REG - Real Estate Investrs - Final Results
26/03/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240326:nRSZ2381Ia&default-theme=true
RNS Number : 2381I Real Estate Investors PLC 26 March 2024
Real Estate Investors Plc
("REI" or the "Company" or the "Group")
Final Results
For the year ended 31 December 2023
Orderly sales programme underway, debt reduced and continued covered dividend
Real Estate Investors Plc (AIM: RLE), the UK's only Midlands-focused Real
Estate Investment Trust (REIT) with a portfolio of 1.24 million sq ft of
investment property, is pleased to report its final results for the year ended
31 December 2023:
Successful sales, debt reduction and underlying profitability
· Completed sales totalling £17.97 million (an aggregate uplift,
pre-costs, of 2.93% above December 2022 valuations)
· Disposal proceeds used to pay down £17.1 million of debt,
reducing drawn debt to £54.4 million (FY 2022: £71.5 million)
· LTV (net of cash) reduced to 32.4% (FY 2022: 36.8%)
· Revenue of £11.5 million (FY 2022: £13.3 million) - decrease
mainly due to sales
· Underlying profit before tax* of £4.5 million (FY 2022: £4.6
million)
· EPRA** EPS of 2.6p (FY 2022: 2.7p)
· Basic (loss)/earnings per share of (5.4p) (FY 2022: 6.3p)
· Loss before tax of £9.4 million (FY 2022: £10.9 million
profit), primarily as a result of a revaluation deficit of £13.2 million on
investment properties (FY 2022: gain of £3.2 million) (non-cash item)
· EPRA** Net Tangible Assets ("NTA") per share of 54.9p (FY 2022:
62.2p)
· £8 million cash at bank as at 31 December 2023
· Deficit in market value of hedging instrument of £499,000 (FY
2022: gain of £2.2m) (non-cash item)
Uninterrupted Fully-Covered Dividend
· Final dividend of 0.625p per share, payable in April 2024 as an
ordinary dividend
· Total fully covered dividend for 2023 of 2.5p per share (FY 2022:
2.5p) (the level of dividend for 2024 will be subject to the pace of further
disposals) reflecting a yield of 7.4% based on a mid-market opening price of
33.75p on 25 March 2024
· £50.6 million total declared/paid to shareholders since
commencement of dividend policy in 2012
Robust Portfolio Performance
· Gross property assets of £145.5 million (FY 2022: £175.4
million) with 41 assets and 183 occupiers
· Like-for-like portfolio valuation down by 8.44% to £143.1
million (FY 2022: £156.3 million)
· Continued robust rent collection levels with overall rent
collection for 2023 of 99.82%
· Completed 90 lease events during the year
· WAULT*** of 5.24 years to break and 6.01 years to expiry (FY
2022: 4.98 years & 6.29 years)
· Contracted rental income of £10.9 million p.a. (FY 2022: £12.6
million p.a.) net of disposals
· Portfolio occupancy of 83.03% (FY 2022: 84.54%)
· Major letting contracted to complete in April 2024. This will
improve existing occupancy to 85.91% and boost contracted rental income to
£11.2 million p.a. (subject to sales and other lease activity)
Post Year-End Activity
· Additional £1 million of disposals completed since period-end
· Further £2.7 million of debt repaid since period-end, resulting
in debt reducing to £51.7 million
· Additional pipeline sales in legals
· Healthy pipeline lettings of £803,107 p.a. (gross) (£529,471
p.a. net)
· Revised remuneration policy and Shorter Term Incentive Plan
announced in January 2024, improving alignment with the Disposal Strategy
· In March 2024, the Group extended the £20 million facility with
Lloyds Banking Group Plc for a further 12 months to 31 May 2025, the £28
million facility with National Westminster Bank Plc for a further 12 months to
June 2025 and the £7 million facility with Barclays Bank PLC for a further 6
months to 30 June 2025. As a result, following the multiple increases in
interest rates by the Bank of England, the new average cost of debt is now
6.5%. It is the Group's intention to prioritise the repayment of debt from
property sales proceeds, as reflected by the short-term nature of the
facilities
Paul Bassi, CEO of Real Estate Investors Plc, commented:
"Despite a backdrop of negative market sentiment, higher interest rates and
political instability, coupled with very low levels of property transactions,
we have secured underlying profits of £4.5 million, whilst paying a continued
fully-covered dividend.
Having finalised and announced our strategic plan in January 2024, our
priority is to continue disposing of assets and maximising returns to
shareholders, within the stated timeframe.
We have a healthy pipeline of sales in legal proceedings with completions
anticipated in H1 2024 and we will continue to capitalise on ongoing demand
for smaller lot sizes from private investors and special purchasers. We will
be holding our larger assets for income until corporate and institutional
buyers return to the market. In the meantime, the business is operationally
robust and we will continue intensively managing assets to maximise income and
reduce vacancy levels.
We are committed to maximising shareholder returns, whilst remaining open to a
corporate transaction that is in the best interest of shareholders. In the
meantime, we are focused on further sales and a full repayment of our debt,
with the Board's intention to continue paying a fully covered quarterly
dividend."
