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RNS Number : 4370N Real Estate Investors PLC 25 September 2023
Real Estate Investors Plc
("REI" the "Company" or the "Group")
Half Year Results
For the six months ended 30 June 2023
ROBUST OPERATIONAL PERFORMANCE, CONTINUED SALES & DEBT REDUCTION
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 2023 ("H1 2023").
FINANCIAL
· Disposals of £3.6 million, plus post-period disposals of £6.8
million - total disposals year to date of £10.4 million at an aggregate
uplift of 8.7%, (pre-costs) to 31 December 2022 year end (FY 2022) book value
(comprising of 18 retail units and a drive-thru pod development)
· Disposal proceeds used to pay down £8.4 million of debt year to
date 2023
· Further pipeline of sales are in solicitors' hands to generate
receipts in order to reduce portfolio debt and execute stated strategy
· Underlying profit before tax* of £2.2 million (H1 2022: £2.9
million) due to sales
· Loss before tax of £779,000 (H1 2022: £8.3 million profit)
includes £4.1 million loss on property revaluations (non-cash item)
representing a 2.4% portfolio valuation decline (H1 2022: £3.1 million gain),
£737,000 profit on sale of investment property (H1 2022: £1 million profit)
and £388,000 surplus on hedge valuation (H1 2022: £1.2 million surplus)
· EPRA** Net Tangible Assets ("NTA") per share of 60.3p (FY 2022:
62.2p)
· Revenue of £6.1 million (H1 2022: £7.2 million) reduction due
to H2 2022 and H1 2023 sales
· EPRA** EPS of 1.26p (H1 2022: 1.64p)
· The Company will make a fully covered quarterly dividend payment
of 0.625p per share in respect of Q2 2023 (Q2 2022: 0.8125p per share)
· £48.5 million total declared/paid to shareholders since dividend
policy commenced in 2012
OPERATIONAL
· Strong rent collection for H1 2023 of 99.93% (H1 2022: 99.36%)
· £169.2 million gross portfolio valuation (after asset disposals)
(FY 2022: £175.4 million)
· On a like for like basis the portfolio valuation has reduced by
2.4% on 31 December 2022 valuation to £166.8 million
· Completed 46 lease events, with new lettings generating £385,438
p.a. of new income
· WAULT*** of 4.81 years to break/5.99 years to expiry (FY 2022:
4.98 years /6.29 years)
· Contracted rental income of £12.5 million p.a. as at 30 June
2023 (H1 2022: £14 million p.a. / FY 2022: £12.6 million p.a.) due to
portfolio disposals
· Occupancy levels marginally higher at 85.04% (FY 2022: 84.54%)
BANKING & DEBT RELATED
· Disposal proceeds used to pay down £8.4 million of debt in 2023
year to date
· Total drawn debt of £67.9 million (H1 2022: £75.5 million),
post period reduced to £63 million
· Company's debt is 100% fixed, with a blended debt profile term of
18 months
· Refinancing negotiations with our bankers commenced in early H2
2023
· Loan to Value (net of cash) of 35.9% (FY 2022: 36.8%) (management
revised target LTV net of cash to 35% or below, previously 40% or below)
· £8 million cash at bank - the Company is maximising returns on
cash reserves, with monies on deposit now earning 4.5% on instant access
· Average cost of debt maintained at 3.7% (FY 2022: 3.7%)
· Hedge facility has improved by £388,000 for half year to 30 June
2023
PAUL BASSI, CHIEF EXECUTIVE, COMMENTED:
"Throughout 2023 investment and sales activity has been at its lowest level
since the 2008 financial crisis, with corporate and institutional investors
remaining dormant. With a lack of available assets for purchase and against
the backdrop of an inactive investment marketplace, the diverse nature of our
portfolio has allowed us to break-up and sell individual units, taking
advantage of the ongoing demand for smaller lot sizes from private investors
and owner occupiers. We will continue with this approach until we see a
normalised market. Since the start of 2021, we have operated a successful
sales programme, with sales totalling £48.9 million and £38.3 million of
debt repaid, with further pipeline sales in legals.
We are confident that normalised market conditions will return once the
trajectory of interest rates settles, allowing us to sell further assets where
asset management initiatives have been completed. It is our intention to
accelerate our sales programme and we will consider the sale of assets either
on an individual or collective basis, on terms that represent value for
shareholders.
