REG - Tritax Big Box REIT - Results for the six months ended 30 June 2023
03/08/2023 07:00
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RNS Number : 1290I Tritax Big Box REIT plc 03 August 2023
Half-year results
for the six
months ended
30 June 2023
3 August 2023
Strong operational performance, robust balance sheet and significant
opportunities
H1 2023 key figures
30 June 2023 30 June 2022 Change
Operating profit(1) £95.5m £88.8m +7.5%
Adjusted earnings per share(2) 3.94p 3.73p +5.6%
Adjusted earnings per share (ex. additional development management income) (3) 3.94p 3.73p +5.6%
IFRS earnings per share 5.39p 24.55p -78.0%
Dividend per share 3.50p 3.35p +4.5%
Dividend pay-out ratio (ex. additional development management income) (3) 89% 90%
Total Accounting Return 3.5% 10.7% -7.2 pts
EPRA cost ratio (including vacancy cost) 12.6% 15.2% -2.6 pts
30 June 2023 31 Dec 2022
Contracted annual rent roll £224.0m £224.0m +0.0%
EPRA Net Tangible Assets per share 183.02p 180.37p +1.5%
IFRS net asset value per share 180.92p 179.25p +0.9%
Portfolio value(4) £5.05bn £5.06bn -0.2%
Loan to value (LTV) 30.3% 31.2% -0.9pts
Earnings driven by rental growth and lower costs
· 5.6% increase in Adjusted EPS to 3.94 pence (H1 2022: 3.73 pence)
driven by practical completions of let developments, increasing rents from
active management of assets and reduced operating costs from 14% reduction in
management fee.
· 4.5% increase in dividend to 3.50 pence per share (H1 2022: 3.35
pence) reflecting 89% of Adjusted EPS payout ratio.
· 3.5% Total Accounting Return (H1 2022: 10.7%) supported by
stabilising portfolio valuation.
· 3.1% increase in passing rent to £211.6 million (31 December
2022: £205.1 million).
o Contracted rent unchanged at £224.0 million following incremental £4.1m
from development lettings, £2.0m added from rent reviews, offset by £6.1m
from disposals.
· Lowest reported EPRA cost ratio of 12.6% (H1 2022: 15.2%),
reflecting 9.8% reduction in administrative expenses and increasing net rental
income.
· Reduction in IFRS EPS reflects lower valuation surplus during
period compared to H1 2022.
Occupational market continues to be supported by long term structural
drivers(6)
· 10.0 million sq ft of UK lettings in H1 2023, in line with 12.8m
sq ft pre-pandemic average.
· Vacancy at 3.4% at the period end (31 December 2022: 2.0%), with
supply of new space now slowing.
· In H1 2023, UK prime headline rents increased by an average of
4.9%.
· Valuations stabilising, with the CBRE UK Monthly Industrial index
recording capital value growth of 1.4% for the six month period.
High-quality and resilient portfolio supporting ongoing like-for-like ERV
growth and stabilising valuations
· Total portfolio value of £5.05 billion as at 30 June 2023 (31
December 2022: £5.06 billion), equating to an equivalent yield of 5.3% (31
December 2022: 5.3%).
· Valuation supported by like-for-like Estimated Rental Value (ERV)
growth of 3.9% bringing overall portfolio reversion to 21.3%.
· Portfolio composed of institutional-grade customers on long
leases with WAULT of 12.1 years (31 December 2022: 12.6 years).
· Maintained 100% rent collection (H1 2022: 100%); approaching 10
years of consistent 100% rent collection.
· 1.9% portfolio vacancy (31 December 2022: 2.1%), reducing to 1.4%
post the period end from further development lettings.
· 99% of portfolio rated EPC A-C, with incremental £2.5 million
required to bring all assets to a minimum of EPC B rating.
Capturing portfolio reversion and recycling capital into higher-returning
opportunities
· Added £2.0 million to contracted rents through rent reviews,
achieving 8.8% increase to passing rent across 9.9% of portfolio reviewed.
o Two open market rent reviews completed achieving average 29.2% uplift.
o EPRA like-for-like rental growth of 3.6% (H1 2022: 3.3%) over the period.
· Completed or exchanged on £235 million of asset disposals in H1
2023:
o In line with or above December 2022 valuations and reflecting a blended
net initial yield of 4.4%.
o Further £100-200 million of disposals targeted in H2 2023.
o Recycling capital to enhance total returns.
· Acquired Junction 6 Logistics Park post period end, one of the
UK's leading urban logistics estates, for £58.0 million at a 4.6% net initial
yield, complementing our investment portfolio, broadening our customer offer
and providing attractive opportunities to grow income in the near term
reflected in 6.7% reversionary yield.
· We continue to deliver ESG performance with the detailed
integration of our ESG targets across the investment lifecycle including our
asset management and development management activities.
Earnings growth supported by continued development progress
· Occupational enquiries on development pipeline at near record
levels.
· 2.6 million sq ft under construction of which 65% pre-let or let
during construction securing annual contracted rent of £12.5 million.
· £10.5 million added to passing rent from 1.4 million sq ft of
development lease completions in the period.
· £4.1 million added to annual contracted rent from 0.5 million sq
ft of new development lettings in period.
· 0.8 million sq ft of development starts in H1 2023; maintaining
guidance of 2-3 million sq ft of starts in FY 2023.
· 0.9 million sq ft of new planning consents secured, bringing
total consented undeveloped land portfolio to 7.2 million sq ft.
· 6-8% yield on cost guidance maintained, with 2023 schemes
expected to be delivered in the mid 6-7% range.
Maintaining a strong balance sheet with conservative leverage and low cost of
debt
· LTV of 30.3% at 30 June 2023 (31 December 2022: 31.2%) and Net
Debt/EBITDA of 8.3x(7) (31 December 2022: 8.6x).
· Weighted average cost of debt remains low at 2.6%, with 100% of
drawn debt either fixed or hedged.
· More than £550 million of available liquidity as at 30 June
2023, significant headroom on all debt covenants, and 4.9 year average debt
maturity.
· Credit rating of Baa1 with positive outlook reaffirmed by
Moody's.
Aubrey Adams, Chairman of Tritax Big Box REIT plc, commented:
"We continue to successfully implement our strategy to drive operational
performance delivering positive growth in rents, earnings and dividends. While
the macro-economic environment remains challenging, customers continue to
demand high-quality, well-located, and sustainable logistics space. With
supply remaining constrained, we are seeing strong interest in our development
sites supporting our future rental income and capital value growth. We remain
focused on enhancing operational performance by actively managing assets to
capture growing levels of rental reversion within the portfolio, crystalising
value through asset sales and recycling capital into higher-returning
opportunities. This includes taking advantage of investment market conditions
to acquire attractive assets where we can broaden our customer offer and drive
income growth in the near term through asset management initiatives. Tritax
Big Box remains well financed, with a strong balance sheet, a low cost of debt
and significant liquidity, giving us the resources to continue to advance our
strategy.
"The exceptional scale and quality of our portfolio and operations - as the
largest listed investor in UK logistics real estate and the owner of the
biggest logistics-focused development platform - are key advantages which
ideally position us to capitalise on the attractive fundamentals of our sector
and deliver long-term value for shareholders."
Presentation for analysts and investors
A Company presentation for analysts and investors will take place via a
webcast with live Q&A at 10.00am (BST) today and can be viewed at:
https://stream.brrmedia.co.uk/broadcast/64b026be02658279b596c0ae
If you would like to ask questions verbally please join the presentation via
conference call:
UK: +44 (0) 33 0551 0200
US: +1 786 697 3501
Password: Tritax Big Box
The presentation will also be accessible on-demand later in the day on the
Company website:
https://www.tritaxbigbox.co.uk/investors/results-and-presentations/
Notes
1. Operating profit before changes in fair value and other
adjustments.
2. See Note 6 to the financial statements for reconciliation.
3. The anticipated run rate for development management income is
£3.0-5.0 million per annum over the medium term. Adjusted EPS remains at
3.94p when excluding development management income above this anticipated run
rate ('additional' development management income). £0.0 million of
development management income is included in the 3.94p Adjusted earnings per
share in H1 2023 (2022: £2.6 million included in 3.73p Adjusted earnings per
share).
4. The Portfolio Value includes the Group's investment assets
and development assets, land assets held at cost, the Group's share of joint
venture assets and other property assets.
5. Excludes development assets, land and land options.
6. All market data from CBRE. "Pre-pandemic demand" defined as
demand for H1 2015 to H1 2019.
7. Based on net debt as at 30 June 2023 and EBITDA for the
twelve months to 30 June 2023
For further information, please contact:
Tritax Group
Colin Godfrey, CEO
Tel: +44 (0) 20
8051 5060
Frankie Whitehead, CFO
bigboxir@tritax.co.uk
Ian Brown, Head of Corporate Strategy & Investor Relations
Kekst CNC
Neil Maitland/Guy Bates
Tel: +44 (0)
7971 578 507
+44 (0) 7581 056 415
Email: tritax@kekstcnc.com (mailto:tritax@kekstcnc.com)
The Company's LEI is: 213800L6X88MIYPVR714
Notes:
Tritax Big Box REIT plc (Tritax Big Box or the Company) is the UK's specialist
in logistics real estate with the UK's largest investment portfolio and
largest logistics-focused land platform. Tritax Big Box is committed to
delivering attractive and sustainable returns for shareholders by investing in
and actively managing existing built investments and land suitable for
logistics development. The Company focuses on well-located, modern logistics
assets, typically let to institutional-grade tenants on long-term leases with
upward-only rent reviews and geographic and tenant diversification throughout
the UK. The Company seeks to exploit the significant opportunity provided by
long-term global structural drivers, together with the imbalance between
strong occupational demand and constrained supply of modern logistics real
estate in the UK.
The Company is a real estate investment trust to which Part 12 of the UK
Corporation Tax Act 2010 applies, is listed on the premium segment of the
Official List of the UK Financial Conduct Authority (Ticker: BBOX) and is a
constituent of the FTSE 250, FTSE EPRA/NAREIT and MSCI indices.
Further information on Tritax Big Box REIT is available at
www.tritaxbigbox.co.uk (http://www.tritaxbigbox.co.uk)
Chairman's statement
Further strategic progress and strong operational performance
While the macro-economic backdrop in the UK remains uncertain, we are focused
on continuing to enhance the strong operational performance of the business.
In line with this, we continued to successfully implement all aspects of
Tritax Big Box's (the Group's) strategy and delivered further positive
operational performance. This included adding an incremental £6.1 million to
contracted annual rent through new development lettings and rent reviews;
exchanging contracts on the disposal of £235 million of assets in line with
or above their 31 December 2022 valuations; and recycling £58 million into a
value-added urban logistics estate. We are also on track to achieve our ESG
targets for this year, as set out in the 2022 Annual Report.
Occupational market remains attractive and valuations for high-quality assets
are stabilising
The economic outlook in the UK looks set to remain challenging in the near
term, with inflation proving stubborn and the impact of higher interest rates
likely to further slow the economy in the coming months. Despite this, the
occupational market remains resilient with levels of demand continuing. The
structural drivers of this occupier demand remain in place, notably the growth
of e-commerce; deglobalisation and supply chain optimisation; and customers'
increasing focus on ESG performance. The supply of new space remains
controlled and the level of speculative starts in the market has reduced
during the first half of this year. Vacancy has ticked up but remains very low
in historic terms, contributing to further market rental growth, as evidenced
through our own like-for-like ERV growth of 3.9% for the six month period.
Following the rapid outward yield shift in the second half of 2022, asset
pricing has shown increasing signs of stabilising during the period. This was
reflected in our period-end valuation, which was broadly unchanged against 31
December 2022. Our portfolio valuation was further supported by our own
investment disposals at or above book valuation levels. Looking forward, we
anticipate investors will show greater discernment in asset selection, with
secondary and tertiary quality assets more vulnerable to possible further
outward yield movements than high-quality prime assets of the type within our
portfolio.
High-quality portfolio underpins resilient income
Our business is very well positioned in these more uncertain macro-economic
times. We are the largest listed investor in UK logistics real estate and
control the UKs largest logistics-focused development land platform. This
gives us an unrivalled level of insight and engagement with the market.
The Group owns and manages what we believe is the highest-quality real estate
portfolio in Europe, with long leases and a strong customer line-up. Our
modern buildings have excellent ESG credentials and are in prime logistics
locations, where occupiers desire. This quality is reflected in our record of
never having a single day of rental vacancy in any of our investment
properties, since the Group was founded nearly 10 years ago. This underpins
the security of our income generation and our progressive dividend
aspirations.
