REG - Real Estate Investrs - Half Year Results
29/09/2022 07:00
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RNS Number : 0753B Real Estate Investors PLC 29 September 2022
Real Estate Investors Plc
("REI", the "Company" or the "Group")
Half Year Results
For the six months ended 30 June 2022
STRONG ASSET SALES, REDUCED DEBT AND IMPROVING OCCUPANCY
Real Estate Investors Plc (AIM: RLE), the UK's only Midlands-focused Real
Estate Investment Trust (REIT) with a portfolio of commercial property across
all sectors, is pleased to report its unaudited half year results for the
six-month period ended 30 June 2022 ("H1 2022").
FINANCIAL
· 11 assets sold totalling £5.7 million (before costs), an
aggregate uplift of 27.9% above year end book value, plus post period
disposals of £4.5 million (at near book value) - total disposals year to date
£10.2 million. Additional significant pipeline sales in legals
· Profit before tax of £8.3 million (H1 2021: £9 million profit)
includes £3.1 million gain on property revaluations (H1 2021: £3.3 million
gain), £1 million profit on sale of investment property (H1 2021: £1.2
million profit) and £1.2 million surplus on hedge valuation (H1 2021:
£716,000 surplus)
· EPRA** NTA per share of 61p (FY 2021: 58.8p)
· Revenue of £7.2 million (H1 2021: £7.8 million) predominantly
reduced due to disposals
· Underlying profit before tax* of £2.9 million (H1 2021: £3.8
million)
· EPRA** EPS of 1.64p (H1 2021: 2.1p)
· The Company will make a fully covered quarterly dividend payment
of 0.8125p per share in respect of Q2 2022
OPERATIONAL
· Strong rent collection for H1 2022 of 99.36% (adjusted for
monthly and deferred agreements) (H1 2021: 98.53%)
· £190.2 million gross portfolio valuation (after asset disposals)
(FY 2021: £190.8 million)
· On a like for like basis the portfolio valuation has improved by
2% on 31 December 2021 valuation to £187.9 million
· Completed 56 lease events (including 7 lease renewals)
· WAULT*** of 4.97 years to break/6.53 years to expiry (FY 2021:
5.03/6.76 years)
· Contracted rental income of £14 million p.a. (H1 2021: £14.7
million p.a.) with reduction due to known lease events and portfolio disposals
in line with strategy
· Occupancy levels at 85.88% (FY 2021: 85.75%), increased to 86.47%
post period, with the potential to rise further
BANKING
· Disposal proceeds used to pay down £5.7 million of debt in H1
2022 including AIB facility
· Total net debt now £75.5 million (FY 2021: £79.6 million)
· As at 30 June 2022, hedge facility has improved by £1.2 million
for half year to 30 June 2022 and has improved by a further £600,000 as at 1
September 2022
· 95.2% of Company debt fixed with a weighted average fixed debt
duration of 2.3 years
· Average cost of debt 3.5% (FY 2021: 3.5%)
· 40.2% Loan to Value (net of cash) (FY 2021: 42.2%) (management
target LTV net of cash 40% or below)
· £8.3 million cash at bank
POST PERIOD ACTIVITY
· Total sales since period end of £4.5 million
· Additional significant pipeline sales in legals
· Contracted rental income now £13.7 million (allowing for sales)
· Completed further 28 lease events including 4 lease renewals, 6
break removals and 11 lettings in legals, which have the potential to improve
occupancy to 89.70%
· Additional £2.5 million of debt repaid since period end
Paul Bassi, Chief Executive, commented:
"H1 2022 was a stable period after the challenging years of Brexit and
Covid. Improving occupier demand and sales to a strong private investor
market and overseas buyers will provide the foundation for rising valuations
and improved rental income and allow us to execute our strategy, whilst
remaining open to any sector consolidation opportunities.
We are mindful of current recessionary concerns, inflation and rising interest
rates. Whilst we are not immune to the effects of economic downturns, we are
well insulated with fixed and reduced debt, lower LTV, a diverse occupier base
plus a healthy WAULT with growing levels of cash to capitalise on any market
opportunities. Post period lettings will also add to our revenues going
forward, plus the potential for further capital value appreciation.