Subject to market conditions and our sales rate, the Company intends to repay
bank debt and, in due course, consider a share buyback or other form of
capital return. Management remains open to evaluating any corporate
transaction that is in the best interests of shareholders and in the meantime,
we will continue to pay a fully covered dividend."
FINANCIAL & OPERATIONAL RESULTS
30 June 2023 30 June 2022
Revenue £6.1 million £7.2 million
Underlying profit before tax* £2.2 million £2.9 million
Contracted rental income £12.5 million £14.0 million
EPRA EPS** 1.26p 1.64p
Pre-tax (loss)/profit (£0.8 million) £8.3 million
Dividend per share 1.25p 1.625p
Average cost of debt 3.7% 3.5%
Like for like rental income £12.5 million £12.4 million
30 June 2023 31 December 2022
Gross property assets £169.2 million £175.4 million
EPRA NTA per share** 60.3p 62.2p
Like for like capital value psf £122.44 psf £125.42 psf
Like for like valuation £166.8 million £170.9 million
Tenants 209 201
WAULT to break*** 4.81 years 4.98 years
Total ownership (sq ft) 1.36 million sq ft 1.37 million sq ft
Net assets £106.4 million £109 million
Loan to value 40.7% 42.2%
Loan to value (net of cash) 35.9% 36.8%
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
Enquiries:
Real Estate Investors Plc
Paul Bassi/Marcus Daly +44 (0)121 212 3446
Cavendish Securities (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 & CHIEF EXECUTIVE'S STATEMENT
Despite the backdrop of market uncertainty and the lowest level of activity
since the financial crisis of 2008, the diversity and flexibility of our
portfolio has allowed us to attract interest from private investors and owner
occupiers, enabling us to progress our sales programme and reduce debt in line
with our stated strategy. At the half year, we had disposed of £3.6 million
of assets and repaid £3.6 million of debt. Since the period end, we have
disposed of a further £6.8 million of assets and repaid a further £4.8
million of debt, resulting in total sales year to date of £10.4 million and
total debt repayment of £8.4 million. These sales are at an aggregate
uplift of 8.7%, (pre-costs) to December 2022 year end book value (comprising
of 18 retail units and a drive-thru pod development).
Operationally, the REI portfolio remains stable with robust rent collection
levels of 99.93% for H1 2023. Revenue as at 30 June 2023 was £6.1 million
(H1 2022: £7.2 million) with the reduction due to H2 2022 and H1 2023
disposals. Underlying profit at the half year was £2.2 million (H1 2022:
£2.9 million) with a loss before tax of £779,000, driven predominantly by a
£4.1 million non-cash loss on property revaluations which is reflective of
market sentiment towards the office sector and a lack of transactional
evidence. Of the £4.1 million valuation reduction, 51.2% was across
offices.
There remains a risk of downward pressure on future valuations due to rising
interest rates and an inactive investment market, however, our active asset
management approach and diversified portfolio offer some protection against
this. Contracted rents at the half year were £12.5 million p.a. (H1 2022:
£14 million p.a.) reflecting loss of rent from sales in H2 2022 and H1
2023. At the period end, WAULT was 4.81 years to break and 5.99 years to
expiry, with occupancy sitting at 85.04%. Post period lettings that are
expected to complete in H2 2023, will also add to our revenues and occupancy
going forward, along with the potential to add further capital appreciation
and further sales stock.
The business remains well insulated from rising rates with low gearing of
35.9% (net of cash) and 100% fixed debt at an average cost of 3.7%, with a
blended debt maturity of 18 months at the half year. Management have engaged
in refinancing discussions with lenders to ensure that sensible gearing levels
are maintained in line with management's revised objective to operate gearing
at sub 35%, as we are actively repaying debt from sales proceeds (previous
gearing target 40%).
SALES STRATEGY
Presently, there is little or no demand from our normal buyer pool of property
companies, REITs, UK funds, pension funds, overseas or private equity buyers
and the only known investor demand is from private investors for smaller lot
sizes, owner occupiers, government and public bodies, plus special
purchasers.
