REG - TR Property Inv. - Half-year Financial Report
01/12/2025 07:00
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RNS Number : 5142J TR Property Investment Trust PLC 01 December 2025
TR Property Investment Trust plc
London Stock Exchange Announcement
Unaudited results for the six months ended 30 September 2025
Legal Entity Identifier: 549300BPGCCN3ETPQD32
Information disclosed in accordance with Disclosure Guidance and Transparency
Rule 4.2.2
Kate Bolsover, Chairman:
" This half year marks a genuine turn in the income story. Revenue rose 23%
compared with the same period in 2024, reaching 10.07p per share. The Board is
pleased to increase the interim dividend to 5.75p. Income momentum is
rebuilding and it is good to see our direct property assets contributing
meaningfully once again. After several years in which uncertainty has
overshadowed fundamentals, it is encouraging to see full dividend cover move
back into sight - complementing healthy share price and net asset value
returns."
Marcus Phayre-Mudge, Fund Manager:
" This period has been a classic tug-of-war: political uncertainty and
higher-for-longer rates on one side, solid real estate fundamentals and a
flurry of corporate activity on the other side. Over the half year, the
positives have quietly pulled ahead, with the portfolio delivering a
double-digit NAV return. Financing costs are easing, corporate activity is
back on the front foot and high-quality assets remain in short supply. It is
not a fairytale recovery, but the building blocks for further progress are
firmly in place."
Financial highlights and performance
At 30 September At 31 March
2025 2025 Change
Balance Sheet
Net asset value per share 351.36p 327.16p +7.4%
Shareholders' funds (£'000) 1,115,037 1,038,237 +7.4%
Shares in issue at the end of period (m) 317.4 317.4 0.0%
Net debt(1,5) 18.0% 18.5%
Share Price
Share price 320.50p 294.00p +9.0%
Market capitalisation £1,017m £933m +9.0%
Half year ended Half year ended
30 September 30 September
2025 2024 Change
Revenue
Revenue earnings per share 10.07p 8.16p +23.4%
Interim dividend per share 5.75p 5.65p +1.8%
Half year ended Year ended
30 September 31 March
2025 2025
Performance: Assets and Benchmark
Net Asset Value total return(2,5) +10.6% -2.5%
Benchmark total return +9.6% -3.8%
Share price total return(3,5) +12.4% -4.9%
Ongoing Charges(4,5)
Including performance fee 0.79% 0.84%
Excluding performance fee 0.79% 0.78%
Excluding performance fee and direct property costs 0.77% 0.76%
¹ Net debt is the total value of loan notes, loans (including notional
exposure to contracts for difference ('CFDs') less cash as a proportion of net
asset value.
(2) The NAV Total Return for the period is calculated by reinvesting the
dividends in the assets of the Company from the relevant ex-dividend date.
Dividends are deemed to be reinvested on the ex-dividend date as this is the
protocol used by the Company's benchmark and other
indices.
(3) The Share Price Total Return is calculated by reinvesting the dividends in
the shares of the Company from the relevant ex-dividend date.
(4) Ongoing Charges are calculated in accordance with the AIC methodology.
Ongoing charges provided for the half year are based on estimated expenses and
charges and provide indicative values
only.
(5) Considered to be an Alternative Performance Measure as defined in the Half
Year
Report.
Chairman's statement
Market backdrop
I highlighted in June that our sector is very much part of the 'value' end of
the equity landscape. Given the ongoing global investor focus on technology
and 'growth' stocks, alongside the dominance of the US, it is pleasing to
report that the Company, which focuses on pan-European real estate equities,
has produced a double-digit return for the first six months of its financial
year. Whilst we remain an under-owned part of the equity market, underlying
real estate fundamentals continue to support rental and earnings growth.
I have often emphasised the sector's need for capital - in particular debt -
and it is very encouraging to report a tightening in spreads alongside the
central bank-driven reductions in base rates across Europe. Competition
amongst lenders is very real and the Company has, during the period, had
first-hand experience of improving (versus expectation) margins on its
revolving credit facilities.
As you will read later, our Manager remains optimistic; not only about the
supportive demand/supply dynamic in so many of our markets but, crucially,
about the low valuations applied to the listed companies through which we get
the vast majority of our exposure. This valuation mismatch has resulted in the
Company continuing to maintain a record low physical property exposure and a
record high equity exposure. Having said that, we are pleased with the
progress that the direct property team have made on a range of asset
management initiatives, particularly at Wandsworth and Bicester. More details
are given in the Manager's Report and will follow in the next annual report.
Geo-political risks remain at the forefront of our minds and focusing on
balance sheet strength and quality of earnings remains a central plank of our
investment approach. This does mean that our Manager can miss out on the full
benefits of 'beta rallies' - when all boats are lifted almost regardless of
quality. It also means that we have not always been on the winning side of
mergers where a higher-rated acquirer uses its stronger stock to acquire a
lower grade, more heavily discounted business - as it is usually the latter
that gets the immediate increase in share price. A couple of examples are
given in the Manager's report. More encouragingly, our Manager continues to be
very engaged with small cap consolidation (or failing that privatisation), a
process which has been running for several years and where this half year saw
yet more positive activity.
Revenue Results, Outlook and Dividend
Revenue earnings for the half year were 10.07p per share, an increase of 23%
compared to the level reported for the half year to 30 September 2024.
We are continuing to see a recovery in earnings from the sector, with the
majority of companies in the portfolio having increased their dividends year
on year. Income from our direct property portfolio increased 69% compared to
the first six months of the previous financial year following the purchases of
industrial assets at Northampton and Bicester.
We anticipate that the full year revenue earnings (to March 2026) will be
ahead of the previous full year. Our income is significantly skewed to the
first half of the year whilst most of our finance costs and expenses are
spread evenly across the year, therefore, we do not expect to see such a
significant increase in the second half.
The Board is aware of the importance to shareholders of a growing annual
dividend. Despite a fall in earnings since the March 2023 year end, the annual
dividend has modestly increased; something we have been using our revenue
reserves to achieve. With the current trajectory of increasing earnings, the
Board is confident that the annual dividend will return to being fully
covered. However, it is anticipated that a modest contribution from revenue
reserves for the current financial year will be required.
In recent years, increases have been made through the final dividend which has
widened the gap between the historically smaller interim dividend and the
final. Seeking to redress that balance marginally, the Board has increased the
interim dividend to 5.75p, a small rise of 1.8%. Shareholders should not take
this as an indication of the likely level of increase in the final dividend.
Net Debt and Currencies
Gearing decreased marginally over the first half of the financial year from
18.5% to 18.0%. Net borrowings were broadly unchanged in absolute terms
however the Company's net asset value ('NAV') has increased.
Sterling weakened by an average of 2.2% over the half year, delivering a
positive impact in income terms for the non-sterling denominated income that
accounts for 64% of the total income reported for the half year. Whilst the
income is unhedged and subject to exchange rate fluctuations, the currency
exposure of the portfolio is hedged in line with the benchmark.
Discount
The Company's shares traded at an average discount of 8.5% over the period,
narrowing from 10.1% at the end of March to 8.9% at the end of September. This
is wider than the five-year average of 6.6%, reflective of the under-ownership
of the sector referred to in my opening paragraph.
Awards
I am pleased to report that the Company has recently won two prestigious
awards. It won 'Best PR Campaign' at the AIC Shareholder Communication Awards
2025. This is further vindication of the Manager's and our PR consultants,
Aspectus' efforts to raise and maintain the Company's profile and engagement
with private, direct investors as well as our long standing institutional and
wealth manager shareholders. The Company was also named Investment Company of
the Year in the Property sector at the 2025 Investment Week awards. Finally,
we are very pleased to have received a Gold rating from Morningstar.