Financial and Operational Results
31 Dec 2023 31 Dec 2022
Revenue £11.5 million £13.3 million
Pre-tax (loss)/profit (£9.4 million) £10.9 million
Underlying profit before tax* £4.5 million £4.6 million
Contracted rental income £10.9 million £12.6 million
EPRA EPS** 2.6p 2.7p
Basic (loss)/earnings per share (5.4)p 6.3p
Dividend per share 2.5p 2.5p
Average cost of debt 3.7% 3.7%
Like-for-like rental income £10.9 million £11.1 million
31 Dec 2023 31 Dec 2022
Gross property assets £145.5 million £175.4 million
EPRA NTA per share 54.9p 62.2p
Like-for-like capital value psf £115.46 psf £126.10 psf
Like-for-like valuation £143.1 million £156.3 million
Tenants 183 201
WAULT to break*** 5.24 years 4.98 years
Total ownership (sq ft) 1.24 million sq ft 1.37 million sq ft
Net assets £95.6 million £109 million
Loan to value 38.0% 42.2%
Loan to value net of cash 32.4% 36.8%
Definitions
* Underlying profit before tax excludes gain on revaluation and sale
of properties and interest rate swaps
** EPRA = European Public Real Estate Association
*** WAULT = Weighted Average Unexpired Lease Term
Enquiries:
Real Estate Investors Plc
Paul Bassi/Marcus Daly +44 (0)121 212 3446
Cavendish Capital Markets Limited (Nominated Adviser) +44 (0)20 7220 0500
Katy Birkin/Ben Jeynes
Liberum (Broker) +44 (0)20 3100 2000
Jamie Richards/William King
About Real Estate Investors Plc
Real Estate Investors Plc is a publicly quoted, internally managed property
investment company and REIT with a portfolio of mixed-use commercial property,
managed by a highly-experienced property team with over 100 years of combined
experience of operating in the Midlands property market across all
sectors. The Company's strategy is to invest in well located, real estate
assets in the established and proven markets across the Midlands, with income
and capital growth potential, realisable through active portfolio management,
refurbishment, change of use and lettings. The portfolio has no material
reliance on a single asset or occupier. On 1st January 2015, the Company
converted to a REIT. Real Estate Investment Trusts are listed property
investment companies or groups not liable to corporation tax on their rental
income or capital gains from their qualifying activities. The Company aims to
deliver capital growth and income enhancement from its assets, supporting its
dividend policy. Further information on the Company can be found
at www.reiplc.com (http://www.reiplc.com/) .
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
During 2023, the UK property market has seen very low levels of investment
transactions, a consequence of widespread political uncertainty, combined with
high interest rates and elevated inflation levels. Despite this, REI's
portfolio remains resilient and stable, shielded from wider economic pressures
due to its diversified nature and limited exposure to high-risk sectors,
achieving 99.82% overall rent collection for 2023.
Against this challenging backdrop, REI successfully disposed of £17.97
million of assets during the period, achieving an aggregate uplift (pre-costs)
of 2.93% above December 2022 book values. This is due to the nature of our
portfolio and our ability to 'break up' selected assets, unlocking the
underlying portfolio value and feeding the appetite from private investors and
owner occupiers for smaller, well-positioned assets.
Demand from larger corporate and institutional buyers is yet to materialise
and we will therefore continue to intensively manage our larger assets,
maximising rental income and occupancy levels to support our dividend
payments, until such demand returns, which we anticipate to be in the latter
part of 2024 and 2025.
Using proceeds from sales and in line with our recently announced Disposal
Strategy, we repaid £17.1 million of debt during 2023, reducing our total
drawn debt to £54.4 million (FY 2022: £71.5 million). Over the last three
years, REI has sold over £56.4 million of assets, on an aggregate basis, at
or above book value, and repaid over £46 million of debt, in line with our
stated strategy.
We currently have numerous disposals in solicitors' hands and are progressing
our disposal programme, with a number of completions anticipated before the
end of H1 2024. With the benefit of our unique market insight, we anticipate
2024 to be a year of continued sales to our unique buyer pool, consisting of
special purchasers, owner occupiers and private investors.
Whilst REI's portfolio is diverse and attractive to these buyers, general
market sentiment remains weak due to an increased cost of capital, persistent
inflationary pressures and global uncertainty. Against this backdrop,
market-wide valuation reductions were expected. The REI portfolio has
suffered a relatively mild 8.44% reduction (£13.2 million) in like-for-like
portfolio valuations to £143.1 million (FY 2022: £156.3 million). This is
predominantly due to the nature of our stock, combined with the intensive
management carried out across the portfolio by our asset management team.
Despite the £1.5 million p.a. loss of income associated with disposals during
the period, asset management initiatives generated 90 lease events,
stabilising occupancy at 83.03% (FY 2022: 84.54%), contracted rental income at
£10.9 million p.a. (FY 2022: £12.6 million p.a.), and improving portfolio
WAULT to 5.24 years to break and 6.01 years to expiry (FY 2022: 4.98 years
& 6.29 years). This has resulted in revenue of £11.5 million (FY 2022:
£13.3 million), underlying profits of £4.5 million (FY 2022: £4.6 million)
and a loss before tax of £9.4 million (FY 2022: £10.9 million profit)
(valuation decline is a non-cash item).
The notable letting of 2023 was to DHU Healthcare CIC at Birch House, Oldbury
for £625,000 p.a., which was previously unoccupied. The Agreement for Lease
was signed in October 2023 on a 10-year lease with a 5-year break and
6-months' rent free. NHS England have awarded the Midlands NHS111 contract
to DHU Healthcare CIC, commencing in early April 2024 and making DHU the
largest provider of NHS111 services in England, with responsibility for 11
million patients. Once the DHU lease commences, occupancy will rise to
85.91% and contracted rental income to £11.2 million p.a.
We have continued to manage the portfolio actively, resulting in 90 lease
events. New tenants to the portfolio include; SpaMedica Limited, Luxury
Leisure, and Swarco Smart Charging Limited. There are currently other
lettings in pipeline legals which will improve occupancy and rental income
further, subject to further portfolio disposals.
Following a healthy year of disposals and debt repayment, the total drawn debt
now sits at £54.4 million, with debt spread across 3 lenders. Group LTV
(net of cash) improved to 32.4% (FY 2022: 36.8%) and cost of debt was 3.7%.
However, the fixed rate hedges on our debt expired on 30 November 2023 on £10
million for Lloyds Banking Group, 29 December 2023 for Barclays Bank and 1
March 2024 for National Westminster Bank. As a result, following the multiple
increases in interest rates by the Bank of England, the new average cost of
bank interest is 6.5%. It is the Group's intention to prioritise the
repayment of debt from future property sales proceeds.