Actively managing the portfolio helps us to optimise returns. During the
period, we exchanged contracts or completed on £235 million of asset
disposals, with a target to sell a further £100-200 million of assets in the
second half of the year. The proceeds from these disposals will be recycled
into higher returning opportunities.
Responding to a more uncertain economic backdrop
Our development pipeline provides a high degree of flexibility to ramp up or
down our level of investment to accurately match prevailing or anticipated
market conditions. Despite a resilient occupational market, we prudently
slowed our development activity at the back end of FY 2022 and into FY 2023 to
preserve our balance sheet strength in response to wider uncertainty in the
investment market. This uncertainty was triggered by the sharp rise in UK Gilt
rates following the "mini-budget" in September 2022.
With asset values stabilising, continuing strength within the occupational
market and development still offering attractive returns, we have prudently
commenced new construction starts during H1 2023 and anticipate being at the
lower end of our 2-3 million sq ft guidance for 2023. Our development sites
are located in the leading regions for logistics in the UK and we are seeing
good levels of customer enquiries across all of them.
Development completions relating to our FY 2022 construction starts added
£10.5 million to passing rent in the period, supporting continued earnings
growth, including the letting of all vacant space present as at 31 December
2022. We currently have a further 2.6 million sq ft under construction, of
which 65% is pre-let or has been let during construction and which will
contribute a further £12.5 million to passing rent, de-risking further
earnings growth.
Tritax Symmetry management succession
A significant component of both our current and future success is our
extensive land platform which we acquired in February 2019. Since the
acquisition, three of the founding team of four at Tritax Symmetry have
gradually transitioned away from day-to-day operations in line with an
overarching succession plan and will now be fully stepping away from the
business. As part of this plan, Andrew Dickman, an original founder of the
business, will continue to lead the business supported by other senior members
of the management team. Andrew's team is well established and has been
responsible for much of the significant development progress to date. As part
of this transition, we have agreed to buy the founding team's remaining
interest in Tritax Symmetry. As a Board we are grateful for their contribution
to the performance to date and in facilitating a smooth transition.
Looking to the future, Andrew and his team have an excellent working
relationship with the Investment Manager. We have used this opportunity to
review the overall incentive arrangements in place for the team to ensure they
are appropriately incentivised to continue to deliver the value inherent in
our development land portfolio.
Further details of this process, which results in the Company owning 100% of
Tritax Symmetry, are set out in more detail in the Investment Manager's
report.
Capitalising on opportunities in the investment market to complement our
investment portfolio
We monitor the investment market for suitable opportunities which offer
attractive returns and are complementary to our portfolio. The market
correction in 2022 means that last mile and urban logistics now offer more
attractive returns than they have in recent years, giving us the chance to
acquire smaller assets in urban locations - such as the Junction 6 Logistics
Park we bought just after the period end. The retrenchment of investors more
reliant on debt financing has also reduced the level of competition in the
investment market for such assets.
Smaller assets within prime urban locations provide an opportunity to
complement our portfolio in terms of customer offer, location and building
size, plus they enable us to make the most efficient use of land area on our
development sites. Smaller buildings tend to have shorter leases, creating
more frequent opportunities to capture rent reversion and enhance overall
like-for-like rental growth.
Continuing to enhance our ESG performance
The Group's ESG ratings show it is a sector leader, but we continue to strive
to do even better. For example, we have implemented a new ESG due diligence
framework, which incorporates climate-related risk. We also continue to refine
the net zero pathway for the Group, for which we intend to release an update
before the end of the financial year. At the period end, we were discussing
nine solar projects with a potential for 13.5 MW of renewable energy for
customers and we also have a large number of biodiversity initiatives
underway.
In our development programme, we have progressed our low - carbon baseline
specification which will continue to change over time as materials and
construction methodologies evolve. We have put in place a new target for
embodied carbon in our developments of 400kg CO2 per sqm. As part of this we
have reviewed past developments to understand our performance and identify
actions to meet our new target.
Our commitment to sustainable development encompasses our standards for
construction, which includes achieving a minimum of BREEAM 'Excellent' and EPC
A grade on all new buildings.
A strong balance sheet
We have had a continued focus on balance sheet strength and at the period end,
our LTV ratio was 30.3%. The cost of our debt is either fixed or capped across
100% of our drawn debt resulting in our average interest cost remaining low at
2.6%. By using a blend of fixed rate instruments and interest rate hedging we
are well insulated from the external markets when it comes to the cost of debt
capital. We have in excess of £550 million of available liquidity and
significant headroom within our covenant levels providing capacity to
withstand any further volatility in portfolio valuation.
One of our priorities for 2023 is to extend the maturity on our £450 million
revolving credit facility, which is due to mature in December 2024. We have
engaged in positive discussions with our supportive lenders over the Summer
and expect to conclude this process during the second half of the year.
Growing earnings and dividends
Financial performance in the period was in line with our expectations with
increasing rental income from development completions and asset management
activity in the period as well as lower operating costs from the 14% reduction
in Investment Management fee. As a result, Adjusted EPS grew by 5.6% to 3.94
pence (H1 2022: 3.73 pence). The investment portfolio generated a positive
fair value gain of £29.9 million, contributing to EPRA Net Tangible Assets of
183.02 pence per share (31 December 2022: 180.37 pence). We declared two
interim dividends totalling 3.50 pence per share, an increase of 4.5% (H1
2022: 3.35 pence per share). The Total Accounting Return for the period was
3.5%.
Outlook
While economic conditions in the UK look set to remain challenging in the near
term, we are confident of achieving further progress in the remainder of 2023.
Much of our near-term earnings growth is already secured through development
lettings achieved in FY 2022. The Group's net rental income and earnings will
continue to grow as let developments complete and become income producing with
the earnings effects of our FY 2022 development activity fully recognised in
FY 2024. In addition, the extensive rental reversion with the portfolio also
supports future earnings growth as we capture higher rents through reviews and
other asset management initiatives. Our strong balance sheet, low cost of debt
and significant headroom in our finance facilities give us the capacity to
continue to capture attractive investment and development opportunities.
The outlook for the sector remains positive, with the structural tailwinds
that drive occupier demand remaining in place, which in turn is supportive of
attractive levels of rental growth over the long-term. We therefore believe we
are well placed to continue generating long-term value for shareholders.
Manager's report
Market review
Occupational demand remains healthy and diverse
Occupier leasing has moderated after the exceptional pandemic-driven activity
of recent years, with underlying demand remaining healthy. Leasing volumes for
the period totalled 10.0 million sq ft, in line with the pre-pandemic average
of 12.8 m sq ft 1 (#_ftn1) . This reflects current economic conditions, with
occupiers taking a slower and more cautious approach to capital
expenditure. Demand across the market remains diverse, with third-party
logistics providers (44% of leasing activity in the last 12-months) and
manufacturers (16%) being prominent(1).
Underlying demand for space remains strong with 10.4 million sq ft under offer
at the period end(1), while Savills reported a 64% rise in occupier enquiries
since Q4 2022. This is consistent with enquiries to our occupier hub, which
are the highest in the last two years.
Companies continue to evolve their supply chains with greater resilience,
selective reshoring, and decarbonisation amongst their ongoing priorities.
Additional catalysts for network evolution exist in the UK such as further
growth of the already large e-commerce sector, challenges posed by high
inflation, and the country's revised global trading position. Companies
continue to adjust their supply chains accordingly and in doing so, generate
new and additional demand for logistics buildings.
New supply set to reduce into 2024
The amount of ready to occupy space rose in the period and market vacancy
stood at 3.4% at the end of the period (Q4 2022: 2.0%)(1). New speculative
announcements have declined through the first half of 2023, with Savills
reporting 5.2 million sq ft of announcements in H1 2023 (H1 2022: 7.9 million
sq ft).
Barriers to new supply remain significant, in particular the need to control
suitable sites and the time to secure planning consents. Capital market
conditions mean financing costs have increased markedly on a year ago, while
construction costs have levelled off but not fallen. Importantly, well
capitalised investor-developers control significant land portfolios and remain
incentivised to obtain the best possible terms for new leases to protect the
value of their existing investments.
Low vacancy is contributing to rental growth
Vacancy remains low by historic standards and continues to support rental
growth. Prime headline rent index (regional headline rents weighted by stock)
increased by 4.9% in the period with all UK regions experiencing growth.
Asset pricing is stabilising
H1 2023 transaction volumes totalled £1.6 billion (H1 2022: £4.1 billion)
with buyers from a variety of capital sources completing deals 2 (#_ftn2) .
After the very rapid pricing adjustment in H2 2022, yields stabilised during
the period. CBRE and MSCI monthly indices both reported modest positive
capital growth of 1.4% and 0.3% respectively in H1 2023.
While wider capital market conditions are likely to weigh on investment
volumes in the near term, we believe high quality logistics real estate
remains a compelling investment in the medium term. The long-term structural
drivers that underpin occupier demand remain in place and investment capital
is committed to the sector.
Strategy
Our strategy is aligned to the market drivers described above, seeking to
provide an attractive dividend from growing income and maximise total returns
while ensuring we meet our wider responsibilities and carefully manage risk.
The strategy has three interlinked components that aim to deliver sustainable
income and capital growth, to achieve attractive performance through the
economic cycle and an attractive and progressive dividend. The components
are:
1) High-quality assets attracting world-leading customers - delivering
high-quality, resilient and growing income.
2) Direct and active management - protecting, adding and realising value.
3) Insight driven development and innovation - creating value, future proofing
and capturing occupier demand.
ESG is intrinsic to each of these elements. The Group's key ESG themes are:
· Sustainable buildings - integrating our ESG targets across the
investment lifecycle from acquisition to development and asset management
· Climate and carbon - achieving net zero carbon for all direct
(scope 1 and 2) and indirect (scope 3) activities;
· Nature and wellbeing - enhancing biodiversity and wellbeing
across the portfolio; and
· Social value - creating value and positive impact for people and
communities.
Information on how we implemented the strategy during the period is set out in
the following sections.
1) High-quality assets attracting world-leading customers
Resilient portfolio with embedded income growth
We have constructed the portfolio to generate attractive long-term, resilient
and growing income through the economic cycle. The quality of the Group's
assets and customers enabled us to continue to collect 100% of rent during the
period, and we have maintained our track record of never having a void within
our investment portfolio.
Our overall portfolio is formed of the investment portfolio, which are assets
with either a lease or agreement for lease in place, and the development
portfolio, comprising land or buildings in the course of construction which
gives us the opportunity to construct new best in class assets to enhance our
investment portfolio (see insight driven development and innovation below).
At the period end, the total portfolio was valued at £5.05 billion (31
December 2022: £5.06 billion), broadly in line with the portfolio value from
the previous year end. This reflects stabilising yields during H1 2023 and the
benefits of development gains, asset management including 3.9% like-for-like
ERV growth along with our net disposal activity.
As at 30 June 2023, the investment portfolio comprised 76 assets (31 December
2022: 79 assets), as we leased or practically completed new buildings from our
development activities, and disposed of a number of assets in the period (see
the direct and active management section below). The investment portfolio's
gross lettable area was 36.3 million sq ft at the period end (31 December
2022: 37.5 million sq ft).
Investment portfolio: 93.3% of GAV Development portfolio: 6.7% of GAV
Foundation 65.1% Developments and land: 6.7%
Value Add 28.2%
Secure customer base underpins income generation
The Group has a diversified base of 51 customers (31 December 2022: 51),
including some of the biggest and most important companies in the world, with
74.8% being part of groups listed on exchanges like the DAX 30, FTSE all
share, SBF 120, NYSE and S&P 500. We have minimal exposure to small and
medium sized enterprises (SMEs).
Portfolio vacancy at the period end was 1.9% (31 December 2022: 2.1%),
reflecting recently completed development buildings that were unlet at the
period end. This vacancy consists of two buildings and offers opportunities
for further near-term income growth.
The table below lists the Group's top ten customers:
Customer % of contracted annual rent Customer % of contracted annual rent
Amazon 14.5% B&Q 3.9%
Morrisons 5.4% The Co-Operative Group 3.8%
Tesco 4.7% Ocado 3.4%
Iron Mountain 4.5% Marks & Spencer 3.4%
Howdens 4.0% Argos 3.2%
Long duration, full repairing and insuring leases minimise capex and enhance
income security
At the period end, the investment portfolio's WAULT was 12.1 years (31
December 2022: 12.6 years), with the Foundation assets having a WAULT of 15.4
years (31 December 2022: 15.9 years).
