REG - Real Estate Investrs - Half Year Results
23/09/2024 07:00
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RNS Number : 1391F Real Estate Investors PLC 23 September 2024
Real Estate Investors Plc
("REI", the "Company" or the "Group")
Half Year Results
For the six months ended 30 June 2024
TARGETED SALES ON TRACK & REDUCED DEBT
CONTINUED COVERED DIVIDEND
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 2024 ("H1 2024").
FINANCIAL - ADVANCING SALES STRATEGY IN A CHALLENGING MARKET
· Completed disposals of £6.7 million and contracted disposals of
£1.6 million, plus post-period completed disposals of £5.1 million,
totalling disposals year-to-date of £13.4 million, at an aggregate uplift of
3.5% (pre-costs) to 31 December 2023 year end book value
· Disposal proceeds used to pay down £6.4 million of debt in H1
2024, plus a further £3.6 million paid off since the period end, reducing
total drawn down debt to £44.4 million (H1 2023: £67.9 million)
· Further pipeline of sales in legals to support sales programme
and debt repayment strategy
· Underlying profit before tax* of £1.8 million, due to strategic
disposals (H1 2023: £2.2 million)
· Loss before tax of £3.2 million (H1 2023: £0.8 million loss)
includes loss on property revaluations (non-cash item) of £4.9 million (H1
2023: £4.1 million loss)
· EPRA** Net Tangible Assets ("NTA") per share of 52.0p (FY 2023:
54.9p)
· Revenue of £5.6 million (H1 2023: £6.1 million) reducing due to
income lost from disposals
· EPRA** EPS of 1.04p (H1 2023: 1.26p)
· Q2 2024 fully covered quarterly dividend payment of 0.5p per
share (Q2 2023: 0.625p per share) reflecting a yield of 6.15% based on a
mid-market opening price of 32.50p on 20 September 2024
· £52.4 million total declared/paid to shareholders since dividend
policy commenced in 2012
OPERATIONAL - STRONG RENT COLLECTION & IMPROVED WAULT
· Strong rent collection for H1 2024 of 99.6% (H1 2023: 99.93%)
· £136.2 million gross portfolio valuation (inc. £6.7 million
completed disposals) (FY 2023: £145.5 million)
· Like-for-like, the portfolio valuation (conducted pre-election
and interest rate reduction) has reduced by 3.51% to £133.8 million (FY 2023:
£138.7 million)
· Completed 14 lease events, with new lettings generating £760,000
p.a. of new income (H1 2023: £385,000 p.a) and a positive pipeline of
lettings in legals
· Improved WAULT*** of 5.55 years to break/6.61 years to expiry (FY
2023: 5.24 years /6.01 years), post period end improved further to 5.63 years
to break and 6.74 years to expiry
· Contracted rental income reduced to £10.3 million p.a. as at 30
June 2024 (FY 2023: £10.9 million p.a.), post period end reduced further to
£9.8 million p.a. due to disposals and lease events
· Occupancy level of 86.42% at 30 June 2024 (FY 2023: 83.03%), post
period end reduced to 83.74% due to disposals and lease events
BANKING & DEBT RELATED - PRIORITISING DEBT REPAYMENT FROM SALES PROCEEDS
· Disposal proceeds used to pay down £6.4 million of debt in H1
with £3.6 million repaid since the period end
· Total drawn debt of £48.0 million (H1 2023: £67.9 million),
post period reduced to £44.4 million
· Board's intention remains to extend the reduced bank facilities
for a further year in Q1 2025, which should be repaid in 2025 from property
disposals
· Reducing loan to value (net of cash) of 31.8% (FY 2023: 32.4%)
(in line with target of sub 35%)
· £5.4 million cash at bank - the Company is maximising returns on
cash reserves, with monies on deposit earning an average of 4% on instant
access
· Average cost of debt maintained at 6.5% (FY 2023: 6.5%)
· Hedge facility has improved by £271,000 for half year to 30 June
2024
PAUL BASSI, CHIEF EXECUTIVE, COMMENTED:
"A satisfactory period of activity, despite negative market sentiment with
activity 40% below the 5-year average. Year-to-date, we have made targeted
sales of £13.4 million at 3.5% above 2023 year end book values and prepared
assets for future sales.