Following discussions with our bankers, in March 2024 the Group extended the
£20 million facility with Lloyds Banking Group Plc for a further 12 months to
31 May 2025, the £28 million facility with National Westminster Bank Plc for
a further 12 months to June 2025 and the £7 million facility with Barclays
Bank PLC for a further 6 months to 30 June 2025. The facilities have been
extended on short term bases as it is the Board's intention to repay portfolio
debt in full, from the proceeds of the sales programme. Since the year-end,
a further £2.7 million of debt has been repaid, reducing total drawn down
debt to £51.7 million.
Against a challenging backdrop, the Board is pleased with the robust
operational performance of the business which is reflected in the covered,
uninterrupted dividend payment of 2.5p for 2023, taking the total
declared/paid to shareholders since the commencement of our dividend policy in
2012 to £50.6 million. It is the Board's intention to continue paying an
uninterrupted, fully-covered quarterly dividend payment to shareholders,
subject to the pace of portfolio disposals.
The Board is committed to its formalised Disposal Strategy and maximising
shareholder returns and remains open to a corporate transaction that is in the
best interest of shareholders.
Disposal Strategy
As confirmed in our January 2024 'Trading and Strategic Update', the Board is
committed to pursuing an orderly strategic sale of the Company's portfolio
over the next three years, disposing of assets individually or collectively,
at or above book value, to optimise returns to shareholders. The pace of the
disposal programme will be dictated by market conditions, with an initial
focus on repaying the Company's debt.
Whilst management are aligned with the business and remain major shareholders,
a new Shorter Term Incentive Plan (STIP) has been introduced to replace the
existing Long Term Incentive Plan (LTIP), which is aimed at retaining staff
whilst providing an incentive to facilitate the orderly sale in the best
interests of the shareholders. The Remuneration Committee has approved the
new STIP along with a 33% reduction in Board and Executive remuneration to
support the Company's ongoing cost saving initiative. In determining the
revised remuneration policy and STIP, the Company's Remuneration Committee
consulted with REI's largest institutional shareholders.
Dividend
The Company's dividend payments continued throughout 2023, despite market
uncertainty and significant disposals. The first three quarterly dividend
payments in respect of 2023 were paid at a level of 0.625p per share, fully
covered. Due to the level of disposals, the final dividend in respect of
2023 is confirmed at the same level at 0.625p per share, reflecting a total
fully-covered dividend payment for 2023 of 2.5p (FY 2022: 2.5p) (which would
be the basis for the dividend for FY2024, subject to the pace of further
disposals) and a yield of 7.4% based on a mid-market opening price of 33.75p
on 25 March 2024. The Board remains committed to paying a covered dividend,
subject to business performance and the pace of further disposals.
The proposed timetable for the final dividend, which will be an ordinary
dividend, is as follows:
Ex-dividend date: 4 April 2024
Record date: 5 April 2024
Dividend payment date: 26 April 2024
Outlook for 2024
The Board is steadfast in its commitment to maximising shareholder returns via
sales and full repayment of our debt, with the view to then returning capital
to shareholders.
REI will continue to strive to achieve maximum pricing on disposals and
anticipate potential future valuation growth, via intensive asset management
and a much needed improvement in market conditions.
We remain confident that our proven and diversified portfolio will withstand
market headwinds and any uncertainty this election year will bring. We
expect that any interest rate reduction will lead to a market recovery that
will allow us to accelerate our sales programme and dispose of our larger
corporate and institutional grade assets.
In the meantime, we remain open to a corporate transaction including selling
the whole of the portfolio on terms that are in the best interests of
shareholders.
Our Stakeholders
We sincerely thank our shareholders, advisers, tenants and staff for their
ongoing support and in particular, in assisting management with the finalised
strategy, which is intended to maximise returns to shareholders.
William
Wyatt
Paul Bassi CBE D. Univ
Chairman
Chief Executive
25 March
2024
25 March 2024
PROPERTY REPORT
UK Property Market Overview
Commercial property investment was suppressed throughout 2023, with high and
uncertain interest rates taking their toll on activity across the property
market.
According to JLL Research, total UK property investment reached £31.3 billion
in 2023, a 36% decrease on 2022 volumes of £49.0 billion and 40% below the
10-year average of £51.8 billion. This represents the lowest annual total
since 2012 when volumes reached £30.7 billion. The lack of transactional
activity contributed to weak market sentiment across the property market,
which has directly impacted our year-end valuations which have declined by
8.44% on a like for like basis, mitigated by active asset management and the
diversity of our portfolio which gives access to the relatively stronger
private investor market.
Throughout the year, and in accordance with previous years' strategy, we
continued to break up sales in order to achieve premiums, mainly to private
investors, owner occupiers and special purchasers as they were willing to pay
higher sums. We expect private investors and companies less reliant on
finance will continue to seek opportunities at levels below £1 million or
less and we will continue to benefit from this position.
Interest rate cuts and lower inflation would support real income growth and
this would likely trigger a gradual improvement in market sentiment and
economic activity. We are already seeing signs of traditional institutional
investors returning to the market, which will bring a wider audience for
sales, greater activity, appetite for larger lot sizes and improved
valuations.
REI Portfolio Disposals
Our unique regional network of agent contacts and close proximity to owner
occupiers allows access to more non-traditional purchasers and during the
year, we disposed of 30 units/assets with an average lot size of £600,000,
for a combined consideration of £17.97 million at an aggregate 2.93% uplift
to December 2022 book valuations (pre-costs).
The sales comprised break-ups of retail/leisure units at Alcester Road South,
Acocks Green, Leamington Spa, Redditch, Newcastle Under Lyme and Walsall.
However, they also included the sale of Land at Market Shopping Centre in
Crewe (McDonalds), York House in Birmingham (to a college), and Castlegate
House in Dudley (West Midlands Police). It is therefore worth noting that
around 53% of sales (by value) can be accredited to smaller units sales, and
around 47% of sales (by value) were from the individual asset sales, all of
which were bought by owner occupiers for their own purposes.
Post Period End Disposals
Since 31 December 2023, we have completed a further £1 million of disposals
at Barracks Road, Newcastle-under-Lyme to an owner occupier.
