REG-Custodian Property Income REIT plc Custodian Property Income REIT plc: Interim Results
14/12/2022 07:15
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Custodian Property Income REIT plc (CREI)
Custodian Property Income REIT plc: Interim Results
14-Dec-2022 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information in accordance
with the Market Abuse Regulation (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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14 December 2022
Custodian Property Income REIT plc
(“Custodian Property Income REIT” or “the Company”)
Interim Results
DISPOSALS AHEAD OF VALUATION AND ACTIVE MANAGEMENT OF DIVERSIFIED PORTFOLIO UNDERPIN STRONG
PERFORMANCE
Custodian Property Income REIT (LSE: CREI), which seeks to deliver a strong income return by
investing in a diversified portfolio of smaller regional properties across the UK, today
reports its interim results for the six months ended 30 September 2022 (“the Period”).
Commenting on the results, David Hunter, Chairman of Custodian Property Income REIT, said:
“The Company’s well-diversified investment portfolio has shown its resilience during the
Period and this diversification has mitigated the risks posed by volatility in real estate
investment markets. In addition, the Company’s conservative balance sheet and its longer-term
fixed rate debt profile have provided insulation against the challenge of rising interest
rates in the short to medium term.
“Our dividend remains fully covered and, in line with our objectives, I was very pleased to
announce 2.75p of aggregate dividends (2021: 2.5p) for the Period. The Board expects to
continue to pay quarterly dividends per share of 1.375p to achieve a target dividend per
share for the year ending 31 March 2023 of no less than 5.5p.
“Over the last five years, shareholders have received an income return of 29.7p per share, or
an annual average of 5.93p per share, always fully covered by earnings, supported by both a
diverse, smaller regional property strategy and a conservative gearing policy. There is depth
in occupational demand and latent rental growth in the portfolio which offers the prospect of
growth for existing shareholders, despite the current difficult economic circumstances.”
Property highlights
• Portfolio valuation increased to £685.4m (31 March 2022: £665.2m, 2021: £551.9m), due to
an £8.4m uplift from asset management initiatives and income growth, £47.8m of asset
recycling within the portfolio and capex, and a £36.1m valuation decrease driven by
current investor and market sentiment around the UK’s economic outlook
• £52.7m invested in seven property acquisitions, which aligned with the Company’s
investment policy, targeting smaller regional property with a strong income focus and
potential for asset management
• £4.7m profit from the disposal of three properties for a combined consideration of £14.9m
at an aggregate 46% premium to valuation, comprising:
◦ An industrial unit in Milton Keynes to a special purchaser for £8.5m, reflecting a
73% premium to valuation;
◦ An Audi car dealership in Derby for £5.7m, £1.2m or 27% ahead of valuation; and
◦ A high street retail unit in Weston-Super-Mare at valuation for £0.7m
• Continued improvement in the environmental performance of the portfolio with all F and G
ratings removed, improved or under redevelopment and the weighted average energy
performance certificate (“EPC”) rating improving to a C (58) from C (61) at 31 March 2022
• Since the Period end three properties sold for a consideration of £13.5m
Financial highlights
• EPRA earnings per share for the Period decreased to 2.8p (2021: 3.0p) due to
administrative cost inflation, rising interest rates and additional ESG compliance costs
• 10% increase in aggregate dividends per share declared for the Period to 2.75p (2021:
2.5p), which remains fully covered (102.0%), in line with Company policy, with the target
dividend per share remaining at 1.375p per quarter and no less than 5.5p for the year
ending 31 March 2023
• Fixed rate agreed debt facilities increased from 61% to 74%, significantly mitigating
interest rate risk and maintaining a beneficial margin between the aggregate cost of debt
of 3.5% and income returns from the property portfolio
• NAV per share 113.7p (31 March 2022: 119.7p, 2021: 106.0p)
Further information
Further information regarding the Company can be found at the Company's website
1 www.custodianreit.com or please contact:
Custodian Capital Limited
Richard Shepherd-Cross / Ed Moore / Ian Mattioli MBE Tel: +44 (0)116 240 8740
2 www.custodiancapital.com
Numis Securities Limited
Hugh Jonathan/Nathan Brown Tel: +44 (0)20 7260 1000
www.numiscorp.com
FTI Consulting
Richard Sunderland / Ellie Sweeney / Andrew Davis Tel: +44 (0)20 3727 1000
3 custodianreit@fticonsulting.com
Custodian Property Income REIT plc interim results for the six months ended 30 September 2022
Property highlights
2022
£m Comments
Property portfolio value of £685.4m (31 March 2022:
Portfolio value 685.4 £665.2m, 2021: £551.9m)
Property valuation
movements 4 1 :
• From asset management 8.4 Detailed in the Asset management report
initiatives
• General valuation (36.1) Across all sectors and driven by current investor and
decreases market sentiment around the UK’s economic outlook
(27.7)
• £15.0m retail park in Nottingham
• £11.1m distribution unit near Glasgow
• £8.9m for two DFS retail warehouses in Droitwich and
Measham
Property acquisitions 52.7 • £7.5m industrial facility in Grangemouth
• £3.7m high street retail units in Winchester
• £3.5m industrial unit in Chesterfield
• £3.0m drive-through restaurants in York
Primarily relating to significant refurbishment work on
Capital expenditure 5.3 two industrial assets in Avonmouth and Manchester and a
retail warehouse in Swindon, with £0.7m invested in
electric vehicle chargers at various sites
Sale proceeds of £14.9m at an aggregate 46% premium to
valuation comprising:
• Industrial unit in Milton Keynes to a special
Profit on disposal 5 2 4.7 purchaser for £8.5m
• Audi dealership in Derby for £5.7m
• High street retail unit in Weston-Super-Mare for £0.7m
Disposal proceeds since the • £9.3m for a shopping centre in Gosforth
Period end 13.5 • £2.8m for business park offices in Leicester
• £1.4m for an industrial unit in Kilmarnock
Financial highlights and performance summary
6 months 6 months 12 months
ended ended ended
30 Sept 2022 30 Sept 2021 31 Mar 2022
Comments
Returns
EPRA 6 3 earnings Decrease reflects administrative
per share 7 4 2.8p 3.0p 5.9p cost inflation and higher finance
and ESG compliance costs
Basic and diluted
earnings per (3.2p) 11.4p 28.5p Current period loss reflects
share 8 5 valuation decreases of £27.7m
(Loss)/profit before (14.1) 48.1 122.3
tax (£m)
Dividends per Target dividend per share for the
share 9 6 2.75p 2.5p 5.25p year ended 31 March 2023 of not
less than 5.5p
Dividend cover 10 7 102.0% 120.5% 110.3% In line with the Company’s policy
of paying fully covered dividends
NAV total return per (2.7%) 11.7% 28.4% 2.3% dividends paid and a 5.0%
share 11 8 capital decrease
Share price total (2.0%) 4.7% 17.0% Share price decreased from 101.8p
return 12 9 to 98.5p during the Period
Capital values
NAV and EPRA Decreased due to £27.7m of
NTA 13 10 (£m) 501.4 445.9 527.6 valuation decreases and £3.4m of
acquisition costs, partially
NAV per share and NTA 113.7p 106.0p 119.7p offset by a £4.7m profit on
per share disposal
Borrowings
Increased due to deployment during the
Period, but reduced to 24.0% by
Net gearing 14 11 25.5% 19.6% 19.1% disposals since the Period end
Weighted average cost of drawn Majority fixed rate debt insulating the
debt facilities 3.45% 2.88% 3.06% Company from a 2.25% rise in base rates
during the Period
Costs
Ongoing charges ratio (“OCR”)
excluding direct property 1.20% 1.19% 1.20%
expenses 15 12
Environmental
Weighted average energy EPCs updated at 14 units across 7
performance certificate (“EPC”) C (58) C (62) C (61) properties demonstrating continuing
rating 16 13 improvements in the environmental
performance of the portfolio
The Company presents alternative performance measures (“APMs”) to assist stakeholders in
assessing performance alongside the Company’s results on a statutory basis.
APMs are among the key performance indicators used by the Board to assess the Company’s
performance and are used by research analysts covering the Company. Certain other APMs may
not be directly comparable with other companies’ adjusted measures, and APMs are not intended
to be a substitute for, or superior to, any IFRS measures of performance. Supporting
calculations for APMs and reconciliations between APMs and their IFRS equivalents are set out
in Note 19.
Chairman’s statement
The Company’s well-diversified investment portfolio has shown its resilience during the
Period which has mitigated the risks posed by volatility in real estate investment markets.
In particular, the Company’s conservative balance sheet and its longer-term fixed rate debt
profile have provided insulation against the challenge of rising interest rates in the short
to medium term. We are also confident that the Company’s diversified investment policy and
the depth of the occupational market, which continues to support a high income return
strategy, will also continue to provide insulation against the potential threat to dividends
from increased tenant distress and vacancy caused by a protracted recession. Despite
valuation decreases of £27.7m during the Period EPRA earnings per share were 2.8p (2021:
3.0p) reflecting the Company’s stable rent roll which provided 102% cover for dividends
relating to the Period.
We expect to see medium term acquisition opportunities as increasing debt costs drive market
pricing for new investments closer to our income return requirements. We continue to view
income as the key stable component of property returns. In these circumstances we expect
investment market sentiment to transition from the relative volatility of single sector
investing to a more defensive, diversified, income focused strategy.
We also see opportunities for relative outperformance given the current net initial yield of
the Company’s portfolio stands at 5.9%. Not only is this comfortably ahead of our 3.5%
weighted average cost of debt but is also in stark contrast to the keen pricing recently seen
in specific sectors which are now experiencing more material valuation falls.
In line with the Company’s objective to be the REIT of choice for institutional and private
investors seeking high and stable dividends from well diversified UK commercial real estate,
I was very pleased to be able to announce that despite ongoing uncertainty, dividends per
share of 2.75p (2021: 2.5p) have been declared relating to the Period. The Board expects to
continue to pay quarterly dividends per share of 1.375p to achieve a target dividend per
share for the year ending 31 March 2023 of no less than 5.5p based on rent collection levels
remaining at their current levels.
The Board acknowledges the importance of income for shareholders and its objective is to grow
the dividend on a sustainable basis at a rate which is fully covered by projected net rental
income and does not inhibit the flexibility of the Company’s investment strategy.
Net asset value
The NAV of the Company at 30 September 2022 was £501.4m, approximately 113.7p per share, a
decrease of 6.0p (5.0%) since 31 March 2022:
Pence per share £m
NAV at 31 March 2022 119.7 527.6
Valuation movements relating to:
- Asset management activity 1.9 8.4
- Other valuation movements (8.2) (36.1)
Valuation decrease before acquisition costs (6.3) (27.7)
Impact of acquisition costs (0.8) (3.4)
Valuation decrease including acquisition costs (7.1) (31.1)
Profit on disposal of investment property 1.1 4.7
Net losses on investment property (6.0) (26.4)
EPRA earnings 2.8 12.3
Dividends paid 17 14 during the Period (2.8) (12.1)
NAV at 30 September 2022 113.7 501.4
Borrowings and cash
During the Period the Company refinanced a £25m variable rate revolving credit facility
(“RCF”) with the Royal Bank of Scotland, which had been due to expire on 30 September 2022,
with an additional £25m tranche of debt from Aviva Real Estate Investors (“Aviva”) expiring
in 2032 with a fixed interest rate of 4.1%.
This refinancing increased the proportion of the Company’s agreed debt facilities with a
fixed rate of interest from 61% to 74%, significantly mitigating interest rate risk for the
Company and maintaining a beneficial margin between the aggregate cost of debt of 3.5% and
income returns from the property portfolio.
At 30 September 2022 the Company operates the following debt facilities:
• A £40m RCF with Lloyds Bank plc (“Lloyds”). Interest charged is between 1.5% and 1.8%
above SONIA 18 15 , determined by reference to the prevailing loan-to-value (“LTV”)
ratio, and expiring on 17 September 2024;
• A £20m term loan with Scottish Widows plc (“SWIP”) with interest fixed at 3.935% and
repayable on 13 August 2025;
• A £45m term loan with SWIP with interest fixed at 2.987% and repayable on 5 June 2028;
and
• A £75m term loan with Aviva comprising:
◦ A £35m tranche repayable on 6 April 2032 with fixed annual interest of 3.02%;
◦ A £25m tranche repayable on 3 November 2032 with fixed annual interest of 4.10%; and
◦ A £15m tranche repayable on 3 November 2032 with fixed annual interest of 3.26%.
At 30 September 2022 the Company’s RCF had a £40m facility limit (31 March 2022: £20m limit)
and was £38m drawn (31 March 2022: £nil drawn). The facility limit can be increased to £50m
with Lloyds’ consent. Disposals since the Period end have decreased the drawn RCF to £30m.
Each facility has a discrete security pool, comprising a number of the Company’s individual
properties, over which the relevant lender has security and the following financial
covenants:
• The maximum LTV of each discrete security pool is between 45% and 50%, with an
overarching covenant on the Company’s property portfolio of a maximum 35% LTV; and
• Historical interest cover requiring net rental receipts from each discrete security pool
over the preceding three months to exceed 250% of the facility’s quarterly interest
liability.