Outlook
The outlook for pan-European economic growth is foggy. The region is in the
midst of a huge shift in the global geo-political landscape. In recent
decades, Europe outsourced security to the US; much of its production to
China; and had become increasingly reliant on Russian gas. Termination of the
latter has been both costly and disruptive but is much less of an issue than
it was as recently as two years ago. The need to deliver a European-funded
defence capability will now be an important driver of all European economies,
particularly Germany and its neighbours such as Poland and Finland. Such
growth in manufacturing will be a significant fillip for industrial and
logistics real estate and the German 'fiscal bazooka' has many years of
deployment ahead of it. Real estate is also benefitting from the desire of
many companies to manage supply chain risk by bringing more production and
component storage closer to the customer. Set against these drivers for growth
there are more fundamental concerns around the funding of welfare and ageing
populations. Politicians' clear reluctance to make hard choices has resulted
in inflation remaining stubbornly high, particularly in the UK. However,
elsewhere in Europe inflation is falling alongside slowing job growth. The
uncertainly generated by the tariff wars has resulted in the deferral of
investment decisions, whilst uncertainty around job security and personal
taxation discourages individual consumption. This slower growth outlook is
likely to lead to further cuts in base rates by all European central banks.
Our asset class is very sensitive to the cost of debt and though economic
slowdowns are not welcome, the reduction in the cost of borrowing certainly
is. The key is how much this deceleration in growth impacts job creation,
consumer behaviour and corporate expansion. For our Manager this backdrop only
heightens the need to maintain exposure to the very best-in-class assets -
those with balance sheets which are not only robust but can also be flexed as
opportunities arise.
Ultimately, our sector remains materially under owned - currently viewed as a
stalwart 'value' equity, at a time when many major indices are soaring to
all-time highs. But underneath this unglamorous exterior lies steady earnings
growth, fuelled by easing debt costs and rental growth for top tier assets. It
is quite feasible that these more dependable income-focused equities become
increasingly sought after if global equity markets experience greater
volatility.
Kate Bolsover
Chairman
1 December 2025
Manager's report
Performance
The Company's net asset value ('NAV') total return for the six months to 30
September 2025 was a healthy +10.6%, whilst the share price total return was
slightly better at +12.4%. The benchmark, the FTSE EPRA/NAREIT Developed
Europe Capped Net Total Return Index (in sterling), returned +9.6% in the
period. The sector continues to trade in a tight range following the 2021-2023
sell-off.
The weakness we saw in the second half of the last financial year (September
2024 to March 2025) accelerated in the opening weeks of the new financial year
with President Trump's self-styled 'Liberation Day' tariff announcements. Our
sector was not immune, dropping over 8% between the 3rd and 9th April, only to
rebound as rapidly as broader equity markets. There followed, until the end of
June, a steady recovery in our sector. As I wrote in the Annual Report and I
am happy to reiterate in this half year update, the fundamentals in so many of
our markets are sound. The difficulty in financing development, the rapid
increase in build costs and the elevated returns required by investors has
squeezed construction starts. Supply of best-in-class assets remains tight. We
have continued to focus on companies with those higher quality portfolios.
Alongside these stable underlying market fundamentals, last year's concerns
around stubborn inflation (particularly for service sector wage inflation)
appear to be waning. European economies are slowing down, with lower job
growth figures feeding through. However, some of this weaker sentiment and
reluctance to hire workers or engage in broader corporate expansion is
politically driven. The UK and French political establishments have both (in
their own ways) managed to deter businesses from making decisions by
generating instability and uncertainty. This has, in the case of France,
significantly driven up the cost of sovereign debt, which weighs on the
valuation of all risk assets. For the UK, property (commercial and
residential) is clearly in the crosshairs for a Chancellor looking to raise
tax revenue, not least because it is immoveable. We are, therefore, not
surprised that UK and French real estate equities have had a subdued period of
performance over the summer and through September. For generalist investors
looking for ways to reflect a negative country viewpoint, property stocks are
a likely choice given their very high levels of domestic earnings. For the UK,
meaningful non-domestic exposure is rare, found only in SEGRO among the large
caps and Sirius among the mid-caps.
Whilst this political uncertainty is very much confined to the UK and France
rather than the whole of Europe, almost of greater importance has been the
continued steady reduction in base rates from all European central banks.
Though the longer end of the yield curve has remained stubbornly elevated, it
is very pleasing to report a continued reduction in the spreads/margins which
lenders and the bond markets are charging. More detail follows in the Debt and
Equity Markets section of this report.
The final component of our bull case, alongside constrained supply dynamics
and cheapening cost of finance, is corporate activity. The continued raising
of capital for offensive (as opposed to defensive) purposes, taking advantage
of market opportunities and growing the asset base of listed property
companies. This is a healthy sign for investor sentiment and there are more
examples later in this report. Alongside this sits merger and acquisition
('M&A') activity, which is taking two main forms. First, ongoing
consolidation, as sub-scale real estate investment trusts ('REITs') combine to
achieve greater liquidity, scale efficiencies, and stronger shareholder
earnings. Second, privatisations, which remain an important feature of the
landscape. Both forms of M&A are typically value-accretive for
shareholders and, crucially, the potential for further transactions provides a
solid underpin to current valuations.
The period under review witnessed the conclusion of the significant battle
between private equity (KKR) and a listed property company (Primary Health
Properties, 'PHP') for control of Assura, the only other owner of primary
healthcare facilities (following the sale of Care REIT to a US peer). This
four-month bidding war concluded with the board of Assura, correctly in our
view, switching its recommendation from KKR to PHP, thus ensuring victory for
the listed party. It is rare to see a listed company succeed against deep
pocketed and more highly-leveraged private buyers. We are pleased to see these
healthcare assets remain in the public domain rather than being sold at a low
point in the valuation cycle. We had been supporters of PHP for many years
given its superior total shareholder return versus Assura and look forward to
the Assura assets coming under the PHP management capability.
In Continental Europe, we saw a more congenial merger of two healthcare REITs,
Cofinimmo and Aedifica. The combined entity will be the fourth largest
healthcare REIT globally and there are large synergies to be gained from the
overlap between these care home operators. Whilst this is an all-paper
transaction, it is in reality a takeover of Cofinimmo by Aedifica, with the
target's share price total return reaching 31% over the period. We owned the
higher quality business (Aedifica) and not the acquired. Whilst we welcome the
larger entity, the transaction was not on our radar as a possibility given
Cofinimmo's 20% Brussels office exposure, which Aedifica will now need to
resolve and dispose of. Not owning Cofinimmo was costly (-43bps) to relative
performance.
The only privatisation in the period was Warehouse REIT, an externally managed
microcap owner of a diversified portfolio of industrial assets (and one large
development site) which was eventually acquired by Blackstone. The sale
process was tortuous. Blackstone reduced their initial offer (following due
diligence, mainly around the large development site) only to then increase it
once they realised, following a counter bid from Tritax Big Box, that they
were actually in a competitive situation. This bidding process clearly
established the market price for this portfolio but the winning bid, which
equated to 115p per share (including dividend), was still 12% below the last
published NAV. Another reminder that third party independent valuations need
to be treated with caution.
In the last Annual Report, I wrote extensively about our involvement in the
process which led to the takeover of Urban Logistics REIT by LondonMetric.
Technically this event occurred in this half year and hence I am documenting
this fact rather than revisiting all the details. Suffice to say we were very
pleased with the outcome from both a financial and governance perspective.
Regular viewers of our webcasts and presentations will be aware of my critical
views regarding the lack of alignment - and governance arrangements - in some
externally managed REITs. A number of culprits here were sub-scale vehicles
which raised capital in the era of very low interest rates. They invested
commensurately at the peak of the cycle but lacked the specialist expertise
required to manage the subsequent deterioration as the economy moved into a
higher interest rate environment and occupational markets weakened. Having
held Warehouse REIT briefly in the second quarter of 2023 (following the
Blackstone bid for Industrials REIT) we only bought back into the company in
March this year. The investment premise was that public markets were not
attracted to this sub-scale portfolio, nor its management structure, and that
a private equity buyer with a stronger management platform would bid a premium
to the share price - but still a discount to NAV - which investors would jump
at. We were proven right and therefore sold our position to Blackstone in
July, making an average return of 15% over the four month holding period.
Reviewing our performance attribution, these M&A situations contributed
modestly on a blended basis as the PHP/Assura merger saw the Assura share
price return just 5.8% in the six months, as the majority of the share price
movement (+25%) was back in February in the previous reporting period. PHP, as
the acquirer, returned -0.9% in the six months under review.