At present, we have disposal transactions that are in solicitors' hands, with
several completions expected before the conclusion of H1 2024. We have
additional sales being actively marketed and we have earmarked further assets
for sale, where management initiatives have been concluded and are now ready
for marketing. Staying agile and responsive to evolving market conditions
will be key to successfully executing this strategy throughout the coming
year. However, we intend to make further opportunistic sales, should investor
demand prevail.
The REI Portfolio
The REI portfolio, comprising of 41 assets with 183 tenants has a net initial
yield of 7.18% and a reversionary yield of 8.81%. Valuations have seen a
decline of 8.44% on a like-for-like basis to £143.1 million (FY 2022: £156.3
million). It is management's intention to continue with asset management
initiatives to maximise income, occupancy and capital value. The current
portfolio sector weightings are:
Sector Income by Sector Income by Sector
(£) (%)
Office 4,968,850 45.42%
Traditional Retail 1,480,039 13.53%
Discount Retail - Poundland/B&M etc 1,274,000 11.65%
Medical and Pharmaceutical - Boots/Holland & Barrett etc 652,649 5.97%
Restaurant/Bar/Coffee - Costa Coffee etc 423,751 3.87%
Financial/Licences/Agency - Bank of Scotland etc 216,500 1.97%
Food Stores - Co-op, Iceland etc 406,545 3.72%
Other - Hotels (Travelodge & Vine Hotels), Leisure (The Gym Group & 1,517,306 13.87%
Luxury Leisure), Car parks, AST
Total 10,939,640 100%
Asset Management
During 2023, the asset management team completed 90 lease events. New
lettings during the year totalled just over £500,000 p.a. with lettings at
Titan House (Telford) and Venture Court (Wolverhampton), being prominent.
As a result of the asset management activity in 2023 our WAULT was 5.24 years
to break and 6.01 years to expiry (FY 2022: 4.98 years & 6.29 years) and
occupancy is stable at 83.03% (FY 2022: 84.54%).
Of the 16.97% vacancy as at 31 December 2023 within the portfolio, almost two
thirds (10.72%) can be attributed to spaces at 4 properties (Barracks Road,
Newcastle-under-Lyme; Crewe Shopping Centre; Kingston House and Birch
House). We have already reduced this void in the period since 31 December
2023, with the sale of Units 1&2 at Barracks Road, increasing occupancy to
84.98% (as 25 March 2024). The scheduled letting at Oldbury and further
sales will improve occupancy in H1 2024.
Key asset management initiatives undertaken during the year and subsequently
to the date of this report include:
Titan House
Following the refurbishment of the office space to a Grade A specification and
the letting to BohoMoon Limited at £111,145 p.a., SpaMedica Limited completed
the lease for the third floor at £112,779 p.a. on a 10-year lease with a
tenant break in year 5.
Oldbury
DHU Health Care CIC signed the Agreement for Lease at £625,608 p.a. to
facilitate the move into all the 35,749 sq ft at Birch House. The
refurbishment commenced and is due to complete in April 2024.
Avon House
AFH Financial Group Limited took out a new lease for 11.5 years at the passing
rent of £396,077 p.a. (at ERV) with no break, now occupying all 25,000 sq ft
at Avon House, Bromsgrove.
Acocks Green
Following a number of sales, the previous Argos unit was refurbished and let
to Poundstretcher on a 10-year lease at £62,500 p.a. with a tenant break at
year 5.
Walsall
Following a lengthy planning process, Luxury Leisure signed a lease and
undertook a tenant fit-out of 9-11 Park Street on a 10-year lease at £60,000
p.a. with a break at year 5.
Topaz Business Park
Costa have signed an Agreement for Lease at £89,000 p.a. The forward sale
of the Lease is proceeding, despite the challenges in the investment market.
The contract to build the Costa unit has been secured with completion due in
September 2024.
Boundary House
The 2023 rent review has been settled, achieving an increase from £260,000
p.a. to £316,500 p.a., representing a very strong result in a challenging
office market.
New tenants to the portfolio in 2023
SpaMedica Limited, Luxury Leisure and Swarco Smart Charging Limited.
Post Period End Activity and Sentiment
There is a strong level of pipeline lettings of £803,107 p.a. (gross)
(£529,471 p.a. net) that will have a positive impact on our void space and
contracted rental income.
Portfolio Summary
Value (£) Area (Sq ft) Contracted Rent (£) ERV (£) NIY (%) EQY (%) RY (%) Occupancy (%)
Portfolio 143,105,000 1,239,467 10,939,640 13,701,260 7.18% 8.89% 8.81% 83.03%
Land* 2,394,594 - - - - - - -
Total 145,499,594 1,239,467 10,939,640 13,701,260 7.18% 8.89% 8.81% 83.03%
*Our land holdings are excluded from the yield calculations
Environmental, Social and Governance ("ESG")
REI is now working alongside Systemslink, (a leading energy management
software provider), to collect, track and report carbon emissions data across
REI's landlord-controlled areas. As at the date of this report, accurate and
certified data for the Scope 1 and 2 emissions for 2021-2022 is unavailable,
as this is being verified. The reduction of the portfolio's carbon footprint
is a priority for the business.
Portfolio Energy Performance Certification
In accordance with government guidelines, REI has undertaken a programme to
ensure our assets meet the UK statutory regulations and timeframes for EPCs.
We will continue to upgrade assets when required.
An overview of the asset EPC ratings across the portfolio is noted below:
% of portfolio (by sq ft)
EPC Rating
A B C D E F G Total
31 Dec 2023 2.25 36.88 22.71 35.13 3.03 0 0 100
31 Dec 1.36 22.99 31.18 37.49 6.98 0 0 100
2022
FINANCIAL REVIEW
Overview
In a year in which we disposed of £17.97 million of assets, the underlying
profit before tax decreased by 2% to £4.5 million (FY 2022: £4.6 million).