We are likely at or near the bottom of this cyclical property decline and look
forward to a period of positive activity and the potential for capital and
rental growth, supported by lower interest rates and improving investor and
occupier demand. A normalising market backdrop will contribute to more rapid
sales and debt repayment, allowing us to execute our strategy and return
capital to shareholders, whilst continuing to pay a covered dividend.
Additionally, management remain open to evaluating any portfolio or corporate
transaction that is in the best interests of shareholders, in order to
maximise shareholder returns."
FINANCIAL & OPERATIONAL RESULTS
30 June 2024 30 June 2023
Revenue £5.6 million £6.1 million
Underlying profit before tax* £1.8 million £2.2 million
Contracted rental income £10.3 million £12.5 million
EPRA EPS** 1.04p 1.26p
Pre-tax loss (£3.2 million) (£0.8 million)
Dividend per share 1.00p 1.25p
Average cost of debt 6.5% 3.7%
Like-for-like rental income £10.3 million £10.6 million
30 June 2024 31 December 2023
Gross property assets £136.2 million £145.5 million
EPRA NTA per share** 52.0p 54.9p
Like-for-like capital value psf £118.70 psf £123.02 psf
Like-for-like valuation £133.8 million £138.7 million
Tenants 167 183
WAULT to break*** 5.5 years 5.24 years
Total ownership (sq ft) 1.12 million sq ft 1.24 million sq ft
Net assets £90.7 million £95.6 million
Loan to value 35.8% 38.0%
Loan to value (net of cash) 31.8% 32.4%
Definitions
* Underlying profit before tax excludes profit/loss on revaluation,
sale of properties, interest rate swaps and STIP provision
** EPRA = European Public Real Estate Association
*** WAULT = Weighted Average Unexpired Lease Term
Enquiries:
Real Estate Investors Plc +44 (0)121 212 3446
Paul Bassi/Marcus Daly
Cavendish Capital Markets Limited (Nominated Adviser) +44 (0)20 7220 0500
Katy Birkin/Ben Jeynes
Panmure Liberum Limited (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 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 announced in January 2024 that it would be
undertaking an orderly strategic sale of the Company's portfolio over 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. In the meantime, it is the Board's intention to
continue paying a fully covered quarterly dividend. Further information on the
Company can be found at www.reiplc.com (http://www.reiplc.com) .
CHAIRMAN'S & CHIEF EXECUTIVE'S STATEMENT
Widespread market uncertainty in H1 2024, predominantly due to an early
election and the uncertainty surrounding interest rates, contributed to record
low levels of transactional activity across the UK investment market, noted as
40% below the 5 year average. Despite this, our diverse and flexible
portfolio has continued to attract interest from the strong private investor
and owner-occupier market and this interest has allowed us to advance our
sales programme and reduce debt in line with our strategy.
By the period end, we had completed on the sale of £6.7 million of assets and
contracted on the sale of £1.6 million and repaid £6.4 million in debt.
Since then, we have sold an additional £5.1 million in assets and repaid a
further £3.6 million in debt, totalling £13.4 million in sales and £10.0
million in debt repayment year-to-date. These sales represent a 3.5% increase
(pre-costs) over the December 2023 year-end book value and have an associated
income loss of £848,000 p.a.
Aside from the disposals that have exchanged or completed year-to-date, we
also have several additional properties in our legal pipeline, which on an
aggregate basis, are at or above our 31 December 2023 year end book values.
Whilst a strong sales pipeline is very encouraging, it is worth noting that
our experience to date of selling to the smaller private investor and owner
occupier markets are that transactions take longer to complete due to the
nature of the investors and the legal formalities around their funding, though
these timelines allow us to continue to receive rent where appropriate.