At the individual stock level, our largest active overweight positions
contributed the most to relative performance, which is to be expected in a
rising market. TAG (+20.1%) was our star performer and the overweight position
was balanced with an underweight position in Vonovia (+10.8%) the largest
listed property company in Europe. Picton (+12.3%) was a large contributor by
dint of the size of our holding (4.6% overweight). This microcap is finally
delivering on the strategy of selling assets (at or close to book value) and
buying back its shares at 25-35% discounts to NAV. This strategy is a
guaranteed delivery of earnings and NAV accretion. Credit should be given to
both the board and management for providing comfort to shareholders that the
business is being run on their behalf and the market opportunity in the
mis-priced equity is to be seized upon. Investors are waking up to the impact
of this approach and correctly repricing the equity. Covivio (+18.3%) is a
diversified REIT listed in France but with office and hotel assets across
Europe, alongside a substantial Berlin residential business. The latter two
components have driven returns so far this year and we continue to own it
despite the impact of French politics on sentiment towards French listed
equities. Its see-through exposure to France is just one third of its assets.
The other two largest contributors were also French-listed. As with Covivio
and Klepierre, Unibail-Rodamco-Westfield also has only about one third of its
assets in France. The 25% in the US, where consumer spend remains resilient,
aided their performance.
The underweight position which hampered performance the most was Vonovia
(+10.8%) but this was more than offset by the overweight position in TAG.
However, there was no natural hedge for the (initial) underweight exposure to
Merlin Properties (+33.2%) which saw supercharged performance driven by its
data centre development programme. We were slow to appreciate how positively
the market would treat absolutely any artificial intelligence ('AI')-related
exposure - even as a small part of a fully diversified portfolio including
offices, shopping centres, logistics and residential. We closed the
underweight position over July and August (buying at an average of €12.26
per share) with the stock ending the period at €13.76 per share. This is a
prime example of the importance of accepting a change in market sentiment and
taking corrective action, rather than remaining dogmatic about a previous
valuation of future development gains. However, we remain wary of extended
exuberance in this stock.
The final 'mea culpa' for the period was our underexposure to London offices.
Whilst we noted in last year's half year and annual reports the rapid recovery
in prime rents in the very best locations, the performance of the developer
names Great Portland Estates, Derwent London and Helical was very weak,
touching decade-low pricing in March this year. Our view at the time - which
still holds - is that none of these companies have enough best-in-class new
development opportunities to meaningfully 'move the needle' and their cash
earnings (after reversing out capitalised interest) remain very low. We simply
prefer our companies to have stronger cash earnings. However, investor
sentiment towards those companies has improved markedly in the last six
months. We believe this is at least partly based on the potential for
privatisation given the deep discounts that they trade at. We continue to
prefer Workspace (+0.2%) where new management is getting to grips with the
historic underinvestment in operational systems, particularly in understanding
tenants' occupational intentions. The deep discount to asset value has
attracted several well-known discount arbitrageurs who also see the virtue of
a management turnaround.
Offices
Central London continues to report record rents for new-build offices in the
very best-in-class locations, particularly those close to Elizabeth Line
stations. It is hard to overestimate the attraction of proximity to this new
infrastructure. However, we remain cautious about sub-markets which do not
have this benefit. At the time of writing, the UK economy remains very
subdued, with corporates in 'wait-and-see' mode ahead of the Autumn Budget in
late November, which will coincide with the publication of this report. We
believe this particularly affects hiring in small and medium-sized enterprises
('SMEs') as well as at entry- and graduate-level more broadly. But even though
headcount growth is subdued, the return to office continues to gather
momentum, with more businesses adopting a policy of at least four days per
week in the office. The public sector remains far behind in requiring more
time in the office.
Paris, our second largest office market exposure, showed a similar pattern,
with top performance concentrated in super-prime assets located in core CBD
markets. Rental growth was lower than London and lease incentives continued to
rise for all but the very best assets.
Peripheral but important sub-markets dominated by financially focused
businesses such as Canary Wharf and La Defense continue to see little rental
growth given elevated vacancy levels. Although take up in Paris CBD fell 15%
year-on-year, Savills notes that this was due to a shortage of new supply,
rather than falling demand. A clearer comparison is that vacancy in Paris CBD
is less than 6%, while La Defense is still recording more than 15%. The same
report notes a strengthening of demand from tenants looking to satisfy ESG
credentials by occupying energy efficient and 'energy intelligent' buildings.
The cautious approach which we suspect is prevalent in UK business leaders'
minds could equally be applied to their French equivalents.
Smaller markets, particularly in Germany (which has no single overly dominant
office market), have seen a much wider range of performance, with Frankfurt
and Cologne enjoying 10% rental growth whilst Berlin and Munich recorded
increases in incentive packages to attract tenants. All this data reminds us
that real estate is a local business and blanket assumptions about national
absorption rates are rarely useful.
Even with this mixed occupational picture, the investment market for offices
continues to recover, with European investment volumes for offices reaching
€20bn for the first half of 2025. This is 11% ahead of the prior period but
still some way behind the five year average. It also constitutes only 25% of
all investment in the period. The 10-year average was 39%, so trading in the
asset class remains well below long term norms, however it is clear that
institutional capital is gradually re-emerging for this sector. Yields
compressed very slightly (5bps) in the first half but that compares very
favourably to the 150bps expansion since the beginning of 2022. There is
definitely evidence of price stability for the right asset.
Retail
Shopping centre focused property companies have continued to be star
performers in our universe. The mixture of high earnings yields, stable income
and low vacancies for the most dominant malls remains an attractive
proposition. The underlying asset class has clearly found some equilibrium
following the dramatic decade-and-a-half of retailer retrenchment from
physical units, which started (in earnest) post the introduction of the iPhone
in 2010 and the revolution of mobile access to internet purchasing.
Online sales as a percentage of total sales continue to grow but at much more
modest rates than previously reported, particularly in the most mature markets
such as the UK. According to AEW, e-commerce penetration rates are expected to
reach 20% of all sales by 2029. The current figure for Europe (ex UK) is 16%.
Retailers want us to shop in store, or at least use 'click and collect', as
online fulfilment (including returns) offer the lowest retailer margin.
Retailers are therefore willing to spend more on the locations where they want
a physical presence and this is reflected in rental growth statistics. The
overall rate of growth remains positive, but modest, at 1-2% per annum, but
with hotspots in tourist locations. Retail warehousing has become a real
'sector du jour' recording historically low vacancy levels as retailers (and
customers) remain attracted to the ease of 'click and collect' and 'click and
return' as part of an omni-channel retail journey. Retail warehousing vacancy
levels are at 2% across Europe, the lowest level since 2014.
According to BNP Paribas, retail investment volume reached €18bn in the
first half of 2025, an increase of 15% year-on-year and representing 23% of
total investment volume. Importantly, this share of total investment is now
ahead of the ten year average. Outlets have seen elevated transaction volumes
with Savills expecting investment volumes to breach €1bn in 2025. Retailers
continue to be attracted to outlets given the leasing convention of low base
rents melded with a share of turnover. The alignment between landlord and
tenant to deliver the best customer experience has seen the most dominant
outlet malls thrive across Europe.
Industrial and Logistics
The pattern of slowing rental growth which the industrial sector has
experienced across almost all pan-European markets has continued as vacancy
levels rise. To be clear, rental growth is still positive but significantly
below the elevated growth rates seen in 2020-2023. Jones Lang LaSalle ('JLL')
note that prime logistics rents increased by 1-2% in the first half of 2025
after recording +4% in 2024 and +10% in 2023.
European logistics take-up continued to decline quarter-on-quarter, resulting
in a fall of 16% year-on-year. This ranks as one of the weakest quarters since
2015 as so many businesses try to navigate the impact of the, frankly fluid,
US tariff environment. Vacancy across Europe reached 6.7% in the first half of
2025, ahead of the long run average of 5.5%. As with all average figures, they
mask wide divergence and investors continue to hold prime assets. Savills note
that after 120bps of yield expansion since the end of 2022, prime yields have
stabilised at 5.2%, with Stockholm an outlier recording 10bps of compression
in the first half.
Supply has responded quickly, with Cushman recording a 30% drop in logistics
construction from the recent peak in the second quarter of 2022. This is very
encouraging and, coupled with recent stabilisation in demand as corporates are
increasingly able to model their post tariff requirements, we remain
increasingly positive towards the sector. Demand can change quickly and a
recent report from Savills noted a drop in take up of 30% in the UK in the
aftermath of Brexit in 2017 only to rebound 41% in 2018.