Of total rents:
· 32.3% is generated by leases with 15 or more years to run; and
· 24.6% comes from leases expiring in the next five years,
providing near-term opportunities to capture the growing reversion within the
portfolio.
All but one of our properties is single let and our leases are full repairing
and insuring ("FRI" - equivalent to "triple net" leases in the United States).
This means our customers are responsible for property maintenance during the
lease and have dilapidations responsibilities at the end of the lease term.
This minimises our irrecoverable property costs, which results in our strong
gross to net rental income conversion ratio of 100% for the six months.
Upward-only rent reviews provide attractive income growth.
All our leases benefit from for upward-only rent reviews, meaning the rent
cannot reduce during the lease term, with 18% of our rents reviewed annually.
The remaining 82% have five year review cycles, with the timing of these
reviews staggered such that there are five-yearly reviews taking place each
year.
The table below shows the composition of rent review types across the
portfolio, which balances the certainty offered by fixed and inflation-linked
leases with the ability to capture market rental growth from open market and
hybrid reviews.
Rent review type % of rent roll at 30 June 2023
RPI/CPI linked 52.1%
Open market 29.7%
Fixed 8.8%
Hybrid (higher of inflation or open market) 9.4%
In 2023, 19% of the portfolio is subject to rent reviews, with a further 29.8%
having a rent review in 2024. Progress with rent reviews in H1 2023 is
discussed in the direct and active management section below.
Our inflation linked reviews typically have a collar structure which provides
a minimum and maximum level of rental growth of 1.5% and 3.5% on average.
This, coupled with upward only reviews, provides certainty on the minimum
rental increase within the portfolio, which we supplement through open market
and hybrid rent reviews and other forms of active management.
Due to the balance between open market and inflation-linked rent reviews, and
the growing rental reversion (difference between a lower passing rent and a
higher prevailing market rent) within the investment portfolio (see below), we
remain positive about our ability to continue to deliver attractive, long-term
income growth.
Increasing ERVs provide significant opportunity to grow overall rental income
At each valuation date, the valuer independently assesses the investment
portfolio's estimated rental value (ERV), which is the amount of rent that the
properties would be expected to secure through an open market letting at that
date.
At 30 June 2023, the portfolio ERV was £271.8 million (31 December 2022:
£266.8 million), which is £47.8 million or 21.3% above the contracted rent
and represents a 3.9% like-for-like increase in ERV during the period. We have
opportunities to capture this reversionary potential through open market rent
reviews, lease renewals at expiry, new leases or lease regears.
2) Direct and active management
Realising value and recycling capital through disposals
We constantly review and evaluate the Group's portfolio, to identify assets
where:
1) we have completed our asset management plans and maximised value;
2) the asset's investment characteristics no longer fit within our desired
portfolio profile; or
3) the asset's relative future performance may be below others in the
portfolio or there may be more risk attached to future performance.
When considering asset disposals, we consider criteria such as building age,
location, occupier financial covenant strength, geographic and customer
concentration, rental income profile, total return expectations and ESG
performance. This is viewed against conditions in the investment market, and
near-term opportunities to reinvest in developments and/or income-producing
acquisitions to maintain earnings and dividend progression and optimise total
returns, whilst being mindful of risk.
During the period, we disposed of a number of assets at or above their
prevailing book values, where we felt we could recycle this capital into more
attractive opportunities. These were:
· two newly developed and vacant multi-let assets at Littlebrook,
Dartford, for £25 million
· three investment assets at Skelmersdale (let to DHL), Knowsley
(let to Matalan) and Worksop (let to Cerealto), for £126 million. The
disposals were in line with the 31 December 2022 valuation and reflected a
blended net initial yield of 4.6%. The investments delivered an attractive
blended internal rate of return of 12.8% per annum over the combined hold
period; and
· we exchanged on a £84.3 million building let to Howdens, the
pricing reflected a net initial yield of 4.0% and marginally ahead of its 31
December 2022 valuation.
At the period end, we were in discussions on further disposals, with the aim
to deliver an additional £100-200 million of disposal proceeds in 2023.
Acquiring investments with asset management potential and that broaden our
offer
We look for investments which provide the opportunity to generate attractive
total returns, which increase the Group's customer offer and which have the
potential to capture rental reversion and support our income growth. This
forms part of an ongoing process of portfolio optimisation and complements our
development activity by typically offering lower risk and providing more
immediate income.
Having established what we believe to be Europe's strongest logistics real
estate investment portfolio in terms of asset quality, covenant strength and
lease length, which provides lower risk but attractive and resilient income
characteristics, we seek ways to further enhance overall returns for
investors. Development, which is the primary focus of our capital deployed,
provides such an opportunity, as does increasing our overall exposure to a
range of building sizes.
For several years, the pricing on urban logistics assets made it challenging
to deliver an appropriate level of risk adjusted return for our investors.
With the market repricing in 2022/23, we see an opportunity to complement our
predominately "big box" portfolio with smaller assets, in strong urban
locations, sourced from investment acquisitions in addition to those developed
through our land platform.
Consistent with our strategy, we remain focused on ensuring a high-quality
portfolio and we prefer modern, single occupancy, well-configured assets with
strong ESG credentials or opportunities where there is a clear path for us to
add value through enhancing overall quality.
In line with this, shortly after the period end the Group acquired Junction 6
Logistics Park, one of the UK's leading urban logistics estates of scale, for
£58.0 million. The asset is in a prime location, less than three miles from
the centre of Birmingham, and comprises 12 single occupancy units totalling
384,000 sq ft and ranging in size between 12,000 and 83,000 sq ft.
The WAULT of 2.5 years provides near-term opportunities to capture rental
reversion, with the average passing rent of c£7.30 psf comparing with the
estimated rental value of c£10.90 psf. This rental growth potential is
reflected in the reversionary yield of 6.7%.
Growing and lengthening income
Given the timing mix of lease reviews a relatively small proportion (19%) of
the portfolio is subject to review in FY 2023. This compares to 34.9% in FY
2022 and 29.8% in FY 2024. During the period, we agreed six rent reviews,
including two open market rent reviews that were outstanding from 2022. These
reviews resulted in a £2.0 million or 8.8% uplift in annual contracted
passing rent, contributing to EPRA like-for-like rental growth of 3.6%, noting
that the relatively small proportion of the portfolio subject to rent review
this year will suppress the EPRA like-for-like calculation. A further five
open-market or hybrid (which captures the higher of open-market or inflation)
rent reviews were in negotiation at the period end.
The table below shows a breakdown of these reviews by type:
Number % of Contracted rent Growth in passing rent
Index linked 2 5.3% 2.7%
Open market / hybrid 3 (#_ftn3) 2 2.2% 29.2%
Fixed 2 2.4% 4.0%
Total 6 9.9% 8.8%
Lease negotiations are currently under way across nine assets and in addition
we are working on a number of solar schemes (see below).
Enhancing ESG through integration, engagement and active management
Our ESG strategy and performance criteria underpin our investment philosophy
and approach to active management. Delivering ESG performance in partnership
with customers is a key part of our active management. Through these
initiatives, we can increase income and capital values, prolong an asset's
life, improve its liquidity, reduce obsolescence risk and contribute to local
communities via biodiversity and charitable initiatives. Customers can enhance
working environments, reduce their operating costs and make progress towards
achieving their own corporate ESG targets, such as net zero.
In our 2022 Annual Report, we set out a range of ESG targets for 2023 under
each of our four ESG themes. We have made good progress with these targets and
remain on track to meet them.
Achievements in the period include implementing a new ESG due diligence
framework, which includes embedding consideration of climate and carbon
related risks into our day-to-day operations. We are continuing to monitor the
evolution of ESG-related regulation, specifically the Financial Conduct
Authority's consultation on the UK Sustainability Disclosure Requirements
(SDR) and the continued evolution of the EU Sustainable Finance Disclosure
Regulations (SFDR). Our focus on data and evidence-led disclosure prepares us
well for future regulatory obligations.
In our development programme, we have progressed our low - carbon baseline
specification which will continue to change over time as materials and
construction methodologies evolve. We have put in place a new target for
embodied carbon in our developments of 400kg CO2e per sqm. A part of this we
have reviewed past developments to understand our performance and identify
actions to meet our new target.
Our commitment to sustainable development encompasses our standards for
construction, which includes achieving a minimum of BREEAM 'Excellent' and EPC
A grade on all new buildings.
We continue to refine the net zero pathway for the Group. This is an ongoing
process, which requires us to integrate our current development and asset
management programmes into the pathway, as well as understanding our
customers' plans for decarbonising their own operations. We intend to provide
an update on progress before the end of the financial year.
At the period end, we had nine solar schemes being actively discussed with
customers, with the schemes in aggregate having the potential to generate 13.5
MW of renewable energy. We also have several biodiversity initiatives
underway, having inspected nearly 50 sites to determine the best approach for
each. Projects include wildflower areas to support pollinators, as well as
insect hotels, bird boxes and beehives.
In the area of social value, we have continued to integrate ESG criteria into
our procurement processes and supply chain. Our partnership with Schoolreaders
is continues to deliver much needed impact in child literacy. We have
supported Schoolreaders since 2019 and have just committed to another 3 years
of support. Founded in 2013, the charity matches volunteers with local primary
schools to provide free, weekly one to one reading support, targeting those
pupils most desperately in need. Our partnership with Schoolreaders helps us
to identify specific areas of child literacy need within the local communities
where we own assets and where we are developing new assets.
We are currently reviewing our overall approach to how we optimise our social
impact through effective governance, partnerships and data.
3) Insight driven development and innovation
Development is an attractive way to significantly enhance our returns, while
carefully managing the associated risks.
We control the UK's largest land portfolio for logistics development, capable
of delivering approximately 39.4 million sq ft of new logistics space, which
has the potential to more than double the size of our business. Most of the
land portfolio is held through capital-efficient long-term option agreements.
These include locked-in discounts to prevailing land prices on drawdown and
mean we typically buy the land when planning has been achieved, thereby
reducing risk, and can underwrite a land profit position at the point of
entry.
Our team has a long, proven track record of successfully obtaining planning
consents and delivering new buildings on time. This provides a pipeline of
new, high-quality assets, across a range of building sizes for our investment
portfolio, and is a key driver of returns, delivering a target yield on cost
of 6-8% through a blend of pre-let and speculative developments. The
development pipeline is diversified geographically and provides a high degree
of flexibility in terms of size and location, enabling us to match our
customers' requirements for urban or last mile assets all the way through to
"mega-boxes". As we implement our strategy, the balance of the investment
portfolio will gradually evolve to reflect this broader mix of building sizes
and attractive blend of lease profiles.
A carefully considered and low-risk approach to development
Our Investment Policy limits land and development exposure to 15% of GAV,
including a maximum exposure to speculative development of 5% of GAV. At the
period end:
· land and development exposure was 6.7% of GAV; and
· speculative exposure (based on aggregated costs) was 0.8%.
Managing build costs
Having come through a period of rapidly increasing build costs in 2022, we
have seen a more stable cost environment in the first six months of 2023. The
rate of increase in build costs has slowed markedly over the period and we are
conducting open tenders on most of our construction projects. We continue to
have excellent relationships with key suppliers and the scale of our
development programme means we benefit from contractor loyalty and have
considerable buying power. Consequently, we maintain our guidance of
delivering a 6-8% yield on cost on our overall development programme, with our
2023 schemes expected to be delivered around the midpoint of this range. We
closely monitor the financial strength of our contractors and place our main
building contracts with contractors that are experienced in logistics
warehousing and have robust balance sheets.
On track for 2-3 million sq ft of development starts
As noted above, the nature of the Group's development land portfolio and the
short timescales for construction of logistics buildings give us the ability
to flex our development programme in response to market conditions. In the
second half of 2022, the investment market experienced considerable
uncertainty as a result of high inflation and rising interest rates and we
therefore acted prudently to moderate the pace of our development starts into
H1 2023. As a result, we started 0.8 million sq ft of developments during the
period with the potential to add a further £6.8 million to contracted annual
rent. We expect the overall level of development starts to be weighted towards
H2 2023, and expect to be at the lower end of our 2-3 million sq ft of
development starts guidance range in 2023.