Our diverse portfolio has no material reliance on any one sector, asset or
occupier, and has enabled us to withstand significant headwinds of the
financial crisis, a global pandemic and inflation, whilst enabling us to
continue paying a covered dividend. It has also allowed us to identify
properties that can be sold to a private investor market whilst most other
investors remain inactive. However, attracting a buyer for the whole or
large parts of the portfolio is more difficult as most buyers have a
specialised strategic approach and therefore are not seeking assets of a
diverse, regional nature which require focused asset management and local
expertise. Management have therefore focused efforts on capitalising on
private investor demand and reducing the portfolio size by disposing of assets
individually, with sales year to date of £10.4 million.
We have identified a further 20% of our portfolio that can satisfy this known
demand, some of which is already under offer and in legals. This will
provide us with a reduced portfolio, which assuming a more normalised
marketplace, may attract a corporate or portfolio buyer. Ongoing sales
will allow us to reduce our debt further and, subject to market conditions,
consider a share buyback or other form of capital return, all whilst
continuing to pay a covered dividend.
BANKING & FINANCING
In March 2023, the Group extended the £20 million facility with Lloyds
Banking Group Plc for 6 months to 31 May 2024 and the £31 million facility
with National Westminster Bank Plc for 3 months to June 2024, with a view to
formalising new facilities when long-term rates have stabilised.
As at 30 June 2023, 100% of the Company's debt was fixed, with a blended debt
profile term of 18 months and an average cost of debt of 3.7% (FY 2022: 3.7%).
Management are mindful of the ongoing inflationary pressures on interest rates
and proactively entered refinancing negotiations with our bankers in early H2
2023 in relation to banking facilities that are due for renewal in 2024.
These discussions are ongoing and management are confident of securing
competitive banking facilities for the business but, notwithstanding the
continuing repayment of debt from sales, interest costs will increase next
year.
The business remains multi-banked with debt spread across 4 lenders and all
banking covenants (a combination of interest cover against rental income and
LTV against asset value measurements) continue to be met with headroom
available and cure facilities if necessary:
As at 30 June 2023
Lender Debt Facility Debt Maturity Hedging
Lloyds Bank £20.0m May 2024 100%
National Westminster Bank £32.5m June 2024 100%
Barclays £7.6m December 2024 100%
Aviva £8.2m 2027 & 2030 100%
Following a successful period of sales in H1 2023 and with management firmly
focused on reducing gearing levels via debt repayment, £3.6 million of debt
was repaid using disposal proceeds during the first half of the year. Since
the period end, a further sum of £4.8 million has been repaid, reducing total
drawn debt to £63.4 million (H1 2022: £75.5 million).
2021 2022 2023 to date Total
Sales £17.6m £20.9m £10.4m £48.9m
Debt Repaid £11.9m £18m £8.4m £38.3m
Total Drawn Debt £89.4m £71.4m £63m £63m
Loan to value (net of cash) at the half year was 35.9% (FY 2022: 36.8%). Our
hedge facility improved by £388,000 for the half year to 30 June 2023.
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 half year with the
majority on deposit earning 4.5% on an instant access basis.
COST SAVINGS & EMPLOYEE LTIPS
Identified savings of £300,000 per annum and cost cutting remain on track for
the year end 2023 and further savings of up to £500,000 have been identified
for 2024. The sales of some vacant and part-vacant assets will also reduce
void holding costs going forward, such was the case with the sale of
part-vacant York House in July 2023 which was sold to a college and provided
us with significant savings in void costs.
Management and employee LTIPs are the subject of a comprehensive review and,
upon a conclusion of the review, a further announcement will be made. Any
changes will be directly aligned to the stated strategy and it is anticipated
that a new LTIP scheme will be adopted for the new financial year.
DIVIDEND
Subject to the acceleration of our ongoing sales programme, along with the
businesses' operational performance, the Board remains committed to paying a
covered dividend. The Board is pleased to announce a Q2 2023 fully covered
dividend of 0.625p reflecting a yield of 9.1% based on a mid-market opening
price of 27.50p on 22 September 2023. A total of £48.5 million has been
declared/paid to shareholders since the Company's dividend policy commenced in
2012. The proposed timetable for the dividend, which will be paid as an
ordinary dividend, is as follows:
Ex-dividend date: 5 October 2023
Record date: 6 October 2023
Dividend payment date: 27 October 2023
ASSET MANAGEMENT & OCCUPANCY
The portfolio remains operationally robust with strong rent collection levels
during H1 2023 of 99.93%. Q1 2023 saw a strong start to the year with
occupier interest and demand for space continuing from the previous year.