Residential
The private rental sector ('PRS') remains the sector most sensitive to bond
yields, particularly where rents are heavily regulated such as Germany and
Sweden, where rental levels can be up to 40% below open market equivalents.
The extreme imbalance of supply and demand is compounded by this regulation
which discourages investors from providing more supply. This issue has been
compounded by a rising cost of construction which makes margins even skinnier.
The result was an 11% drop in annual permitting for new developments between
2020 and 2024.
Whilst new supply can initially attract open market rental levels, thereafter
they are subject to below inflation growth rates. It is the most extreme
example of the 'haves' (those with a flat) and the 'have nots' (the multi-year
waiting lists). With rents so far below, open market behaviour becomes skewed
as tenants are unwilling to move even when their accommodation is no longer
suitable. For investors, the opportunity is the ability to buy into extremely
secure rental streams which have a sub-inflation growth outlook, except where
you can drive rental growth through capital expenditure or capital growth
through unit sales.
With base rates marching downwards, European multi-family prime yields have
stabilised at 4.2%, with German prime yields at 3.4% across the seven largest
cities. JLL tracks yields across 24 European markets and the range is 3.2%
(Munich) up to 5.3% in Warsaw. We do not expect further yield expansion
because open market rents are rising and this does drag up regulated rents
where there is an element of open market pricing capture.
The major issue remains the lack of large-scale demand from institutional
buyers. Large scale (more than €200m) deals continue to be a rarity,
accounting for just 16% of all deals, as opposed to 27% in the first half of
2024. The best live example of this phenomena is in the UK where the board of
PRS REIT (a small cap, multi-family portfolio) invited bids for the company.
After an extensive marketing campaign, the best offer equated to 115p per
share, well below the last published asset value of over 140p per share. The
difference is that the bid is for all £1.3bn of gross assets as a single
deal, whilst the independent valuation assumes a break-up of the portfolio
into multiple packages. In our view the board should have clarified to the
market that the published NAV (the higher figure) had an important caveat in
its assessment of market value, i.e. the valuation assumes a break-up. The
'discount for size' is therefore nearly 18% based on the current potential
offer and reflects the lack of demand for large scale residential portfolios.
Alternatives
This loose collective of all sectors which do not fall into either office,
retail, industrial/logistics or residential is now a very significant
component of our investment universe. It mainly encompasses primary
healthcare, nursing homes/senior living, student accommodation and
self-storage. All very different sub-sectors in their own right.
Healthcare, both in the UK and Europe has been busy, not only at the corporate
level (PHP/Assura and CareTrust acquiring Care REIT), but also at the property
level with Knight Frank expecting a record transaction volume of £12bn for
2025, well ahead of the 5-year average of £2.4bn. US investors have been busy
with the acquisition of Hartford Care (£100m) by Foundation Partners as an
example beyond CareTrust's £448m acquisition of Care REIT. Investors are
clearly attracted not only to primary healthcare facilities with government
backed income, but also elderly care assets where tenants are private
businesses, albeit with varying levels of indirect state income. In Europe,
the largest deal of the year was the takeover of Cofinimmo by Aedifica to
create a €6bn market cap business. Some care home operators, particularly in
Europe, have continued to resolve their balance sheet issues with portfolio
sales. These include sales by Clariane (previously Korian), Emeis (Orpea) and
Premonial.
Self-storage is always seen as one of the more economically sensitive sectors
given that customer contracts have rolling four week notice periods. The rise
in interest rates reduced business confidence and residential transaction
volumes. This impacted on performance, culminating in the operators reducing
rate growth to support occupancy, which hit share prices hard from 2022 to
late 2024. This year has seen investor sentiment become more positive,
particularly since September, with the announcement that the board of Big
Yellow is investigating the possible sale of the company.
The poorest performing alternatives sub-sector over the period was
purpose-built student accommodation ('PBSA'). Unite (-7.5%) had been the
poster child of stable long-term earnings growth but the new CEO (previously
CFO) surprised investors with the acquisition (through a mix of cash and
paper) of post-graduate focused Empiric Student Property. There is more on
this subject in the Investment Activity section of this report. Unite's
subsequent announcement (in October) that it had failed to reach its own
guidance of 97% occupancy for the academic year 2025/6, having only reiterated
that expectation a couple of weeks earlier, sent shock waves through the
equity market's (too) rosy outlook for PBSA. The message is clear. There is a
growing cohort of students choosing to study closer to home because of
accommodation costs. In addition, recent visa changes are continuing to affect
many overseas students, and there is a rising concern that more school leavers
are questioning the financial value of attending university given the debts
that can take years to repay.
Debt and Equity Markets
One of the key underpins of our optimism towards the real estate equity sector
has been both the availability of debt and the improving competition amongst
lenders. The Euro-denominated bond market has been equally conducive with
issuance of €18bn in the first half of 2025. ING estimates that total
issuance for the year will be over €30bn, only €6bn short of the 2021
record of €36bn. The pace of issuance has also accelerated, from €4bn in
May to over €6bn in September.
The credit rating agencies also helped funding conditions by becoming more
positive on the sector at a time of tightening spreads. Alongside multiple
refinancings, we have seen very positive maiden issuance from the likes of
Colonial, with an €800m unsecured six-year at spread of just 92bps, and
WDP's unsecured €500m, five-year at an impressive 80bps spread and an all-in
coupon of 3.175%. Borrowing at these levels is clearly helping drive earnings.
The bond market is attracted to the combination of portfolio quality and low
overall loan-to-value levels of so many of our listed companies.
In comparison, equity issuance has been much more muted, with the only
sizeable capital raises in the period from TAG (€186m) to acquire more of
their Polish joint venture and Hammerson (£140m) to acquire the 50% that they
did not own in the Bullring and Grand Central in Birmingham. In Sweden, we saw
two modest capital raises from Cibus (€91m) to acquire more supermarkets and
Corem (€85m) to continue their required de-gearing.
Investment Activity
Portfolio turnover (purchases and sales divided by two) in the first six
months totalled £290m. Given average net assets of £1.11bn, this equated to
turnover of 26%. This was broadly in line with the equivalent last year, which
was 22%. Please note that this is turnover for six months versus total net
assets and hence the full year figure will be commensurately higher.
The adjustments in our largest overweight and underweight positions (versus
their respective weights in the benchmark) were as follows. In the German
residential space, we continued to add to TAG, participating in the capital
raise when they acquired more assets in Poland. We remain very optimistic
about growth in the Polish business, both 'build-to-rent' and 'build-to-sell'.
With long Bund yields stable, we have also reduced the underweight position in
Vonovia (from over 5% to under 3.5%). As the largest and most liquid real
estate equity name in Europe, it remains the easiest way for generalist
investors to express any renewed conviction if bund yields continue to
tighten. Our other most significant position in this sector is Phoenix Spree
Deutschland (2.7% of net assets), where we are hopeful that a game-changing
debt restructure will be announced in the next month or so. This would allow
the company to begin the process of returning capital to shareholders given
that it has successfully initiated the planned process of selling flats in
Berlin (either to existing tenants or once they become vacant). Berlin
remains, by some margin, the cheapest residential market of any European
capital.
Other overweight positions which have been reduced towards neutral include
Klepierre and Gecina, the former following a period of excellent
outperformance and the latter on concerns around the Paris office market.
Overlaying all of our French positions is our growing concern about the
country's governance structure and the inability to pass a Budget, without
which consumers and corporates cannot have clarity on the economic outlook.
Unite has also been discussed earlier in the report. Having halved the
overweight position by selling at 850p per share, we paused given the 10%
correction to that price. Little did we foresee that the management team's
missteps would see the share price at 585p at the end of October. Down at this
price we are holding an equal weight position.
Our new tenth largest relative holding is Irish Residential Properties REIT
(1.5% of assets). We are positive about the Irish government's sensible
conclusion that capping rents below market value just results in no new
development. Dublin is crying out for more supply and therefore enabling
developers to make sensible returns given the risk of planning, construction
and leasing is common sense. If only other city governing bodies (such as the
Mayor and the Government Office for London) would take note of the Irish
approach.