We remain focused on delivering maximum value to our shareholders and subject
to the ongoing success of the disposals programme and market conditions, in
particular the impact of economic headwinds on the real estate sector and with
due consideration being given to any downturn, the Board will consider how
best to allocate surplus capital including a capital return to our
shareholders. Alternatively, if the environment for acquisitions changes
markedly by the year end and opportunities offering significant value start to
arise, then we may look to make opportunistic acquisitions where there is
scope to capture material upside through asset management."
FINANCIAL & OPERATIONAL RESULTS
30 June 2022 30 June 2021
Revenue £7.2 million £7.8 million
Underlying profit before tax* £2.9 million £3.8 million
Contracted rental income £14.0 million £14.7 million
EPRA EPS** 1.64p 2.13p
Pre-tax profit £8.3 million £9 million
Dividend per share 1.625p 1.5p
Average cost of debt 3.5% 3.4%
Like for like rental income £14.0 million £13.9 million
30 June 2022 31 December 2021
Gross property assets £190.2 million £190.8 million
EPRA NTA per share** 61.0p 58.8p
Like for like capital value psf £128.24 psf £125.67 psf
Like for like valuation £187.9 million £184.1 million
Tenants 239 256
WAULT to break*** 4.97 years 5.03 years
Total ownership (sq ft) 1.47 million sq ft 1.5 million sq ft
Net assets £110.5 million £105 million
Loan to value 44.6% 47.4%
Loan to value (net of cash) 40.2% 42.2%
Definitions
* Underlying profit before tax excludes profit/loss on revaluation
and sale of properties and interest rate swaps
** EPRA = European Public Real Estate Association
*** WAULT = Weighted Average Unexpired Lease Term
Certain of the information contained within this announcement is deemed by the
Company to constitute inside information as stipulated under the UK version of
the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018, as amended and supplemented from
time to time.
Enquiries:
Real Estate Investors Plc
Paul Bassi/Marcus Daly +44 (0)121 212 3446
Cenkos Securities (Nominated Adviser) +44 (0)20 7397 8900
Katy Birkin/Ben Jeynes
Liberum (Broker) +44 (0)20 3100 2000
Jamie Richards/William King
Novella Communications +44 (0)20 3151 7008
Tim Robertson/Safia Colebrook
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 covered dividend policy. Further information on the Company can be found
at www.reiplc.com (http://www.reiplc.com/) .
CHAIRMAN & CHIEF EXECUTIVE'S STATEMENT
In H1 2022, the Company has seen an increase in NTA per share of 3.7% and
reports pre-tax profits of £8.3 million. The cash inflow has seen LTV
reduce to 40.2% in line with management's objectives. The lettings and
disposals pipelines are strong and the Board anticipates further increases in
NAV by the year end should these events crystallise.
The portfolio continues to deliver strong rent collection levels with overall
collection for the period standing at 99.36% (adjusted for monthly and
deferred agreements). Current quarter (June - September) rent collection so
far is 99.86%.
During H1 2022, we took advantage of a particularly strong private investor
market, disposing of 11 assets totalling £5.7 million (an aggregate uplift of
27.9% on December 2021 valuations). Since the period end, we have disposed
of a further £4.5 million of assets (at near book value) totalling £10.2
million for 2022 year to date and have a strong pipeline of disposals in
legals which reflects the difference between market pricing and NAV valuations
and demonstrating the underlying value of our diversified portfolio.
In line with management's intention to operate the portfolio with prudent
gearing levels, disposal proceeds were used to pay down £5.7 million of debt
in H1 2022. Subsequently, our LTV (net of cash) has reduced to 40.2%. Our
average cost of debt has remained at 3.5% with 95.2% of the Company's debt now
fixed (as at 30 June 2022) with a weighted average fixed debt term of 2.3
years. We are mindful of current recessionary concerns, inflation and rising
interest rates. Whilst we are not immune to the effects of economic
downturns, we are well insulated with fixed and reduced debt, improved LTV,
diverse occupier base, a healthy WAULT and growing cash balances to capitalise
on any market opportunities.
A more normalised marketplace paved the way for occupiers to make decisions
and this confidence led to significantly increased leasing activity during the
period. This activity has continued into H2 2022 and enquiries from
occupiers is reflected in lettings on our void space totalling £90,701 p.a.,
plus pipeline lettings in solicitors' hands totalling £685,000 p.a. Subject
to market conditions, this will potentially drive further portfolio capital
values, contributing to a rise in our NAV and rental income, supporting our
covered dividend policy and reducing our gearing further.