During the period, we also delivered:
· 0.5 million sq ft of development lettings, increasing contracted
annual rent by £4.1 million;
· 0.9 million sq ft of leased buildings reaching practical
completion, adding £6.4 million to passing rents; and
· Outline planning consent for a further 0.9 million sq ft.
The UK's largest land portfolio for logistics development
The Group's development land portfolio comprises:
· sites that we own or are being exercised, with capacity for 5.3
million sq ft of development; and
· sites we control through long-term option agreements, with
capacity for a further 34.1 million sq ft subject to securing planning
consent.
We categorise our development portfolio based on the timing of opportunities:
1) Current Development Pipeline - assets that have received planning consent
and are under construction. These assets are either pre-let, let during
construction or speculative developments. The Group owns these sites.
2) Near-term Development Pipeline - sites with planning consent received or
submitted, and where we aim to begin construction in the next three years. The
Group will own some of these sites, with others held under option pending
planning consent.
3) Future Development Pipeline - longer-term land opportunities, which are
principally held under option, and may be progressing through the planning
process.
While the primary intention is to create income-producing assets for the
investment portfolio, we will occasionally work with a customer to develop an
asset for freehold sale to them, where this will help us to gain planning,
open up a site and accelerate our profit capture.
We currently benefit from 6.2 million sq ft of planning consents across the
Near-Term development pipelines.
1) Current Development Pipeline - assets under construction to be delivered in
next 12 months
At 30 June 2023, the Group had the following assets in the Current Development
Pipeline. The total estimated cost to complete is £83.3 million.
Estimated costs to completion
Total Period Total sq ft Contractual rent / ERV
£m H2 2023 H1 2024 H2 2024 m £m
£m
£m
£m
Current Speculative Development 38.2 19.5 18.0 0.7 0.9 7.8
Current Let / Pre-Let Development 45.1 44.3 0.8 - 1.7 12.5
Total 83.3 63.8 18.8 0.7 2.6 20.3
2) Near-term Development Pipeline - construction expected to commence in next
12 - 36 months
At the period end, the Near-term Development Pipeline consisted of land
capable of accommodating 11.9 million sq ft and delivering £102.4 million of
annual rent. Of this:
· 6.2 million sq ft relates to land with planning consent; and
· 1.9 million sq ft relates to sites where we have submitted a
planning application.
As at 30 June 2023, the Group was awaiting decisions on planning applications
totalling 10.9 million sq ft.
The table below presents the potential Near-term Development Pipeline at the
period end, these are schemes within the portfolio where we have the potential
to commence construction within the timeframes indicated below. Movements in
the figures are driven by construction starting (which will move space to the
Current Development Pipeline), or changes in our view on likely timing starts,
resulting in movements between the two categories below. All schemes are
expected to be delivered within our 6-8% yield on cost guidance:
Total sq ft Current book value Estimated cost to completion ERV
(Uncommitted)
£m £m £m
Potential near-term starts in the next 12 months 2.9m 39 320 25
Potential near-term starts in the following 24 months 9.0m 116 1,015 77
11.9m 155 1,335 102
3) Future Development Pipeline
The Future Development Pipeline is predominantly controlled under longer-term
option agreements. Most option agreements contain an extension clause,
allowing the option expiry date to be extended where necessary.
The Future Development Pipeline has sites at various stages of the planning
process, with multiple sites being currently promoted through local plans. We
have continued to replenish the pipeline through securing options over new
sites.
At 30 June 2023, the Future Development Pipeline comprised 1,248 acres with
the potential to support up to 26.7 million sq ft of development.
Development Management Agreements (DMAs)
Under a DMA, the Group typically manages the development of an asset for a
third-party funder, in return for a fee and/or profit share. The Group will
not own the site during construction or the completed investment. DMAs are
therefore excluded from the Group's asset portfolio. DMAs can provide the
Group with an attractive but variable source of additional income for
shareholders, with no capital funding requirements.
Income from DMAs can vary over time. The treatment and impact of DMA income is
discussed in the Financial Review.
Financial review
The Group's financial performance continued to benefit from the strong
operational performance during the six month period. Development completions
in the period, combined with the full-year impact of last year's developments
and rent reviews, contributed to growth in net rental income. This was
partially offset by the impact of asset disposals in the period. Adjusted
earnings rose 5.6% to 3.94 pence (H1 2021: 3.73 pence) as a result of this
income growth, alongside a reduction to administrative costs. The total
dividend for the six months was 3.5 pence per share (H1 2021: 3.35 pence), in
line with the Group's dividend policy.
The business remains well financed, with the strength of the balance sheet
reflected in the period-end LTV of 30.3% (31 December 2022: 31.2%). Preserving
our balance sheet strength given the volatility in the broader capital markets
has been one of our priorities over the past 12 months. During 2023, we are
aiming to refinance the Group's £450 million revolving credit facility, which
matures in December 2024. Positive discussions with our lenders are ongoing
and we expect to conclude this during the second half. We were pleased to see
the Group's financial strength reflected in its credit rating with Moody's,
which was reaffirmed during the period at a Baa1 with positive outlook.
Presentation of financial information
The financial information is prepared under IFRS. The Group's subsidiaries are
consolidated at 100% and its interests in joint ventures are equity accounted
for.
The Board continues to see Adjusted EPS 4 (#_ftn4) as the most relevant
measure when assessing dividend distributions. Adjusted EPS is based on EPRA's
Best Practices Recommendations and excludes items considered to be
exceptional, not in the ordinary course of business or not supported by cash
flows.
Financial results
Net rental income
Net rental income for the period grew by 7.7% to £109.3 million (H1 2022:
£101.5 million). EPRA like-for-like rental growth was 3.6% , although this
reflected a comparatively small number of rent reviews settled in the year to
date.
At the period end, the contracted annual rent roll was £224.0 million across
76 assets (31 December 2022: £224.0 million across 79 assets). Despite being
unchanged, activity in the period included new lettings adding £4.1 million,
rent review settlement adding £2.0 million whilst our disposal activity
reduced annual rent roll by £6.1 million.
The annual passing rent increased by 3.1% to £211.6 million (31 December
2022: £205.1 million), which was driven by new passing rent attached to
development completions.
Administrative and other expenses
Administrative and other expenses, which include all the operational costs of
running the Group, were £13.8 million (H1 2022: £15.3 million). The
Investment Management fee for the six months fell by 14.3% to £10.8 million
(H1 2022: £12.6 million), reflecting the reduction in net asset value between
the two periods and the lower fee scale from 1 July 2022, following changes to
the Investment Management Agreement announced in the prior year.
As suggested at the previous period end, this contributed to an expected
reduction in the EPRA Cost Ratio (including and excluding vacancy cost), which
was 12.6% for the period (H1 2022: 15.2%).
Operating profit
Operating profit before changes in fair value and other adjustments was £95.5
million (H1 2022: £88.8 million).
The Group earns DMA income from managing developments for third parties. DMA
income is more variable than property rental income, and we include it within
Adjusted earnings as it is supported by cash flows. We expect DMA income in a
typical year to be £3.0-5.0 million per annum, over the medium term. We
expect DMA income for 2023 to fall within this range, with all of this being
earned in the second half. In H1 2023, the Group recorded £nil of DMA income
as there were no live DMA projects (H1 2022: £2.6 million).
Share-based payment charge and contingent consideration
The acquisition of DB Symmetry (rebranded to Tritax Symmetry) resulted in
senior members of the Symmetry team becoming B and C shareholders in Tritax
Symmetry Holdings Limited. Under IFRS, the structure of this transaction has
led to the B and C shareholders' value being split between:
i) contingent consideration, which is determined by certain provisions under
the shareholder agreement between Tritax Symmetry HoldCo and the Tritax
Symmetry Management Shareholders; and
ii) a share-based payment charge, which is the compensation the B and C
shareholders will receive as a result of their economic right to a share of
the future performance of Tritax Symmetry Development Assets.
During H1 2023, £2.5 million (H1 2022: £4.5 million) was charged to the
Group Statement of Comprehensive Income in respect of share-based payment
charges and £0.4 million (H1 2022: £4.8 million) was charged in respect of
contingent consideration.
Financing costs
Net financing costs for the period were £20.7 million (H1 2022: £18.4
million), excluding the gain in the fair value of interest rate derivatives of
£2.9 million (H1 2022: £7.4 million gain). The average cost of debt at the
period end, was little changed at 2.56% (31 December 2022: 2.57%), due to 100%
of the Group's drawn debt being either fixed rate or covered by interest rate
caps as part of our hedging policy (see below). The movement in net financing
costs therefore reflects the higher average drawn debt during the period.
£2.1 million of interest expense was capitalised (H1 2022: £1.3 million),
reflecting the level of capital deployed into active development projects in
the period.
The interest cover ratio, being operating profit before changes in fair value
and other adjustments over net finance expenses, was 4.6x (31 December 2022:
4.8x).
Tax
The Group has continued to comply with its obligations as a UK REIT and is
exempt from corporation tax on its property rental business.
A tax charge of £1.7 million arose in the period (H1 2022: £nil), as a
result of the profit on disposal of the asset at Littlebrook. This charge has
been removed from EPRA earnings in line with guidance.
Profit and earnings
Profit before tax was £102.4 million (H1 2022: £458.7 million), with profit
in the comparative period benefiting significantly from a substantial gain on
revaluation of the portfolio. Basic EPS was 5.39 pence (H1 2022: 24.55 pence).
Basic EPRA EPS, which excludes the impact of property valuation movements, was
3.60 pence (H1 2022: 3.32 pence).
Adjusted EPS for the period was 3.94 pence (H1 2022: 3.73 pence). The
calculation of Adjusted EPS can be found in note 6. In both H1 2023 and H1
2022, the level of DMA income did not exceed of the anticipated run rate, and
therefore Adjusted EPS excluding excess DMA income was the same as Adjusted
EPS in both periods.
Dividends
The Board has declared the following interim dividends in respect of the
period:
Declared Amount per share In respect of three months to Paid/to be paid
4 May 2023 1.75p 31 March 2023 1 June 2023
2 August 2023 1.75p 30 June 2023 31 August 2023
The total dividend for the period was therefore 3.50 pence per share, an
increase of 4.5% on the 3.35 pence paid in respect of H1 2022. The pay-out
ratio was 89% of Adjusted EPS. The Board uses the Q4 dividend to implement any
progression with the Q1 to Q3 dividends each reflecting 25% of the prior full
year dividend.
Portfolio valuation
CBRE independently values the Group's assets that are leased, pre-leased or
are under construction. These assets are recognised in the Group Statement of
Financial Position at fair value. Colliers independently values all owned and
optioned land. Land options and any other property assets are recognised at
cost, less amortisation or impairment charges under IFRS.
The share of joint ventures relates to 50% interests in two sites at
Middlewich and Northampton, relating to land and land options. These two sites
are equity accounted for and appear as a single line item in the Statement of
Comprehensive Income and Statement of Financial Position.
The total portfolio value at 30 June 2023 was £5.05 billion, including the
Group's share of joint ventures:
30 June 2023 31 December 2022
£m £m
Investment properties 4,766.1 4,847.3
Other property assets 2.3 2.3
Land options (at cost) 165.0 157.4
Share of joint ventures 26.8 27.2
Financial asset 2.4 -
Asset held for sale 84.3 25.1
Portfolio value 5,046.9 5,059.3
The gain recognised on revaluation of the Group's Investment properties was
£29.9 million (H1 2022: £390.5 million gain). The portfolio equivalent yield
remained flat during the period at 5.3% (31 December 2022: 5.3%), with growth
driven primarily through income growth across the portfolio. This was
supplemented by the benefits of our continued progress with the development
programme and further growth in ERVs, which were 3.9% higher in the first half
of this year.
Capital expenditure
Capital expenditure into developments in H1 2023 was £108.9 million,
reflecting an additional 0.8 million sq ft of construction starts. This
compares with our guidance of £200-250 million for the year, based on an
expected range of 2-3 million sq ft of construction starts. We expect
construction starts and capital expenditure to be within our guidance for the
full year.
Embedded value within land options
Under IFRS, land options are recognised at cost and subject to impairment
review. As at 30 June 2023, the Group's investment in land options totalled
£165.0 million (31 December 2022: £157.4 million). We continue to progress
strategic land through the planning process. There were no transfers between
land options and investment property during the period.
As the land under option approaches the point of receiving planning consent,
any associated risk should reduce and the fair value should increase. When
calculating its EPRA NTA, the Group therefore makes a fair value
mark-to-market adjustment for land options. At the period end, the fair value
of land options was £41.4 million greater (31 December 2022: £20.4 million
greater) than costs expended to date.