Earlier in the report I mentioned Merlin, which was a significant underweight
at the end of March, but this negative position has been entirely closed and
we now hold a small overweight position. Merlin remains the only viable way to
get exposure to data centres with developments in Spain and Portugal. Segro
has some exposure but it is very modest in the context of the whole portfolio.
Between the two UK majors, we switched our overweight in Landsec into British
Land. Landsec announced their intention to sell out of a significant part of
their mature London office portfolio alongside several development sites. We
applaud that decision; our issue is that they intend to rotate the capital
into their PRS platform. This is an entirely new area for management and a
market dominated by the need for scale, alongside a sophisticated operating
platform to manage business-to-consumer relationships on relatively short-term
contracts. In the summer, we got the distinct feeling that management had
listened to shareholders (and the share price) and realised that this was not
received well by the market. British Land has 25% of its assets in retail
warehouses, the sector with the highest five-year compound annual growth rate
forecast.
At the country level, our largest underweight positions were in Sweden, where
we were concerned about the refinancing risk of these higher leveraged
businesses, alongside seeking minimal exposure to Stockholm and Gothenburg
offices, where we see plenty of new supply. The other regional trade which
generated alpha was the underweight exposure to Switzerland. Traditionally a
safe haven, these performed well in the initial aftermath of 'Liberation Day'
and the tariff turmoil, only to underperform later in the period as the
outlook stabilised.
Our UK small cap portfolio saw exits from Warehouse REIT following the bid
from Blackstone and PRS REIT where the board has indicated that a bid from a
consortium of local authority pension funds is acceptable. In the case of the
latter, I have chosen to recycle the capital, taking a price slightly below
the bid (112p) in October but ahead of our average acquisition price of 104p
in July and September. In the case of Urban Logistics REIT we took
LondonMetric paper.
Physical Property Portfolio
The physical property portfolio produced a total return of +2.8%, made up of a
capital return of +0.9% and an income return of +1.9%. Following completion
of phase two of our rolling refurbishment at Ferrier Street in Wandsworth, we
have let one unit to an existing tenant on the estate on a ten year lease. We
have now refurbished five units (out of 16) and let three of them. Whilst take
up has been a little slower than we would have liked, we have good interest in
the remaining two units from a wide range of occupiers. In addition to this
letting, we have extended leases on three other units in order to maintain
income in a market where decisions are taking longer. In Gloucester, we have
facilitated the assignment of two leases to Supreme Imports for them to
package Typhoo Tea following their acquisition of the brand. Supreme are an
exciting business with a stable of consumer facing brands and we are delighted
to welcome them to the estate.
In accordance with the RICS UK Valuation Standards, the Company has
implemented a mandatory change of valuer following the completion of a nine
year consecutive appointment period by Knight Frank. This rotation supports
the Company's commitment to maintaining best-in-class governance and valuation
independence, ensuring continued compliance with evolving regulatory
standards. JLL has been appointed following a competitive selection process,
offering relevant sector expertise and robust valuation capabilities.
Revenue and Revenue Outlook
The first half earnings of 10.07p are some 23% ahead of the prior year. As
anticipated in the 2025 Annual Report, we are seeing the benefit of the
resumption of distributions where companies had paused dividends (following
the rapid interest rate increase in late 2022), together with steady increases
in distribution rates generally. Coupled with this, our real estate
investments during the last financial year produced a meaningful increase in
net rental income.
Our earnings are usually skewed to the first half of the financial year and we
do not expect that to change. The rate of increase for the second half will be
less marked since many of the companies who had paused distributions in the
2023/24 financial year and beyond had, in the main, recommenced payment in the
second half of the last financial year. Any increase in the second half
earnings will therefore largely be driven by growth in distribution rates, so
will be modest compared to the first half growth.
The Board has announced a 1.8% increase in the interim dividend. It has not
been increased over the last two financial years, therefore the gap between
the interim and final dividend has widened and the Board is seeking to begin
to redress this. As set out above, earnings growth in the second half is not
expected to match that in the first half. For both these reasons shareholders
should not take the increase in the level of the interim dividend as an
indicator of the level of growth for the final dividend.
As the Chairman has set out in her statement, although we expect to see a
healthy improvement in our earnings for the full year, we still expect to make
a small contribution from our revenue reserves to cover the full year
distribution.
Looking forward, although we are comfortable with the prospects for rental
growth and expect to see this feeding through into company dividends, we do
not expect interest rates to fall as fast and far as once hoped and this will
continue to impact the earnings of the companies we receive dividends from
and, also, through our on-balance sheet borrowings, our own interest costs.
With that headwind, growth back to our record levels of earnings (in the
financial year to 31 March 2023) will be steady and modest contributions from
our retained earnings may be required in the medium term to keep moving
forward the dividend to our own shareholders.
Gearing and Debt
Our €50m loan note matures in February 2026. We are currently in discussion
with a number of potential debt providers about the potential refinancing of
this. Although the appetite for funding is currently much healthier than it
has been over the last few years, underlying interest rates have moved up
markedly from the historic lows which prevailed when the Euro loan note was
taken out almost ten years ago and we will inevitably see an increase in our
overall financing rate.
Gearing over the period has remained relatively constant at around 18%. The
positive return over the period has vindicated that decision and the level of
gearing as we enter the second half of our financial year indicates our
continued optimism for our sector.
Outlook
In the Outlook section of my annual report written in May 2025 I referenced
our high level of gearing and general sense of optimism. This might have
seemed heroic at the time given the poor performance of real estate equities
in the second half of the last financial year. However, we felt strongly that
the mix of market fundamentals (supply/demand disequilibrium for prime assets
in all sectors) and the historically low valuation of the listed sector (no
one seems to want to own the ultimate 'value' equity) were together compelling
underpins. Whilst it is pleasing to report a shareholder total return of
+12.4% for the first six months of the financial year, the ongoing lack of
enthusiasm for the sector by generalist investors has resulted in only a
modest narrowing of discounts and this, in our view, presents further upside
from here, particularly if the cost of borrowing continues to fall.
The potential for earnings to grow, not only at the top line through market
rental growth but also through lower cost of debt, is an important underpin
for the next stage of this cycle. Our listed companies have balance sheet
resilience and (in the main) high quality portfolios. Private capital
continues to circle, providing another valuation underpin. Consolidation (or
privatisation) amongst our smallest companies is almost at an end but the
elongated process has been cathartic. We are confident that the outcome will
be viewed positively, with a smaller number of more efficient businesses
providing greater liquidity and driven by management teams aligned with
shareholders.
Marcus Phayre-Mudge
Fund Manager
1 December 2025
Investment portfolio by country
as at 30 September 2025
Market
value % of total
£'000 investments
Austria
CA Immobilien 506 -
506 -
Belgium
Warehouses De 50,670 4.2
Pau
Aedifica 23,269 2.0
Cofinimmo 9,749 0.8
Montea 5,839 0.5
89,527 7.5
Finland
Kojamo 2,375 0.2
2,375 0.2
France
Argan 56,208 4.7
Klepierre 51,121 4.3
Gecina 35,298 2.9
Covivio 11,836 1.0
Carmila 7,246 0.6
161,709 13.5
Germany
TAG 73,412 6.1
Immobilien
Vonovia 68,192 5.7
LEG Immobilien 33,854 2.8
175,458 14.6
Ireland
Irish Residential Properties 19,149 1.6
19,149 1.6
Italy
Immobiliare Grande 65 -
65 -
Netherlands
Unibail-Rodamco-Westfield 26,774 2.3
Eurocommercial Properties 20,335 1.7
CTP 19,430 1.6
Wereldhave 1,422 0.1
67,961 5.7
Spain
Merlin Properties 27,701 2.3
27,701 2.3
Sweden
Fastighets Balder B 33,674 2.8
Wihlborgs 26,271 2.2
Nyfosa 10,264 0.9
Pandox 8,505 0.7
Fabege 8,477 0.7
Cibus Nordic Real Estate 8,459 0.7
Dios 4,458 0.4
Samhallsbyggnadsbolaget 2,751 0.2
Platzer 2,259 0.2
Intea 291 -
105,409 8.8
Switzerland
Swiss Prime Site 52,955 4.4
PSP Swiss Property 33,744 2.8
86,699 7.2
United Kingdom
LondonMetric Property 69,747 5.8
Picton Property 39,957 3.3
Income
Tritax Big Box 34,881 2.9
REIT
Unite Group 34,765 2.9
British Land 27,453 2.3
Phoenix Spree 27,167 2.3
Deutschland
Primary Health Properties 16,595 1.4
Supermarket Income 16,538 1.4
REIT
Sirius Real 15,169 1.3
Estate
SEGRO 13,603 1.1
Workspace 13,257 1.1
Hammerson 12,828 1.1
Big Yellow Group 11,842 1.0
Shaftesbury Capital 10,820 0.9
Social Housing REIT 10,669 0.9
Schroder REIT 10,660 0.9
Safestore 9,156 0.8
NewRiver REIT 8,967 0.7
Target Healthcare 7,593 0.6
Grainger 4,445 0.4
PRS REIT 2,604 0.2
Empiric Student Property 699 -
399,415 33.3
Direct Property 62,156 5.2
CFD Positions (included in current assets and current liabilities) 1,260 0.1
Total Investment Positions 1,199,390 100.0
Notes
> Companies shown by country of listing.