Reflecting the improved occupier activity, our asset management team completed
56 lease events, leading to a WAULT of 4.97 years to break and 6.53 years to
expiry.
Occupancy as at 30 June 2022 was 85.88% (FY 2021: 85.75%) and is stable
despite the sales of fully let assets. Since the period end, occupancy has
risen to 86.47%. Contracted rental income sits at £14 million p.a. (FY 2021
£14.3 million p.a.).
Taking into account the disposals in H1 2022, the portfolio's property assets
have increased by 2% to £187.9 million (on a like for like basis) and we are
therefore pleased to report an increase in our EPRA NTA per share to 61p (FY
2021: 58.8p) up 3.7%. These valuations do not reflect the post period
lettings upside potential.
As a result of sales and known voids, our revenue has reduced in the short
term to £7.2 million (H1 2021: £7.8 million) as we achieve debt reduction
and cash generation with underlying profit before tax to £2.9 million (H1
2021: £3.8 million). As at 1 July 2022, the hedge facility has improved by
£1.2 million and has improved by a further £600,000 as at 1 September
2022. The Board announces a fully covered quarterly dividend for Q2 2022 of
0.8125p per share (Q2 2021: 0.75p per share) to reflect the operational
performance of the business in H1 2022.
The region enjoyed a very successful 2022 Commonwealth Games, which launched
Birmingham onto the global stage and has positively driven investor and
economic activity. The region has been further boosted by the Chancellor's
Growth Plan announcement detailing the inclusion of the West Midlands in the
38 local combined authorities that will benefit from 'investment
zones'. These zones promise to offer generous, targeted and time-limited tax
cuts for businesses, backing them to increase productivity and create new
jobs, liberalised planning rules and reforms to increase the speed of
delivering development. This is expected to further encourage and improve
demand from investors and occupiers.
REI continues to benefit from its locality and expects both investor and
occupier demand to remain positive into the foreseeable future.
CORPORATE STRATEGY
Management continues to remain focused on delivering maximum value to our
shareholders. As stated in our July trading update, private investor demand
has remained high and we have taken advantage of this by disposing of assets
at an aggregate value above NAV, and we will continue to make further
opportunistic sales.
The disposal proceeds will be used to reduce debt and, subject to the ongoing
success of the disposals programme and market conditions, in particular the
impact of economic headwinds on the real estate sector and with due
consideration being given to any downturn, the Board will consider how best to
utilise excess capital, including a return of capital to shareholders.
Alternatively, if the environment for acquisitions changes markedly by the
year end and opportunities offering significant value start to arise, then we
may look to make opportunistic acquisitions where there is scope to capture
material upside through asset management. The Board evaluates the relative
merits of these options on an ongoing basis. The quantum of any return of
capital will be set to ensure that we maintain a prudent loan-to-value ratio
and will be subject to market conditions.
In the meantime, we continue to be alert to market consolidation within the
real estate sector. Management remains open to evaluating any corporate
transaction that is in the best interests of shareholders.
STRONG PRIVATE INVESTOR MARKETPLACE
We have successfully disposed of £5.7 million of assets during the period at
an aggregate uplift of 27.9% above the 31 December 2021 valuation. The income
associated with these disposed assets is £424,900 per annum. Mindful of
this demand, we have continued to make sales and can confirm post period
disposals as follows:
· Completed sales of £4.5 million
· Significant pipeline of sales in legals
No acquisitions were made during H1 2022 due to the lack of suitably priced
assets. Management will continue to monitor the market place for attractive
acquisition opportunities.
FINANCE & BANKING
The business remains multi-banked with debt spread across 4 lenders.
Following the proactive decision in 2021 to take advantage of a low interest
rate environment, 95.2% of the Company's debt is now fixed with an average
weighted fixed debt term of 2.3 years and an average cost of debt of 3.5%.
Our hedge facility has improved by £1.2 million for the half year to 30 June
2022 and has recovered by a further £600,000 as at 1 September 2022. REI
has seen a material fall in its swap liability position. As at 31 December
2021, the swap liability position was £2.1 million. The Company reports that
as at 30 June 2022, the unaudited swap liability position had fallen to £0.9
million and that as at 31 August 2022, the unaudited liability had fallen
further to £0.3 million.