Whilst the Board's key objective remains to execute an orderly sales programme
to maximise capital returns to shareholders, the primary focus of our asset
management team on a day-to-day basis is to actively manage the remaining
portfolio to maintain high-quality assets for disposal whilst boosting
occupancy, revenue, and capital values, and supporting the ongoing dividend.
The occupier market remains buoyant and our asset management team completed 14
lease transactions in H1 2024, totalling £760,000 p.a. new income to the
portfolio (with further transactions completed since the period end),
offsetting some income losses from sales and tenants vacating.
Operationally, the portfolio remains robust with a rent collection rate of
99.6% for H1 2024. The portfolio contracted rental income as at 30 June 2024
was £10.3 million p.a. (FY 2023: £10.9 million p.a.), and our active asset
management approach improved portfolio WAULT at the half year to 5.5 years to
break and 6.61 years to expiry, with occupancy at 86.42% (FY 2023: 83.03%).
Post period end, occupancy has reduced to 83.74% due to disposals and known
lease events, with contracted rental income also reduced due to these factors
to £9.8 million and WAULT now sitting at 5.63 years to break and 6.74 years
to expiry. Pipeline lettings should further boost our contracted rental
income and occupancy and combat some of the rental loss should our disposal
programme gain pace in the coming months, together with holding cost savings
for our void properties that are in our legal pipeline to sell.
Revenue for the period ended 30 June 2024 was £5.6 million (H1 2023: £6.1
million), reduced due to the loss of income associated with disposing of
assets in late 2023 and into H1 2024. Underlying profit for the half-year
was £1.8 million (H1 2023: £2.2 million) with a pre-tax loss of £3.2
million, primarily driven by a £4.9 million non-cash loss on property
revaluations, undertaken prior to the election and interest rate reduction in
August. In addition a provision of £0.3 million (H1 2023: Nil) has been made
in relation to the Shorter Term Incentive Plan ("STIP") announced in January
2024 although no payment will be due until completion has been determined in
line with the rules of the STIP.
The 3.5% reduction in our half year portfolio value on a like for like basis,
is in line with reductions seen across the market and is indicative of the
ongoing pressure around interest rates, a lack of transactional activity and
the negative sentiment that persists towards the office sector that has led to
softening yields across the portfolio. Of the £4.9 million valuation
reduction in the REI portfolio, 63% was across our office assets.
The business is conservatively geared with a reducing loan to value (net of
cash) of 31.8% (FY 2023: 32.4%). The Company's average cost of debt remained
at 6.5% against a net initial yield across the portfolio of 7.23%. It is the
Board's intention to repay all Company debt prior to December 2025 or before,
with the focus then shifting to returning surplus capital to shareholders, all
whilst continuing to pay a covered dividend.
In the meantime, it is business as usual for REI as we approach the final
quarter of 2024 and await to see the effects of the summer's interest rate
reduction and the impact of the Labour government. We will continue to focus
our efforts on selling assets to the existing buyer pool, maximising our
income and capital values for future disposals and continuing to pay a
fully-covered quarterly dividend to shareholders.
Management remain open to a portfolio or corporate transaction that is in the
best interests of shareholders and which could lead to an acceleration of the
Company's disposal strategy.
BUSINESS PERFORMANCE/RESULTS
The loss before tax of £3.2 million (H1 2023: £0.8 million loss) includes a
£4.9 million loss on property revaluations (non-cash item) representing a
3.5% portfolio valuation decline (H1 2023: £4.1 million loss), £80,000 loss
on sale of investment property (H1 2023: £737,000 profit), £271,000 surplus
on hedge valuation (H1 2023: £388,000 surplus) and a provision for the STIP
of £0.3 million (H1 2023: Nil).