The Aviva facility also contains a projected interest cover covenant requiring net
contractual rents from the security pool over the next 12 months to exceed 250% of the
facility’s quarterly interest liability.
The Company complied with all loan covenants during the Period.
£188.9m of the Company’s portfolio (representing 27.6%) is unencumbered and available to be
charged to the security pools to enhance the LTV on individual loans if required.
The Company’s debt profile is summarised below:
Maximum facilities Drawn facilities
30 Sept 2022 31 Mar 2022 30 Sept 2022 31 Mar 2022
Amount £190m £190m £178m £138m
Net gearing N/a N/a 25.5% 19.1%
Weighted average cost 3.47% 2.87% 3.45% 3.07%
Weighted average maturity 6.0 years 5.2 years 6.3 years 6.3 years
Percentage of facilities at a fixed rate of 74% 61% 79% 84%
interest
The weighted average term of the Company’s fixed-rate debt facilities is 7.5 years (31 March
2022: 7.4 years).
Dividends
During the Period the Company paid a fourth interim dividend per share for the financial year
ended 31 March 2022 of 1.375p, and the first quarterly dividend per share for the financial
year ending 31 March 2023 of 1.375p, relating to the quarter ended 30 June 2022.
In line with the Company’s dividend policy the Board approved an interim dividend of 1.375p
per share for the quarter ended 30 September 2022 which was paid on 30 November 2022 to
shareholders on the register on 14 October 2022.
Business model and strategy
Custodian Property Income REIT offers investors the opportunity to access a diversified
portfolio of UK commercial real estate through a closed-ended fund. The Company seeks to
provide investors with an attractive level of income and the potential for capital growth,
becoming the REIT of choice for private and institutional investors seeking high and stable
dividends from well-diversified UK real estate.
The Company’s investment policy 19 16 is summarised below:
• To invest in a diverse portfolio of UK commercial real estate, principally characterised
by individual property values of less than £15m at acquisition.
• The property portfolio should be diversified by sector, location, tenant and lease term,
with a maximum weighting to any one property sector or geographic region of 50%.
• To acquire modern buildings or those considered fit for purpose by occupiers, focusing on
areas with:
• High residual values;
• Strong local economies; and
• An imbalance between supply and demand.
• No one tenant or property should account for more than 10% of the rent roll at the time
of purchase, except for:
(i) governmental bodies or departments; or
(ii) single tenants rated by Dun & Bradstreet as having a credit risk score higher than
two 20 17 , where exposure may not exceed 5% of the rent roll.
• The Company will not undertake speculative development except for the refurbishment or
redevelopment of existing holdings, but may invest in forward funding agreements where
the Company may acquire pre-let development land and construct investment property with
the intention of owning the completed development.
• The Company may use gearing provided that the maximum LTV shall not exceed 35%, with a
medium-term net gearing target of 25% LTV.
Investment Manager
Custodian Capital Limited (“the Investment Manager”) is appointed under an investment
management agreement (“IMA”) to provide asset management, investment management and
administrative services to the Company.
Board succession and tenure
After eight years of service, Matthew Thorne retired as Non-Executive Director of the Company
at the AGM on 31 August 2022, in line with its succession plan. The Board would like to
thank Matthew for his significant contribution to the development of the Company since his
appointment on IPO in 2014.
Responding to Matthew’s departure we were delighted to welcome Malcolm Cooper, who joined the
Board on 6 June 2022, and who brings a range of experience and skills including the financial
expertise to take on the role of Chair of the Audit and Risk Committee and maintain the
Board’s property and governance experience.
The Company’s Directors are appointed on an initial three-year term, with a typical
expectation that two, three-year terms will be served, plus the potential to be invited to
serve for an additional three-year period. The Company’s succession policy allows for a
tenure of longer than nine years, in line with the 2019 AIC Corporate Governance Code for
Investment Companies (“AIC Code”), but the Board acknowledges the benefits of ongoing Board
refreshment.
In line with the Company’s succession plan I intend to retire as a Non-Executive Director of
the Company at the AGM in 2023 when I will have completed my ninth year of service. Where
possible, the Board’s policy is to recruit successors well ahead of the retirement of
Directors and a recruitment process is underway with an executive search consultancy to
identify a suitable replacement in time to allow an appropriate period of handover.
Diversity
The Board is conscious of increased stakeholder focus on diversity and understands a diverse
Board brings constructive challenge and fresh perspectives to discussions.
The Company follows the AIC Code which recommends:
• The Board has a combination of skills, experience and knowledge; and
• Both appointments and succession plans should be based on merit and objective criteria
and, within this context, should promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths.
The Board supports the overall recommendations of the Hampton-Alexander and Parker Reviews
for appropriate gender and ethnic diversity. During the Period the FCA has introduced
‘comply or explain’ targets of:
• At least 40% of the board should be women;
• At least one of the senior board positions (Chair, Chief Executive Officer, Chief
Financial Officer or Senior Independent Director (“SID”) should be a woman; and
• At least one member of the board should be from an ethnic minority background
The Company’s Board contains two females representing 33% with Elizabeth McMeikan acting as
the Senior Independent Director. No Directors are from a minority ethnic background.
The Board’s positive approach to diversity means that, where possible, each time a director
is recruited at least one of the shortlist candidates is female and at least one of the
shortlist candidates is from a minority ethnic background. Custodian Property Income REIT is
an investment company with no Executive Directors and a small Board compared to equivalent
size listed trading companies. As a result, the Company does not comply with the newly
introduced diversity targets. We will report on what steps the Company is taking to address
these targets in the Annual Report for the year ending 31 March 2023.
Remuneration
During the Period the Board has reviewed its governance processes and identified that,
because the Board has no Executive Directors and the Company has no employees, it is most
appropriate for the Board as a whole to be responsible for setting and reviewing the
Directors’ remuneration policy. On that basis the Company’s Remuneration Committee has been
disbanded with immediate effect with its key duties now performed by the Board. This
announcement is made in accordance with Listing Rule 9.6.11 (3).
Environmental, social and governance (“ESG”)
The Board recognises that its decisions have an impact on the environment, people and
communities. The Board also believes that the Company’s property strategy and ESG
aspirations create a compelling rationale to make environmentally beneficial improvements to
its property portfolio and incorporate ESG best practice into everything the Company does.
The Company’s ESG Committee: agrees the Company’s environmental key performance indicators
(“KPIs”) and monitors its performance against them; ensures it complies with its
environmental reporting requirements and best practice; assesses the engagement with the
Company’s environmental consultants; and assesses the level of social outcomes being achieved
for its stakeholders and the communities in which it operates.
The Company's ESG policy 21 18 outlines our approach to managing ESG impacts and provides
the framework for setting and reviewing environmental and social objectives to ensure we are
continuously improving our performance and setting a leadership direction.
As a result, the Board has committed to:
• Understanding environmental risks and opportunities;
• Improving the energy performance of our buildings;
• Reducing energy usage and emissions;
• Achieving positive social outcomes and supporting local communities; and
• Complying with all requirements and reporting in line with best practice where
appropriate.
The Board is determined to ensure the Company’s pathway towards net zero carbon fits with
stakeholder expectations and the Company’s property strategy. We see the careful
implementation of a practical carbon reduction strategy as a crucial next step in the
Company’s ESG journey and during the Period we have engaged Jones Lang LaSalle (“JLL”) to
assist the Investment Manager in developing a detailed plan to achieve this.
Change of company name
The Company changed its name from Custodian REIT plc to Custodian Property Income REIT plc on
6 December 2022 to better reflect the property strategy and income focus, and we believe this
clarification will be of particular benefit to retail investors investing via platforms. In
conjunction with this name change our corporate branding, website and marketing material will
be updated to provide all stakeholders with an enhanced experience.
Outlook
Over the last five years shareholders have received an income return of 29.7p per share, or
an annual average of 5.93p per share, always fully covered by earnings, supported by both a
diverse, smaller regional property strategy and a conservative gearing policy. These core
pillars of the Custodian Property Income REIT strategy are set firm and we hope and expect
will continue to provide strong income returns as valuations settle into the prevailing
market conditions. As the Investment Manager sets out below, there is depth in occupational
demand and latent rental growth in the portfolio which offers the prospect of growth for
existing shareholders, despite the current difficult economic circumstances.
David Hunter
Chairman
13 December 2022
Investment Manager’s report
Property market
The investment market reached record highs in certain sectors earlier this year as positive
market sentiment pushed valuation increases. That sentiment has recently reversed due
primarily to inflation, the rising cost of debt as well as global economic and market
uncertainty, with associated valuation decreases commencing in August 2022. Certain sectors,
particularly prime logistics, have seen the most significant valuation increases over the
last 12-18 months but pricing of Custodian Property Income REIT’s smaller regional properties
never hit the heights of super-prime logistics, so we expect to see a more correspondingly
muted pricing correction as the market reacts to current circumstances.
Custodian Property Income REIT has delivered a diversified portfolio strategy, despite the
recent trend for single sector investing. This has enabled the acquisition of some prime
high street retail properties and strong, regional, city centre offices which have held their
value through the Period. In line with our smaller regional property strategy, the Company
has assembled a portfolio comprising 165 properties with an average value of £4.2m and no one
tenant in any single property accounting for more than 1.5% of the Company’s rent roll. This
spread significantly mitigates property specific risk and tenant default risk.
We believe strong recent leasing activity demonstrates the resilience of Custodian Property
Income REIT’s well-diversified investment portfolio. The depth of the occupational market
remains the backbone of the Company’s robust earnings and this was demonstrated by the 18 new
leases signed during the Period adding £2.2m of annual rent for c. six more years.
The Company has continued to see good levels of occupier activity, with seven new leases
already signed since the Period end and a strong pipeline of asset management and
refurbishment/redevelopment opportunities.
EPRA earnings per share of 2.8p showed an annualised earnings yield 22 19 of 5.8% at 30
September 2022 and 6.2% at the time of writing. As pricing for listed property companies is
increasingly out of step with NAV, we believe earnings yield is a more reliable measure of
value and comparator between different companies with differing strategies, as income
supports the greater part of total return. On this measure Custodian Property Income REIT
rates very strongly against its close peers, offering an annual dividend per share of 5.5p,
fully covered by net earnings, representing a dividend yield 23 20 of 5.7% at 30 September
2022 and 6.1% at the time of writing.
Custodian Property Income REIT’s loan-to-value at 30 September 2022 of 25.5% now stands at
24.0% following post Period end sales. Of the Company’s £178m of drawn debt facilities 79%
is at fixed rates of interest and the balance is drawn on a variable rate revolving credit
facility. The weighted average term of drawn debt is 6.3 years and the average cost of debt
is 3.5%. Thanks to a strong balance sheet with significant covenant headroom and no debt
facility maturing until September 2024 the Company is under no pressure to sell and the
relatively low cost of debt should remain accretive to earnings through this phase of market
turbulence.
Property portfolio performance
At 30 September 2022 the Company’s property portfolio comprised 165 assets (31 March 2022:
160 assets), 263 tenants and 335 tenancies with an aggregate net initial yield
(“NIY”) 24 21 of 5.9% (31 March 2022: 5.7%, 30 September 2021: 6.2%) and a weighted average
unexpired lease term to first break or expiry (“WAULT”) of 4.8 years (31 March 2022: 4.7
years).
Across the portfolio there is rental reversionary potential, particularly in the office and
industrial sectors, where the potential rental reversion over passing rent is 10.6% and 7.3%
respectively, as shown below:
Rental reversionary potential
Sector % of rent roll
£000
Industrial 4,343 10.6%
Office 3,012 7.3%
Retail warehouse 849 2.1%
Other 539 1.3%
Retail (443) (1.1%)
8,300 20.2%
The rental growth prospects for UK commercial property is one of the attractions of real
assets in an inflationary environment and we believe the portfolio is set fair to deliver
that growth.
Through judicious capital expenditure, refurbishment, redevelopment and an objective to
enhance the environmental and social impact of buildings we expect to pick up even more
rental growth.
The property portfolio is split between the main commercial property sectors, in line with
the Company’s objective to maintain a suitably balanced portfolio, with a relatively low
exposure to office and a relatively high exposure to industrial, retail warehouse and
alternative sectors, often referred to as ‘other’ in property market analysis.
The current sector weightings are:
Valuation Weighting by Valuation Weighting Valuation
income 25 22 by income movement
30 Sept 31 March before
2022 30 Sept 2022 31 March acquisition Weighting Weighting
costs by value by value
£m 2022 £m 2022 £m 30 Sept 31 March
2022 2022
Sector
Industrial 327.3 38% 325.1 38% (16.4) 48% 49%
Retail 147.3 24% 125.4 21% (2.5) 22% 19%
warehouse
Office 83.4 16% 88.1 17% (5.4) 12% 13%
Other 26 23 77.2 11% 76.9 13% (1.9) 11% 12%
High street 50.2 11% 49.7 11% (1.5) 7% 7%
retail
Total 685.4 100% 665.2 100% (27.7) 100% 100%
Industrial and logistics property remains a very good fit with the Company's strategy. The
demand for smaller lot-sized units is very broad, from manufacturing, urban logistics, online
traders and owner occupiers. This demand, combined with a restricted supply resulting from
limited new development, supports high residual values (where the vacant possession value is
closer to the investment value than in other sectors) and drives rental growth. Despite a
long period of growth in this sector, as the rental reversionary potential table above
demonstrates, there is more rental growth to come.