During the period, £5.7 million of debt was repaid using the proceeds from
portfolio disposals with a further £2.5 million repaid since 30 June 2022.
Debt repayment from the proceeds of disposals, combined with a gain in the
Company's like-for-like portfolio valuations had supported a reduction in the
Company's loan to value to 40.2% (net of cash). This is in line with the
Company's strategy and management's objective to operate the business with
sensible gearing levels.
The Group has total drawn down debt of £83.8 million (FY 2021: £89.4
million) and all banking covenants (which are a combination of both the
measurement of LTV against asset value and interest cover against rental
income) continue to be met with headroom available and the ability to correct
through substitute security or cash deposits and reduction. The Group has
£8.3 million cash at bank.
Management remains committed to a covered dividend policy.
LETTINGS/ASSET MANAGEMENT UPDATE
As renewed occupier confidence gathered pace in 2022, demand increased leading
to 56 lease events being completed, including 7 lease renewals, generating
£365,000 p.a. of new rental income, recovering the majority of income lost
due to sales during the period. In particular, we have seen office demand
improving, the sector had previously dominated our voids during and since
Covid.
As a result of asset management activity in H1 2022 our WAULT was 4.97 years
to break and 6.53 years to expiry (FY 2021: 5.03 years to break and 6.76 years
to expiry).
Hotel Income Update
Our hotel in West Bromwich, previously let to Premier Inn, was re-let to Vine
Hotels on a new 15-year lease at £300,000 p.a. (above external valuer ERV
level at time of letting), with the intention of operating a Best Western
hotel. No rent-free incentives were given, but the first 3 years are a
profit share. We are pleased to say that Vine secured a rolling annual
letting at 100% occupancy that has provided REI with an income in excess of
£300,000 p.a.
Post Period Activity
Since the period end, we have:
· Completed a further 3 lettings, generating £90,701 p.a. income
· We also have approximately £685,000 p.a. of lettings in pipeline
legals, which if completed would translate into improved occupancy to 89.70%
and enhanced contracted rental income to £14.3 million p.a.
We anticipate further occupancy improvement in the next few months which will
potentially lead to further capital value improvement as we secure lettings in
line with our ERVs with improved lease lengths.
These new lettings and the related valuation gain is not accounted for in our
H1 valuation.
During 2022 to date, new tenants within the portfolio include; Cityfibre
Holdings and King & Moffat UK Ltd.
Portfolio Mix
The current sector weightings are:
Sector £ per annum % by income
Office 5,039,442 36.03
Traditional Retail 2,457,794 17.57
Discount Retail - Poundland/B&M etc 1,895,350 13.55
Other - Hotels (Travelodge), Leisure (The Gym Group, Luda Bingo), Car parking, 1,641,784 11.74
AST
Medical and Pharmaceutical - Boots/Holland & Barrett etc 1,066,599 7.63
Restaurant/Bar/Coffee - Costa Coffee, Loungers etc 793,250 5.67
Food Stores - M&S, Aldi, Co-op, Iceland etc 585,690 4.19
Financial/Licences/Agency - Lloyds TSB, Santander UK Plc, Bank of Scotland etc 507,000 3.62
Total 13,986,909 100.00
Portfolio Summary
Value (£m) Area Contracted ERV (£) NIY (%) RY (%) Occupancy (%)
(sq ft) Rent (£)
Central Birmingham £24,935,000 101,477 £1,406,702 £1,824,650 5.29% 6.87% 80.17%
Other Birmingham £24,215,000 172,483 £2,012,186 £1,994,005 7.80% 7.73% 89.63%
West Midlands £72,935,000 636,671 £5,407,474 £6,473,460 6.96% 8.33% 82.68%
Other Midlands £65,790,000 554,379 £5,160,547 £5,880,040 7.36% 8.39% 89.42%
Other Locations - - - - - - -
Land* £2,387,320 - - -
Total £190,262,320 1,465,010 £13,986,909 £16,172,155 6.90% 7.98% 85.88%
* Our land holdings are excluded from the yield calculations.
