid on 1 March 2023 to shareholders on the register as at 16 February 2023.
The ex-dividend date was 15 February 2024.
Change of Investment Advisor
As explained in the Chairman's Statement, the Board has undertaken a review of
the Group's investment advisory arrangements. This review included proposals
from select third party investment managers with the relevant property
expertise. Following this, on 26 February 2024 the Board approved the
appointment of Martley Capital as the Group's Investment Adviser, subject to
final regulatory approvals. The Martley Capital Group (of which Martley
Capital is a subsidiary) launched in December 2023 as a new venture whereby
key members of the current advisory team at M7 Real Estate will continue to
service the Group as part of the Martley Capital team. The appointment of
Martley Capital was by way of a deed of novation of the Group's investment
advisory agreement (and subsequent minor changes thereto) leaving the parties
on substantially the same terms and at an unchanged fee.
EPRA Performance Measures (unaudited)
EPRA Yield calculations At 31 December At 31 December 2022 At 30 June
2023 £'000 2023
£'000 £'000
Investment properties wholly owned:
- by Company 1,875 1,950 1,875
- by Alternative Income Limited 101,450 105,475 105,150
Total - note 10 103,325 107,425 107,025
Allowance for estimated purchasers' costs 6,716 6,983 6,957
Gross completed property portfolio valuation B 114,408 113,982
110,041
Annualised gross passing rent 7,645 7,462 7,560
Annualised property outgoings (5) (55) (55)
Annualised net rents A 7,640 7,407 7,505
Add: notional rent expiration of rent-free periods or other lease incentives 688
408 563
Topped-up net annualised rent C 8,048 8,096 8,068
EPRA NIY* A/B 6.94% 6.47% 6.58%
EPRA "topped-up" NIY C/B 7.31% 7.08% 7.08%
*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 2023 31 December 30 June
£'000 2022 2023
£'000 £'000
Include:
EPRA Costs (including direct vacancy costs) A 571 585 1,232
- note 4
Direct vacancy costs - - -
EPRA Costs (excluding direct vacancy costs) B 571 585 1,232
Gross rental income - note 3 C 3,492 3,856 8,088
EPRA Cost Ratio** A/C 16.35% 15.17% 15.23%
(including direct vacancy costs)
EPRA Cost Ratio B/C 16.35% 15.17% 15.23%
(excluding direct vacancy costs)
**Due to the timing of the Mercure Hotel disposal, and the subsequent
Streatham acquisition, the rental income has decreased in the half year ended
31 December 2023. This has resulted in the above increase to the EPRA cost
ratio.
EPRA Vacancy rate Half year ended Half year ended Year ended
31 December 2023 31 December 30 June
£'000 2022 2023
£'000 £'000
Annualised potential rental value of vacant premises A - - -
Annualised potential rental value for the completed property portfolio B 6,841 6,998 7,040
EPRA Vacancy rate A/B 0% 0% 0%
Alternative Performance Measures (APMs)
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.
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 2023 31 December 2022 30 June 2023
NAV per Ordinary share (note 8) A 81.62 84.34p 84.16p
Share price B 71.50 66.70p 64.70p
Discount (A-B)/A 12.40% 20.92% 23.12%
Dividend Cover
The ratio of Group's Adjusted EPS divided by the Group's dividends payable for
the relevant period/ year.
31 December 2023 31 December 2022 30 June 2023
Adjusted EPS (note 8) A 2.96p 3.35p 6.43p
Dividend per share (note 9) B 2.85p 2.75p 6.045p
Dividend cover A/B 103.86% 121.82% 106.37%
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 2023 31 December 2022 30 June 2023
Annual dividend target*/payable A 5.90p 5.50p 6.045p
Share price B 71.50p 66.70p 64.70p
Dividend yield A/B 8.25% 8.25% 9.34%
* The Board had set a target dividend for the year ended 30 Jun 2023 of 5.70p.
As explained in the 2023 Annual Report's Chairman's Statement on page 6, a
higher dividend was paid for the year in order to pay sufficient dividends as
a PID in order to meet tax requirements, and to distribute to shareholders the
extra income received in that year.
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 2023 31 December 2022 30 June 2023
Borrowings (£'000) A 41,000 41,000 41,000
Total assets (£'000) B 109,376 111,469 111,524
Loan to GAV (A/B) 37.49% 36.78% 36.76%
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/year. 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 2023 31 December 2022 30 June 2023
Other operating expenses for the half year / year (£'000) A 509 499 1,049
Ongoing charges- annualised where required (£'000) B 975† 1,034† 1,009†
Average net assets (£'000) C 66,725 72,747 72,675
Ongoing charges ratio B/C 1.46% 1.42% 1.39%
† Non-recurring legal and professional costs have been excluded in the
annualised amount for the period/year presented.
* The Board had set a target dividend for the year ended 30 Jun 2023 of 5.70p.
As explained in the 2023 Annual Report's Chairman's Statement on page 6, a
higher dividend was paid for the year in order to pay sufficient dividends as
a PID in order to meet tax requirements, and to distribute to shareholders the
extra income received in that year.
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 2023
31 December 2022
30 June 2023
Borrowings (£'000)
A
41,000
41,000
41,000
Total assets (£'000)
B
109,376
111,469
111,524
Loan to GAV
(A/B)
37.49%
36.78%
36.76%
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/year. 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 2023
31 December 2022
30 June 2023
Other operating expenses for the half year / year (£'000)
A
509
499
1,049
Ongoing charges- annualised where required (£'000)
B
975†
1,034†
1,009†
Average net assets (£'000)
C
66,725
72,747
72,675
Ongoing charges ratio
B/C
1.46%
1.42%
1.39%
† Non-recurring legal and professional costs have been excluded in the
annualised amount for the period/year presented.
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 2023 A 64.70p 84.16p
Closing at 31 December 2023 B 71.50p 81.62p
Return C=(B/A)-1 10.51% (3.02%)
Dividend reinvestment * D 5.18% 3.98%
Total shareholder return C+D 15.69% 0.96%
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 30 June 2022 A 82.10p 96.40p
Closing at 30 June 2023 B 64.70p 84.16p
Return C=(B/A)-1 (21.19%) (12.69%)
Dividend reinvestment* D 6.97% 5.97%
Total shareholder return C+D (14.22%) (6.72%)
* 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.
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 2024
30 June 2024 Year end
September 2024 Announcement of annual results
November 2024 Annual General Meeting
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.
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 combined valuation of the property portfolio (as provided by
the valuer) and the fair value of other investments.
Loan to Value ('LTV')
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
Company Secretary
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
AIFM
Langham Hall Fund Management LLP
1 Fleet Place
8(th) Floor
London
EC4M 7RA
Depositary
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
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
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
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
Corporate Broker
Panmure Gordon (UK) Limited
40 Gracechurch Street
London
EC3V 0BT
Communications Adviser
H/Advisors Maitland
3 Pancras Square
London
N1C 4AG
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. END IR PPUMWPUPCPGQRecent news on Alternative Income REIT
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