The occupational market in the retail sector (neighbourhood and convenience)
has remained resilient. We have disposed of all our Central Business District
assets, with the exception of our own Head Office in Birmingham. Our non-city
centre occupier demand is stable and we are achieving our ERV levels.
However, there is a notable slowing down of decision making and completions in
H2 2023.
In H1 2023, we effected 46 lease events, to include 6 lease renewals, 5 breaks
removals and 19 new lettings with new lettings generating £385,438 p.a. of
new income to the portfolio, more than offsetting the £184,500 p.a. of lost
income associated with sales. Contracted rental income was £12.5 million
per annum as at 30 June 2023, due to disposals (FY 2022: £12.6m).
The portfolio occupancy at the period end was 85.04% (FY 2022: 84.54%) and the
WAULT was 4.81 years to break and 5.99 years to expiry. There are a
significant number of lettings in the pipeline that, once completed, will
continue to improve the WAULT and occupancy across the portfolio (subject to
sales and other unforeseen lease events). The lettings will also reduce the
associated void costs across the portfolio and support the Company's
underlying profit and covered dividend payments.
Example key lease events year to date include:
· AFH Financial Group Limited took out a new lease for 11.5 years
at the passing rent of £396,077 per annum (at ERV) with no break, now
occupying all 25,000 sq ft at Avon House, Bromsgrove
· Walsall - Luxury Leisure took 9,500 sq ft on a 10-year lease at
£60,000 per annum at ERV, removing a void unit and associated costs
· Walsall - Superdrug renewed on a 5-year lease at £110,900 per
annum, therefore retaining a national retailer in the unit at ERV and ensuring
no void costs whilst maintaining rental income to a strong covenant
· Wolverhampton - SGS UK Limited took 5,500 sq ft at £90,500 per
annum on a 10-year lease at Venture Court at ERV, maximising occupancy at the
property
· Bromsgrove - detailed planning consent secured for letting to
Costa Coffee on a new straight 15-year lease at £85,000 per annum, without
the usual Costa terms of a break at 10 years
· Nuneaton - Poundland, new 5-year lease in their existing unit at
a rent of £90,000 per annum
· Acocks Green - Poundstretcher, new 10-year lease at £60,000 per
annum
Following the recent publicity relating to Wilkos closures, we can confirm
that we only have one unit in Crewe which is already the subject of
discussions with other operators, representing 2% of our rental income.
PORTFOLIO MIX TABLE
Sector £ per annum % by income
Office Office 5,398,868 43.17%
TR Traditional Retail 2,027,790 16.22%
DR Discount Retail - Poundland/B&M/Poundstretcher etc 1,472,350 11.77%
M&P Medical and Pharmaceutical - Boots/Holland & Barrett etc 759,049 6.07%
RBC Restaurant/Bar/Coffee - Costa Coffee 531,251 4.25%
FIN Financial/Licences/Agency - Bank of Scotland 346,125 2.77%
FS Food Stores - Lidl, Co-op, Iceland etc 406,545 3.25%
Other Other - Hotels (Travelodge), Leisure (The Gym Group), Car parking, AST, 1,563,606 12.50%
(Education) School/College
Total 12,505,584 100%
PORTFOLIO SUMMARY TABLE
Value Area Contracted Rent (£) ERV NIY EQY (%) RY Occupancy (%)
(£) (sq ft) (£) (%) (%)
Portfolio 166,800,000 1,373,631 12,505,584 15,066,920 7.02% 8.38% 8.46% 85.04%
Land* 2,393,390 - - - - - -
Total 169,193,390 1,373,631 12,505,584 15,066,920 7.02% 8.38% 8.46% 85.04%
*Our land holdings are excluded from the yield calculations
ENVIRONMENTAL & SOCIAL GOVERNANCE ("ESG")
REI continues to work with leading professionals to collect, track and report
carbon emissions data across landlord-controlled areas. The reduction of the
portfolio's carbon footprint is an ongoing priority for the business.