ENVIRONMENTAL SOCIAL AND GOVERNANCE
We remain committed to acting responsibly and operating a sustainable
business. Our EPC programme across the portfolio is progressing in line with
the Company's ESG strategy to ensure that the business is compliant with
regulations in April 2023 when all assets require an EPC rating of 'E' or
above. Currently only 0.24% of the portfolio is below an 'E' (previously
reported figure in March 2022 was 0.84%). Some of our previously
non-compliant assets have been/are being sold.
We intend to expand on our ESG reporting in our full year results and commit
to doing so annually.
DIVIDEND
The Board remains committed to paying a covered dividend, throughout the
period of our sales programme, subject to business performance. In line with
this commitment and to recognise the operational stability of the business,
the Board is pleased to announce a Q2 2022 fully covered dividend of 0.8125p
reflecting a yield of 9.7% based on a mid-market opening price of 33.50p on 28
September 2022.
The proposed timetable for the dividend, which will be paid as an ordinary
dividend, is as follows:
Ex-dividend date: 6 October 2022
Record date: 7 October 2022
Dividend payment date: 28 October 2022
OUTLOOK
With a strong investor and occupier market evidenced by £10.2 million
disposals year to date and current pipeline lettings of £685,000 p.a. the
second half of 2022 has started on a promising note. We will continue to
capitalise on market conditions and dispose of assets on an opportunistic
basis and will utilise proceeds from disposals to pay down debt and execute
our stated strategy. We have the potential to secure valuation gains,
through new lettings on our void space and further improve the NAV.
The business is well insulated from rising rates due to 95.2% fixed debt with
a weighted average fixed debt term of 2.3 years, sensible gearing levels and
healthy WAULT and our portfolio has the resilience to withstand economic
pressure as demonstrated by our ability to cope with Brexit, Covid and the
financial crisis.
Subject to further disposals in H2 2022 and ongoing market conditions, in
particular the impact of economic headwinds on the real estate sector and with
due consideration being given to any downturn, the Board will consider how
best to allocate surplus capital including a capital return to our
shareholders. Alternatively, if the environment for acquisitions changes
markedly by the year end and opportunities offering significant value start to
arise, then we may look to make opportunistic acquisitions where there is
scope to capture material upside through asset management.
In the meantime, we continue to be alert to market consolidation within the
real estate sector. Management remains open to evaluating any corporate
transaction that is in the best interests of shareholders.
OUR STAKEHOLDERS
Our thanks to our shareholders, advisors, occupiers and staff for their
ongoing support and assistance.
William
Wyatt
Paul Bassi CBE D.UNIV
Chairman
Chief Executive
28 September
2022
28 September 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 30 June 2022
Six months to Six months to Year ended
30 June 2022 30 June 2021 31 December 2021
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Revenue 7,165 7,782 15,971
Cost of sales (1,170) (836) (3,329)
Gross profit 5,995 6,946 12,642
Administrative expenses (1,483) (1,488) (3,045)
Surplus on sale of investment properties 1,001 1,157 1,177
Change in fair value of investment properties 3,149 3,331 4,951
Profit from operations 8,662 9,946 15,725
Finance income 26 1 46
Finance costs (1,600) (1,634) (3,235)
Profit on financial liabilities held at fair value 1,238 716 1,388
Profit on ordinary activities before taxation 8,326 9,029 13,924
Income tax charge - - -
Net profit after taxation and total comprehensive income 8,326 9,029 13,924
Basic earnings per share 6 4.64p 5.0p 7.76p
Diluted earnings per share 6 4.56p 4.9p 7.64p
EPRA earnings per share 6 1.64p 2.1p 3.67p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 30 June 2022
Share Share Capital Retained Total
Other
Capital Premium Redemption Reserves Earnings
Account Reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2020 17,938 51,721 749 26,657 97,674
609
Share based payment - - - 75 - 75
Dividends - final 2020 - - - - (2,500) (2,500)
Dividends - interim 2021 - - - - (1,250) (1,250)
Transactions with owners - - - (3,750) (3,675)
75
Profit for the period and total comprehensive income - - - 9,029 9,029
-
At 30 June 2021 17,938 51,721 749 684 31,936 103,028
Share based payment - - - 75 - 75