Out-of-town retail/retail warehousing remains an important asset class for the Company. We
expect that well-located retail warehouse units, let off low rents, located on retail parks
which are considered dominant in their area will continue to be in demand by retailers. The
importance of convenience, free parking, the capacity to support click and collect and the
relatively low cost compared to the high street should continue to support occupational
demand for the Company’s retail warehouse assets.
Regional offices will remain a sector of interest for the Company and we expect there to be
activity post-pandemic in regional office markets. Locations that offer an attractive
environment to both live and work in and that offer buildings with high environmental
standards and accessibility to a skilled workforce, will be most desirable. There is latent
rental growth in many regional office markets where supply has been much diminished through
redevelopment to alternative uses.
Custodian Property Income REIT targets properties across all asset classes that are capable
of supporting the Company’s ESG objectives and it is fully committed to investing in and
refurbishing both new properties and the existing portfolio to meet these objectives.
The Company operates a geographically diversified property portfolio across the UK, seeking
to ensure that no one region represents more than 50% of portfolio income. The geographic
analysis of the Company’s portfolio at 30 September 2022 was as follows:
Period valuation
Weighting by value 30 Sep movement Weighting Weighting
Valuation 2022 by income11 by income11
£m 30 Sep 2022 31 Mar 2022
30 Sep 2022
Location £m
West Midlands 128.0 19% (11.5) 19% 18%
North-West 112.1 16% (6.6) 18% 19%
South-East 84.4 12% 1.8 12% 14%
East Midlands 99.6 14% (2.7) 14% 13%
South-West 66.9 10% (2.7) 8% 9%
Scotland 88.5 13% (3.1) 12% 10%
North-East 67.5 10% (1.1) 12% 12%
Eastern 32.6 5% (1.6) 4% 4%
Wales 5.8 1% (0.2) 1% 1%
685.4 100% (27.7) 100% 100%
For details of all properties in the portfolio please see
27 custodianreit.com/property/portfolio.
Acquisitions
The Company invested £52.7m during the Period described below:
• The 70,160 sq ft Springfield Retail Park in Nottingham for £15.0m comprising four units
occupied by Wickes, Matalan, Poundland and KFC. The leases have a WAULT of nine years
with an aggregate passing rent of £994k per annum, reflecting a NIY of 6.21%;
• A 91,955 sq ft distribution facility on Eurocentral park between Edinburgh and Glasgow
for £11.125m let to Gist on a five-year lease with third year break option. The annual
rent is £623k reflecting a NIY of 5.25% with an expected reversionary yield 28 24 of
7.0%;
• Two retail warehouses covering an aggregate 40,077 sq ft in Droitwich and Measham for
£8.9m. Both units are let to DFS with an aggregate WAULT of 8.0 years and aggregate
annual passing rent of £894k reflecting a NIY of 9.43%;
• An 86,922 sq ft industrial facility in Grangemouth for £7.5m let to Thornbridge Sawmills
for a further 18 years. The unit has a passing rent of £388k per annum, with a reversion
in September 2023 linked to RPI, which is expected to reflect a net reversionary yield of
5.5%;
• Two retail units on Winchester high street covering an aggregate 5,228 sq ft for £3.65m
let to Nationwide Building Society and Hobbs. The tenants’ leases expire in April 2028
and December 2031 respectively and are currently at an aggregate current passing rent of
£249k per annum, reflecting a NIY of 6.41%;
• A 47,882 sq ft industrial facility near Chesterfield let to Container Components with 20
years remaining on the lease for £3.5m. The property produces an index linked passing
rent of £227k per annum, reflecting a NIY of 6.10%; and
• Two drive-through restaurants on Clifton Moor Retail Park, York for £3.025m. The units
are occupied by Burger King and KFC franchisees with a WAULT of 9.7 years and an
aggregate passing rent of £163k per annum, reflecting a NIY of 5.07%.
Disposals
Owning the right properties at the right time is a key element of effective property
portfolio management, which necessarily involves periodically selling properties to balance
the property portfolio. Custodian Property Income REIT is not a trading company but
identifying opportunities to dispose of assets significantly ahead of valuation or that no
longer fit within the Company’s investment strategy is important.
The Company sold the following properties during the Period for an aggregate consideration of
£14.8m:
• An industrial unit in Milton Keynes to a special purchaser for £8.5m, reflecting a 73%
premium to valuation
• An Audi car dealership in Derby for £5.7m, £1.2m ahead of valuation; and
• A high street retail unit in Weston-Super-Mare at valuation for £0.7m.
Since the Period end the Company has sold:
• A shopping centre in Gosforth for £9.3m, which had been part of the purchase of DRUM
Income Plus REIT plc (“DRUM REIT”) in November 2021, for a 3.5% premium to the £8.975m
apportioned value of the asset at purchase. Since acquisition, the asset has produced
rental income of c. £0.9m with the completion of several asset management activities
increasing occupancy and extending contractual lease terms;
• Business park offices in Leicester for £2.8m at valuation where minimal future rent and
valuation growth was expected; and
• An industrial unit in Kilmarnock at auction for £1.4m, 12% ahead of valuation. The
unit’s environmental credentials did not fit with the Company’s ESG objectives and it was
not considered practical to mitigate these risks.
Property portfolio risk
The property portfolio’s security of income is enhanced by 15% of income benefitting from
either fixed or indexed rent reviews.
Short-term contractual income at risk is a relatively low proportion of the property
portfolio’s total income, with 34% expiring in the next three years and 11% within one year.
30 Sept 31 Mar
2022 2022
Aggregate income expiry
0-1 years 11% 15%
1-3 years 23% 23%
3-5 years 21% 19%
5-10 years 34% 31%
10+ years 11% 12%
100% 100%
The Company’s Annual Report for the year ended 31 March 2022 set out the principal risks and
uncertainties facing the Company at that time. This disclosure highlighted inflation as an
emerging risk due to the recovery in global demand following the COVID-19 pandemic and the
ongoing war in Ukraine contributing to global supply chain issues and energy price
inflation. Inflation has continued, in particular for energy prices, and interest rates have
risen sharply as a result. This prevailing economic situation has continued to impact the
Company in terms of the cost and availability of materials and labour in carrying out
redevelopments, refurbishments and maintenance, and an increase in the cost of its variable
rate borrowing. They also present an indirect risk through their impact on the UK economy in
terms of growth and consumer spending and the consequential impact on occupational demand for
real estate.
We do not anticipate any changes to the other risks and uncertainties disclosed over the
remainder of the financial year.
Outlook
Rental growth from real assets, diversified by tenant, location and sector and supported by a
strong balance sheet provides a robust model to face down current market volatility.
Accordingly we remain optimistic for returns from Custodian Property Income REIT and
confident that the smaller regional property portfolio will continue to support fully covered
dividends while offering a defensive strategy to investors.
Richard Shepherd-Cross
for and on behalf of Custodian Capital Limited
Investment Manager
13 December 2022
Asset management report
Our continued focus on asset management during the Period including rent reviews, new
lettings, lease extensions and the retention of tenants beyond their contractual break
clauses and expiries resulted in a £8.4m valuation increase in the Period.
Property portfolio summary
30 Sept 2022 31 Mar 2022
Property portfolio value £685.4m £665.2m
Separate tenancies 335 339
EPRA occupancy rate 89.3% 89.8%
Assets 165 160
WAULT 4.8 years 4.7 years
NIY 5.9% 5.7%
Weighted average EPC rating C (58) C (61)
During the Period we have seen that, despite macroeconomic uncertainty, continued close
collaboration with tenants will generate asset management opportunities including lease
extensions and re-gears which has seen the Company increase its WAULT to 4.8 years.
Key asset management initiatives completed during the Period include:
• A 10-year lease renewal without break with B&Q on a retail warehouse unit in Banbury with
an annual rent of £400k, increasing valuation by £2.6m;
• A new 10-year lease without break with Nationwide Platforms on a vacant industrial unit
in Avonmouth with an annual rent of £300k, increasing valuation by £1.5m;
• A 10-year lease renewal with a fifth-year tenant break option with Heywood Williams on an
industrial unit in Bedford with an annual rent of £289k, increasing valuation by £1.4m;
• A new 20-year lease with a 15-year tenant break option to Giggling Squid on a vacant
retail unit in Shrewsbury at an annual rent of £80k, increasing valuation by £0.5m;
• A new 10-year lease with a fifth-year tenant break option with Bunzl on an industrial
unit in Castleford with an annual rent of £164k, increasing valuation by £0.4m;
• A new 10-year lease with a fifth-year tenant break option with Jollyes Pets on a vacant
retail warehouse unit in Southport with an annual rent of £48k, increasing valuation by
£0.3m;
• A five-year lease extension with The Range on a retail warehouse unit in Burton-on-Trent,
including extending the external demise to create a new garden centre area generating an
additional £10k of annual rent, increasing valuation by £0.3m;
• A new 10-year lease with a fifth-year tenant break option to CVS Vets on a vacant retail
warehouse unit in Southport with an annual rent of £48k, increasing valuation by £0.3m;
• A new six-year lease with a third-year tenant break option to CD Transport UK on a vacant
industrial unit in Weybridge with an annual rent of £219k, increasing valuation by £0.2m;
• A new 10-year lease with a sixth-year tenant break option with Costa on a vacant retail
unit in Colchester with an annual rent of £65k, increasing valuation by £0.2m;
• A 10-year lease renewal with a fifth-year tenant break option with Harris Cars on an
industrial unit in Kettering with an annual rent of £80k, increasing valuation by £0.1m;
• A three-year lease extension with H Samuel on a retail unit in Colchester with an annual
rent of £71k, increasing valuation by £0.1m;
• A five-year lease renewal with a third-year tenant break option with Savers on a retail
unit in Colchester with an annual rent of £56k, increasing valuation by £0.1m;
• A five-year lease renewal with a third-year tenant break option to Signet on a retail
unit in Chester with an annual rent of £68k, increasing valuation by £0.1m;
• An 8.5-year lease renewal without break to Leeds Building Society on a retail unit in
Colchester with annual rent of £30k, increasing valuation by £0.1m;
• A five-year lease renewal with a third-year tenant break option with Savers on a retail
unit in Bury St Edmunds with an annual rent of £40k, with no impact on valuation;
• A new 10-year lease with a fifth-year tenant break option with Massarella on a vacant
retail unit in Gosforth with an annual rent of £18k, with no impact on valuation; and
• A five-year lease renewal with Scope on a retail unit in Gosforth with an annual rent of
£16k, with no impact on valuation.
During the Period the following rent reviews were settled with:
• Yesss Electrical on an industrial unit in Normanton with annual rent increasing from
£337k to £448k, increasing valuation by £0.2m; and
• Audi at a car showroom in Shrewsbury with annual rent increasing from £198k to £203k,
with no impact on valuation.
Of the Company’s remaining vacant space, 25.0% is currently under offer to sell or let and a
further 53.8% is planned vacancy to enable redevelopment or refurbishment as illustrated
below:
ERV
Number of assets % ERV % of vacancy
£m
Vacant assets:
- Undergoing or earmarked for 11 2.8 5.7% 53.8%
refurbishment/redevelopment
- Under offer to sell or let 9 1.3 2.7% 25.0%
- Being marketed to let 11 1.1 2.3% 21.2%
31 5.2 10.7% 100.0%
Let property 134 43.4 89.3% -
Portfolio 165 48.6 100.0% 100.0%
Since the Period end the following initiatives have completed:
• A 10-year lease renewal to SCS Furniture on an industrial unit in Livingston with annual
rent increasing from £221k to £282k. The agreement also involves some refurbishment work
and the Company constructing a 20k sq ft extension of the property during 2023 which,
once complete, will increase annual rent to £413k and is expected to result in an
approximate £1.5m valuation increase;
• A new 25-year lease with a 15-year tenant break option to Tenpin on a leisure park in
Crewe with an annual rent of £210k, increasing valuation by £0.9m;
• A new 20-year lease with a 15-year tenant break option to Ocado on a vacant industrial
unit in Leeds with annual rent of £102k, increasing valuation by c. £400k;
• A 10-year lease renewal to Warburtons on an industrial unit in Langley Mill with annual
rent increasing from £164k to £203k, increasing valuation by c. £400k;
• A 15-year lease renewal to F1 Auto Centres on a trade counter unit in Crewe with an
annual rent of £25k, increasing valuation by £0.3m;
• A new 10-year lease with a fifth-year tenant break option to Rexel on a retail warehouse
unit in Gloucester with an annual rent of £55k, increasing valuation by £0.3m; and
• A new five-year lease with mutual two and three-year break options to IJ Tours for
additional space in an office building in Manchester at an annual rent of £24k with no
impact on valuation.