Despite the reduction in turnover, mainly due to sales, the Group maintained
underlying profit by a reduction in holding costs (£260,000), administrative
expenses (£640,000) and interest costs (£610,000), resulting in an EPRA EPS
of 2.6p (FY 2022: 2.7p).
The loss before tax was £9.4 million (FY 2022: £10.9 million profit),
including a revaluation deficit of £13.2 million on investment properties (FY
2022: gain of £3.2 million), a deficit of £182,000 on the sale of investment
property (FY 2022: gain of £948,000) and a loss in the market value of our
interest rate hedging instruments of £499,000 (FY 2022: gain of £2.2
million). As a result, the EPRA NTA per share reduced by 11.7% to 54.9p
(2022: 62.2p).
Receipts from disposals during the period were used to repay £17.1 million of
debt in line with our stated strategy, reducing total drawn debt to £54.4
million (FY 2022: £71.5 million) with LTV (net of cash) improved to 32.4% (FY
2022: 36.8%). REI repaid its Aviva facility in full and remains banked with
3 lenders. All banking covenants continue to be met and there is headroom
available with cure facilities in place.
As expected, contracted rental income reduced during the period to £10.9
million (FY 2022: £12.6 million) predominantly due to disposals, with some
reduction due to lease events across the portfolio. Occupancy levels
remained robust at 83.03%. The loss of contracted rental income, whilst
predicted, has led to a reduction in revenue to £11.5 million (FY 2022:
£13.3 million). Our like-for-like rental income reduced to £10.9 million
p.a (FY 2022: £11.1 million p.a.).
Despite a reduction in our revenue due to disposals, dividend payments
continued throughout the period, at a level of 0.625p per share for Q1, Q2 and
Q3, all fully covered. The final dividend in respect of 2023 is confirmed as
0.625p per share, reflecting a total fully-covered dividend payment for 2023
of 2.5p (FY 2022: 2.5p).
31 December 2023 31 December 2022
Gross Property Assets £145.5 million £175.4 million
Underlying profit before tax £4.5 million £4.6 million
Pre-tax (loss)/profit (£9.4 million) £10.9 million
Revenue £11.5million £13.3 million
EPRA EPS 2.6p 2.7p
EPRA NTA per share 54.9p 62.2p
Net Assets £95.6 million £109 million
Loan to value 38.0% 42.2%
Loan to value net of cash 32.4% 36.8%
Average cost of debt 3.7% 3.7%
Dividend per share 2.5p 2.5p
Like-for-like rental income £10.9 million £11.1 million
Like-for-like capital value psf £115.46 psf £126.10 psf
Like-for-like valuation £143.1 million £156.3 million
Results For the Year
The loss before tax of £9.4 million (FY 2022: £10.9 million profit),
includes a revaluation deficit of £13.2 million on investment properties (FY
2022: gain of £3.2 million), a deficit of £182,000 on the sale of investment
property (FY 2022: gain of £948,000) and a deficit on the market value of our
interest rate hedging instruments of £499,000 (FY 2022: gain of £2.2
million). Underlying profits reduced to £4.5 million (FY 2022: £4.6
million).
Due to a loss of income during the year of £1.8 million p.a. (in the main due
to loss of income associated with sales combined with other expected lease
events) revenues for the year decreased to £11.5 million (FY 2022: £13.3
million). However, this was partly offset by a reduction in holding costs of
void space and direct costs to £2.2 million (FY 2022: £2.5 million).
During the year, administrative costs and overhead expenses reduced by
£640,000 to £2.6 million (FY 2022: £3.3 million), mainly due to no bonuses
for executive directors and staff (FY 2022: £280,000), no provision for costs
of the LTIP (FY 2022: £150,000), following the Group strategic review and
introduction of the STIP and targeting services no longer required as the size
of the portfolio reduces. The Group expects further savings in 2024 of
£500,000.
The Group prioritised the repayment of debt from the proceeds of sale of
investment property and as a result, interest costs for the year reduced by
£600,000 to £2.4 million (FY 2022: £3 million) due to £17.1 million debt
repayment during the year.
(Loss)/earnings per share were:
Basic: (5.4)p (FY 2022: 6.3p)
Diluted: (5.4)p (FY 2022:
6.3p)
EPRA: 2.6p (FY 2022: 2.7p)
Shareholders' funds decreased to £95.6 million at 31 December 2023 (FY 2022:
£109 million) primarily as a result of the loss on property portfolio
revaluation.
Basic NAV: 55p (FY 2022: 63.1p)
EPRA NTA: 54.9p (FY 2022: 62.2p)
Strategy
The Board concluded that it will conduct an orderly strategic sale of the
Company's portfolio over the next 3 years with the objective of maximising the
return of capital to shareholders (the "Disposal Strategy"). To achieve this
outcome, assets will be sold individually, as smaller portfolios or as a whole
portfolio sale, with the initial priority to repay the Company's debt. The
pace of disposals will be dictated by market conditions and management will
look to secure disposals at book value or higher, maximising returns to
shareholders.
Shorter Term Incentive Plan ("STIP")
To support the Disposal Strategy and the return of capital to shareholders,
the Company is implementing a new Shorter Term Incentive Plan ("STIP"). The
STIP will replace the existing Long Term Incentive Plan ("LTIP"), help to
retain Paul Bassi, Chief Executive Officer and Marcus Daly, Finance Director
(the "Executives"), and the wider management team and incentivise them to
achieve an orderly and timely disposal of the Company's assets to maximise the
capital return to shareholders. The STIP is being implemented to compensate
the Executives for the retrospective reduction in awards and cancellation of
future awards under the LTIP.
1. Under the STIP, the participants will receive a proportion of a
notional cash pool (the "Pool") which will be created from the excess ("Gain")
of Total Shareholder Return ("TSR") over the market value of the Company as at
31 December 2023.
2. TSR is cash per Ordinary Share returned to shareholders, excluding
ordinary dividends.
3. To ensure the timely disposal of assets, the Gain attributable to the
Pool will be reduced over time.