Dividends - interim 2021 - - - - (2,976) (2,976)
Transactions with owners - - - 75 (2,976) (2,901)
- - - 4,895 4,895
Profit for the period and total comprehensive income
-
At 31 December 2021 17,938 51,721 749 759 33,855 105,022
Share based payment - - - 75 - 75
Dividends - final 2021 - - - - (1,457) (1,457)
Dividends - interim 2022 - - - - (1,458) (1,458)
- - - (2,915) (2,840)
Transactions with owners 75
Profit for the period and total comprehensive income - - - 8,326 8,326
-
At 30 June 2022 17,938 51,721 749 39,266 110,508
834
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2022
30 June 2022 30 June 2021 31 December 2021
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Assets
Non-current assets
Investment properties 5 187,875 192,813 188,485
Property, plant and equipment 4 3 4
187,879 192,816 188,489
Current assets
Inventories 2,387 2,380 2,384
Trade and other receivables 3,757 4,798 3,588
Cash and cash equivalents 8,268 9,085 9,836
14,412 16,263 15,808
Total assets 202,291 209,079 204,297
Liabilities
Current liabilities
Bank loans 379 3,979 2,479
Trade and other payables 7,078 7,183 7,685
7,457 11,162 10,164
Non-current liabilities
Bank loans 83,418 92,071 86,965
Derivative financial liabilities 908 2,818 2,146
84,326 94,889 89,111
Total liabilities 91,783 106,051 99,275
Net assets 103,028 105,022
110,508
Equity
Ordinary share capital 17,938 17,938 17,938
Share premium account 51,721 51,721 51,721
Capital redemption reserve 749 749 749
Other reserves 834 684 759
Retained earnings 39,266 31,936 33,855
Total equity 110,508 103,028 105,022
CONSOLIDATED STATEMENT OF CASHFLOWS
for the 6 months ended 30 June 2022
Six months to Six months to Year ended
30 June 30 June 2021 31 December 2021
2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Cashflows from operating activities
Profit after taxation 8,326 9,029 13,924
Adjustments for:
Depreciation 1 2 2
Surplus on sale of investment property (1,001) (1,157) (1,177)
Net valuation surplus (3,149) (3,331) (4,951)
Share based payment 75 75 150
Finance income (27) (1) (46)
Finance costs 1,600 1,634 3,235
Surplus on financial liabilities held at fair value (1,238) (716) (1,388)
(Increase)/decrease in inventories (3) 1,416 1,412
(Increase)/decrease in trade and other receivables (169) (458) 752
Decrease in trade and other payables (618) (506) (100)
3,797 5,987 11,813
Cash flows from investing activities
Purchase of investment properties (723) (228) (955)
Purchase of property, plant and equipment (1) - (2)
Proceeds from sale of property, plant and equipment 5,483 9,423 16,119
Interest received 27 1 46
4,786 9,196 15,208
Cash flow from financing activities
Interest paid (1,600) (1,634) (3,235)
Equity dividends paid (2,904) (3,398) (6,278)
Repayment of bank loans (5,647) (5,304) (11,910)
(10,151) (10,336) (21,423)
Net (decrease)/increase in cash and cash equivalents (1,568) 4,847 5,598
Cash and cash equivalents at beginning of period 9,836 4,238 4,238
Cash and cash equivalents at end of period 8,268 9,085 9,836
NOTES TO THE INTERIM FINANCIAL INFORMATION
for the 6 months ended 30 June 2022
1. BASIS OF PREPARATION
Real Estate Investors Plc, a Public Limited Company, is incorporated and
domiciled in the United Kingdom.
The interim financial report for the period ended 30 June 2022 (including the
comparatives for the year ended 31 December 2021 and the period ended 30 June
2021) was approved by the board of directors on 28 September 2022.
It should be noted that accounting estimates and assumptions are used in
preparation of the interim financial information. Although these estimates are
based on management's best knowledge and judgement of current events and
action, actual results may ultimately differ from these estimates. The areas
involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the interim financial information
are set out in note 3 to the interim financial information.
The interim financial information contained within this announcement does not
constitute statutory accounts within the meaning of the Companies Act 2006.
The full accounts for the year ended 31 December 2021 received an unqualified
report from the auditor and did not contain a statement under Section 498 of
the Companies Act 2006.
2. ACCOUNTING POLICIES
The interim financial information has been prepared under the historical cost
convention.
The principal accounting policies and methods of computation adopted to
prepare the interim financial information are consistent with those detailed
in the 2021 financial statements approved by the Board on 21 March 2022.