> The above positions are the physical holdings included in
the investments held at fair value in the Balance Sheet. The CFD positions are
the net of the profit or loss on the CFD contracts (i.e. not the investment
exposure) included in the Balance Sheet current assets and liabilities.
Group statement of comprehensive income
Half year ended Half year ended Year ended
30 September 2025 30 September 2024 31 March 2025
(Unaudited) (Unaudited) (Audited)
Revenue Capital Revenue Capital Revenue Capital
Return Return Total Return Return Total Return Return Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Income
Investment income 33,049 - 33,049 26,893 - 26,893 44,666 - 44,666
Rental income 1,226 - 1,226 724 - 724 1,896 - 1,896
Other operating income 152 - 152 393 - 393 626 - 626
Gains/(losses) on Investments held at Fair Value - 64,538 64,538 - 84,557 84,557 - (67,339) (67,339)
Net movement on foreign exchange; investments and
loan notes - (2,111) (2,111) - 3,013 3,013 - 1,635 1,635
Net movement on foreign exchange; cash and cash
equivalents - 4,078 4,078 - (2,368) (2,368) - (1,289) (1,289)
Net returns on contracts for difference 5,423 13,148 18,571 4,737 11,204 15,941 6,156 4,997 11,153
Total income 39,850 79,653 119,503 32,747 96,406 129,153 53,344 (61,996) (8,652)
Expenses
Management and
performance fees (note 2) (645) (2,582) (3,227) (791) (3,910) (4,701) (1,588) (5,408) (6,996)
Direct property expenses, rent payable and service
charge costs (169) - (169) (64) - (64) (324) - (324)
Other administrative expenses (751) (305) (1,056) (721) (294) (1,015) (1,450) (585) (2,035)
Total operating expenses (1,565) (2,887) (4,452) (1,576) (4,204) (5,780) (3,362) (5,993) (9,355)
Operating profit/(loss) 38,285 76,766 115,051 31,171 92,202 123,373 49,982 (67,989) (18,007)
Finance costs (675) (2,701) (3,376) (915) (2,744) (3,659) (1,873) (5,622) (7,495)
Profit/(loss) from operations
before tax 37,610 74,065 111,675 30,256 89,458 119,714 48,109 (73,611) (25,502)
Taxation (5,641) 3,294 (2,347) (4,356) 2,555 (1,801) (6,907) 4,968 (1,939)
Total comprehensive income 31,969 77,359 109,328 25,900 92,013 117,913 41,202 (68,643) (27,441)
Earnings/(loss) per ordinary share 10.07p 24.38p 34.45p 8.16p 28.99p 37.15p 12.98p (21.63)p (8.65)p
The Total column of this statement represents the Group's Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards. The Revenue Return and Capital Return columns are
supplementary to this and are prepared under guidance published by the
Association of Investment Companies. All items in the above statement derive
from continuing operations.
The Group does not have any other income or expense that is not included in
the above statement therefore "Total comprehensive income" is also the profit
for the period.
As permitted by Section 408 of the Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income. The net profit loss after
taxation of the Company dealt with in the accounts of the Group was
£109,328,000 profit (30 September 2024: £117,913,000 profit; 31 March 2025:
£27,441,000 loss).
All income is attributable to the shareholders of the parent company.
Group statement of changes in equity
Share Capital
Share Premium Redemption Retained
For the half year ended Capital Account Reserve Earnings Total
30 September 2025 (Unaudited) £'000 £'000 £'000 £'000 £'000
At 31 March 2024 79,338 43,162 43,971 871,766 1,038,237
Total comprehensive income - - - 109,328 109,328
Dividends paid (note 4) - - - (32,528) (32,528)
At 30 September 2024 79,338 43,162 43,971 948,566 1,115,037
Share Capital
Share Premium Redemption Retained
For the half year ended Capital Account Reserve Earnings Total
30 September 2024 (Unaudited) £'000 £'000 £'000 £'000 £'000
At 31 March 2024 79,338 43,162 43,971 949,032 1,115,503
Total comprehensive income - - - 117,913 117,913
Dividends paid - - - (31,894) (31,894)
At 30 September 2024 79,338 43,162 43,971 1,035,051 1,201,522
Share Capital
Share Premium Redemption Retained
For the year ended Capital Account Reserve Earnings Total
31 March 2025 (Audited) £'000 £'000 £'000 £'000 £'000
At 31 March 2024 79,338 43,162 43,971 949,032 1,115,503
Total comprehensive income - - - (27,441) (27,441)
Dividends paid - - - (49,825) (49,825)
At 31 March 2025 79,338 43,162 43,971 871,766 1,038,237
Group balance sheet
30 September 30 September 31 March
2025 2024 2025
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Non-current assets
Investments held at fair value 1,135,974 1,192,987 1,024,826
Investment properties 62,156 39,360 61,519
1,198,130 1,232,347 1,086,345
Deferred taxation asset 1,359 903 1,809
1,199,489 1,233,250 1,088,154
Current assets
Other receivables 58,296 60,664 65,003
Cash and cash equivalents 6,961 29,506 11,676
65,257 90,170 76,679
Current liabilities (134,709) (65,297) (111,596)
Net current (liabilities)/assets (69,452) 24,873 (34,917)
Total assets less current liabilities 1,130,037 1,258,123 1,053,237
Non-current liabilities (15,000) (56,601) (15,000)
Net assets 1,115,037 1,201,522 1,038,237
Capital and reserves
Called up share capital 79,338 79,338 79,338
Share premium account 43,162 43,162 43,162
Capital redemption reserve 43,971 43,971 43,971
Retained earnings 948,566 1,035,051 871,766
Equity shareholders' funds 1,115,037 1,201,522 1,038,237
Net Asset Value per:
Ordinary share 351.36p 378.61p 327.16p
Group cash flow statement
Half year ended Half year ended Year ended
30 September 30 September 31 March
2025 2024 2025
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Reconciliation of profit from operations before tax to net cash flow from
operating activities
Profit/(loss) from operations before tax 111,675 119,714 (25,502)
Finance costs 3,376 3,659 7,495
(Gains)/losses on investments and derivatives held at fair value through (77,686) (95,761) 62,342
profit or loss
Net movement on foreign exchange; cash and cash
equivalents and loan notes (1,567) 1,188 209
Scrip dividends included in investment income and net
returns on contracts for difference (7,948) (7,167) (6,981)
Accrued income in the prior year received as a scrip dividend (2,034) (1,680) (1,686)
Sale of investments 233,286 230,730 559,336
Purchase of investments (256,975) (239,395) (582,839)
Increase/(decrease) in prepayments and accrued income 2,196 2,269 (382)
(Increase)/decrease in sales settlement receivables (5,776) 2,929 2,891
Increase/(decrease) in purchase settlement payables 3,059 (5,561) (4,222)
Decrease/(Increase) in other receivables 10,185 (12,525) (13,223)
Increase/(decrease) in other payables 1,398 (7,282) (9,797)
Net cash flow from operating activities before interest and taxation 13,189 (8,882) (12,359)
Interest paid (3,376) (3,659) (7,495)
Taxation paid (2,203) (2,006) (3,624)
Net cash flow from operating activities 7,610 (14,547) (23,478)
Financing activities
Equity dividends paid (see note 4) (32,528) (31,894) (49,825)
Drawdown of loans (see note 6) 68,158 59,170 115,356
Repayment of loans (see note 6) (52,033) - (48,233)
Net cash flow from financing activities (16,403) 27,276 17,298
(Decrease)/increase in cash (8,793) 12,729 (6,180)
Cash and cash equivalents at start of year 11,676 19,145 19,145
Net movement on foreign exchange; cash and cash equivalents 4,078 (2,368) (1,289)
Cash and cash equivalents at end of period 6,961 29,506 11,676
Notes to the financial statements
1 Accounting policies
The accounting policies applied for these half year financial statements are
consistent with those applied in the financial statements of the Company's
most recent annual report. The statements have been prepared on a going
concern basis, in accordance with UK-adopted international accounting
standards and in conformity with the requirements of the Companies Act 2006.