4. If the Company's sell down strategy is completed in 2024 then the Pool
is calculated as 10% of the Gain. If the strategy is completed in 2025 the
Pool reduces to 7.5% and if by 2026, the Pool reduces to 5%.
5. Of the Pool, a minimum figure of £410k is ringfenced for the
management team (excluding the Executives) equivalent to a bonus of 100%
salary.
6. The STIP will pay out as soon as reasonably practicable after the
earliest of (1) the sale of all the assets, (2) a takeover of the Company or
(3) when the Remuneration Committee determine that a sufficient proportion of
the assets have been sold and that the STIP has achieved its original purpose.
Revised Remuneration Policy (Effective 1 January 2024)
In addition, the Company's Remuneration Committee has approved changes to the
Executives' remuneration to align the policy with the wider Company strategy.
1. Basic salary: Executive salaries to be reduced by one third.
New salaries - Paul Bassi, CEO reduced to £367k (previously £550k) and
Marcus Daly, CFO reduced to £229k (previously £344k) amounting to a cost
saving of approximately £330k (including National Insurance contributions).
In addition, Non-Executive Directors' fees also to be reduced by one third
2. Annual discretionary bonus: The Executives' bonus is reduced
from up to a maximum of 100% of basic salary to a maximum of 50% of the new
reduced basic salary
3. Executives' service contracts: If contracts are to be paid up
following a corporate transaction or equivalent, then compensation under the
Executives' service contracts reverts to old salary levels
4. LTIP Awards: The Executives' entitlement to awards under the
Company's existing LTIP scheme have been amended as follows:
· Unvested awards granted re: FY2020 - to be reduced by one third
· Unvested awards granted re: FY2021 - to be reduced by two thirds
· Unvested awards granted re: FY2022 - to be cancelled
· No further awards under the LTIP going forward
· The approximate value in the reduction in the awards equates to
approximately 4 million Ordinary Shares, which at a share price of 30p equates
to £1.2 million
5. Shorter Term Incentive Plan ("STIP"): To compensate the
Executives (albeit not to the same extent) for the retrospective reduction in
LTIPs in relation to FY2020 and FY2021, the cancelling of awards relating to
FY2022 and no further issuing of awards under the LTIP in relation to FY2023
or going forward, the Executives will be entitled to participate in the STIP.
Finance and Banking
Due to significant sales in 2023 of £17.97 million and debt repayment of
£17.1 million, total drawn debt at 31 December 2023 was £54.4 million (FY
2022: £71.5 million) (now reduced further to £51.7 million post period end)
with the Aviva facility repaid in full. As at 31 December 2023, the Group
had £8 million cash at bank and remains multi-banked across 3 lenders and
continues to meet banking covenants.
Up until the end of November 2023,100% of the debt across the portfolio was
fixed, preserving a low average cost of debt at 3.7%. However, the fixed
rate hedges on our debt expired on 30 November 2023 on £10 million for Lloyds
Banking Group, 29 December 2023 for Barclays Bank and 1 March 2024 for
National Westminster Bank. As a result, following the multiple increases in
interest rates by the Bank of England, the new average rate of bank interest
is 6.5%. It is the Group's intention to prioritise the repayment of debt
from property sales proceeds.
Whilst management focuses on debt repayment, it is prudent to keep cash
reserves at a healthy level, should the business be required to provide bank
security in the form of cash. The Company continues to maximise its returns
on cash reserves, with £8 million cash at bank at the year end with the
majority on deposit earning 4.5% on an instant access basis.
The LTV as at 31 December 2023 was 38% (FY 2022: 42.2%) and the LTV (net of
cash) was 32.4% (FY 2022: 36.8%). The Group's hedge facility suffered a loss
of £499,000 for the year to 31 December 2023.
Lender Debt Facility (£m) Debt Maturity
National Westminster Bank 28 June 2025
Lloyds Banking Group 20 May 2025
Barclays 7 June 2025
Refinancing
In March 2024, the Group extended the £20 million facility with Lloyds
Banking Group Plc for a further 12 months to 31 May 2025, the £28 million
facility with National Westminster Bank Plc for a further 12 months to June
2025 and the £7 million facility with Barclays Bank PLC for a further 6
months to 30 June 2025. The facilities have been extended on short term bases
as it is the Group's intention to prioritise the repayment of debt from the
sale of properties.
Going concern
The consolidated financial statements for the Group have been prepared on a
going concern basis.
Taxation
The Group converted to a Real Estate Investment Trust (REIT) on 1 January
2015. Under REIT status the Group does not pay tax on its rental income
profits or on gains from the sale of investment properties. The Group
continues to meet all REIT requirements for REIT status.
Dividend
Under the REIT status the Group is required to distribute at least 90% of
rental income taxable profits arising each financial year by way of a Property
Income Distribution. Quarterly dividends commenced in 2016.
Despite a loss of income during the period associated with portfolio
disposals, the Company's dividend payments continued uninterrupted with the
first three quarterly dividend payments in respect of 2023 paid at a level of
0.625p per share, fully covered and a final dividend in respect of 2023
confirmed as 0.625p per share. This reflects a total fully-covered
uninterrupted dividend payment for 2023 of 2.5p (FY 2022: 2.5p) (the level of
dividend for 2024 will be subject to the pace of further disposals), and a
yield of 7.4% based on a mid-market opening price of 33.75p on 25 March
2024. This takes the total declared/paid to shareholders since the
commencement of our dividend policy in 2012 to £50.6 million.
The dividend will be paid on 26 April 2024 as an ordinary dividend, to all
shareholders on the register as at 5 April 2024 with an ex-dividend date of 4
April 2024. The Board remains committed to paying a covered dividend,
subject to the rate at which assets are disposed of.