The underlying profit for the period was £1.8 million (H1 2023: £2.2
million), the reduction in the main due to the strategic sales and the
increase of £0.4 million in finance costs as a result of rising interest
costs and hedge deals expiring.
Administrative expenses for the period were £1.3 million (H1 2023: £1.4
million). Identified cost savings and cost reductions remain on track and
totalled £0.4 million for H1 2024, the majority of which was the agreed
reduction in directors' remuneration. However, these savings were offset by a
provision of £0.3 million (H1 2023: Nil) for the Company's STIP which was
approved following a comprehensive review and in line with the strategic
programme although no payment will be due until completion of the corporate
strategy, in line with the rules of the STIP.
BANKING & FINANCING
Following completed sales of £6.7 million and contracted sales of £1.6
million in H1 2024 and with management committed to lowering gearing levels
through debt repayment, £6.4 million of debt was repaid utilising proceeds
from asset disposals during the first half of the year. As at 30 June 2024,
total drawn debt reduced to £48.0 million (H1 2023: £67.9 million), with
£5.4 million cash at bank earning an average of 4%.
Since the period end and at the time of writing, an additional £5.1 million
of sales have completed and subsequent receipts were used to pay down an
additional £3.6 million of debt, reducing total drawn debt to £44.4 million.
2021 2022 2023 2024 to date Total
Sales £17.6m £20.9m £18.0 m £13.4 m £69.9 m
Debt Repaid £11.9m £18.0m £17.0 m £10.0 m £56.9 m
Total Drawn Debt £89.4m £71.4m £54.4 m £44.4 m £44.4 m
It remains the Board's intention to extend the reduced bank facilities for a
further year in Q1 2025, which should be repaid in 2025 from property
disposals. Due to the current high interest rate environment and the hedge
deals falling away, interest costs increased and the average cost of debt was
6.5% as at 30 June 2024. The short-term nature of the facilities is driven by
management's intention to prioritise the repayment of debt from property sales
proceeds.
The Group's loan to value (LTV) net of cash at the half year was 31.8% (FY
2023: 32.4%) and the hedge facility improved by £271,000 for the half year to
30 June 2024.
The business continues to be multi-banked across 3 lenders:
Lender Debt Facility Debt Maturity Hedging Debt Facility
(as at 30 June 2024) (as at 30 June 2024) (year-to-date)
Lloyds Bank £15.8 million May 2025 63% £14.5 million
National Westminster Bank £26.3 million June 2025 Nil £24.0 million
Barclays £5.9 million June 2025 Nil £5.9 million
DIVIDEND
The Board is pleased to announce a Q2 2024 fully-covered dividend of 0.5p
reflecting a yield of 6.15% based on a mid-market opening price of 32.50p on
20 September 2024.
Subject to the pace of the ongoing sales programme, the Board remains
committed to paying a fully-covered dividend. The proposed timetable, for
the dividend, which will be paid as an ordinary dividend, is as follows:
Ex-dividend date: 3 October 2024
Record date: 4 October 2024
Dividend payment date: 25 October 2024
ASSET MANAGEMENT & OCCUPANCY
Rent collection for the first half of 2024 remained strong at 99.6%. Q1
2024 saw a steady start to the year, with Q2 showing a strong return to lease
activity, especially in the retail sector (neighbourhood and convenience),
which like 2023 has remained resilient. In H1 2024, we effected 14 lease
events, made up of nine new lettings and six lease renewals, with further
transactions completed since the period end. Whilst not as many in number as
H1 2023, the impact was greater, as new lettings generated £760,000 p.a. (H1
2023 was £385,000 p.a. Contracted rental income was £10.3 million p.a. as
at 30 June 2024, due to disposals and tenants vacating (FY 2023: £10.9
million).
Portfolio occupancy at the period end improved to 86.42% (FY 2023: 83.03%) and
the WAULT also improved to 5.55 years to break and 6.61 years to expiry.
The void space across the portfolio predominantly relates to four properties
(circa 60% of void space), of which two of these assets are in legals to sell.