Net assets
The EPRA NTA per share at 30 June 2023 was 183.02 pence (31 December 2022:
180.37 pence).
The Total Accounting Return for the period, which is the change in EPRA NTA
plus dividends paid, was 3.5% (H1 2022: 10.7%).
Debt capital
At 30 June 2023, the Group had the following borrowings:
Lender Maturity Loan commitment Amount drawn at 30 June 2023
£m
£m
Loan notes
2.625% Bonds 2026 Dec 2026 250.0 249.6
2.86% Loan notes 2028 Feb 2028 250.0 250.0
2.98% Loan notes 2030 Feb 2030 150.0 150.0
3.125% Bonds 2031 Dec 2031 250.0 247.9
1.5% Green Bonds 2033 Nov 2033 250.0 246.9
Bank borrowings
RCF (syndicate of seven banks) Dec 2024 450.0 129.0
RCF (syndicate of six banks) Jun 2026 300.0 90.0
Helaba Jul 2028 50.9 50.9
PGIM Real Estate Finance Mar 2027 90.0 90.0
Canada Life Apr 2029 72.0 72.0
Total 1,912.9 1,576.3
Interest rates and hedging
Of the Group's drawn debt as at 30 June 2023, 83% is at fixed interest rates.
For its variable rate debt, the Group's hedging strategy is to use interest
rate caps which run coterminous with the respective loan. These protect the
Group from significant increases in interest rates.
Combined with the fixed rate debt, the Group's derivative instruments hedged
100% of its drawn debt as at the period end. The average cost of borrowing at
30 June 2023 was 2.56% (31 December 2022: 2.57%).
Debt maturity
At 30 June 2023, the Group's debt had an average maturity of 4.9 years (31
December 2022: 5.4 years), with the next maturity falling due in approximately
18 months and the farthest maturity falling due in more than 10 years.
We have begun the process of refinancing the £450 million RCF that expires in
December 2024 and have held positive talks with our lenders and we expect to
complete this process in the second half of the year.
Loan to value (LTV)
The Group has a conservative leverage policy. At the period end, the LTV was
30.3% (31 December 2022: 31.2%), reflecting a modest reduction in net debt
across the half alongside a stable portfolio valuation. Managing leverage over
the past 12 months has been a priority for the Company.
The Group has exchanged on the Junction 6, Birmingham acquisition with a
purchase price of £58 million and the Howdens, Raunds disposal, with proceeds
agreed of £84.3 million. When taking into account these transactions which
are to complete in July and August respectively, the pro-forma LTV reduces to
30.0%.
Net debt and operating cash flow
Net debt at the period end was £1,530.4 million, comprising £1,576.3 million
of gross debt less £45.9 million of cash (31 December 2022: £1,624.0 million
gross debt, £71.1 million cash).
Net operating cash flow was £95.8 million for the period (H1 2022: £86.1
million).
Going concern
We continue to have a healthy liquidity position, with strong levels of rent
collection, a favourable debt maturity profile and substantial headroom
against our financial covenants.
The Directors have reviewed our current and projected financial position over
a five-year period, making reasonable assumptions about our future trading
performance. Various forms of sensitivity analysis have been performed, in
particular regarding the financial performance of our customers and
expectations over lease renewals. As at 30 June 2023, our property values
would have to fall by approximately 45% before our loan covenants are breached
at the corporate level.
At the period end, we had an aggregate of £531 million of undrawn commitments
under our senior debt facilities and £45.9 million of cash, of which £141.3
million (see note 18) was committed under various development and purchase
contracts. In addition, we had exchanged to sell one asset for £84.3 million,
with proceeds expected to be received in August 2023.
Our loan to value ratio stood at 30.3%, with the debt portfolio having an
average maturity term of approximately 4.9 years.
As at the date of approval of this report, we had substantial headroom within
our financial loan covenants. Our financial covenants have been complied with
for all loans throughout the period and up to the date of approval of these
financial statements. As a result, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future, which is considered to be to
3 August 2024.
Tritax Symmetry succession planning update
On 31 July 2023, we agreed with the founding directors of Tritax Symmetry, to
acquire their 13% retained equity interest in Tritax Symmetry Holdings Limited
(TSHL) which formed part of the contingent consideration following its
acquisition in February 2019.
The B and C Non-Hurdle shares in TSHL, are being acquired for a total
consideration of £65.0 million, and will be settled through a combination of
cash and the issue of new ordinary shares in the Company (Ordinary Shares),
upon which the founding directors (excluding Andrew Dickman) will be fully
stepping away from the business.
In conjunction, the Company will also purchase the remaining C Hurdle shares
in TSHL, awarded under the previous arrangements, valued at £1.6 million as
at 30 June 2023, also for a combination of cash and the issue of new Ordinary
Shares.
Post settlement, the full quota of B and C shares (equivalent to the 13%
equity interest) will be extinguished and the Company will own 100% of TSHL.
The B and C share liability recognised within the Statement of Financial
Position, as at 30 June 2023, was £45.1 million.
Under the previous arrangement, the Company had an ability to buyback the
remaining B and C shares post December 2026, therefore this, is in part, an
acceleration of the charge to EPRA NTA that would have been expected to be
charged during the period June 2023 to December 2026.
The charge expected to EPRA NTA resulting from the early settlement, including
the issue of the new ordinary shares to both the founding directors and other
C shareholders, would amount to approximately 1% of EPRA NTA as at 30 June
2023.
The new Ordinary Shares will likely be issued to the founding directors and
other C shareholders on or before 26 August 2023, at an issue price equivalent
to the closing mid-market price of the Company's Ordinary Shares on the
business day immediately prior to the date of issue and will be subject to
agreed 12 month lock-up for the exiting directors and orderly market
provisions. A further announcement to confirm the number of shares and issue
price will be issued upon completion.
We saw this as an excellent opportunity to further align the incentivisation
of the remaining TSHL team, to be led by Andrew Dickman, and so have put in
place a long-term scheme that rewards value created within the Symmetry
development portfolio and is therefore aligned with the Company and its
shareholders.
Taking into account the accelerated settlement of the B and C shares and the
new incentivisation scheme, it is the Company's view that this is in the best
interests of shareholders. We believe that the new arrangement is likely to
result in a better financial outcome for shareholders over the period to 2026,
assuming a certain level of development is undertaken based on existing
business plans.
Credit rating
The Group has a Baa1 long-term credit rating and positive outlook from Moody's
Investor Services, which was reaffirmed during the period.
Alternative Investment Fund Manager (AIFM)
The Manager is authorised and regulated by the Financial Conduct Authority as
a full-scope AIFM. The Manager is therefore authorised to provide services to
the Group and the Group benefits from the rigorous reporting and ongoing
compliance applicable to AIFMs in the UK.
As part of this regulatory process, Langham Hall UK Depositary LLP (Langham
Hall) is responsible for cash monitoring, asset verification and oversight of
the Company and the Manager. In performing its function, Langham Hall conducts
a quarterly review during which it monitors and verifies all new acquisitions,
share issues, loan facilities and other key events, together with shareholder
distributions, the quarterly management accounts, bank reconciliations and the
Company's general controls and processes. Langham Hall provides a written
report of its findings to the Company and to the Manager, and to date it has
not identified any issues. The Company therefore benefits from a continuous
real-time audit check on its processes and controls.
Key performance indicators
Our objective is to deliver attractive, low-risk returns to Shareholders, by
executing the Group's Investment Policy and operational strategy. Set out
below are the key performance indicators we use to track our progress. For a
more detailed explanation of performance, please refer to the Manager's
Report.
KPI Relevance to strategy Performance
1. Total accounting return (TAR) TAR calculates the change in the EPRA net tangible assets (EPRA NTA) over the 3.5% for the six months to 30 June 2023
period plus dividends paid. It measures the ultimate outcome of our strategy,
which is to deliver value to our shareholders through our portfolio and to (H1 2022: 10.7%, FY 2022: -15.9%)
deliver a secure and growing income stream.
2. Dividend The dividend reflects our ability to deliver a low-risk but growing income 3.50p per share for six months to 30 June 2023
stream from our portfolio and is a key element of our TAR.
(H1 2022: 3.35p, FY 2022: 7.00p)
3. EPRA NTA per share(1) The EPRA NTA reflects our ability to grow the portfolio and to add value to it 183.02p at 30 June 2023
throughout the lifecycle of our assets.
(30 June 2022: 242.88p, 31 December 2022: 180.37p).
4. Loan to value ratio (LTV) The LTV measures the prudence of our financing strategy, balancing the 30.3% at 30 June 2023
potential amplification of returns and portfolio diversification that come
with using debt against the need to successfully manage risk. (30 June 2022: 23.7%, 31 December 2022: 31.2%).
5. Adjusted earnings per share The Adjusted EPS reflects our ability to generate earnings from our portfolio, 3.94p per share for the six months to 30 June 2023
which ultimately underpins our dividend payments.
(H1 2022: 3.73p, FY 2022: 7.79p)
6. Weighted average unexpired lease term (WAULT) The WAULT is a key measure of the quality of our portfolio. Long lease terms 12.1 years at 30 June 2023
underpin the security of our income stream.
(30 June 2022: 12.8 years, 31 December 2022: 12.6 years).
7. Global Real Estate Sustainability Benchmark (GRESB) score The GRESB score reflects the sustainability of our assets and how well we are 83/100 and 4 Green Star rating for 2022
managing ESG risks and opportunities. Sustainable assets protect us against
climate change and help our customers to operate efficiently. (2021: 81/100, 4 Green Star rating)
99/100 and 5 Green Star rating for developments for 2022 and received the
GRESB 2022 Leader for Development in the European and Global Industrial
Sectors award
(1) EPRA NTA is calculated in accordance with the Best Practices
Recommendations of the European Public Real Estate Association (EPRA). We use
these alternative metrics as they provide a transparent and consistent basis
to enable comparison between European property companies.
EPRA performance indicators
The table below shows additional performance measures, calculated in
accordance with the Best Practices Recommendations of the European Public Real
Estate Association (EPRA). We provide these measures to aid comparison with
other European real estate businesses.
For a full reconciliation of all EPRA performance indicators, please see Notes
to the EPRA and other key performance indicators.
Measure and Definition Purpose Performance
1. EPRA Earnings (Diluted) A key measure of a company's underlying operating results and an indication of £67.2m / 3.60p per share
the extent to which current dividend payments are supported by earnings.
See note 6 (H1 2022: £62.0m / 3.32p per share, FY 2022: £144.8m / 7.66p per share).
2. EPRA Net Tangible Assets Assumes that entities buy and sell assets, thereby crystallising certain £3,420.4m / 183.02p per share as at 30 June 2023
levels of unavoidable deferred tax.
See note 16 (30 June 2022: £4,539.1m / 242.88p per share, 31 December 2022: £3,370.8m /
180.37p per share).
3. EPRA Net Reinstatement Value (NRV) Assumes that entities never sell assets and aims to represent the value £3,775.2m / 202.01p per share as at 30 June 2023
required to rebuild the entity.
(30 June 2022: £4,953.0m / 265.03p per share, 31 December 2022: £3,759.6m /
201.17p per share).
4. EPRA Net Disposal Value (NDV) Represents the shareholders' value under a disposal scenario, where deferred £3,682.7m / 197.06p per share as at 30 June 2023
tax, financial instruments and certain other adjustments are calculated to the
full extent of their liability, net of any resulting tax. (30 June 2022: £4,640.5m / 248.31p per share, 31 December 2022: £3,591.5m /
192.18p per share).
5 EPRA Net Initial Yield (NIY) This measure should make it easier for investors to judge for themselves how 4.05% as at 30 June 2023
the valuations of two portfolios compare.
(30 June 2022: 3.36%, 31 December 2022: 4.19%).
6 EPRA 'Topped-Up' NIY This measure should make it easier for investors to judge for themselves how 4.34% as at 30 June 2023
the valuations of two portfolios compare.
(30 June 2022: 3.60%, 31 December 2022: 4.39%).
7. EPRA Vacancy A "pure" (%) measure of investment property space that is vacant, based on 1.9% as at 30 June 2023
ERV.
(30 June 2022: 0%, 31 December 2022: 2.1%).
8. EPRA Cost Ratio A key measure to enable meaningful measurement of the changes in a company's 12.6%
operating costs.
(H1 2022: 15.2%, FY 2022: 15.7%). Both the 2023 and 2022 ratios are the same,
inclusive or exclusive of vacancy costs.