Marcus Daly, Finance Director
25 March 2024
Real Estate Investors plc
Consolidated statement of comprehensive income
For the year ended 31 December 2023
Note 2023 2022
£000 £000
Revenue 11,513 13,293
Cost of sales (2,232) (2,489)
Gross profit 9,281 10,804
Administrative expenses (2,616) (3,252)
(Deficit)/gain on sale of investment property (182) 948
(Deficit)/gain in fair value of investment properties (13,197) 3,152
(Loss)/profit from operations (6,714) 11,652
Finance income 177 49
Finance costs (2,371) (2,981)
(Deficit)/gain on financial liabilities at fair value through profit and loss (499) 2,214
(Loss)/profit on ordinary activities before taxation (9,407) 10,934
Income tax charge - -
Net (loss)/profit after taxation and total comprehensive income (9,407) 10,934
Total and continuing (loss)/earnings per ordinary share
Basic 3 (5.44)p 6.33p
Diluted 3 (5.44)p 6.25p
EPRA 3 2.59p 2.68p
The results of the Group for the year related entirely to continuing
operations.
Real Estate Investors plc
Consolidated statement of changes in equity
For the year ended 31 December 2023
Share Share Capital Share-based payment reserve Retained Total
capital premium redemption Earnings
account reserve
£000 £000 £000 £000 £000 £000
At 1 January 2022 17,938 51,721 749 759 33,855 105,022
Share based payment - - - 150 - 150
Share buyback (714) - - - (1,296) (2,010)
Transfer re capital - - 714 - (714) -
Share issue 42 108 - (150) - -
Dividends - - - - (5,131) (5,131)
Transactions with owners (672) 108 714 - (7,141) (6,991)
Profit for the year and total comprehensive income - - - 10,934 10,934
-
17,266 51,829 1,463 759 37,648 108,965
At 31 December 2022
Share based payment - - - - - -
Share issue 119 215 - (334) - -
Dividends - - - - (4,000) (4,000)
Transactions with owners 119 215 - (334) (4,000) (4,000)
Profit for the year and total comprehensive income - - - - (9,407) (9,407)
At 31 December 2023 17,385 52,044 1,463 425 24,241 95,558
Real Estate Investors plc
Consolidated statement of financial position
At 31 December 2023
Note 2023 2022
£000 £000
Assets
Non-current
Intangible assets - -
Investment properties 4 143,105 173,030
Property, plant and equipment 2 3
143,107 173,033
Current
Inventories 2,395 2,389
Trade and other receivables 2,550 3,110
Derivative financial asset - 68
Cash and cash equivalents 7,981 7,818
12,926 13,385
Total assets 156,033 186,418
Liabilities
Current
Bank loans (54,407) (20,325)
Trade and other (5,637) (5,982)
payables
(60,044) (26,307)
Non-current
Bank loans (-) (51,146)
Derivative financial liabilities (431) -
(431) (51,146)
Total liabilities (60,475) (77,453)
Net assets 95,558 108,965
Equity
Share capital 17,385 17,266
Share premium account 52,044 51,829
Capital redemption reserve 1,463 1,463
Share-based payment reserve 425 759
Retained earnings 24,241 37,648
Total Equity 95,558 108,965
Net assets per share 63.1p
55.0p
Real Estate Investors plc
Consolidated statement of cash flows
For the year ended 31 December 2023
2023 2022
£000 £000
Cash flows from operating activities
(Loss)/profit after taxation (9,407) 10,934
Adjustments for:
Depreciation 1 2
Net deficit/(gain) on valuation of investment property 13,197 (3,152)
Deficit/(gain) on sale of investment property 182 (948)
Share based payment - 150
Finance income (177) (49)
Finance costs 2,371 2,981
Loss/(gain) on financial liabilities at fair value through profit and loss 499 (2,214)
Increase in inventories (6) (5)
Decrease in trade and other receivables 560 478
Decrease in trade and other payables (624) (1,051)
6,596 7,126
Cash flows from investing activities
Expenditure on investment properties (733) (609)
Purchase of property, plant and equipment (-) (1)
Proceeds from sale of investment properties 17,279 20,164
Interest received 177 49
16,723 19,603
Cash flows from financing activities
Interest paid (2,371) (2,981)
Share buyback - (2,010)
Equity dividends paid (3,721) (5,783)
Payment of bank loans (17,064) (17,973)
(23,156) (28,747)
Net increase/(decrease) in cash and cash equivalents 163 (2,018)
Cash and cash equivalents at beginning of period 7,818 9,836
Cash and cash equivalents at end of period 7,981 7,818
NOTES:
Cash and cash equivalents consist of cash in hand and balances with banks
only.
Real Estate Investors plc
Notes to the preliminary announcement
For the year ended 31 December 2023
1. Basis of preparation
The financial statements have been prepared under the historical cost
convention, except for the revaluation of properties and financial instruments
held at fair value through profit and loss, and in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006.
It should be noted that accounting estimates and assumptions are used in
preparation of the financial statements. Although these estimates are based
on management's best knowledge and judgement of current events and actions,
actual results may differ from those estimates. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are set out in the Group's annual
report and financial statements.
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries made up to 31 December each year. Material
intra-group balances and transactions, and any unrealised gains arising from
intra-group transactions, are eliminated on consolidation. Unrealised losses
are also eliminated unless the transaction provides evidence of an impairment
of the asset transferred.
The principal accounting policies are detailed in the Group's annual report
and financial statements.
Going concern
The Group has prepared and reviewed forecasts and made appropriate enquiries
which indicate that the Group has adequate resources to continue in
operational existence for the foreseeable future, being a period of 12 months
from the date of approval of these financial statements to 31 March 2025.
These enquiries considered the following:
· the significant cash balances the Group holds and the low levels of
historic and projected operating cash outflows
· any property purchases will only be completed if cash resources or
loans are available to complete those purchases
· the Group's bankers have indicated their continuing support for the
Group. In March 2024 the Group extended the £20 million facility with Lloyds
Banking Group Plc for 12 months to 31 May 2025.
· In March 2024 the Group extended the facility of £28 million with
National Westminster Bank PLC by a further 12 months to June 2025.
· In March 2024 the Group extended the facility of £7 million with
Barclays Bank PLC by a further 6 months to 30 June 2025.