In accordance with government guidelines, REI also continues to ensure our
assets meet the UK statutory regulations and timeframes for Energy Performance
Certificates ("EPCs"). An overview of the asset EPC ratings across the
portfolio is noted below, showing the progress since 31 December 2022 to date:
% of portfolio (by sq ft)
EPC Rating
A B C D E F G Total
31 Dec 1.36 22.99 31.18 37.49 6.98 0 0 100.00
2022
22 Sep 2023 2.08 37.19 22.96 34.52 3.25 0 0 100.00
ONGOING STRATEGY & OUTLOOK
In the absence of any consolidation opportunities within the real estate
sector that align with the best interests of shareholders and the backdrop of
poor market conditions, management have focused efforts on an opportunistic
and targeted sales programme with a view to significantly reducing debt and
leverage and returning capital to shareholders.
Maximum flexibility will be maintained when considering all future options,
including share buybacks or another form of capital return, with the view to
maximising shareholder returns.
The Company will consider sales of assets either on an individual or
collective basis, subject to market conditions that represent value for
shareholders. Management remain open to evaluating any corporate transaction
that is in the best interests of shareholders.
OUR STAKEHOLDERS
Our continued thanks to our shareholders, advisors, occupiers and staff for
their ongoing support and assistance.
CHANGE OF NAME OF NOMINATED ADVISER
The Company also announces that its nominated adviser has changed its name to
Cavendish Securities plc (formerly Cenkos Securities plc) following completion
of its own corporate merger.
William
Wyatt
Paul Bassi CBE D.UNIV
Chairman
Chief Executive
22 September
2023
22 September 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 30 June 2023
Six months to Six months to Year ended
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Revenue 6,056 7,165 13,293
Cost of sales (1,285) (1,170) (2,489)
Gross profit 4,771 5,995 10,804
Administrative expenses (1,359) (1,483) (3,252)
Gain on sale of investment properties 737 1,001 948
(Loss)/gain in fair value of investment properties (4,073) 3,149 3,152
Profit from operations 76 8,662 11,652
Finance income 51 26 49
Finance costs (1,294) (1,600) (2,981)
Gain on financial liabilities held at fair value 388 1,238 2,214
(Loss)/profit on ordinary activities before taxation (779) 8,326 10,934
Income tax charge - - -
Net (loss)/profit after taxation and total comprehensive income (779) 8,326 10,934
Basic earnings per share 6 Nil 4.64p 6.33p
Diluted earnings per share 6 Nil 4.56p 6.25p
EPRA earnings per share 6 1.26p 1.64p 2.68p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 30 June 2023
Share Share Capital Retained Total
Other
Capital Premium Redemption Reserves Earnings
Account Reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2021 17,938 51,721 749 33,855 105,022
759
Share based payment - - - 75 - 75
Dividends - final 2021 - - - - (1,457) (1,457)
Dividends - interim 2022 - - - - (1,458) (1,458)
Transactions with owners - - - (2,915) (2,840)
75
Profit for the period and total comprehensive income - - - 8,326 8,326
-
At 30 June 2022 17,938 51,721 749 834 39,266 110,508
Share based payment - - - 75 - 75
Share buyback (714) - - - (1,296) (2,010)
Transfer re capital - - 714 - (714) -
Share issue 42 108 - (150) - -
Dividends - interim 2022 - - - - (2,216) (2,216)
Transactions with owners (672) 108 714 (75) (4,226) (4,151)
- - - 2,608 2,608
Profit for the period and total comprehensive income
-
At 31 December 2022 17,266 51,829 1,463 759 37,648 108,965
Share based payment - - - 75 - 75
Dividends - final 2022 - - - - (755) (755)
Dividends - interim 2023 - - - - (1,079) (1,079)
- - - (1,834) (1,759)
Transactions with owners 75
Loss for the period and total comprehensive income - - - (779) (779)
-
At 30 June 2023 17,266 51,829 1,463 35,035 106,427
834
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2023
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Assets
Non-current assets
Investment properties 5 166,800 187,875 173,030
Property, plant and equipment 2 4 3
166,802 187,879 173,033
Current assets
Inventories 2,393 2,387 2,389
Trade and other receivables 2,882 3,757 3,110
Derivative financial asset 456 - 68
Cash and cash equivalents 8,010 8,268 7,818