The Company has a very strong pipeline of ongoing asset management initiatives, including
those detailed below, which we expect to complete during the next 12 months and which are
expected to enhance earnings and deliver valuation increases in excess of capital
expenditure:
• A £2m refurbishment is in progress of five floors of an office block on Fountain Street,
Manchester involving developing a roof terrace, installing a high-specification internal
fit-out and adding EV charging points, air source heat pumps and tenant wellbeing
facilities. The refurbishment is expected to increase rents at the property from c. £20
per sq ft towards c. £30 per sq ft. Once fully let, the refurbishment is expected to
enhance valuation by c. £3.0m – £4.0m;
• A £6.5m redevelopment of a 60,000 sq ft industrial unit in Redditch which commenced in
September 2022 to construct a BREEAM excellent, EPC A rated unit with solar panels
covering the roof, EV chargers, with the construction targeting net zero carbon. Annual
rent of the completed asset is expected to be c. £0.5m, with an expected gross
development profit of c. £2.0m;
• An application has been submitted for planning at the Company’s Carlisle retail park for
a 2,500 sq ft drive-through restaurant with an agreed 20-year lease without break at an
annual rent of £80k, expected to increase valuation by c. £1.4m on completion; and
• Discussions are at an advanced stage for new leases with Tenpin on a vacant retail
warehouse unit in Milton Keynes and with CB Printforce regarding a lease renewal on an
industrial property in Biggleswade. If successful, these initiatives are expected to
result in aggregate valuation increases of c. £2.5m.
Outlook
Looking forward, we maintain a positive outlook with many of the asset management initiatives
currently under way expected to come to fruition over the next 6-12 months which should see
new tenants secured, leases extended and new investment into existing assets improving their
environmental credentials and realising their full potential.
Alex Nix
Assistant Investment Manager
for and on behalf of Custodian Capital Limited
Investment Manager
13 December 2022
ESG Committee report
The Board recognises that its decisions have an impact on the environment, people and
communities. The Board also believes that the Company’s property strategy and ESG
aspirations create a compelling rationale to make environmentally beneficial improvements to
its property portfolio and incorporate ESG best practice into everything the Company does.
The primary responsibilities of the ESG Committee (“the Committee”) are to agree the
Company’s environmental KPIs, monitor performance against those KPIs and ensure the
Investment Manager is managing the property portfolio in line with the ESG policy, which
commits the Company to:
• Understanding environmental risks and opportunities;
• Improving the energy performance of our buildings;
• Reducing energy usage and emissions;
• Achieving positive social outcomes and supporting local communities; and
• Complying with all requirements and reporting in line with best practice where
appropriate.
ESG approach
Environmental - we want our properties to minimise their impact on the local and wider
environment. The Investment Manager carefully considers the environmental performance of our
properties, both before we acquire them and during our period of ownership. Sites are visited
on a regular basis by the Investment Manager and any environmental issues are reported.
Social - Custodian Property Income REIT strives to manage and develop buildings which are
safe, comfortable and high-quality spaces. As such, our aim is that the safety and
well-being of occupants of our buildings is maximised.
Governance - high standards of corporate governance and disclosure are essential to ensuring
the effective operation of the Company and instilling confidence amongst our stakeholders.
We aim to continually improve our levels of governance and disclosure to achieve industry
best practice.
The Committee encourages the Investment Manager to act responsibly in the areas it can
influence as a landlord, for example by working with tenants to improve the environmental
performance of the Company’s properties and minimise their impact on climate change. The
Committee believes that following this strategy will ultimately be to the benefit of
shareholders through enhanced rent and asset values.
The Company’s environmental policy commits it to:
• Improving the energy performance of our buildings - investing in lower carbon technology,
infrastructure and onsite renewables and ensuring redevelopments are completed to high
environmental standards.
• Reducing energy usage and emissions - liaising closely with our tenants to gather and
analyse data on the environmental performance of our properties to identify areas for
improvement.
• Achieving positive social outcomes and supporting local communities - engaging
constructively with tenants and local government to ensure we support the wider community
through local economic and environmental plans and strategies and playing our part in
providing the real estate fabric of the economy, giving employers safe places of business
that promote tenant well-being.
• Understanding environmental risks and opportunities – allowing the Board to maintain
appropriate governance structures to ensure the Investment Manager is appropriately
mitigating risks and maximising opportunities
• Reporting in line with best practice and complying with all requirements - exposing the
Company to public scrutiny and communicating our targets, activities and initiatives to
stakeholders
ESG adviser
On 6 October 2022 the Company appointed Jones Lang LaSalle Limited (“JLL”) as its ESG
adviser, replacing Carbon Intelligence. JLL is one of the world’s largest investment
advisory firms and a market leader in real estate ESG advisory with 90 ESG focused
consultants in the UK and over 650 internationally.
The Committee believes JLL’s appointment will enable the Company to accelerate the
implementation of its ESG strategy and more effectively achieve its objectives.
The Company’s ESG adviser’s engagement scope, performance and fees are determined by the ESG
Committee and ratified by the Board. Chris Ireland, a Non-Executive Director of the Company
and Chairman of JLL UK, stepped down from the Committee following JLL’s appointment. Chris
was not involved in JLL’s appointment and does not participate in Board discussions regarding
Committee recommendations relating to the Company’s ESG adviser.
Environmental key performance indicators
During the prior financial year the Company updated its environmental targets measured by key
performance indicators (“KPIs”) which provide a strategic way to assess its success towards
achieving its environmental objectives and ensure the Investment Manager has embedded key ESG
principles. These environmental KPIs cover our main areas of environmental impact including
energy efficiency, greenhouse gas emissions, water, waste and tenant engagement.
These environmental KPIs also directly support climate risk mitigation and capture some ESG
opportunities from the transition to a low-carbon economy.
The Company’s environmental KPIs in place during the Period, and comments relating to our
performance against each one, are set out below:
Area Target Progress during the Period
• 16 x 75kW/hr public facing
chargers (1,200kW/hr of
Increase EV charging capacity capacity) were in place at the
to the following by start of the Period
2025 29 25 : • 13 x 75kW/hr owned public facing
chargers were installed during
• 4,200 kW/h 30 26 across the Period by Pod Point
retail warehouse and other (975kW/hr capacity)
sector assets; and • 11 x 7kW/hr owned chargers for
• 980 kW/h 31 27 across tenant use (77 kW/hr capacity)
office and industrial were installed by Pod Point
assets during the Period at office
assets with a further 15
chargers (105kW/hr capacity) in
the pipeline
Solar and air source heat pumps
Install onsite renewable installed at West Bromwich
electricity generation at 75% redevelopment. Solar also being
of redevelopments and major installed at ongoing redevelopments
Physical building refurbishments at Redditch and Trafford Park,
improvements (whole Manchester
portfolio boundary)
Installations completed at four
sites during the Period with 12
Install smart meters across further locations due to be online
25% of the portfolio by floor during December 2022 which will
area provide 19% smart meter coverage
All ‘D’ EPC ratings to be Weighted average EPC rating has
removed or improved by 2027 moved from C (61) to C (58) during
and all ‘E’ EPC ratings to be the Period, detailed further below,
removed or improved by 2025 and all F and G ratings removed,
improved or under redevelopment
All redevelopments to achieve
Building Research
Establishment Environmental Ongoing Redditch redevelopment is
Assessment Method (“BREEAM”) expected to be BREEAM Excellent
Excellent rating rated
For landlord-controlled areas
in the like for like
portfolio, on a 2019 baseline,
achieve:
Landlord controlled area data covers
• Reduction in Scope 1 and 2 c. 75% of sites. Analysis of this
emissions of 30% by 2025 data will allow us to analyse the
• Reduction in energy portfolio and identify assets which
consumption of 15% by 2025 are performing poorly in order to
Landlord controlled usage • Less than 5% waste to make improvements
(landlord-controlled landfill by 2022
boundary) • Reduction in water
consumption by 50% by 2025
Switch all landlord-controlled Currently at 95% and expect to
sites to 100% renewable achieve further improvements by the
electricity by 2023 end of the financial year
Switch all landlord-controlled Achieved
sites to green gas by 2023.
Use TCFD recommendations and
reporting framework to
disclose our approach to Achieved for the 2022 Annual Report,
climate related governance, subject to omitting scenario
strategy, risk management and analysis as the Company is exempt
opportunities from mandatory TCFD reporting
Incorporate ESG factors into
all investment due diligence
Risk management and undertaken Ongoing
reporting
Achieve an annual improvement
in GRESB score between 2021 GRESB ‘Real Estate’ and
and 2025 ‘Development’ scores have both
increased from 2021 to 2022
Continue to report in line
with EPRA sustainability Best Achieved
Practice Recommendations to
achieve a ‘gold’ standard
For the non-landlord Tenant data collection via a data
controlled like-for-like platform currently covers c. 35% of
portfolio, on a 2019 baseline, the Company’s portfolio by floor
achieve: area which is expected to increase
with improved tenant engagement.
• Reduction in Scope 1 and 2 Analysis of this data will allow us
emissions of 20% by 2025 to analyse the portfolio and
• Reduction in energy identify assets which are performing
consumption of 10% by 2025 poorly in order to make improvements
Tenant engagement (tenant
boundary) Engage with tenants on a Quarterly meetings are taking place
quarterly basis on ESG issues with tenants at multi-let office
buildings. A tenant engagement
survey for occupiers will be issued
in December 2022
Engage with occupiers during
lease negotiations to
incorporate sustainability Ongoing
clauses into new leases
Utilise 25% of vacant high Of five vacant retail properties two
street retail space for are being used by charities and at a
short-term not-for-profit third asset windows and frontage are
lettings used by the local business
improvement district (“BID”)
New cycle storage and shower
Install changing facilities facilities have been installed at
and secure cycle parking at Lochside Way, Edinburgh and an
all appropriate assets amenity block will be installed at
an industrial property in Ashby as
Social outcomes part of a planned refurbishment
Ensure properties comply with
the Company’s cladding policy
within three months of Ongoing
acquisition
Consider biodiversity and New bat roost being installed at the
habitat strategy during all ongoing Redditch redevelopment
redevelopments
Case studies
Redditch
The Company received planning permission in June 2022 to redevelop an existing 59,000 sq ft
industrial building constructed in the 1980’s into a new 60,000 sq ft industrial/distribution
facility.
The new development will be built to a high ESG specification and will be certified BREEAM
‘Excellent’ as well as having an Energy Performance rating ‘A’.
In order to achieve this the specification will include: a carbon neutral base build,
electric vehicle charging points, solar photovoltaic panels (“PV”) to the south facing roof
elevations, LED lighting to warehouse and offices, cycle storage and shower facilities and a
bat roost to aid biodiversity.
The expected cost of the redevelopment is £7.2m and will generate an ERV in the region of
£500k pa. Given the occupation demand in this locality, we are confident the property will
be pre-let prior to completion of the construction.
Winsford
The previous tenant at this site vacated in June 2022 and alongside the required
dilapidations works we are completing an extensive refurbishment of the site including the
following which will significantly improve the building’s ESG credentials and futureproof the
site:
• LED lighting across the warehouse and office space;
• Decarbonisation of the site by removing the gas boiler and replacing with an air source
heat pump system; and
• 12 EV charging points installed for the tenant’s usage.
The site will also benefit from the installation of solar PV as part of the refurbishment
which will be utilised by an incoming tenant. Additionally, any power that isn’t used by the
tenant will be sold back to a distribution network operator to assist with the shortfall of
green energy currently available in the UK. This assists with the investment returns of the
solar PV with providers offering between 5-20p/kWh of energy produced.
EPC ratings
During the Period the Company has updated EPCs at 14 units across 7 properties covering 68k
sq ft for properties where existing EPCs had expired or where works had been completed,
improving the weighted average EPC rating from C (61) at 31 March 2022 to C (58). For
updated EPCs, there was an aggregate improvement in the rating of 24 energy performance asset
rating points 32 28 . Some of the properties showing an improvement are detailed below:
• Leicester – a new Tim Hortons drive through restaurant was built on the site of a former
Pizza Hut, improving the EPC score from D (87) to A (24)
• Chester – a refurbishment of this small retail property was carried out during the
Period, improving the EPC score from E (103) to C (61)
• Plymouth – tenant improvements of the retail warehouse unit improved the EPC score from D
(78) to A (25)
Net zero 33 29 carbon pathway
Starting the journey towards net zero carbon is a crucial next step in our ESG strategy and
making this journey fit with stakeholder goals and the Company’s property strategy is one of
the key challenges facing the Company and the real estate sector. Developing a carbon
reduction pathway with the Company’s newly appointed ESG advisers, JLL, supporting the
Investment Manager, is now underway.
Outlook
The Company will work towards achieving its refined ESG targets over the course of the
remainder of the financial year, improving our understanding of the specific impacts of
climate change on the Company, seeking to influence tenant behaviour to improve environmental
outcomes and assessing our strategy towards creating a carbon reduction pathway.