This will reduce the void space considerably and consequently, portfolio void
costs will reduce.
Post period end, occupancy has reduced to 83.74% due to disposals and known
lease events, with contracted rental income also reduced due to these factors
to £9.8 million and WAULT now sitting at 5.63 years to break and 6.74 years
to expiry.
As part of the ongoing sales strategy, a number of assets are undergoing asset
management initiatives and will be marketed for sale once these are completed,
to maximise disposal value.
Example key lease events year-to-date include:
· Oldbury - DHU Healthcare CIC took out a new lease of Birch House,
for 10 years at a rent of £625,608 p.a. (above ERV), occupying all 35,000 sq
ft
· Crewe - British Heart Foundation took 10,765 sq ft on a 10-year
lease at £57,500 p.a., removing a large part of a void unit and associated
costs
· Tunstall - McDonalds Restaurants Limited signed an Agreement
for Lease for 3,189 sq ft at £55,000 p.a. Once the works completed the
lease completed in July 2024, for 20-years with a break after year 10. Not
only was this above the ERV, but the presence of McDonalds adds significant
weight to the scheme
· Bromsgrove - United Recruitment Group Limited took a unit at
£31,787 p.a. In addition, Ladies Fighting Breast Cancer also took a unit -
at a 50% rental discount as part of REI's ESG policy
PORTFOLIO MIX TABLE
Sector Income (£) Income (%)
Office 5,068,890 49.44
Traditional Retail 1,365,681 13.32
Discount Retail - Poundland/B&M etc 922,500 9.00
Medical and Pharmaceutical - Boots/Holland & Barrett etc 541,749 5.28
Restaurant/Bar/Coffee - Costa Coffee 273,286 2.67
Financial/Licences/Agency - Bank of Scotland 216,500 2.11
Food Stores - Co-op and Iceland 406,545 3.97
Other - Hotels (Travelodge and Vine), Leisure (The Gym Group and Luxury 1,457,307 14.21
Leisure), Car parking, AST
10,252,458 100.00
PORTFOLIO SUMMARY TABLE
Value Area Contracted ERV NIY EQY RY Occupancy
(£) (sq ft) Rent (£) (£) (%) (%) (%) (%)
133,825,000 1,127,383 10,252,458 12,731,915 7.23 8.84 8.98 86.42
Portfolio
2,403,262 n/a n/a n/a n/a n/a n/a
Land*
136,228,262 1,127,383 10,252,458 12,731,915 7.23 8.84 8.98 86.42
Total
*Our land holdings are excluded from the yield calculations
ENVIRONMENTAL & SOCIAL GOVERNANCE ("ESG")
As with previous years, the reduction of the portfolio's carbon footprint is
an ongoing priority for the business.
REI is continuing to work alongside Systemslink, (a leading energy management
software provider), to collect, track and report carbon emissions data across
REI's landlord-controlled areas. We are currently still verifying carbon
emissions data for the last 3 years to ensure accuracy and it is our intention
to report latest carbon emissions data in year-end reporting.
PORTFOLIO ENERGY PERFORMANCE CERTIFICATION
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 2023 to date:
% of portfolio (by sq ft)
EPC Rating
A B C D E F G Total
31 Dec 2.25 36.88 22.71 35.13 3.03 0 0 100
2023
20 Sep 2024 2.56 37.35 24.90 32.41 2.78 0 0 100
OUTLOOK
Looking to the remainder of 2024 and into 2025, with the election now
concluded, a 0.25% interest rate reduction announced in August and the
likelihood of further interest rate reductions, we anticipate more normalised
investment market conditions on the horizon as investors take comfort from
reducing inflationary pressures and borrowing costs.
This will likely signal the return of the UK funds, property companies,
private equity and overseas buyers to re-enter the market and will enable us
to sell our larger assets at positive pricing levels, eliminate our debt and
return capital to shareholders.