Some accounting pronouncements which have become effective from 1 January 2022
and have therefore been adopted do not have a significant impact on the
Group's financial results or position.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal actual results. The
estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
accounting year are as follows:
Investment property revaluation
The Group uses the valuations performed by its independent valuers or the
directors as the fair value of its investment properties. The valuation is
based upon assumptions including future rental income, anticipated maintenance
costs, anticipated purchaser costs and the appropriate discount rate. The
valuer and the directors also make reference to market evidence of transaction
prices for similar properties.
Interest rate swap valuation
The Group carries the interest rate swap as a liability at fair value through
the profit or loss at a valuation. This valuation has been provided by the
Group's bankers.
Critical judgements in applying the Group's accounting policies
The Group makes critical judgements in applying accounting policies. The
critical judgement that has been made is as follows:
REIT Status
The Group elected for REIT status with effect from 1 January 2015. As a
result, providing certain conditions are met, the Group's profit from property
investment and gains are exempt from UK corporation tax. In the Directors'
opinion the Group have met these conditions.
4. SEGMENTAL REPORTING
Primary reporting - business segment
The only material business that the Group has is that of investment in
commercial properties. Revenue relates entirely to rental income from
investment properties.
5. INVESTMENT PROPERTIES
The carrying amount of investment properties for the periods presented in the
interim financial information is reconciled as follows:
£'000
Carrying amount at 31 December 2020 197,520
Additions 228
Disposals (8,266)
Revaluation 3,331
Carrying amount at 30 June 2021 192,813
Additions 727
Disposals (6,675)
Revaluation 1,620
Carrying amount at 31 December 2021 188,485
Additions 723
Disposals (4,482)
Revaluation 3,149
Carrying amount at 30 June 2022 187,875
6. EARNINGS AND NAV PER SHARE
The calculation of the basic earnings per share is based on the profit
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the period. The calculation of the diluted earnings
per share is based on the basic earnings per share adjusted to allow for all
dilutive potential ordinary shares.
The calculation of the basic NAV per share is based on the balance sheet net
asset value divided by the weighted average number of shares in issue during
the period. The calculation of the diluted NAV per share is based on the basic
NAV per share adjusted to allow for all dilutive potential ordinary shares.
The European Public Real Estate Association ("EPRA") earnings and NAV figures
have been included to allow more effective comparisons to be drawn between the
Group and other businesses in the real estate sector.
EPRA EPS per share
30 June 2022 30 June 2021
Earnings Shares Earnings per share Earnings Shares Earnings per share
£'000 No P £'000 No P
Basic earnings per share 8,326 179,377,898 4.64 9,029 179,377,898 5.03
Fair value of investment properties (3,331)
(3,149)
Profit on disposal of investment properties (1,001) (1,157)
Change in fair value of derivatives (1,238) (716)
EPRA Earnings 2,938 179,377,898 1.64 3,825 179,377,898 2.13
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.
30 June 2022
EPRA NTA EPRA NRV
EPRA NDV
£'000 £'000 £'000
Net assets 110,508 110,508 110,508
Fair value of derivatives 908 908 -
Real estate transfer tax - 13,676 -
EPRA NAV 111,416 125,092 110,508
Number of ordinary shares issued for diluted and EPRA net assets per share 182,502,063 182,502,063 182,502,063
EPRA NAV per share 61.0p 68.5p 60.5p
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 2021
EPRA NTA EPRA NRV
EPRA NDV
£'000 £'000 £'000
Net assets 105,022 105,022 105,022
Fair value of derivatives 2,146 2,146 -
Real estate transfer tax - 13,127 -
EPRA NAV 107,168 120,295 105,022
Number of ordinary shares issued for diluted and EPRA net assets per share 182,261,263 182,261,263 182,261,263
EPRA NAV per share 58.8p 66.0p 57.6p
30 JUNE 2022 31 DECEMBER 2021
No of Shares No of Shares
Number of ordinary shares issued at end of period 179,377,898 179,377,898
Dilutive impact of options 2,883,365
3,124,705
Number of ordinary shares issued for diluted and EPRA net assets per share 182,502,063 182,261,263
Net assets per ordinary share
Basic 61.6p 58.5p
Diluted 60.5p 57.6p
EPRA NTA 61.0p 58.8p
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