13,741 14,412 13,385
Total assets 180,543 202,291 186,418
Liabilities
Current liabilities
Bank loans (52,915) (379) (20,325)
Trade and other payables (6,205) (7,078) (5,982)
(59,120) (7,457) (26,307)
Non-current liabilities
Bank loans (14,996) (83,418) (51,146)
Derivative financial liabilities - (908) -
(14,996) (84,326) (51,146)
Total liabilities (74,116) (91,783) (77,453)
Net assets 110,508 108,965
106,427
Equity
Ordinary share capital 17,266 17,938 17,266
Share premium account 51,829 51,721 51,829
Capital redemption reserve 1,463 749 1,463
Other reserves 834 834 759
Retained earnings 35,035 39,266 37,648
Total equity 106,427 110,508 108,965
CONSOLIDATED STATEMENT OF CASHFLOWS
for the 6 months ended 30 June 2023
Six months to Six months to Year ended
30 June 30 June 2022 31 December 2022
2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Cashflows from operating activities
(Loss)/profit after taxation (779) 8,326 10,934
Adjustments for:
Depreciation - 1 2
Gain on sale of investment property (737) (1,001) (948)
Net valuation loss/(gain) 4,073 (3,149) (3,152)
Share based payment 75 75 150
Finance income (51) (27) (49)
Finance costs 1,294 1,600 2,981
Gain on financial liabilities held at fair value (388) (1,238) (2,214)
Increase in inventories (4) (3) (5)
(Increase)/decrease in trade and other receivables 231 (169) 478
Decrease in trade and other payables (164) (618) (1,051)
3,550 3,797 7,126
Cash flows from investing activities
Expenditure on investment properties (425) (723) (609)
Purchase of property, plant and equipment (-) (1) (1)
Proceeds from sale of property, plant and equipment 3,318 5,483 20,164
Interest received 51 27 49
2,944 4,786 19,603
Cash flow from financing activities
Interest paid (1,294) (1,600) (2,981)
Share buyback - - (2,010)
Equity dividends paid (1,448) (2,904) (5,783)
Repayment of bank loans (3,560) (5,647) (17,973)
(6,302) (10,151) (28,747)
Net increase/(decrease) in cash and cash equivalents 192 (1,568) (2,018)
Cash and cash equivalents at beginning of period 7,818 9,836 9,836
Cash and cash equivalents at end of period 8,010 8,268 7,818
NOTES TO THE INTERIM FINANCIAL INFORMATION
for the 6 months ended 30 June 2023
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 2023 (including the
comparatives for the year ended 31 December 2022 and the period ended 30 June
2022) was approved by the board of directors on 22 September 2023.
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 2022 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 2022 financial statements approved by the Board on 27 March 2023.
Some accounting pronouncements which have become effective from 1 January 2023
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 2021 188,485
Additions 723
Disposals (4,482)
Revaluation 3,149
Carrying amount at 30 June 2022 187,875
Additions (114)
Disposals (14,734)
Revaluation 3
Carrying amount at 31 December 2022 173,030
Additions 425
Disposals (2,582)
Revaluation (4,073)
Carrying amount at 30 June 2023 166,800
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 2023 30 June 2022
Earnings Shares Earnings per share Earnings Shares Earnings per share
£'000 No P £'000 No P
Basic (loss)/earnings per share (779) 172,651,577 Nil 8,326 179,377,898 4.64
Fair value of investment properties (3,149)
4,073
Gain on disposal of investment properties (737) (1,001)
Change in fair value of derivatives (388) (1,238)
EPRA Earnings 2,169 172,651,577 1.26 2,938 179,377,898 1.64
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 2023
EPRA NTA EPRA NRV
EPRA NDV
£'000 £'000 £'000
Net assets 106,426 106,426 106,426
Fair value of derivatives (456) (456) -
Real estate transfer tax - 10,842 -
EPRA NAV 105,970 116,812 106,426
Number of ordinary shares issued for diluted and EPRA net assets per share 175,749,795 175,749,795 175,749,795
EPRA NAV per share 60.3p 66.5p 60.6p
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
30 JUNE 2023 31 DECEMBER 2022
No of Shares No of Shares
Number of ordinary shares issued at end of period 172,651,577 172,651,577
Dilutive impact of options 2,312,675
3,098,218
Number of ordinary shares issued for diluted and EPRA net assets per share 175,749,795 174,964,252
Net assets per ordinary share
Basic 60.3p 62.2p
Diluted 66.5p 68.7p
EPRA NTA 60.6p 62.3p
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