We are already seeing signs of these traditional investors returning to the
market and expect this trend to continue into 2025, coupled with a strong
occupier market and rental growth.
OUR STAKEHOLDERS
The Executive & Management team would like to extend their thanks to all
shareholders, advisors, occupiers and staff for their support and assistance,
particularly since the announcement of our disposal strategy in January 2024.
CHANGE OF NAME OF BROKER
The Company also announces that its broker has changed its name to Panmure
Liberum Limited (formerly Liberum Capital Limited) following completion of its
own corporate merger on 1 July 2024.
William
Wyatt
Paul Bassi CBE D.UNIV
Chairman
Chief Executive
20 September
2024
20 September 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 6 months ended 30 June 2024
Six months to Six months to Year ended
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Revenue 5,578 6,056 11,513
Cost of sales (1,132) (1,285) (2,232)
Gross profit 4,446 4,771 9,281
Administrative expenses (1,299) (1,359) (2,616)
(Deficit)/gain on sale of investment properties (80) 737 (182)
Deficit in fair value of investment properties (4,863) (4,073) (13,197)
(Loss)/profit from operations (1,796) 76 (6,714)
Finance income 88 51 177
Finance costs (1,734) (1,294) (2,371)
Gain/(deficit) on financial liabilities held at fair value 271 388 (499)
Loss before taxation (3,171) (779) (9,407)
Income tax charge - - -
Net loss after taxation and total comprehensive income (3,171) (779) (9,407)
Basic loss per share 6 (1.82)p (0.45)p (5.44)p
Diluted loss per share 6 (1.82)p (0.45)p (5.44)p
EPRA earnings per share 6 1.04p 1.26p 2.59p
+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 30 June 2024
Share Share Capital Retained Total
Share-based payment
Capital Premium Redemption Reserve Earnings
Account Reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2022 17,266 51,829 1,463 37,648 108,965
759
Share based payment - - - 75 - 75
Dividends - final 2022 - - - - (755) (755)
Dividends - interim 2023 - - - - (1,079) (1,079)
Transactions with owners - - - (1,834) (1,759)
75
Loss for the period and total comprehensive income - - - (779) (779)
-
At 30 June 2023 17,266 51,829 1,463 834 35,035 106,427
Share based payment - - - (75) - (75)
Share issue 119 215 - (334) - -
Dividends - interim 2023 - - - - (2,166) (2,166)
Transactions with owners 119 215 - (409) (2,166) (2,241)
- - - (8,628) (8,628)
Loss for the period and total comprehensive income
-
At 31 December 2023 17,385 52,044 1,463 425 24,241 95,558
Share based payment - - - 300 - 300
Share issue 54 129 - (183) - -
Dividends - final 2023 - - - - (1,086) (1,086)
Dividends - interim 2024 - - - - (872) (872)
54 129 - (1,958) (1,658)
Transactions with owners 117
Loss for the period and total comprehensive income - - - (3,171) (3,171)
-
At 30 June 2024 17,439 52,173 1,463 19,112 90,729
542
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2024
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Assets
Non-current assets
Investment properties 5 133,825 166,800 143,105
Property, plant and equipment 1 2 2
133,826 166,802 143,107
Current assets
Inventories 2,403 2,393 2,395
Trade and other receivables 2,608 2,882 2,550
Derivative financial asset - 456 -
Cash and cash equivalents 5,400 8,010 7,981
10,411 13,741 12,926
Total assets 144,237 180,543 156,033
Liabilities
Current liabilities
Bank loans (47,970) (52,915) (54,407)
Trade and other payables (5,378) (6,205) (5,637)
(53,348) (59,120) (60,044)
Non-current liabilities
Bank loans - (14,996) -
Derivative financial liabilities (160) - (431)
(160) (14,996) (431)
Total liabilities (53,508) (74,116) (60,475)
Net assets 106,427 95,558
90,729
Equity
Ordinary share capital 17,439 17,266 17,385
Share premium account 52,173 51,829 52,044
Capital redemption reserve 1,463 1,463 1,463