Approval
This report was approved by the Committee and signed on its behalf by:
Hazel Adam
Chair of the ESG Committee
13 December 2022
Property portfolio
Location Tenant % Portfolio Income 34 30
INDUSTRIAL
Glasgow Gist 1.30%
Ashby Teleperformance 1.10%
Burton ATL Transport 1.00%
Salford Restore 0.90%
Normanton Yesss Electrical 0.90%
Redditch DS Smith Packaging 0.80%
Hilton Daher Aerospace 0.80%
Doncaster Silgan Closures 0.80%
West Bromwich PDS Group 0.80%
Grangemouth National Timber Group 0.80%
Eurocentral Next 0.80%
Warrington Life Technologies 0.80%
Milton Keynes Massmould 0.80%
Tamworth ICT Express 0.70%
Kettering Multi-let 0.70%
Biggleswade Turpin Distribution 0.70%
Warrington Procurri Europe and Synertec 0.70%
Manchester Harbour International Freight 0.70%
Cannock HellermannTyton 0.70%
Bellshill Yodel 0.60%
Avonmouth Nationwide Platforms 0.60%
Daventry Multi-Colour 0.60%
Bedford Heywood Williams Components 0.60%
Edinburgh Menzies Distribution 0.60%
Gateshead - Team Valley Zentia Profiles 0.60%
Plymouth Sherwin Williams 0.60%
Knowsley Multi-let 0.60%
Nuneaton DX Network Service 0.50%
Bristol BSS Group 0.50%
Coventry Royal Mail 0.50%
Glasgow Menzies Distribution 0.50%
Aberdeen Menzies Distribution 0.50%
Hamilton Ichor Systems 0.50%
Chesterfield Container Components Europe 0.50%
Stevenage Morrison Utility Services 0.50%
Cambuslang Brenntag 0.50%
38.3%
Livingston A Share & Sons (t/a SCS) 0.50%
Weybridge CD Transport 0.50%
Oldbury Sytner Group 0.40%
Coalville MTS Logistics 0.40%
Warwick Semcon 0.40%
York Menzies Distribution 0.40%
Farnborough Green Retreats 0.40%
Norwich Menzies Distribution 0.40%
Erdington West Midlands Ambulance Service NHS 0.30%
Trust
Langley Mill Warburton 0.30%
Ipswich Menzies Distribution 0.30%
Irlam Northern Commercials 0.30%
Castleford Bunzl 0.30%
Sheffield Parkway Synergy Health 0.30%
Liverpool, Speke Powder Systems 0.30%
Aberdeen Multi-let 0.30%
Swansea Menzies Distribution 0.30%
Leeds Tricel Composites 0.30%
Sheffield Arkote 0.30%
Nottingham Hickling and Squires 0.30%
Kettering Sealed Air 0.30%
Sheffield Intelligent Facility Solutions and 0.30%
ITM Power
Atherstone North Warwickshire Borough Council 0.20%
Liverpool, Speke DHL International 0.20%
Huntingdon PHS Group 0.20%
Dundee Menzies Distribution 0.20%
Harrison Court Multi-let 0.20%
Glasgow - air cargo DHL Global Forwarding 0.20%
Normanton Acorn Web Offset 0.20%
Kilmarnock Royal Mail 0.20%
Aberdeen, Hilton, Kettering, Leeds, Redditch, VACANT 4.00%
Warrington, Weybridge and Winsford
RETAIL WAREHOUSE
Nottingham Gastronomy Restaurants (t/a KFC), Matalan, 2.00%
Poundland and Wickes
Evesham Multi-let 1.80%
Carlisle Multi-let 1.70%
Weymouth B&Q, Halfords and Sports Direct 1.60%
Winnersh Pets at Home and Wickes 1.20%
Burton CDS and Wickes 1.20%
Droitwich DFS 1.10%
Southport Multi-let 1.10%
Leicester Matalan 1.00%
Ashton-under-Lyne B&M 0.90%
Plymouth B&M, InstaVolt and Magnet 0.80%
Banbury B&Q 0.80%
Plymouth A Share & Sons (t/a SCS) and Oak 0.80%
FurnitureLand
Measham DFS 0.80%
Sheldon Dreams, Halfords, InstaVolt and Pets at Home 0.80%
Leighton Buzzard Homebase 0.70%
Cromer Homebase 0.60%
Gloucester Magnet, Smyths Toys and InstaVolt 0.50%
Leicester Magnet 0.50%
Torpoint Sainsbury’s 0.50%
Swindon B&M and InstaVolt 0.40%
Portishead Majestic Wine, TJ Morris (t/a Home Bargains) 0.40%
and InstaVolt
Grantham Poundstretcher, PureGym and InstaVolt 0.30%
Gloucester Farmfoods 0.10%
Gloucester, Grantham, Milton Keynes and VACANT 1.90%
Swindon
23.5%
OFFICE
West Malling Regus (Maidstone West Malling) 1.30%
Oxford Multi-let 1.20%
Leicester Multi-let 1.00%
Birmingham Multi-let 1.00%
Glasgow Skills Development Scotland 0.90%
Sheffield Health & Safety Executive and 0.80%
Home Office
Cheadle Agilent Technologies 0.70%
Leeds First Title 0.70%
Cheadle Wienerberger 0.70%
Edinburgh Multi-let 0.60%
Leeds First Title 0.60%
Manchester - Arthur House Multi-let 0.60%
Leicester Countryside Properties and PIB 0.60%
(Group Services)
Derby Edwards Geldards 0.60%
Gateshead Datawright and Worldpay 0.50%
Solihull Lyons Davidson 0.40%
Glasgow Livingstone Brown and Safe 0.20%
Deposits
Manchester - Fountain Street Meridian Healthcomms 0.10%
Birmingham, Castle Donington, Cheadle, Edinburgh,
Gateshead, Glasgow, Manchester - Fountain St and VACANT 3.30%
Manchester - Arthur House
15.8%
OTHER
Perth Bannatyne Fitness, Scotco Restaurants (t/a KFC) and Tim 0.80%
Hortons
Stoke Nuffield Health 0.60%
Lincoln Total Fitness 0.60%
Torquay Bistrot Pierre 1994, Las Iguanas, Jurassic Coast Coffee 0.60%
(t/a Costa) and Loungers
Gillingham Arthur Foodstores (t/a Co-Op) 0.50%
Crewe Mecca Bingo (sublet to Odeon) 0.50%
York Pendragon 0.50%
Liverpool Merseycare NHS Trust 0.40%
Shrewsbury Ask Italian, Chokdee (t/a Giggling Squid) and Sam's 0.40%
Club (t/a House of the Rising Sun)
Shrewsbury VW Group 0.40%
Salisbury Parkwood Health & Fitness 0.40%
Lincoln MKM Buildings Supplies 0.40%
Loughborough Listers Group 0.30%
Watford Tim Hortons 0.30%
Bath Chokdee (t/a Giggling Squid) 0.30%
Shrewsbury TJ Vickers & Sons 0.30%
Leicester Tim Hortons 0.30%
Castleford MKM Buildings Supplies 0.30%
High Wycombe Stonegate Pubs 0.30%
Maypole Starbucks 0.20%
Nottingham Kbeverage (t/a Starbucks) 0.20%
Carlisle The Gym Group 0.20%
Portishead AGO Hotels 0.20%
York Clifton Moor Chicken Cabins and Karali (t/a KFC) 0.40%
Crewe Autoclenz, Edmundson Electrical and F1 Autocentres 0.20%
Plymouth McDonald's 0.20%
Portishead JD Wetherspoons 0.20%
Stratford The Universal Church of the Kingdom of God 0.10%
Burton 1 Oak (t/a Starbucks) 0.10%
Knutsford Knutsford Day Nursery 0.10%
Chesham Ashbourne Day Nurseries 0.10%
Crewe, Liverpool and Redhill VACANT 1.00%
11.4%
RETAIL
Gosforth Multi-let 2.10%
Worcester Superdrug Stores 0.80%
Dunfermline Multi-let 0.80%
Cardiff Multi-let 0.80%
Portsmouth Poundland, Sportswift and Your Phone Care 0.50%
Winchester Hobbs and Nationwide Building Society 0.50%
Colchester Costa, H Samuel, Leeds Building Society and Lush 0.50%
Shrewsbury Multi-let 0.50%
Southampton URBN UK 0.40%
Guildford Reiss 0.40%
Southsea Portsmouth City Council and Superdrug 0.30%
Birmingham Coral, Greggs, Subway and Tesco 0.30%
Edinburgh Phase Eight, 0.30%
Chester Felldale Retail (t/a Lakeland) and Signet Trading 0.20%
(t/a Ernest Jones)
Chester Aslan Jewellery and Der Touristik 0.20%
Portsmouth The Works 0.20%
Shrewsbury Nationwide Building Society 0.20%
Stratford Foxtons 0.20%
Taunton Wilko Retail 0.20%
Bury St Edmunds The Works 0.20%
Chester Ciel (Concessions) and Diamonds of Chester 0.20%
Colchester Kruidvat (t/a Savers) 0.10%
St Albans Crepeaffaire 0.10%
Cirencester Brook Taverner and Danish Wardrobe (t/a Noa Noa) 0.10%
Glasgow Ramsdens Financials 0.10%
Bury St Edmunds Savers 0.10%
Colchester, Guildford, Newcastle, VACANT 0.50%
Portsmouth and Shrewsbury
10.8%
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2022
Audited
Unaudited Unaudited
12 months
6 months 6 months
to 31 Mar
to 30 Sept 2022 to 30 Sept 2021
2022
Note £000 £000 £000
Revenue 4 22,296 20,152 39,891
Investment management fee (2,086) (1,788) (3,854)
Operating expenses of rental property
(852)
• rechargeable to tenants (2,704) (882)
• directly incurred (1,127) (1,708) (3,422)
Professional fees (428) (262) (617)
Directors’ fees (167) (145) (291)
Administrative expenses (460) (356) (776)
Expenses (6,972) (5,141) (9,812)
Operating profit before financing and
revaluation of investment property
15,324 15,011 30,079
Unrealised (losses)/gains on revaluation of
investment property:
- relating to gross property revaluations
9 (27,742) 32,310 93,977
• relating to acquisition costs 9 (3,404) (1,069) (2,273)
Net valuation (decrease)/increase (31,146) 31,241 91,704
Profit on disposal of investment property 4,695 4,165 5,369
Net (losses)/profit on investment property (26,451) 35,406 97,073
Operating (loss)/profit before financing (11,127) 50,417 127,152
Finance income 5 - - -
Finance costs 6 (2,960) (2,347) (4,827)
Net finance costs (2,960) (2,347) (4,827)
(Loss)/profit before tax (14,087) 48,070 122,325
Income tax 7 - - -
(Loss)/profit and total comprehensive
(expense)/income for the Period, net of tax
(14,087) 48,070 122,325
Attributable to:
Owners of the Company (14,087) 48,070 122,325
Earnings per ordinary share:
Basic and diluted (p) 3 (3.2) 11.4 28.5
EPRA (p) 3 2.8 3.0 5.9
The (loss)/profit for the Period arises from the Company’s continuing operations.