The financial statements have also been prepared in accordance with the
Association of Investment Companies Statement of Recommended Practice,
"Financial Statements of Investment Trust Companies and Venture Capital
Trusts," ('SORP'), to the extent that it is consistent with UK-adopted
international accounting
standards.
The financial statements are expressed in sterling, which is the Company's
functional and presentational currency. Sterling is the functional currency as
it is the currency of the primary economic environment in which the Group
operates.
In assessing Going Concern the Board has made a detailed assessment of the
ability of the Company and the Group to meet its liabilities as they fall due,
including stress and liquidity tests which considered the effects of
substantial falls in investment valuations, revenues received and market
liquidity as the global economy continues to suffer from geopolitical and
economic
pressures.
In accordance with IFRS10 the Company has been designated as an investment
entity on the basis
that:
• it obtains funds from investors and provides those investors with
investment management services;
• it commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation and investment income; and
• it measures and evaluates performance of substantially all its
investments on a fair value
basis.
Each of the subsidiaries of the Company was established for the sole purpose
of operating or supporting the investment operations of the Company (including
raising additional financing) and is not itself an investment entity. IFRS 10
sets out that in the case of controlled entities that support the investment
activity of the investment entity, those entities should be consolidated
rather than presented as investments at fair value. Accordingly, the Company
has consolidated the results and financial positions of those
subsidiaries.
Subsidiaries are consolidated from the date of their acquisition, being the
date on which the Company obtains control, and continue to be consolidated
until the date that such control ceases. The financial statements of
subsidiaries used in the preparation of the consolidated financial statements
are based on consistent accounting policies. All intra-group balances and
transactions, including unrealised profits arising therefrom, are
eliminated.
The standards issued before the reporting date that become effective after 30
September 2025 are not expected to have a material effect on equity or profit
for the subsequent period. The Group has not early‑adopted any new
UK-adopted international accounting standards or interpretations. Standards,
amendments and interpretations issued but not yet effective up to the date of
issuance of the Group's financial statements are listed
below:
IFRS 18 Presentation and Disclosure in Financial Statements (effective date 1
January 2027): the amendments specify the requirements to provide investors
with more transparent and comparable information about companies' financial
performance. The amendments are not expected to have a material impact on the
Group's financial statements.
2 Management and performance fees
Half year ended Half year ended Year ended
30 September 2025 30 September 2024 31 March 2025
(Unaudited) (Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Management fee 645 2,582 3,227 791 2,374 3,165 1,588 4,764 6,352
Performance fee - - - - 1,536 1,536 - 644 644
645 2,582 3,227 791 3,910 4,701 1,588 5,408 6,996
Under the terms of the management agreement the Manager is not entitled to a
performance fee based on the net assets at 30 September 2025 (30 September
2024 - £1,536,000, 31 March 2025 - £644,000). Any payment is not due until
the full year performance fee is calculated at 31 March 2026.
A summary of the terms of the management agreement is given in the Report of
the Management Engagement Committee on pages 56 and 57 of the latest annual
report.
With effect from 1 April 2025, 80% of the Company's management fee and finance
costs are allocated to the capital account and 20% to the revenue account
(prior to 1 April 2025: 75% to capital and 25% to revenue).
3 Earnings/(loss) per share
Half year ended Half year ended Year ended
30 September 30 September 31 March
2025 2024 2025
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Revenue profit 31,969 25,900 41,202
Capital profit 77,359 92,013 (68,643)
Total comprehensive income 109,328 117,913 (27,441)
Weighted average number of ordinary shares in issue during the period 317,350,980 317,350,980 317,350,980
Earnings/(loss) per share 34.45p 37.15p (8.65)p
The Group has no securities in issue that could dilute the earnings per
ordinary share. Therefore the basic and diluted earnings per ordinary share
are the same.
4 Dividends
Half year ended Half year ended Year ended
30 September 30 September 31 March
2025 2024 2025
Record Payment (Unaudited) (Unaudited) (Audited)
Dividends paid/payable in the period on ordinary shares date date £'000 £'000 £'000
Interim dividend for the year ended 13-Dec-24 10-Jan-25 - 17,931 17,931
31 March 2025 of 5.65p
Final dividend for the year ended 27-Jun-25 30-Jul-25 - - 32,528
31 March 2025 of 10.25p
Interim dividend for the year ended 12-Dec-25 8-Jan-26 18,248 - -
31 March 2026 of 5.75p
18,248 17,931 50,459
The final dividend of 10.25p (2024: 10.05p) in respect of the year ended 31
March 2025 was declared on 10 June 2025 and paid on 30 July 2025. This can be
found in the Group Statement of changes in equity for the half year ended
30 September 2025 in the Half Year Report.
The interim dividend of 5.75p (2025: 5.65p) in respect of the year ending 31
March 2026 was declared on 1 December 2025 and will be paid on 8 January 2026
to all shareholders on the register on 12 December 2025. The shares will be
quoted ex-dividend on 11 December 2025.
The interim dividend has not been included as a liability in these interim
financial statements in accordance with IAS 10 "Events after the reporting
period".
5 Investments held at fair value
Financial assets and financial liabilities are carried in the Balance Sheet
either at their fair value (investments) or the balance sheet amount is a
reasonable approximation of fair value (due from brokers, dividends and
interest receivable, due to brokers, accruals and cash at bank).
Fair value hierarchy disclosures
The table below sets out fair value measurements using IFRS 13 fair value
hierarchy, including investment properties to show the fair value level of the
complete investment portfolio:
Financial assets/(liabilities) at fair value through profit or loss
Level 1 Level 2 Level 3 Total
At 30 September 2025 £'000 £'000 £'000 £'000
Equity investments 1,135,974 - - 1,135,974
Investment properties - - 62,156 62,156
1,135,974 - 62,156 1,198,130
Contracts for difference - 1,260 - 1,260
1,135,974 1,260 62,156 1,199,390
Foreign exchange forward contracts - 478 - 478
1,135,974 1,738 62,156 1,199,868
Level 1 Level 2 Level 3 Total
At 30 September 2024 £'000 £'000 £'000 £'000
Equity investments 1,190,095 - 2,892 1,192,987
Investment properties - - 39,360 39,360
1,190,095 - 42,252 1,232,347
Contracts for difference - (1,049) - (1,049)
1,190,095 (1,049) 42,252 1,231,298
Foreign exchange forward contracts - 121 - 121
1,190,095 (928) 42,252 1,231,419
Level 1 Level 2 Level 3 Total
At 31 March 2025 £'000 £'000 £'000 £'000
Equity investments 1,024,826 - - 1,024,826
Investment properties - - 61,519 61,519
1,024,826 - 61,519 1,086,345
Contracts for difference - 1,688 - 1,688
1,024,826 1,688 61,519 1,088,033
Foreign exchange forward contracts - 80 - 80
1,024,826 1,768 61,519 1,088,113
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 - quoted (unadjusted) prices in active markets for identical assets or
liabilities, including investments listed on recognised exchanges.
Level 2 - other techniques for which all inputs that have a significant effect
on the recorded fair value are observable, either directly or indirectly,
including forward foreign exchange trades, contracts for difference, and
equity investments with no recent trading history.
Level 3 - techniques that use inputs that have a significant effect on the
recorded fair value that are not based on observable market data, including
direct property and unlisted investments.