9. EPRA LTV A key (shareholder-gearing) metric to determine the percentage of debt 32.1%
comparing to the appraised value of the properties.
(30 June 2022: 24.8 %,
31 December 2022: 32.9%).
Principal risks and uncertainties
The Audit & Risk Committee, which assists the Board with its
responsibilities for managing risk, considers that whilst some risks may have
increased and some risks reduced in the period, all principal risks and
uncertainties presented on pages 55-58 of our 2022 Annual Report, dated 1
March 2023, remained valid during the period and we believe will continue to
remain valid for the remainder of the year.
We remain focused on the risk of continued challenges to the UK economy,
including current interest rate and inflation levels.
Property risks
· Tenant default: the risk of one or more of our tenants defaulting
· Portfolio strategy and industry competition: the ability of the
Company to execute its strategy and deliver performance
· Performance of the UK retail sector and the continued growth of
online retail
· Execution of development business plan: there may be a higher
degree of risk within our development portfolio
Financial risks
· Debt financing - LTV, availability and cost of debt
Corporate risk
· We rely on the continuance of the manager
Taxation risk
· UK REIT status: we are a UK REIT and have a tax-efficient
corporate structure, which is advantageous for UK Shareholders.
Other risks
· Severe economic downturn
· Physical and transition risks from climate change
Statement of directors' responsibilities
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with the Disclosure Guidance and Transparency Rules of the
Financial Services Authority, IAS 34 'Interim Financial Reporting',
· the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
Shareholder information is as disclosed on the Tritax Big Box REIT plc
website.
For and on behalf of the Board
Aubrey Adams OBE (Chairman)
2 August 2023
Independent review report to Tritax Big Box REIT plc
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises the Condensed Group Statement of Comprehensive
Income, the Condensed Group Statement of Financial Position, the Condensed
Group Statement of Changes in Equity, the Condensed Group Cash Flow Statement
and related notes.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, United Kingdom
2 August 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Condensed group statement of comprehensive income
For the six months ended 30 June 2023
Note Six months Six months ended Year ended
ended 30 June 2022 (unaudited) 31 December 2022
30 June 2023 £m (audited)
(unaudited) £m
£m
Gross rental income 109.3 101.5 206.2
Service charge income 3.1 2.6 6.3
Service charge expense (3.1) (2.6) (6.5)
Net rental income 109.3 101.5 206.0
Gross operating income - 8.3 18.3
Other operating costs - (5.7) (9.0)
Other operating income - 2.6 9.3
Administrative and other expenses (13.8) (15.3) (32.2)
Operating profit before changes in fair value and other adjustments(1) 95.5 88.8 183.1
Changes in fair value of investment properties 8 29.9 390.5 (759.5)
Loss on disposal of investment properties (2.0) - -
Share of profit/(loss) from joint ventures - - 0.5
Impairment of intangible and other property assets (0.3) (0.3) (1.4)
Share-based payment charge 14 (2.5) (4.5) (1.9)
Changes in fair value of contingent consideration payable 14 (0.4) (4.8) 1.1
Operating profit 120.2 469.7 (578.1)
Finance income 4.6 - 1.6
Finance expense 4 (25.3) (18.4) (39.4)
Changes in fair value of interest rate derivatives 10 2.9 7.4 14.9
Profit before taxation 102.4 458.7 (601.0)
Taxation 5 (1.7) - 1.6
Profit and total comprehensive income 100.7 458.7 (599.4)
Earnings per share - basic 6 5.39p 24.55p (32.08)p
Earnings per share - diluted(2) 6 5.39p 24.55p (32.08)p
(1) Operating profit before changes in fair value of investment properties and
contingent consideration, loss on disposal of investment properties, share of
loss from joint ventures, impairment of intangible and other property assets
and share-based payment charges.
(2 ) There is no dilution in the period to 30 June 2023
Condensed group statement of financial position
As at 30 June 2023
Note Six months ended Six months ended Year ended
30 June 2023 30 June 2022 (unaudited) 31 December 2022
(unaudited) £m (audited)
£m £m
Non-current assets
Intangible assets 1.2 1.6 1.4
Investment property 8 4,766.1 5,847.1 4,847.3
Investment in land options 9 165.0 150.7 157.4
Investment in joint ventures 26.8 27.1 27.2
Other property assets 2.3 3.1 2.3
Financial asset 2.4 - -
Trade and other receivables 11 2.0 2.0 2.0
Interest rate derivatives 10 22.8 12.4 19.9
Total non-current assets 4,988.6 6,044.0 5,057.5
Current assets
Rent and other receivables 11 24.6 28.9 24.9
Assets held for sale 84.3 - 25.1
Cash at bank 12 45.9 34.8 47.6
Total current assets 154.8 63.7 97.6
Total assets 5,143.4 6,107.7 5,155.1
Current liabilities
Deferred rental income (32.1) (34.9) (34.7)
Trade and other payables (111.4) (92.5) (111.2)
Tax liabilities (4.1) (4.3) (1.1)
Total current liabilities (147.6) (131.7) (147.0)
Non-current liabilities
Trade and other payables (2.0) (2.0) (2.0)
Bank borrowings 13 (427.8) (314.2) (474.8)
Loan notes 13 (1,139.8) (1,138.4) (1,139.1)
Amounts due to B and C shareholders 14 (45.1) (50.7) (42.2)
Total non-current liabilities (1,614.7) (1,505.3) (1,658.1)
Total liabilities (1,762.3) (1,637.0) (1,805.1)
Total net assets 3,381.1 4,470.7 3,350.0
Equity
Share capital 15 18.7 18.7 18.7
Share premium reserve 15 - 764.3 764.3
Capital reduction reserve 15 1,529.8 897.7 835.1
Retained earnings 15 1,832.6 2,790.0 1,731.9
Total equity 3,381.1 4,470.7 3,350.0
Net asset value per share - basic 16 180.92p 239.23p 179.25p
Net asset value per share - diluted 16 180.92p 239.23p 179.25p
EPRA net tangible asset per share - basic 16 183.02p 242.88p 179.25p
EPRA net tangible asset per share - diluted 16 183.02p 242.88p 180.37p
These financial statements were approved by the Board of Directors on 2 August
2023 and signed on its behalf by:
Aubrey Adams OBE (Chairman)
Condensed group statement of changes in equity
For the six months ended 30 June 2023
Six months ended 30 June 2023 (unaudited) Note Share capital Share premium Capital reduction reserve Retained earnings Total
£m £m £m £m £m
At 1 January 2023 18.7 764.3 835.1 1,731.9 3,350.0
Profit and total comprehensive income - - - 100.7 100.7
18.7 764.3 835.1 1,832.6 3,450.7
Contributions and distributions
Shares issued in relation to management contract - - - - -
Share-based payments - - - 2.2 2.2
Cancellation of the share premium account 15 - (764.3) 764.3 - -
Transfer of share-based payments to liabilities to reflect settlement - - - (2.2) (2.2)
Dividends paid 7 - - (69.6) - (69.6)
At 30 June 2023 18.7 - 1,529.8 1,832.6 3,381.1
Six months ended 30 June 2022 (unaudited) Note Share capital Share premium Capital reduction reserve Retained earnings Total
£m £m £m £m £m
At 1 January 2022 18.7 762.0 964.5 2,331.3 4,076.5
Profit and total comprehensive income - - - 458.7 458.7
18.7 762.0 964.5 2,790.0 4,535.2
Contributions and distributions
Shares issued in relation to management contract - 2.3 - - 2.3
Share-based payments - - - 2.6 2.6
Transfer of share-based payments to liabilities to reflect settlement - - - (2.6) (2.6)
Dividends paid 7 - - (66.8) - (66.8)
At 30 June 2022 18.7 764.3 897.7 2,790.0 4,470.7
Year ended 31 December 2022 (audited) Note Share capital Share premium Capital reduction reserve Retained earnings Total
£m £m £m £m £m
1 January 2022 18.7 762.0 964.5 2,331.3 4,076.5
Profit and total comprehensive income - - - (599.4) (599.4)
18.7 762.0 964.5 1,731.9 3,477.1
Contributions and distributions
Shares issued in relation to management contract - 2.3 - - 2.3
Share-based payments - - - 5.3 5.3
Transfer of share-based payments to liabilities to reflect settlement - - - (5.3) (5.3)
Dividends paid 7 - - (129.4) - (129.4)
At 31 December 2022 18.7 764.3 835.1 1,731.9 3,350.0
Condensed group cash flow statement
For the six months ended 30 June 2023
Note Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December
2022 (audited)
(unaudited) (unaudited)
£m
£m £m
Cash flows from operating activities
Profits for the period (attributable to the shareholders) 100.7 458.7 (599.4)
Add: tax charge 1.7 - (1.6)
Add: changes in fair value of contingent consideration payable 0.4 4.8 (1.1)
Add: finance expense 25.3 18.4 39.4
Add: changes in fair value of interest rate derivatives (2.9) (7.4) (14.9)
Add: share-based payment charges 2.5 4.5 1.9
Add: impairment of intangible and other property assets 0.3 0.2 1.4
Add: amortisation of other property assets - 0.9 1.7
Add: share of loss from joint ventures - - (0.5)
Less: changes in fair value of investment properties (29.9) (390.5) 759.5
Add: loss on disposal of investment properties 1.7 - -
Accretion of tenant lease incentive (7.4) (5.2) (11.1)
Less: Finance income (4.6) - (1.6)
Decrease in trade and other receivables 2.2 8.0 12.1
(Decrease)/increase in deferred income (2.6) (3.7) (3.9)
Increase/(decrease) in trade and other payables 6.8 (2.6) (2.9)
Cash generated from operations 94.2 86.1 179.0
Taxation refunded/(paid) 1.3 - (1.6)
Net cash flow generated from operating activities 95.5 86.1 177.4
Investing activities
Additions to investment properties (102.1) (136.1) (286.8)
Additions to land options (7.6) (6.4) (13.1)
Additions to joint ventures - (1.9) (2.8)
Net proceeds from disposal of investment properties 149.0 - -
Interest received 0.1 - 0.1
Dividends received from joint ventures 0.4 0.4 0.5
Net cash flow generated from/(used in) investing activities 39.8 (144.0) (302.1)
Financing activities
Proceeds from issue of Ordinary Share Capital - 2.3 2.3
Bank borrowings drawn 102.0 133.0 319.0
Bank and other borrowings repaid (150.0) (26.0) (52.0)
Interest derivatives payments received 3.1 - 1.5
Loan arrangement fees paid (0.2) (0.5) (1.4)
Bank interest paid (22.3) (17.5) (35.8)
Interest rate cap premium paid - (3.2) (3.2)
Dividends paid to equity holders (69.6) (66.5) (129.2)
Net cash flow (used in)/generated from financing activities (137.0) 21.6 101.2
Net decrease in cash and cash equivalents for the period (1.7) (36.3) (23.5)
Cash and cash equivalents at start of period 12 47.4 70.9 70.9
Cash and cash equivalents at end of period 12 45.7 34.6 47.4
Notes to the consolidated accounts
1. Basis of preparation
These condensed consolidated interim financial statements for the 6 months to
30 June 2023 have been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Services Authority, IAS 34 'Interim
financial reporting' and also in accordance with the measurement and
recognition principles of UK adopted international accounting standards. They
do not include all of the information required for full annual financial
statements and should be read in conjunction with the 2022 Annual Report and
Accounts, which were prepared in accordance with UK-adopted International
Accounting Standards (IFRS).
The condensed consolidated financial statements for the six months ended 30
June 2023 have been reviewed by the Group's Auditor, BDO LLP, in accordance
with International Standard on Review Engagements 2410, Review of Interim
Financial Information Performed by the Independent Auditor of the Entity and
were approved for issue on 2 August 2023. The condensed consolidated financial
statements are unaudited and do not constitute statutory accounts for the
purposes of the Companies Act 2006.
The comparative financial information presented herein for the year to 31
December 2022 does not constitute full statutory accounts within the meaning
of Section 434 of the Companies Act 2006. The Group's Annual Report and
accounts for the year to 31 December 2022 have been delivered to the Registrar
of Companies. The Group's independent auditor's report on those accounts was
unqualified, did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their report and did not
contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
1.1. Going concern
The Board has paid attention to the appropriateness of the going concern basis
in preparing these financial statements. Any going concern assessment
considers the Group's financial position, cash flows and liquidity, including
its continued access to its debt facilities and its headroom under financial
loan covenants.