Condensed consolidated statement of financial position
At 30 September 2022
Registered number: 08863271
Unaudited Unaudited Audited
30 Sept 30 Sept 31 Mar
2022 2021 2022
Note £000 £000 £000
Non–current assets
Investment property 9 685,423 565,279 665,186
Property, plant and equipment 10 747 - -
Total non-current assets 686,170 565,279 665,186
Current assets
Trade and other receivables 11 6,019 6,452 5,201
Cash and cash equivalents 13 4,765 37,139 11,624
Total current assets 10,784 43,591 16,825
Total assets 696,954 608,870 682,011
Equity
Issued capital 15 4,409 4,206 4,409
Share premium 250,970 251,015 250,970
Merger reserve 18,931 - 18,931
Retained earnings 227,116 190,648 253,330
Total equity attributable to equity holders of the Company
501,426 445,869 527,640
Non-current liabilities
Borrowings 14 176,596 145,713 113,883
Other payables 570 571 570
Total non-current liabilities 177,166 146,284 114,453
Current liabilities
Borrowings 14 - - 22,727
Trade and other payables 12 10,702 10,098 9,783
Deferred income 7,660 6,619 7,408
Total current liabilities 18,362 16,717 39,918
Total liabilities 195,528 163,001 154,371
Total equity and liabilities 696,954 608,870 682,011
These interim financial statements of Custodian Property Income REIT plc were approved and
authorised for issue by the Board of Directors on 13 December 2022 and are signed on its
behalf by:
David Hunter
Director
Condensed consolidated statement of cash flows
For the six months ended 30 September 2022
Audited
Unaudited Unaudited
12 months
6 months 6 months
to 31 Mar
to 30 Sept 2022 to 30 Sept 2021
2022
Note £000 £000 £000
Operating activities
(Loss)/profit for the Period (14,087) 48,070 122,325
Net finance costs 5,6 2,960 2,347 4,827
Net revaluation loss/(profit) 9 31,146 (31,241) (91,704)
Profit on disposal of investment property (4,695) (4,165) (5,369)
Impact of lease incentives 9 (832) (741) (1,112)
Amortisation 9 4 4 7
Depreciation 10 8 - -
Cash flows from operating activities before
changes in working capital and provisions
14,504 14,274 28,974
(Increase)/decrease in trade and other (818) (451) 1,923
receivables
Increase in trade and other payables 1,169 3,913 1,702
Cash generated from operations 351 3,462 35,299
Interest and other finance charges (2,777) (2,176) (4,463)
12,078 15,560
Net cash flows from operating activities 28,136
Investing activities
Purchase of investment property (52,818) (12,217) (21,529)
Purchase of property, plant and equipment (755) - -
Capital expenditure (4,455) (1,803) (3,515)
Acquisition costs (3,404) (1,069) (2,272)
Proceeds from the disposal of investment 14,899 38,299 54,403
property
Costs of disposal of investment property (80) (424) (479)
Net cash flows from/(used in) investing (46,613) 22,786 26,608
activities
Financing activities
Proceeds from the issue of share capital - 558 558
Costs of the issue of share capital - (5) (51)
New borrowings 14 63,000 7,000 -
New borrowings origination costs 14 (437) (62) -
Repayment of borrowings (22,760) - (25,057)
Dividends paid 8 (12,127) (12,618) (24,191)
Net cash flows (used in)/from financing 27,676 (5,127) (48,874)
activities
Net (decrease)/increase in cash and cash (6,859) 33,219
equivalents
6,003
Cash acquired through the acquisition of DRUM
REIT - -
1,701
Cash and cash equivalents at start of the 11,624 3,920 3,920
Period
Cash and cash equivalents at end of the Period 4,765 37,139 11,624
Condensed consolidated statements of changes in equity
Issued Share Retained Total
Merger reserve
capital premium earnings equity
£000
Note £000 £000 £000 £000
At 31 March 2022 (audited) 4,409 18,931 250,970 253,330 527,640
Profit and total comprehensive income
for Period -
- - (14,087) (14,087)
Transactions with owners of the
Company, recognised directly in equity
Dividends 8 - - - (12,127) (12,127)
At 30 September 2022 (unaudited) 4,409 250,970
18,931 227,116 501,426
For the six months ended 30 September 2022
For the six months ended 30 September 2021
Issued Share Retained Total
Merger reserve
capital premium earnings equity
£000
Note £000 £000 £000 £000
At 31 March 2021 (audited) 4,201 - 250,469 155,196 409,866
Profit and total comprehensive income
for Period -
- - 48,070 48,070
Transactions with owners of the
Company, recognised directly in equity
Dividends 8 - - - (12,618) (12,618)
Issue of share capital 15 5 - 546 - 551
At 30 September 2021 (unaudited) 4,206 251,015
- 190,648 445,869
Notes to the interim financial statements for the period ended 30 September 2022
1. Corporate information
The Company is a public limited company incorporated and domiciled in England and Wales,
whose shares are publicly traded on the London Stock Exchange plc’s main market for listed
securities. The interim financial statements have been prepared on a historical cost basis,
except for the revaluation of investment property, and are presented in pounds sterling with
all values rounded to the nearest thousand pounds (£000), except when otherwise indicated.
The interim financial statements were authorised for issue in accordance with a resolution of
the Directors on 13 December 2022.
2. Basis of preparation and accounting policies
1. Basis of preparation
The interim financial statements have been prepared in accordance with IAS 34 Interim
Financial Reporting. The interim financial statements do not include all the information and
disclosures required in the annual financial statements. The Annual Report for the year
ending 31 March 2023 will be prepared in accordance with International Financial Reporting
Standards adopted by the International Accounting Standards Board (“IASB”) and
interpretations issued by the International Financial Reporting Interpretations Committee
(“IFRIC”) of the IASB (together “IFRS”) as adopted by the United Kingdom, and in accordance
with the requirements of the Companies Act applicable to companies reporting under IFRS.
The information relating to the Period is unaudited and does not constitute statutory
financial statements within the meaning of section 434 of the Companies Act 2006. A copy of
the statutory financial statements for the year ended 31 March 2022 has been delivered to the
Registrar of Companies. The auditor’s report on those financial statements was not
qualified, did not include a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying the report and did not contain statements under section
498(2) or (3) of the Companies Act 2006.
The interim financial statements have been reviewed by the auditor and its report to the
Company is included within these interim financial statements.
Certain statements in this report are forward looking statements. By their nature, forward
looking statements involve a number of risks, uncertainties or assumptions that could cause
actual results or events to differ materially from those expressed or implied by those
statements. Forward looking statements regarding past trends or activities should not be
taken as representation that such trends or activities will continue in the future.
Accordingly, undue reliance should not be placed on forward looking statements.
2. Significant accounting policies
The principal accounting policies adopted by the Company and applied to these interim
financial statements are consistent with those policies applied to the Company’s Annual
Report and financial statements, except for the addition of:
• A property, plant and equipment policy following investment made in EV chargers during
the Period; and
• An amendment to the existing income recognition policy reflecting a change to the
recognition of service charge income. The Company outsources the management of service
charges on its multi-let properties to managing agents and premises costs incurred by the
service charges for let property are recharged in full to the tenant. Due to an increase
in the number of multi-let assets owned by the Company from acquisitions during the year
ended 31 March 2022, service charge income and expenditure has become more significant
and £1,673k has been disclosed as revenue with a corresponding cost within operating
expenses of rental property rechargeable to tenants in the Period’s Condensed
consolidated statement of comprehensive income. This change has no impact on reported
NAV or earnings metrics.
Property, plant and equipment
Plant, machinery, fixtures and fittings are stated at cost less accumulated depreciation and
accumulated impairment loss.
Depreciation is recognised so as to write off the cost of assets (less their residual values)
over their useful lives, using the straight-line method, on the following bases:
EV chargers 10 years
The estimated useful lives, residual values and depreciation method are reviewed at the end
of each reporting period, with the effect of any changes in estimate accounted for on a
prospective basis.
Income recognition
Contractual revenues are allocated to each performance obligation of a contract and revenue
is recognised on a basis consistent with the transfer of control of goods or services.
Revenue is measured at the fair value of the consideration received, excluding discounts,
rebates, VAT and other sales taxes or duties.
Rental income from operating leases on properties owned by the Company is accounted for on a
straight-line basis over the term of the lease. Rental income excludes service charges and
other costs directly recoverable from tenants which are recognised within ‘income from
recharges to tenants’.
Lease incentives are recognised on a straight-line basis over the lease term.
Revenue and profits on the sale of properties are recognised on the completion of contracts.
The amount of profit recognised is the difference between the sale proceeds and the carrying
amount.
Finance income relates to bank interest receivable and amounts receivable on ongoing
development funding contracts.
3. Critical judgements and key sources of estimation uncertainty
Preparation of the interim financial statements requires the Company to make judgements and
estimates and apply assumptions that affect the reported amount of revenues, expenses, assets
and liabilities.
There are no areas where a higher degree of judgement or complexity arises.
The areas where a higher degree of estimation uncertainty arises significant to the interim
financial statements are discussed below:
Valuation of investment property - Investment property is valued at the reporting date at
fair value. In making its assessment over the valuation of properties, the Company considers
valuations performed by the independent valuers in determining the fair value of its
investment properties. The valuers make reference to market evidence of transaction prices
for similar properties. The valuations are based upon assumptions including future rental
income, anticipated maintenance costs and appropriate discount rates.
Impairment of trade receivables - The Company’s assessment of expected credit losses is
inherently subjective due to the forward-looking nature of the assumptions made, most notably
around the assessment over the likelihood of tenants having the ability to pay rent as
demanded, as well as the likelihood of rent deferrals and lease incentives being offered to
tenants as a result of the pandemic. The expected credit loss which has been recognised is
therefore subject to a degree of uncertainty which may not prove to be accurate.
4. Going concern
Provision 30 of the UK Corporate Governance Code 2018 (“the Code”) requires the Board to
report whether the business is a going concern and identify any material uncertainties to the
Company’s ability to continue to do so. The Investment Manager has continued to forecast
prudently in particular regarding cash flows and borrowing facilities.
The Company operates four loan facilities which are summarised in Note 14. At 30 September
2022 the Company has significant headroom on lender covenants at a portfolio level. Net
gearing was 25.5% compared to a maximum LTV covenant of 35% with £188.9m (27.6% of the
property portfolio at 30 September 2022) of unencumbered assets available to be charged to
the security pools to enhance the LTV on individual loans if required. Completion of
property disposals since the Period end have decreased net gearing to 24.0%.
The Company’s 12-month forecast indicates that:
• The Company has surplus cash to continue in operation and meet its liabilities as they
fall due;
• Interest cover and LTV covenants on borrowings are complied with; and
• REIT tests are complied with.
The going concern assessment considered the following key assumptions and judgements included
in the financial projections to understand what circumstances would result in potential
breaches of financial covenants or the Company not being able to meet its liabilities as they
fall due:
• Tenant default;
• Length of potential void period following lease break or expiry;
• Acquisition NIY, disposals, anticipated capital expenditure and the timing of deployment
of cash;
• Interest rate changes; and
• Property portfolio valuation movements.
The results of this assessment are described below:
Covenant compliance
The testing indicated that at a portfolio level:
• The rate of loss of contractual rent through tenant default or company voluntary
arrangements (“CVAs”) would need to deteriorate by a further 40% from the 2% level
included in the Company’s forecasts to breach interest cover covenants; and
• Property valuations would have to decrease by 26% from the 30 September 2022 position to
risk breaching the overall 35% LTV covenant.
While the assumptions applied in these scenarios are possible, they do not represent the
Board’s view of a reasonably plausible downside scenario, but the results help inform the
Directors’ going concern assessment.
The Board notes that the October 2022 IPF Forecasts for UK Commercial Property Investment
survey suggests an average 1.3% increase in rents during 2023 and a 1.5% increase in 2024,
with a capital value decrease forecast of 1.5% in 2023 and an increase of 1.3% in 2024. The
Board believes the valuation of the Company’s property portfolio will prove resilient due to
its higher weighting to smaller lots with low capital values per square foot and an overall
diverse and high-quality asset and tenant base comprising over 150 assets and over 200
typically 'institutional grade' tenants across all commercial sectors.
Liquidity
At 30 September 2022 the Company has:
• £4.8m of cash with gross borrowings of £178m resulting in low net gearing, with no
expiries until September 2024 and a weighted average debt facility maturity of 6 years;
and
• An annual contractual rent roll of £43.0m, with interest costs on drawn loan facilities
of only c. £6.2m per annum.
The Board has considered the scenario used in covenant compliance reverse stress testing,
where the rate of loss of contractual rent deteriorates by a further 40% from the levels
included in the Company’s prudent forecast. In this scenario all financial covenants and the
REIT tests are complied with and the Company has surplus cash to settle its liabilities.
Having due regard to these matters and after making appropriate enquiries, the Directors have
reasonable expectation that the Company has adequate resources to continue in operational
existence for a period of at least 12 months from the date of signing of these condensed
consolidated financial statements and, therefore, the Board continues to adopt the going
concern basis in their preparation.
5. Segmental reporting
An operating segment is a distinguishable component of the Company that engages in business
activities from which it may earn revenues and incur expenses, whose operating results are
regularly reviewed by the Company’s chief operating decision maker to make decisions about
the allocation of resources and assessment of performance and about which discrete financial
information is available. As the chief operating decision maker reviews financial
information for, and makes decisions about, the Company’s investment property as a portfolio,
the Directors have identified a single operating segment, that of investment in commercial
properties.
6. Principal risks and uncertainties
The Company’s assets consist of direct investments in UK commercial property. Its principal
risks are therefore related to the UK commercial property market in general, the particular
circumstances of the properties in which it is invested and their tenants. Principal risks
faced by the Company are:
• Loss of contractual revenue;
• Decreases in property portfolio valuations;
• Reduced availability or increased costs of debt and complying with loan covenants;
• Inadequate performance, controls or systems operated by the Investment Manager;
• Non-compliance with regulatory or legal changes;
• Business interruption from cyber or terrorist attack or pandemics;
• Failure to meet ESG compliance requirements or shareholder expectations; and
• Inflation in property costs and capital expenditure.
These risks, and the way in which they are mitigated and managed, are described in more
detail under the heading ‘Principal risks and uncertainties’ within the Company’s Annual
Report for the year ended 31 March 2022. The Company’s principal risks and uncertainties
have not changed materially since the date of that report, except for an exacerbation of the
risks around inflation and a worsening of the general economic outlook since 31 March 2022.
3. Earnings per ordinary share
Basic earnings per share (“EPS”) amounts are calculated by dividing net profit for the Period
attributable to ordinary equity holders of the Company by the weighted average number of
ordinary shares outstanding during the Period.
Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity
holders of the Company by the weighted average number of ordinary shares outstanding during
the Period plus the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares. There are no
dilutive instruments.