Contracts for Difference are synthetic equities and are valued by reference to
the investments' underlying market values.
There were no transfers during the half year between any of the levels.
Investment properties are carried by the Group at fair value in accordance
with IFRS 13, revalued twice a year, with changes in fair values being
recognised in the Group Statement of Comprehensive Income. The Group engaged
Knight Frank LLP as independent valuation specialists to determine fair value
as at 30 September 2025. Determination of the fair value of investment
properties has been prepared on the basis defined by the RICS Valuation -
Global Standards (The Red Book Global Standards) as follows:
"The estimated amount for which a property should exchange on the date of
valuation between a willing buyer and a willing seller in an arm's length
transaction after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion."
The valuation takes into account future cash flow from assets (such as
lettings, tenants' profile, future revenue streams, capital values of fixtures
and fittings plant and machinery, any environmental matters and the overall
repair and condition of the property) and discount rates applicable to those
assets. These assumptions are based on local market conditions existing at the
balance sheet date.
In arriving at their estimates of fair values as at 30 September 2025, the
valuers have used their market knowledge and professional judgement and have
not only relied solely on historical transactional comparables.
Reconciliation of movements in financial assets categorised as level 3 for the
half year ended 30 September 2025
Movement in
Valuation unrealised Valuation
31 March Realised appreciation/ 30 September
2025 Additions Disposals losses (depreciation) 2025
£'000 £'000 £'000 £'000 £'000 £'000
Unlisted investments - - (67) (582) 649 -
Investment properties 61,519 85 - - 552 62,156
- Industrial
61,519 85 (67) (582) 1,201 62,156
The Group has no unlisted investments as at 30 September 2025, see the
Investment Portfolio information in the Half Year Report for details. During
the half year, the final liquidation proceeds of £67,000 were received for
Ediston Property.
All appreciation/(depreciation) as stated above relates to movements in fair
value of unlisted equity investments and investment properties held at 30
September 2025.
Sensitivity information for investment property valuations
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of investment
properties are:
Weighted average estimated
rental value Weighted average
(per square foot) capitalisation rates
30 September 31 March 30 September 31 March
2025 2025 2025 2025
Investment property £24.52 £23.96 5.8% 5.8%
Significant increases (decreases) in estimated rental value and rent growth in
isolation would result in a significantly higher (lower) fair value
measurement. A significant increase (decrease) in long-term vacancy rate in
isolation would result in a significantly lower (higher) fair value
measurement.
6 Borrowings
Loan notes
On the 10th February 2016, the Company issued 1.92% Unsecured Euro 50,000,000
Loan Notes and 3.59% Unsecured GBP 15,000,000 Loan Notes which are due to be
redeemed at par on the 10th February 2026 and 10th February 2031 respectively.
At the Balance Sheet date the fair value of the 1.92% Euro Loan Notes was
£43,640,000 (30 September 2024: £42,067,000; 31 March 2025: £41,843,000)
and the 3.59% GBP Loan Notes was £14,301,000 (30 September 2024:
£14,320,000; 31 March 2025: £14,286,000) and are deemed to be categorised
within Level 2 of the IFRS 13 fair value hierarchy.
The loan notes agreement requires compliance with a set of financial covenants
as shown in note 11.7 of the 2025 Annual Report. These covenants have all been
complied with during the half year ended 30 September 2025.
Multi-currency revolving loan facilities
The Group also has unsecured, multi-currency, revolving short-term loan
facilities totalling £90,000,000 (30 September 2024: £60,000,000; 31 March
2025: £90,000,000). At the balance sheet date, £83,787,000 was drawn on
these facilities (30 September 2024: £59,136,000; 31 March 2025:
£66,948,000). The covenants for these facilities have all been met during the
period.
Reconciliation of liabilities arising from financing activities
Group and Company Loan notes Bank loans Total
£'000
£'000
£'000
Opening liabilities from financing activities at 31 March 2025 56,843 66,948 123,791
Cash flows:
Drawdown of bank loans - 68,158 68,158
Repayment of bank loans - (52,033) (52,033)
Non Cash flows:
Movement on foreign exchange 1,797 714 2,511
Closing liabilities from financing activities at 30 September 2025 58,640 83,787 142,427
7 Called-up share capital
As at 30 September 2025, 317,350,980 ordinary shares of 25p nominal value were
in issue (30 September 2024: 317,350,980; 31 March 2025: 317,350,980). During
the period, the Company made no market purchases of ordinary shares of 25p
each for cancellation or to be held in treasury. Since 30 September 2025 no
ordinary shares have been purchased for cancellation or to be held in
treasury.
8 Net Asset Value per ordinary share
Half year ended Half year ended Year ended
30 September 30 September 31 March
2025 2024 2025
(Unaudited) (Unaudited) (Audited)
Net asset value per share (pence) 351.36p 378.61p 327.16p
Net assets attributable to shareholders (£'000) 1,115,037 1,201,522 1,038,237
Number of ordinary shares in issue at the period end 317,350,980 317,350,980 317,350,980
9 Going concern
The Directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements. The assets of the Company
consist mainly of securities that are readily realisable and, accordingly,
they believe that the Company has adequate financial resources to meet its
liabilities as and when they fall due and continue in operational existence
for a period of at least 12 months from the date of approval of this Half Year
Report.
10 Comparative Information
The financial information contained in this Half Year Report does not
constitute statutory accounts as defined in section 435(1) of the Companies
Act 2006. The financial information for the half year periods ended 30
September 2025 and 30 September 2024 has not been audited or reviewed by the
Company's auditors. The figures and financial information for the year ended
31 March 2025 are an extract from the latest published financial statements
and do not constitute statutory financial statements for that year. Those
financial statements have been delivered to the Registrar of Companies and
include the report of the auditors, which was unqualified and did not contain
a statement under either section 498(2) or 498(3) of the Companies Act 2006.
Directors' Responsibility Statement in respect of the Half Year Report
Principal and Emerging Risks
The Principal and Emerging Risks facing the Company have not changed since the
date of the Annual Report 2025 and continue to be as set out in that report.
The Principal and Emerging Risks facing the Company include, but are not
limited to, poor share price performance in comparison to the underlying NAV;
poor investment performance of the portfolio relative to the benchmark; market
and geopolitical risk; the Company is unable to maintain dividend growth;
accounting and operational risks; financial risks; loss of Investment Trust
status; legal, regulatory and reporting risks; inappropriate use of gearing,
other financial risks and personnel changes at the Investment Manager. An
explanation of these risks and how they are managed are set out on pages 36 to
39 of the Annual Report for the year ended 31 March 2025 (which can be found
on the Company's website www.trproperty.com (http://www.trproperty.com) ).
Going Concern
As stated in note 9 above, the Directors are satisfied that the Group has
sufficient resources to continue in operation for a period of at least 12
months from the date of this report. Accordingly, the going concern basis has
been adopted in preparing the condensed financial statements.
Directors' Responsibility Statement
In accordance with Chapter 4 of the Disclosure Guidance and Transparency
Rules, the Directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with applicable UK Accounting Standards on a going concern basis
and gives a true and fair view of the assets, liabilities, financial position
and net return of the Company;
· this half year report includes a fair review of the important events
that have occurred during the first six months of the financial year and their
impact on the financial statements;
· the statement of Principal and Emerging Risks shown opposite is a fair
review of the Principal and Emerging Risks for the remainder of the financial
year; and
· this half year report includes a fair review of the related party
transactions that have taken place in the first six months of the financial
year.
On behalf of the Board
Kate Bolsover
Chairman
1 December 2025
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
By order of the Board
Columbia Threadneedle Investment Business Limited
Company Secretary,
1 December 2025
ENDS
A copy of the Half Year Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection
at data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
The Half Year Report will also be available shortly on the Company's website
at www.trproperty.com (http://www.trproperty.com/) where up to date
information on the Company, including daily NAV and share prices, factsheets
and portfolio information can also be found.
For further information please contact:
Marcus Phayre-Mudge
Fund Manager, TR Property Investment Trust plc
020 7011 4711
Mark Young
Stifel
020 7710 7633
Tom Scrivens
Panmure Gordon (UK) Limited
020 7886 2648
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