The Directors have considered the cash flow forecasts for the Group for a
period of at least twelve months from the date of approval of these condensed
consolidated financial statements. These forecasts include the Directors'
assessment of plausible downside scenarios. The Directors have reviewed the
current and projected financial position of the Group, making reasonable
assumptions about its future trading performance. Various forms of sensitivity
analysis have been performed having a particular regard to the financial
performance of its Customers, taking into account any discussions held with
the Customer surrounding their rental obligations. The analysis also included
sensitising the impact of portfolio valuation movements through market
volatility, rent collection and customer default. These scenarios all paid
regard to the current economic environment.
The Group has a strong track record around rent collection with no history of
bad debts. There have been no agreements to grant rent free periods or rent
holidays across the whole portfolio as a result of customer credit issues. The
Directors have also considered the arrears position in light of IFRS 9,
expected credit loss model, see Note 11 for further details.
As at 30 June 2023, the Group had an aggregate £531 million of undrawn
commitments under its senior debt facilities, of which £141.3 million was
committed under various development and purchase contracts. In addition, the
Group had exchanged on an asset for sale, where £84.3 million of proceeds
were due to be received in August 2023.
At 30 June 2023 the Group's loan to value ratio stood at 30.3%, with the debt
portfolio having an average maturity term of approximately 4.9 years. As at
the date of approval of this report, the Group has substantial headroom within
its financial loan covenants. As at 30 June 2023 property values would have to
fall by approximately 45% before loan covenants are breached.
The Group's financial covenants have been complied with for all loans
throughout the period and up to the date of approval of these financial
statements.
The Directors are therefore satisfied that the Group is in a position to
continue in operation for at least twelve months from the date of approval of
these condensed consolidated financial statements and consider it appropriate
to adopt the going concern basis of accounting in preparing them. There is no
material uncertainty relating to going concern.
2. Significant accounting judgements, estimates and
assumptions
The condensed consolidated financial statements have been prepared on the
basis of the accounting policies, significant judgements, estimates and key
assumptions as set out in the notes to the Group's annual financial statements
for the year ended 31 December 2022. No changes have been made to the Group's
accounting policies as a result of the amendments and interpretations which
became effective in the period as they do not have a material impact on the
Group. Full details can be found in the Group's annual financial statements
for the year ended 31 December 2022, apart from the below:
2.1 Judgements
Other operating income
Other operating income is receivable from development management agreements in
place with third parties. Development management income is recognised in the
accounting period in which the services are rendered and a significant
reversal is not expected in future periods.
Judgement is exercised in identifying performance obligations including
achieving a pre-let, managing the building of an asset and arranging for lease
completion. Certain performance obligations are recognised at a point in time
and others are recognised over time based on the actual service provided to
the end of the reporting period as a proportion of the total services. A
judgement is formed over the level of other operating income to be recognised
in any accounting period, which also takes into account any associated costs
attached to the development management agreements.
2.2 Estimates
Fair valuation of Investment property
The market value of Investment property is determined by an independent
property valuation expert (see note 8) to be the estimated amount for which a
property should exchange on the date of the valuation in an arm's-length
transaction. Properties have been valued on an individual basis. The valuation
expert uses recognised valuation techniques and the principles of both IAS 40
and IFRS 13.
The valuations have been prepared in accordance with the RICS Valuation -
Global Standards July 2017 ("the Red Book"). Factors reflected comprise
current market conditions including net initial yield applied, annual rentals,
lease lengths and location. The net initial yield, being the most significant
estimate, is subject to changes depending on the market conditions which are
assessed on a periodic basis. The significant methods and assumptions used by
the valuers in estimating the fair value of Investment property, together with
the sensitivity analysis on the most subjective inputs, are set out in note 8.
3. Summary of significant accounting policies
The accounting policies adopted in this report are consistent with those
applied in the Group's consolidated financial statements for the year ended 31
December 2022 and are expected to be applied consistently during the year
ending 31 December 2023.
3.1 New standard issued and effective from 1 January 2023
The following standard and amendment to existing standards has been applied in
preparing the condensed financial statements.
The following amendments are effective for the period beginning 1 January
2023:
· IFRS 17 Insurance Contracts;
· Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and Errors);
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes); and
· International Tax Reform - Pillar Two Model Rules (Amendment to
IAS 12 Income Taxes)
There was no material effect from the adoption of the above-mentioned
amendments to IFRS effective in the period. They have no significant impact to
the Group as they are either not relevant to the Group's activities or require
accounting which is already consistent with the Group's current accounting
policies.
4. Finance expense
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December
(unaudited) (unaudited) 2022
£m £m (audited)
£m
Interest payable on bank borrowings 9.9 3.0 9.3
Interest payable on loan notes 14.8 14.8 29.8
Commitment fees payable on bank borrowings 1.0 1.0 1.7
Swap interest payable - 0.1 0.1
Borrowing costs capitalised against development properties (2.1) (1.3) (4.7)
Amortisation of loan arrangement fees 1.7 0.8 3.2
25.3 18.4 39.4
5. Taxation
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December
(unaudited) (unaudited) 2022
£m £m (audited)
£m
UK corporation tax credit/(charge) (1.7) - 1.6
The UK corporation tax rate for the financial year is 19% to 5 April 2023 and
25% from 6 April 2023. Accordingly, a blended rate of 22% has been applied in
the measurement of the Group's tax liability at 30 June 2023.
Non‑taxable items include income and gains that are derived from the
property rental business and are therefore exempt from UK corporation tax in
accordance with Part 12 of CTA 2010.
REIT exempt income includes property rental income that is exempt from UK
corporation tax in accordance with Part 12 of CTA 2010.
The tax charge in the period relates to the profit on disposal of an asset
which is not exempt from UK corporation tax.
6. Earnings per share
Earnings per share (EPS) are calculated by dividing profit for the period
attributable to ordinary equity holders of the Company by the weighted average
number of Ordinary Shares in issue during the period. As there are dilutive
instruments outstanding, basic and diluted earnings per share are shown below.
In relation to the dilutive shares to be issued in respect of the B and C
Shares, the Directors have indicated an intention as at 30 June 2023 to settle
these 100% in cash. The calculation of basic and diluted earnings per share is
based on the following:
For the six months ended 30 June 2023 (unaudited) Net profit attributable to Ordinary Shareholders Weighted average number of Ordinary Shares(1) Earnings per share
£m '000 pence
Basic EPS and diluted EPS(2) 100.7 1,868,827 5.39
Adjustments to remove:
Changes in fair value of Investment property (29.9)
Changes in fair value of interest rate derivatives (2.9)
Finance income received on interest rate derivatives (4.6)
Loss on sale of investment properties 2.0
Tax on disposals 1.7
Impairment of intangible contract 0.2
EPRA EPS and EPRA diluted EPS(2) 67.2 1,868,827 3.60
Adjustments to include:
Fixed rental uplift adjustments (2.8)
Share-based payments charges 2.5
Changes in fair value of contingent consideration payable 0.4
Finance income received on interest rate derivatives 4.6
Amortisation of loan arrangement fees and intangibles (see note 4) 1.7
Adjusted EPS and Adjusted diluted EPS(2) 73.6 1,868,827 3.94
1. Based on the weighted average number of Ordinary Shares in issue throughout
the period.
2. Based on the weighted average number of Ordinary Shares in issue throughout
the period, plus potentially issuable dilutive shares (see below).
3. Relates to dilutive shares in respect of contingent consideration. This
being the 75% of the amounts due to the B and C Shareholders that could
potentially be settled as equity. The share-based payments charges are not
dilutive at period end.
For the six months ended 30 June 2022 (unaudited) Net profit attributable to Ordinary Shareholders Weighted average number of Ordinary Shares(1) Earnings per share
£m '000 pence
Basic EPS and diluted EPS(2) 458.7 1,868,446 24.55
Adjustments to remove:
Changes in fair value of Investment property (390.5)
Changes in fair value of interest rate derivatives (7.4)
Amortisation of other property assets 0.9
Impairment of intangible contract 0.3
EPRA EPS and EPRA diluted EPS(2) 62.0 1,868,446 3.32
Adjustments to include:
Fixed rental uplift adjustments (2.3)
Share-based payments charges 4.5
Changes in fair value of contingent consideration payable 4.8
Amortisation of loan arrangement fees and intangibles (see note 4) 0.7
Adjusted EPS and Adjusted diluted EPS(2) 69.7 1,868,446 3.73
1. Based on the weighted average number of Ordinary Shares in issue throughout
the period.
2. Based on the weighted average number of Ordinary Shares in issue throughout
the period, plus potentially issuable dilutive shares (see below).
3. Relates to dilutive shares in respect of contingent consideration. This
being the 75% of the amounts due to the B and C Shareholders that could
potentially be settled as equity. The share-based payments charges are
dilutive at period end.
For the year ended 31 December 2022 Net profit attributable to Ordinary Shareholders Weighted average number of Ordinary Shares(1) Earnings per share
£m '000 pence
Basic EPS (599.4) 1,868,638 (32.08)
Diluted EPS(2) (599.4) 1,868,638 (32.08)
Adjustments to remove:
Changes in fair value of investment property 759.5
Changes in fair value of interest rate derivatives (14.9)
Amortisation of other property assets 1.7
Share of profit from joint ventures (0.5)
Impairment of intangible contract and other property assets 1.5
EPRA EPS 147.9 1,868,638 7.92
Dilutive shared based payment charge (2.0)
Fair value movement in contingent consideration (1.1) 14,040
Dilutive shares in respect of B and C Shareholders 8,775
EPRA diluted EPS(2) 144.8 1,891,453 7.66
Adjustments to include:
Share-based payments charge 2.0
Fair value movement in contingent consideration 1.1
Fixed rental uplift adjustments (6.1)
Share-based payments charges 1.9
Changes in fair value of contingent consideration payable (1.1)
Amortisation of loan arrangement fees and intangibles (see note 4) 3.0
Adjusted EPS(4) 145.6 1,868,638 7.79
Dilutive shared based payment charge (2.0)
Fair value movement in contingent consideration (1.1) 14,040
Dilutive shares in respect of B and C Shareholders 8,775
Adjusted diluted EPS(2) 142.5 1,891,453 7.54
1. Based on the weighted average number of Ordinary Shares in issue throughout
the year.
2. Based on the weighted average number of Ordinary Shares in issue throughout
the year, plus potentially issuable dilutive shares (see below).
3. Relates to dilutive shares in respect of contingent consideration. This
being the 75% of the amounts due to the B and C shareholders that could
potentially be settled as equity. The share-based payments charges are
dilutive to basic EPS only at year end.
4. Relates to dilutive effect of shares to be issued on outstanding investment
manager's fees.
Adjusted earnings is a performance measure used by the Board to assess the
Group's financial performance and dividend payments. The metric adjusts EPRA
earnings by other non-cash items credited or charged to the Group Statement of
Comprehensive Income, such as fixed rental uplift adjustments and amortisation
of loan arrangement fees. Licence fees received during the period are added to
EPRA earnings on the basis noted below as the Board sees these cash flows as
supportive of dividend payments. The Board compares the Adjusted earnings to
the available distributable reserves when considering the level of dividend to
pay.
Fixed rental uplift adjustments relate to adjustments to net rental income on
leases with fixed or minimum uplifts embedded within their review profiles.
The total minimum income recognised over the lease term is recognised on a
straight-line basis and therefore not supported by cash flows during the early
term of the lease, but this reverses towards the end of the lease.
Share-based payment charges relate to the B and C Shareholders. Whilst
impacting on earnings, this value is considered capital in nature from the
perspective it relates to an equity holding in Tritax Symmetry Limited. It is
therefore removed from Adjusted earnings.
7. Dividends paid
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
£m £m £m
Fourth interim dividend in respect of year ended 31 December 2021 at 1.90 - 35.5 35.5
pence per Ordinary Share
First interim dividend in respect of year ended 31 December 2022 at 1.675 - 31.3 31.3
pence per Ordinary Share
Second interim dividend in respect of year ended 31 December 2022 at 1.675 - - 31.3
pence per Ordinary Share
Third interim dividend in respect of year ended 31 December 2022 at 1.675 - - 31.3
pence per Ordinary Share
Fourth interim dividend for the year ended 31 December 2022 at 1.975 pence per 36.9 - -
Ordinary Share
First interim dividend for the year ended 31 December 2023 at 1.75 pence per 32.7 - -
Ordinary Share
Total dividends paid 69.6 66.8 129.4
Total dividends paid in respect of the period/year 1.75p 1.675p 5.025p
Total dividends unpaid but declared in respect of the period/year 1.75p 1.675p 1.975p
Total dividends declared - per share 3.50p 3.35p 7.00p
On 2 August 2023, the Company approved the declaration of the second interim
dividend in respect of the year ended 31 December 2023 of 1.75 pence per share
payable on 31 August 2023. In relation to the total dividends declared for the
period of 3.50 pence, 3.50 pence is a property income distribution (PID).