The following reflects the income and share data used in the basic and diluted earnings per
share computations:
Audited
Unaudited 6 months Unaudited 6 months 12 months
to 30 Sept 2022 to 30 Sept 2021 to 31 Mar
2022
Net loss/(profit) and diluted net
loss/(profit) attributable to equity holders (14,087) 48,070
of the Company (£000) 122,325
Net loss/(profit) on investment property 26,451 (35,406) (97,073)
(£000)
EPRA net profit attributable to equity
holders of the Company (£000) 12,364 12,664
25,252
Weighted average number of ordinary shares:
Issued ordinary shares at start of the Period
(thousands) 440,850 420,053
420,053
- 441
Effect of shares issued during the Period 8,649
(thousands)
Basic and diluted weighted average number of
shares (thousands) 440,850
420,494 428,702
Basic and diluted EPS (p) (3.2) 11.4 28.5
2.8 3.0
EPRA EPS (p) 5.9
4. Revenue
Audited
Unaudited 6 months Unaudited
12 months
to 30 Sept 6 months
2022 to 31 Mar
to 30 Sept 2021
£000 2022
£000
£000
Rental income from investment property 19,592 19,270 39,039
Income from recharges to tenants 2,704 882 852
22,296 20,152 39,891
5. Finance income
Audited
Unaudited 6 months Unaudited 6 months 12 months
to 30 Sept 2022 to 30 Sept 2021 to 31 Mar
£000 £000 2022
£000
Bank interest - - -
Finance income - - -
- - -
6. Finance costs
Audited
Unaudited 6 months Unaudited 6 months 12 months
to 30 Sept 2022 to 30 Sept 2021 to 31 Mar
£000 £000 2022
£000
Amortisation of arrangement fees on debt 183 171 364
facilities
Other finance costs 172 34 307
Bank interest 2,605 2,142 4,156
2,960 2,347 4,827
7. Income tax
The effective tax rate for the Period is lower than the standard rate of corporation tax in
the UK during the Period of 19.0%. The differences are explained below:
Audited
Unaudited
Unaudited 6 months 6 months 12 months
to 30 Sept 2022 to 30 Sept 2021 to 31 Mar
£000 £000 2022
£000
(Loss)/profit before income tax (14,087) 48,070 122,325
Tax (benefit)/charge on (loss)/profit at a
standard rate of 19.0% (30 September 2021:
19.0%, 31 March 2022: 19.0%) (2,677) 9,133 23,242
Effects of:
REIT tax exempt rental (profits)/losses 2,677 (9,133) (23,242)
Income tax expense for the Period - - -
Effective income tax rate 0.0% 0.0% 0.0%
The Company operates as a Real Estate Investment Trust and hence profits and gains from the
property investment business are normally exempt from corporation tax.
8. Dividends
Unaudited Audited
6 months Unaudited 6 months 12 months
to 30 Sept to 30 Sept 2021 to 31 Mar
2022 £000 2022
£000 £000
Interim equity dividends paid on ordinary shares
relating to the periods ended:
31 March 2021: 1.25p - 5,258 5,257
31 March 2021: 0.5p - 2,102 2,102
30 June 2021: 1.25p - 5,258 5,257
30 September 2021: 1.25p - - 5,511
31 December 2021: 1.375p - - 6,062
31 March 2022: 1.375p 6,065 - -
30 June 2022: 1.375p 6,062 - -
12,127 12,618 24,191
All dividends paid are classified as property income distributions.
The Directors approved an interim dividend relating to the quarter ended 30 September 2022 of
1.375p per ordinary share in October 2022 which has not been included as a liability in these
interim financial statements. This interim dividend was be paid on 30 November 2022 to
shareholders on the register at the close of business on 14 October 2022.
9. Investment property
£000
At 31 March 2022 665,186
Impact of lease incentives 832
Additions 56,224
Capital expenditure 4,455
Disposals (10,124)
Amortisation of right-of-use asset (4)
Valuation decrease before acquisition costs (27,742)
Acquisition costs (3,404)
Valuation decrease including acquisition costs (31,146)
At 30 September 2022 685,423
£000
At 31 March 2021 551,922
Impact of lease incentives 741
Additions 13,286
Capital expenditure 1,803
Disposals (33,710)
Amortisation of right-of-use asset (4)
Valuation increase before acquisition costs 32,310
Acquisition costs (1,069)
Valuation increase including acquisition costs 31,241
At 30 September 2021 565,279
Investment property is stated at the Directors’ estimate of its 30 September 2022 fair
value. Savills and Knight Frank LLP (“KF”), professionally qualified independent valuers,
valued the properties at 30 September 2022 in accordance with the Appraisal and Valuation
Standards published by the Royal Institution of Chartered Surveyors. Savills and KF have
recent experience in the relevant location and category of the properties being valued.
Investment property has been valued using the investment method which involves applying a
yield to rental income streams. Inputs include yield, current rent and ERV. For the Period
end valuation, the equivalent yields used ranged from 3.8% to 13.2% (31 March 2022: 4.3% to
12.3%). Valuation reports are based on both information provided by the Company (e.g.
current rents and lease terms) which are derived from the Company’s financial and property
management systems and are subject to the Company’s overall control environment, and
assumptions applied by the valuers (e.g. ERVs and yields). These assumptions are based on
market observation and the valuers’ professional judgement. In estimating the fair value of
the property, the highest and best use of the properties is their current use.
10. Property, plant and equipment
Unaudited at 30 Sept Unaudited at 30 Sept Audited
2022 2021 at 31 Mar 2022
EV chargers £000 £000 £000
Cost
Balance at the start of the period - - -
Additions 755 - -
755 - -
Depreciation
At the start of the period - - -
During the period (8) - -
(8) - -
Net book value at the end of the 747 - -
period
11. Trade and other receivables
Unaudited at 30 Sept Unaudited at 30 Sept Audited
2022 2021 at 31 Mar 2022
£000 £000 £000
Trade receivables before expected
credit loss provision
8,233 8,875 6,085
Expected credit loss provision (2,914) (2,940) (2,991)
Trade receivables 5,319 5,935 3,094
Other receivables 445 477 1,960
Prepayments and accrued income 255 40 147
6,019 6,452 5,201
The Company has provided fully for those receivable balances that it does not expect to
recover based on a specific assessment of the reason for non-payment and the creditworthiness
of the counterparty.
For remaining balances the Company has applied an expected credit loss (“ECL”) matrix based
on its experience of collecting rent arrears. The ECL matrix fully provides for receivable
balances more than 180 days past due and partially provides against receivable balances
between 60 and 180 days past due.
12. Trade and other payables
Unaudited at 30 Sept Unaudited at 30 Sept Audited
2022 2021 at 31 Mar 2022
£000 £000 £000
Falling due in less than one
year:
Trade and other payables 4,507 4,714 3,960
Social security and other 621 1,144 456
taxes
Accruals 3,948 3,235 4,226
Rental deposits and 1,626 1,005 1,141
retentions
10,702 10,098 9,783
The Directors consider that the carrying amount of trade and other payables approximates
their fair value. Trade payables and accruals principally comprise amounts outstanding for
trade purchases and ongoing costs. For most suppliers interest is charged if payment is not
made within the required terms. Thereafter, interest is chargeable on the outstanding
balances at various rates. The Company has financial risk management policies in place to
ensure that all payables are paid within the credit timescale.
13. Cash and cash equivalents
Unaudited at 30 Sept 2022 Unaudited at 30 Sept 2021 Audited
at 31 Mar 2022
£000 £000
£000
Cash and cash equivalents 4,765 37,139 11,624
Cash and cash equivalents at 30 September 2022 include £2.4m (2021: £24.5m, 31 March 2022:
£1.7m) of restricted cash comprising: £1.4m (2021: £0.8m, 31 March 2022: £0.3m) rental
deposits held on behalf of tenants, £0.7m (2021: £23.4m, 31 March 2022: £1.1m) disposal
proceeds held in charged disposal accounts and £0.3m (2021: £0.3m, 31 March 2022: £0.3m)
retentions held in respect of development fundings.
14. Borrowings
Costs incurred in the arrangement of
bank borrowings
£000
Bank borrowings
Total
£000
£000
Falling due within one year:
At 31 March 2022 22,760 (33) 22,727
Repayment of borrowings (22,760) - (22,760)
Amortisation of arrangement - 33 33
fees
At 30 September 2022 - - -
Falling due in more than 1
year:
At 31 March 2022 115,000 (1,117) 113,883
New borrowings 63,000 (437) 62,563
Repayment of borrowings - - -
Amortisation - 150 150
At 30 September 2022 178,000 (1,404) 176,596
Costs incurred in the arrangement of
bank borrowings
£000
Bank borrowings
Total
£000
£000
Falling due in more than one
year:
At 31 March 2021 140,000 (1,396) 138,604
New borrowings 7,000 - 7,000
Costs incurred in the
arrangement of - (62) (62)
bank borrowings
Amortisation - 171 171
At 30 September 2021 147,000 (1,287) 145,713
All of the Company’s borrowing facilities require minimum interest cover of 250% of the net
rental income of the security pool. The maximum LTV of the Company combining the value of
all property interests (including the properties secured against the facilities) must be no
more than 35%.
The Company’s borrowing position at 31 March 2022 is set out in the Annual Report for the
year ended 31 March 2022.
During the Period the Company refinanced a £25m variable rate RCF facility with the Royal
Bank of Scotland, which had been due to expire on 30 September 2022, with an additional £25m
tranche of 10-year debt from Aviva with a fixed interest rate of 4.1%.
15. Issued capital and reserves
Ordinary shares
Share capital of 1p £000
At 31 March 2022 440,850,398 4,409
Issue of share capital - -
At 30 September 2022 440,850,398 4,409
Ordinary shares
Share capital of 1p £000
At 31 March 2021 420,053,344 4,201
Issue of share capital 550,000 5
At 30 September 2021 420,603,344 4,206
The Company has made no further issues of new shares since the Period end.
The following table describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share premium Amounts subscribed for share capital in excess of nominal value less any
associated issue costs that have been capitalised.
Retained earnings All other net gains and losses and transactions with owners (e.g.
dividends) not recognised elsewhere.
A non-statutory reserve that is credited instead of a company’s share
Merger reserve premium account in circumstances where merger relief under section 612 of
the Companies Act 2006 is obtained.
16. Financial instruments
Fair values
The fair values of financial assets and liabilities are not materially different from their
carrying values in the half yearly financial report. The IFRS 13 Fair Value Measurement fair
value hierarchy levels are as follows:
• Level 1 – quoted prices (unadjusted) in active markets for identical assets and
liabilities;
• Level 2 – inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
• Level 3 – inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
There have been no transfers between Levels 1, 2 and 3 during the Period. The main methods
and assumptions used in estimating the fair values of financial instruments and investment
property are detailed below.
Investment property – level 3
Fair value is based on valuations provided by independent firms of chartered surveyors and
registered appraisers. These values were determined after having taken into consideration
recent market transactions for similar properties in similar locations to the investment
property held by the Company. The fair value hierarchy of investment property is level 3.
At 30 September 2022, the fair value of investment property was £685.4m and during the Period
the valuation decrease was £27.7m.
Interest bearing loans and borrowings - level 3
At 30 September 2022, the amortised cost of the Company’s loans with Lloyds, Scottish Widows
plc and Aviva approximated their fair value.
Trade and other receivables/payables – level 3
The carrying amounts of all receivables and payables deemed to be due within one year are
considered to reflect the fair value.
Property, plant and equipment – level 3
The carrying amount of PPE is considered to reflect its fair value.
17. Related party transactions
Directors and officers
Each of the directors is engaged under a letter of appointment with the Company and does not
have a service contract with the Company. Under the terms of their appointment, each
director is required to retire by rotation and seek re-election at least every three years.
Each director’s appointment under their respective letter of appointment is terminable
immediately by either party (the Company or the director) giving written notice and no
compensation or benefits are payable upon termination of office as a director of the Company
becoming effective.
Ian Mattioli is Chief Executive Officer of Mattioli Woods plc (“Mattioli Woods”), the parent
company of the Investment Manager, and is a director of the Investment Manager. As a result,
Ian Mattioli is not independent.
The Company Secretary, Ed Moore, is also a director of the Investment Manager.
Investment Management Agreement
The Investment Manager is engaged as AIFM under an IMA with responsibility for the management
of the Company’s assets, subject to the overall supervision of the Directors. The Investment
Manager manages the Company’s investments in accordance with the policies laid down by the
Board and the investment restrictions referred to in the IMA. The Investment Manager also
provides day-to-day administration of the Company and acts as secretary to the Company,
including maintenance of accounting records and preparing the annual and interim financial
statements of the Company.
During the Period asset management and investment management fees payable to the Investment
Manager under the IMA were calculated as follows:
• 0.9% of the NAV of the Company at the relevant quarter day which is less than or equal to
£200m divided by 4;
• 0.75% of the NAV of the Company at the relevant quarter day which is in excess of £200m
but below £500m divided by 4;
• 0.65% of the NAV of the Company at the relevant quarter day which is in excess of £500m
but below £750m divided by 4; plus
• 0.55% of the NAV of the Company at the relevant quarter day which is in excess of £750m
divided by 4.