Share-based payment reserve 542 834 425
Retained earnings 19,112 35,035 24,241
Total equity 90,729 106,427 95,558
CONSOLIDATED STATEMENT OF CASHFLOWS
for the 6 months ended 30 June 2024
Six months to Six months to Year ended
30 June 30 June 2023 31 December 2023
2024
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Cashflows from operating activities
Loss after taxation (3,171) (779) (9,407)
Adjustments for:
Depreciation 1 - 1
Deficit/(gain) on sale of investment property 80 (737) 182
Net valuation loss 4,863 4,073 13,197
Share based payment 300 75 -
Finance income (88) (51) (177)
Finance costs 1,734 1,294 2,371
(Gain)/loss on financial liabilities held at fair value (270) (388) 499
Increase in inventories (9) (4) (6)
(Increase)/decrease in trade and other receivables (59) 231 560
Decrease in trade and other payables (159) (164) (624)
3,222 3,550 6,596
Cash flows from investing activities
Expenditure on investment properties (2,121) (425) (733)
Proceeds from sale of property, plant and equipment 6,459 3,318 17,279
Interest received 88 51 177
4,426 2,944 16,723
Cash flow from financing activities
Interest paid (1,734) (1,294) (2,371)
Equity dividends paid (2,058) (1,448) (3,721)
Repayment of bank loans (6,437) (3,560) (17,064)
(10,229) (6,302) (23,156)
Net (decrease)/increase in cash and cash equivalents (2,581) 192 163
Cash and cash equivalents at beginning of period 7,981 7,818 7,818
Cash and cash equivalents at end of period 5,400 8,010 7,981
NOTES TO THE INTERIM FINANCIAL INFORMATION
for the 6 months ended 30 June 2024
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 2024 (including the
comparatives for the year ended 31 December 2023 and the period ended 30 June
2023) was approved by the board of directors on 20 September 2024.
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 2023 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 2023 financial statements approved by the Board on 25 March 2024.
Some accounting pronouncements which have become effective from 1 January 2024
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 has 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 2022 173,030
Additions 425
Disposals (2,582)
Revaluation (4,073)
Carrying amount at 30 June 2023 166,800
Additions 308
Disposals (14,879)
Revaluation (9,124)
Carrying amount at 31 December 2023 143,105
Additions 2,121
Disposals (6,538)
Revaluation (4,863)
Carrying amount at 30 June 2024 133,825
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 2024 30 June 2023
Earnings Average number of shares Earnings per share Earnings Average number of shares Earnings per share
£'000 P £'000 P
Basic loss per share (3,171) 173,977,342 (1.82) (779) 172,651,577 (0.45)
Fair value of investment properties 4,073
4,863
Deficit/(gain) on disposal of investment properties 80 (737)
STIP provision 300 -
Change in fair value of derivatives (271) (388)
EPRA Earnings 1,801 173,977,342 1.04 2,169 172,651,577 1.26
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 2024
EPRA NTA EPRA NRV
EPRA NDV
£'000 £'000 £'000
Net assets 90,729 90,729 90,729
Fair value of derivatives 160 160 -
Real estate transfer tax - 7,360 -
EPRA NAV 90,889 98,249 90,729
Number of ordinary shares issued for diluted and EPRA net assets per share 174,738,511 174,738,511 174,738,511
EPRA NAV per share 52.0p 56.2p 51.9p
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 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
30 June 2024 31 December 2023
No of Shares No of Shares
Number of ordinary shares issued at end of period 174,381,971 173,844,434
Dilutive impact of options 858,042
356,540
Number of ordinary shares issued for diluted and EPRA net assets per share 174,738,511 174,702,476
Net assets per ordinary share
Basic 52.0p 54.9p
Diluted 56.2p 59.8p
EPRA NTA 51.9p 54.7p
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