· The directors have at the time of approving these financial
statements, a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future being a period of
not less than 12 months from the date of approval of these financial
statements.
For these reasons, the Directors continue to adopt the going concern basis in
preparing the financial statements.
2. Gross profit
2023 2022
£000 £000
Revenue Rental income 10,919 12,725
Surrender premiums 594 568
11,513 13,293
Cost of sales Direct costs (2,232) (2,489)
Gross profit 9,281 10,804
3. Earnings per share
The calculation of earnings per share is based on the result for the year
after tax and on the weighted average number of shares in issue during the
year.
Reconciliations of the earnings and the weighted average numbers of shares
used in the calculations are set out below.
2023 2022
Earnings Average Earnings per Average Earnings
number of Share Earnings number of per share
shares shares
£000 £000
Basic (loss)/earnings per share (9,407) 172,909,757 (5.44)p 10,934 172,651,577
6.33p
Dilutive effect of share options - - - - 2,312,675 -
Diluted earnings per share (9,407) 172,909,757 (5.44)p 10,934 174,964,252 6.25p
The European Public Real Estate Association indices below have been included
in the financial statements to allow more effective comparisons to be drawn
between the Group and other business in the real estate sector.
EPRA EPS per share
2023 2022
Earnings Shares Earnings Shares Earnings
Per Share Earnings per share
£000 No p £000 No P
Basic (loss)/earnings per share (9,407) 172,909,757 (5.44) 10,934 172,651,577 6.33
Net deficit/(gain) on valuation of investment properties 13,197 (3,152)
Deficit/(gain) on disposal of investment properties 182 (948)
Loss/(gain) in fair value of derivatives 499 (2,214)
EPRA earnings per share 4,471 172,909,757 2.59 4,620 172,651,577 2.68
NET ASSET VALUE PER SHARE
The Group has adopted the new EPRA NAV measures which came into effect for
accounting periods starting 1 January 2020. EPRA issued new best practice
recommendations (BPR) for financial guidelines on its definitions of NAV
measures. The new NAV measures as outlined in the BPR are EPRA net tangible
assets (NTA), EPRA net reinvestment value (NRV) and EPRA net disposal value
(NDV).
The Group considered EPRA Net Tangible Assets (NTA) to be the most relevant
NAV measure for the Group and we are now reporting this as our primary NAV
measure, replacing our previously reported EPRA NAV and EPRA NNNAV per share
metrics. EPRA NTA excludes the intangible assets and the cumulative fair value
adjustments for debt-related derivatives which are unlikely to be realised.
31 December 2023
EPRA NTA EPRA NRV
EPRA NDV
£'000 £'000 £'000
Net assets 95,558 95,558 95,558
Fair value of derivatives 431 431 -
Real estate transfer tax - 8,586 -
EPRA NAV 95,989 104,575 95,558
Number of ordinary shares issued for diluted and EPRA net assets per share 174,702,476 174,702,476
174,702,476
EPRA NAV per share 54.9p 59.8p 54.7p
The adjustments made to get to the EPRA NAV measures above are as follows:
• Real estate transfer tax: Gross value of property portfolio as provided in
the Valuation Certificate (i.e. the value prior to any deduction of
purchasers' costs).
• Fair value of derivatives: Exclude fair value financial instruments that
are used for hedging purposes where the company has the intention of keeping
the hedge position until the end of the contractual duration.
31 December 2022
EPRA NTA EPRA NRV
EPRA NDV
£'000 £'000 £'000
Net assets 108,965 108,965 108,965
Fair value of derivatives (68) (68) -
Real estate transfer tax - 11,245 -
EPRA NAV 108,897 120,142 108,965
Number of ordinary shares issued for diluted and EPRA net assets per share 174,964,252 174,964,252 174,964,252
EPRA NAV per share 62.2p 68.7p 62.3p
3 Earnings per share (continued)
31 December 2023 31 December 2022
No of Shares No of Shares
Number of ordinary shares issued at end of period 173,844,434 172,651,577
Dilutive impact of options 2,312,675
858,042
Number of ordinary shares issued for diluted and EPRA net assets per share
174,702,476 174,964,252
Net assets per ordinary share
EPRA NTA 54.9p 62.2p
EPRA NRV 59.8p 68.7p
EPRA NDV 54.7p 62.3p
4. Investment properties
Investment properties are those held to earn rentals and for capital
appreciation.
The carrying amount of investment properties for the periods presented in the
consolidated financial statements is reconciled as follows:
£000
Carrying amount at 1 January 2022 188,485
Additions - subsequent expenditure 609
Disposals (19,216)
Change in fair value 3,152
Carrying amount at 31 December 2022 173,030
Additions - subsequent expenditure 733
Disposals (17,461)
Change in fair value (13,197)
Carrying amount at 31 December 2023 143,105
5. Publication
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. The consolidated statement of financial position at 31 December 2023
and the consolidated statement of comprehensive income, the consolidated
statement of changes in equity, the consolidated statement of cash flows and
the associated notes for the year then ended have been extracted from the
Group's financial statements upon which the auditor's opinion is unqualified
and does not include any statement under section 498 of the Companies Act
2006. The statutory accounts for the year ended 31 December 2023 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.
6. Copies of the announcement
Copies of this announcement are available for collection from the Company's
offices at 2(nd) Floor, 75-77 Colmore Row, Birmingham, B3 2AP and from the
Company's website at www.reiplc.com (http://www.reiplc.com) . The report and
accounts for the year ended 31 December 2023 are available from the Company's
website and will be posted to shareholders in April 2024.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SEEESIELSEIDRecent news on Real Estate Investors
See all newsREG - Real Estate Investrs - Publication of Report and Accounts & Notice of AGM
AnnouncementREG - Real Estate Investrs - Final Results
AnnouncementREG - Real Estate Investrs - Trading & Strategic Update
AnnouncementREG - Real Estate Investrs - Holding(s) in Company
AnnouncementREG - Real Estate Investrs - 2023 Q3 Dividend Declaration
Announcement