Administrative fees payable to the Investment Manager under the IMA during the Period were:
• 0.125% of the NAV of the Company at the relevant quarter day which is less than or equal
to £200m divided by 4;
• 0.08% of the NAV of the Company at the relevant quarter day which is in excess of £200m
but below £500m divided by 4;
• 0.05% of the NAV of the Company at the relevant quarter day which is in excess of £500m
but below £750m divided by 4; plus
• 0.03% of the NAV of the Company at the relevant quarter day which is in excess of £750m
divided by 4.
The IMA is terminable by either party by giving not less than 12 months’ prior written notice
to the other, which notice may only be given after expiry of the three-year Initial Term
which commenced in June 2020. The IMA may also be terminated on the occurrence of an
insolvency event in relation to either party, if the Investment Manager is fraudulent,
grossly negligent or commits a material breach which, if capable of remedy, is not remedied
within three months, or on a force majeure event continuing for more than 90 days.
The Investment Manager receives a marketing fee of 0.25% (2021: 0.25%) of the aggregate gross
proceeds from any issue of new shares in consideration of the marketing services it provides
to the Company.
During the Period the Investment Manager charged the Company £2.09m (2021: £1.79m) in respect
of asset management and investment management fees, £0.25m (2021: £0.21m) in respect of
administrative fees and £nil (2021: £nil) in respect of marketing fees.
18. Events after the reporting date
Property disposals
Since the Period end the Company has sold:
• A shopping centre in Gosforth for £9.3m, which had been part of the purchase of DRUM REIT
in November 2021, for a 3.5% premium to the £8.975m apportioned value of the asset at
purchase. Since acquisition, the asset has produced rental income of c. £0.9m with the
completion of several asset management activities increasing occupancy and extending
contractual lease terms;
• Business park offices in Leicester for £2.8m at valuation where minimal future rent and
valuation growth was expected; and
• An industrial unit in Kilmarnock at auction for £1.4m, 12% ahead of valuation. The
unit’s environmental credentials did not fit with the Company’s ESG objectives and it was
not considered practical to mitigate these risks.
19. Additional disclosures
NAV per share total return
A measure of performance taking into account both capital returns and dividends by assuming
35 dividends declared are reinvested at NAV at the time the shares are quoted
36 ex-dividend, shown as a percentage change from the start of the Period.
Audited
Unaudited
Unaudited 6 months 6 months 12 months
to 30 Sept 2022 to 30 Sept 2021 to 31 Mar
2022
Net assets (£000) 501,426 445,869 527,640
Shares in issue at the period end (thousands) 440,850 420,603 440,850
NAV per share at the start of the period (p) 119.7 97.6 97.6
Dividends per share paid during the period (p) 2.75 3.0 5.625
NAV per share at the end of the period (p) 113.7 106.0 119.7
NAV per share total return (2.7%) 11.7% 28.4%
Share price total return
A measure of performance taking into account both share price returns and dividends by
assuming 37 dividends declared are reinvested at the ex-dividend share price, shown as a
percentage change from the start of the period.
Audited
Unaudited
Unaudited 6 months 6 months 12 months
to 30 Sept 2022 to 30 Sept 2021 to 31 Mar
2022
Share price at the start of the period (p) 101.8 91.8 91.8
Dividends per share for the period (p) 2.75 3.0 5.625
Share price at the end of the period (p) 97.0 93.1 101.8
Share price total return (2.0%) 4.7% 17.0%
Net gearing
Gross borrowings less cash (excluding rent deposits), divided by property portfolio value.
Unaudited at 30 Sept Unaudited at 30 Sept Audited
2022 2021 at 31 Mar 2022
£000 £000 £000
Gross borrowings 178,000 147,000 137,760
Cash (4,765) (37,139) (11,624)
Tenant rental deposits and 1,626 1,142 1,141
retentions
Net borrowings 174,861 111,003 127,277
Investment property 685,423 565,279 665,186
Net gearing 25.5% 19.6% 19.1%
Weighted average cost of debt
The interest rate payable on bank borrowings at the period end weighted by the amount of
borrowings at that rate as a proportion of total borrowings
Amount drawn
30 September 2022
£m Interest rate
Weighting
Lloyds RCF 38 3.790% 0.81%
Total variable rate 38
SWIP £20m loan 20 3.935% 0.44%
SWIP £45m loan 45 2.987% 0.76%
Aviva
• £35m tranche 35 3.020% 0.59%
• £15m tranche 15 3.260% 0.27%
• £25m tranche 25 4.100% 0.58%
Total fixed rate 140
Weighted average drawn facilities 178 3.45%
Amount drawn
31 March 2022
£m Interest rate
Weighting
Lloyds RCF - 2.341% -
RBS RCF 23 2.441% 0.40%
Total variable rate 23
SWIP £20m loan 20 3.935% 0.56%
SWIP £45m loan 45 2.987% 0.96%
Aviva
• £35m tranche 35 3.020% 0.76%
• £15m tranche 15 3.260% 0.35%
Total fixed rate 115
Weighted average rate on drawn facilities 138 3.02%
Amount drawn
30 September 2021
£m Interest rate
Weighting
Lloyds RCF 32 1.755% 0.38%
Total variable rate 32
SWIP £20m loan 20 3.935% 0.54%
SWIP £45m loan 45 2.987% 0.91%
Aviva
• £35m tranche 35 3.020% 0.72%
• £15m tranche 15 3.260% 0.33%
Total fixed rate 115
Weighted average rate on drawn facilities 147 2.88%
EPRA EPS
A measure of the Company’s operating results excluding gains or losses on investment
property, giving a better indication than basic EPS of the extent to which dividends paid in
the year are supported by recurring net income.
Audited
Unaudited
Unaudited 6 months 6 months 12 months
to 30 Sept 2022 to 30 Sept 2021 to 31 Mar
£000 £000 2022
£000
(Loss)/profit for the Period after taxation (14,087) 48,070 122,325
Net losses/(profits) on investment property 26,451 (35,406) (97,073)
EPRA earnings 12,364 12,664 25,252
Weighted average number of shares in issue
(thousands)
440,850 420,494 428,702
EPRA EPS (p) 2.8 3.0 5.9
EPRA vacancy rate
EPRA vacancy rate is the estimated rental value (“ERV”) of vacant space as a percentage of
the ERV of the whole property portfolio.
Unaudited at 30 Sept Unaudited as 30 Sept Audited
2022 2021 at 31 Mar 2021
£000 £000 £000
Annualised potential rental value of 5,236 3,424 4,643
vacant premises
Annualised potential rental value 49,183 41,009 45,580
for the property portfolio
EPRA vacancy rate 10.7% 8.4% 10.2%
EPRA Net Tangible Assets (“NTA”)
Assumes that the Company buys and sells assets for short-term capital gains, thereby
crystallising certain deferred tax balances.
Unaudited at 30 Sept Unaudited at 30 Sept Audited
2022 2021 at 31 Mar 2021
£000 £000 £000
Group and Company
IFRS NAV 501,425 445,869 527,640
Fair value of financial instruments - - -
Deferred tax - - -
EPRA NTA 501,425 445,869 527,640
Closing number of shares in issue 440,850 420,603 440,850
(thousands)
EPRA NTA per share (p) 113.7 106.0 119.7
Directors’ responsibilities for the interim financial statements
The Directors have prepared the interim financial statements of the Company for the Period
from 1 April 2022 to 30 September 2022.
We confirm that to the best of our knowledge:
a. The condensed interim financial statements have been prepared in accordance with IAS 34
‘Interim Financial Reporting’ as adopted by the United Kingdom;
b. The condensed set of financial statements, which has been prepared in accordance with the
applicable set of accounting standards, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company, or the undertakings
included in the consolidation as a whole as required by DTR 4.2.4R;
c. The interim financial statements include a fair review of the information required by DTR
4.2.7R of the Disclosure 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 Financial Statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
d. The interim financial statements include a fair review of the information required by DTR
4.2.8R of the Disclosure and Transparency Rules, being material related party
transactions that have taken place in the first six months of the current financial year
and any material changes in the related party transactions described in the last Annual
Report.
A list of the current directors of Custodian Property Income REIT plc is maintained on the
Company’s website at 38 custodianreit.com.
By order of the Board
David Hunter
Chairman
13 December 2022
Independent review report to Custodian Property Income REIT plc
Conclusion
We have been engaged by the Company to review the condensed set of financial statements in
the half-yearly financial report for the six months ended 30 September 2022 which comprises
the Condensed consolidated statement of comprehensive income, the Condensed consolidated
statement of financial position, the Condensed consolidated statements of changes in equity,
the Condensed consolidated statement of cash flows and related notes 1 to 19.
Based on our review, nothing has come to our attention that causes us to believe that the
condensed set of financial statements in the half-yearly financial report for the six months
ended 30 September 2022 is not prepared, in all material respects, in accordance with United
Kingdom adopted International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom’s Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review Engagements (UK)
2410 “Review of Interim Financial Information Performed by the Independent Auditor of the
Entity” issued by the Financial Reporting Council for use in the United Kingdom (ISRE (UK)
2410). A review of interim financial information consists of making inquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2.1, the annual financial statements of the Company are prepared in
accordance with United Kingdom adopted international accounting standards. The condensed set
of financial statements included in this half-yearly financial report has been prepared in
accordance with United Kingdom adopted International Accounting Standard 34, “Interim
Financial Reporting”.
Conclusion relating to Going Concern
Based on our review procedures, which are less extensive than those performed in an audit as
described in the Basis for Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately adopted the going concern basis
of accounting or that the directors have identified material uncertainties relating to going
concern that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with ISRE (UK)
2410; however future events or conditions may cause the entity to cease to continue as a
going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report in accordance
with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are responsible for assessing
the Company’s ability to continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the half-yearly
financial report. Our Conclusion, including our Conclusion Relating to Going Concern, are
based on procedures that are less extensive than audit procedures, as described in the Basis
for Conclusion paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with ISRE (UK) 2410. Our work has
been undertaken so that we might state to the Company those matters we are required to state
to it in an independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company,
for our review work, for this report, or for the conclusions we have formed.
Use of our report
This report is made solely to the Company in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Financial Reporting Council. Our work has
been undertaken so that we might state to the Company those matters we are required to state
to it in an independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company,
for our review work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
13 December 2022
- Ends -
═════════════════════════════════════════════════════════════════════════════════════════════
39 1 Before acquisition costs of £3.4m.
40 2 Net of disposal costs of £0.1m.
41 3 The European Public Real Estate Association (“EPRA”).
42 4 Profit after tax excluding net gains or losses on investment property divided by
weighted average number of shares in issue.
43 5 Profit after tax divided by weighted average number of shares in issue.
44 6 Dividends paid and approved for the Period.
45 7 Profit after tax, excluding net gains or losses on investment property, divided by
dividends paid and approved for the Period.
46 8 Net Asset Value (“NAV”) movement including dividends paid during the Period on shares
in issue at 31 March 2022.
47 9 Share price movement including dividends paid during the Period.
48 10 EPRA net tangible assets (“NTA”) does not differ from the Company’s IFRS NAV or EPRA
NAV.
49 11 Gross borrowings less cash (excluding rent deposits) divided by property portfolio
value.
50 12 Expenses (excluding operating expenses of rental property) divided by average
quarterly NAV.
51 13 For properties in Scotland, English equivalent EPC ratings have been obtained.
52 14 Dividends of 2.75p per share were paid during the Period on shares in issue
throughout the Period.
53 15 The sterling overnight index average (“SONIA”) which has replaced LIBOR as the UK’s
main interest rate benchmark.
54 16 A full version of the Company’s Investment Policy is available at
custodianreit.com/wp-content/uploads/2022/09/CREIT-Investment-policy-updated-31_8_22.pdf
55 17 A risk score of two represents “lower than average risk”.
56 18
custodianreit.com/wp-content/uploads/2022/06/Custodian-Capital-ESG-Policy-June-2022-FINAL.pdf
57 19 Annualised EPRA earnings per share divided by the prevailing share price (97.0p.at
30 September 2022, 89.9p at 13 December 2022).
58 20 Annual target dividend per share of 5.5p divided by the prevailing share price
(97.0p.at 30 September 2022, 89.9p at 13 December 2022).
59 21 Passing rent divided by purchase price plus assumed purchasers’ costs.
60 22 Current passing rent plus ERV of vacant properties.
61 23 Includes drive-through restaurants, car showrooms, trade counters, gymnasiums,
restaurants and leisure units.
62 24 Reversionary rent divided by purchase price plus assumed purchasers’ costs.
63 25 Excluding assets with no car parking facilities.
64 26 Equating to 56 75kW ‘Rapid’ Chargers.
65 27 Equating to 140 7kW ‘Fast’ Chargers.
66 28 One EPC letter represents 25 energy performance asset rating points.
67 29 As defined by the Committee on Climate Change.
68 30 % of property portfolio passing rent plus ERV of vacant units.
═════════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00BJFLFT45
Category Code: IR
TIDM: CREI
LEI Code: 2138001BOD1J5XK1CX76
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 208376
EQS News ID: 1512233
End of Announcement EQS News Service
══════════════════════════════════════════════════════════════════════════
69 fncls.ssp?fn=show_t_gif&application_id=1512233&application_name=news&site_id=reuters9
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