8. Investment property
In accordance with IAS 40: Investment property, the Investment property has
been independently valued at fair value by CBRE Limited ("CBRE") and Colliers
International Valuation UK LLP ("Colliers"), both accredited independent
valuers with recognised and relevant professional qualifications and with
recent experience in the locations and categories of the investment properties
being valued. CBRE value all properties with leases or agreements for lease
attached or assets that are under construction.
Colliers value all land holdings either owned or held under option. The
valuations have been prepared in accordance with the RICS Valuation - Global
Standards November 2021 ("the Red Book") and incorporate the recommendations
of the International Valuation Standards which are consistent with the
principles set out in IFRS 13.
The valuer in forming its opinion make a series of assumptions, which are
typically market related, such as net initial yields and expected rental
values and are based on the valuer's professional judgement. The valuer has
sufficient current local and national knowledge of the particular property
markets involved and has the skills and understanding to undertake the
valuations competently. There has been no changes to the assumptions made in
the period as a result of a range of factors including the macro-economic
environment, availability of debt finance and physical and transition risks
relating to climate change.
The valuations are ultimately the responsibility of the Directors.
Accordingly, the critical assumptions used in establishing the independent
valuation are reviewed by the Board.
(unaudited) Investment Investment property Investment Total
Property long leasehold property under construction £m
freehold £m £m
£m
As at 1 January 2023 3,811.2 637.2 398.9 4,847.3
Property additions 0.2 - 93.6 93.8
Fixed rental uplift and tenant lease incentives(2) 7.1 0.3 - 7.4
Assets transferred to held for sale (84.3) - - (84.3)
Property disposed in the year (75.7) (52.3) - (128.0)
Transfer of completed property to Investment property 173.5 - (173.5) -
Change in fair value during the period 31.8 2.4 (4.3) 29.9
As at 30 June 2023 3,863.8 587.6 314.7 4,766.1
(unaudited) Investment Investment property Investment Total
Property long leasehold property under construction £m
freehold £m £m
£m
As at 1 January 2022 4,208.7 812.5 227.9 5,249.1
Property additions 4.4 - 197.9 202.3
Fixed rental uplift and tenant lease incentives(1) 5.1 0.1 - 5.2
Transfer of completed property to Investment property 16.5 - (16.5) -
Change in fair value during the period 274.9 16.4 99.2 390.5
As at 30 June 2022 4,509.6 829.0 508.5 5,847.1
Investment Investment property Investment Total
property long leasehold property under construction £m
freehold £m £m
£m
As at 1 January 2022 4,208.7 812.5 227.9 5,249.1
Property additions 4.9 0.1 366.7 371.7
Fixed rental uplift and tenant lease incentives(1) 10.4 0.7 - 11.1
Assets transferred to held for sale - - (25.1) (25.1)
Transfer of completed property to investment property 200.4 - (200.4) -
Change in fair value during the year (613.2) (176.1) 29.8 (759.5)
As at 31 December 2022 3,811.2 637.2 398.9 4,847.3
1. Included within the carrying value of Investment property is £78.0 million
(31 December 2022: £70.6 million) in respect of accrued contracted rental
uplift income. This balance arises as a result of the IFRS treatment of leases
with fixed or minimum rental uplifts and rent‑free periods, which requires
the recognition of rental income on a straight‑line basis over the lease
term. The difference between this and cash receipts change the carrying value
of the property against which revaluations are measured.
30 June 2023 30 June 2022 31 December
(unaudited) (unaudited) 2022 (audited)
£m £m £m
Investment property at fair value per Group Statement of Financial Position 4,766.1 5,847.1 4,847.3
Assets held for sale 84.3 - 25.1
Total Investment property valuation 4,850.4 5,847.1 4,872.4
The Group has other capital commitments which represent commitments made in
respect of direct construction, asset management initiatives and development
land (refer to note 18).
Fees payable under the DMA totalling £nil (31 December 2022: £2.3 million)
have been capitalised in the period being directly attributable to the ongoing
development projects.
Valuation risk
There is risk to the fair value of real estate assets that are part of the
portfolio of the Group, comprising variation in the yields that the market
attributes to the real estate investments and the market income that may be
earned.
Real estate investments can be impacted adversely by external factors such as
the general economic climate, supply and demand dynamics in the market,
competition for buildings and environmental factors which could lead to an
increase in operating costs.
Besides asset specific characteristics, general market circumstances affect
the value and income from investment properties such as the cost of regulatory
requirements related to investment properties, interest rate levels, the
availability of financing and ESG scores.
The Manager of the Group has implemented a portfolio strategy with the aim to
mitigate the above stated real estate risk. By diversifying in regions, risk
categories and tenants, it is expected to lower the risk profile of the
portfolio.
Fair value hierarchy
The Group considers that all of its investment properties fall within Level 3
of the fair value hierarchy as defined by IFRS 13. There have been no
transfers between Level 1 and Level 2 during any of the periods, nor have
there been any transfers between Level 2 and Level 3 during any of the
periods.
The valuations have been prepared on the basis of Market Value (MV), which is
defined in the RICS Valuation Standards, as:
"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."
MV as defined in the RICS Valuation Standards is the equivalent of fair value
under IFRS.
The following descriptions and definitions relating to valuation techniques
and key unobservable inputs made in determining fair values are as follows:
The key unobservable inputs made in determining fair values are as follows:
Unobservable input: estimated rental value (ERV)
The rent per square foot at which space could be let in the market conditions
prevailing at the date of valuation.
Passing rents are dependent upon a number of variables in relation to the
Group's property. These include: size, location, tenant covenant strength and
terms of the lease.
Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as a percentage
of the market value (or purchase price as appropriate) plus standard costs of
purchase.
30 June 2023 Unobservable Inputs
ERV range Net initial yield
£ psf range
%
South East 5.46 - 16.80 3.65 - 5.62
South West 6.50 - 7.00 4.00 - 4.75
East Midlands 5.88 - 11.25 3.55 - 5.82
West Midlands 6.69 - 9.09 4.00 - 5.75
Yorkshire and the Humber 5.96 - 7. 50 4.29 - 5.25
North East 3.91 - 4.25 4.61 - 4.79
North West 4.95 - 11.25 4.10 - 5.92
31 December 2022 Unobservable Inputs
ERV range Net initial yield
£ psf range
%
South East 5.46 - 15.12 3.65 - 5.66
South West 6.50 - 7.00 4.00 - 4.85
East Midlands 5.75 - 11.25 3.60 - 5.82
West Midlands 6.33 - 8.54 4.10 - 6.00
Yorkshire and the Humber 5.96 - 7.25 4.30 - 5.25
North East 3.91 - 4.25 4.63 - 4.80
North West 4.95 - 11.25 4.05 - 6.31
30 June 2022(1) Unobservable Inputs
ERV range Net initial yield
£ psf range
%
South East 5.30 - 13.75 2.67 - 5.00
South West 6.25 - 6.50 3.50 - 4.10
East Midlands 5.50 - 7.00 3.24 - 6.00
West Midlands 5.50 - 7.25 3.10 - 5.75
Yorkshire and the Humber 5.75 - 6.50 2.95 - 5.00
North East 3.91 - 4.25 3.40 - 3.40
North West 4.25 - 10.00 3.20 - 6.31
1. The unobservable input data for 30 June 2022 was not previously
reported and has been provided for comparability purposes.
Sensitivities of measurement of significant unobservable inputs
As set out within significant accounting estimates and judgements above, the
Group's property portfolio valuation is open to judgements and is inherently
subjective by nature.
As a result, the following sensitivity analysis has been prepared:
-0.25% net +0.25% net initial yield -5.0% in +5.0% in
initial yield £m passing rent passing rent
£m £m £m
(Decrease)/increase in the fair value of investment properties as at 30 June 271.0 (242.1) (226.8) 226.8
2023 (unaudited)
(Decrease)/increase in the fair value of investment properties as at 30 June 410.8 (356.0) (266.9) 266.9
2022 (unaudited)
(Decrease)/increase in the fair value of investment properties as at 31 273.0 (243.6) (251.1) 251.1
December 2022 (audited)
9. Investment in land options
Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£m £m £m
Opening balance 157.4 201.5 201.5
Costs capitalised in the period 7.6 6.4 13.0
Transferred to Investment property - (57.2) (57.1)
Closing balance 165.0 150.7 157.4
10. Interest rate derivatives
To mitigate the interest rate risk that arises as a result of entering into
variable rate loans, the Group has entered into a number of interest rate
derivatives. The fair value of Group's interest rate derivatives is recorded
in the Group Statement of Financial Position and is determined by forming an
expectation that interest rates will exceed strike rates and discounting these
future cash flows at the prevailing market rates as at the year end. This
valuation technique falls within Level 2 of the fair value hierarchy as
defined by IFRS 13. There have been no transfers between Level 1 and Level 2
during any of the years, nor have there been any transfers between Level 2 and
Level 3 during any of the years.
11. Trade and other receivables
Non-current trade and other receivables 30 June 2023 (unaudited) 30 June 31 December
£m 2022 (unaudited) 2022
£m (audited)
£m
Cash in public institutions 2.0 2.0 2.0
The cash in public institutions is a deposit of £2.0 million (June 2022:
£2.0 million and December 2022: £2.0 million) paid by certain tenants to the
Company, as part of their lease agreements.
30 June 2023 (unaudited) 30 June 31 December
£m 2022 (unaudited) 2022
£m (audited)
£m
Trade receivables 9.5 13.8 16.4
Prepayments, accrued income and other receivables 9.6 7.8 2.9
VAT 5.5 7.4 5.6
24.6 29.0 24.9
The carrying value of trade and other receivables classified at amortised cost
approximates fair value.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables.
To measure expected credit losses on a collective basis, trade receivables are
grouped based on similar credit risk and ageing.
The expected loss rates are based on the Group's historical credit losses
experienced over the three‑year period prior to the period end. The
historical loss rates are then adjusted for current and forward-looking
information on macroeconomic factors affecting the Group's Customers. The
expected credit loss provision for June 2023 was £0.3 million (June 2022:
£0.1 million and December 2022: £0.3 million). The incurred loss provision
in the current and prior year are immaterial. No reasonably possible changes
in the assumptions underpinning the expected credit loss provision would give
rise to a material expected credit loss.
12. Cash held at bank
30 June 31 December
30 June 2022 2022
2023 (unaudited) (audited)
(unaudited) £m £m
£m
Cash and cash equivalents to agree with cash flow 45.7 34.6 47.4
Restricted cash 0.2 0.2 0.2
45.9 34.8 47.6
Restricted cash is cash where there is a legal restriction to specify its type
of use, i.e. this may be where there is a joint arrangement with a tenant
under an active asset management initiative.
13. Borrowings
The Group has a £300 million unsecured revolving credit facility (RCF). The
Group also has a second RCF of £450 million which provides the Group with a
significant level of operational flexibility. Both facilities are provided by
a syndicate of relationship lenders formed of large multi-national banks.
As at 30 June 2023, 83% (December 2022: 80% and June 2022: 89%), of the
Group's drawn debt is fixed term, with 38% floating term (December 2022: 38%
and June 2022: 31%). When including interest rate hedging the Group has fixed
term or hedged facilities totaling 100% of drawn debt for 30 June 2023,
December 2022 and June 2022 (see note 10).
As at 30 June 2023, the weighted average cost of debt was 2.56% (December
2022: 2.57% and June 2022: 2.52%). As at the same date, the Group had undrawn
debt commitments of £531.0 million (and 31 December 2022: £483.0 million and
30 June 2022: £443.0 million).
The Group has been in compliance with all of the financial covenants of the
Group's bank facilities as applicable throughout the period covered by these
financial statements.
A large part of the Group's borrowings are unsecured financing arrangements. A
summary of the drawn and undrawn bank borrowings in the period is shown below:
Bank borrowings drawn
30 June 2023 (unaudited) 30 June 2022 (unaudited) 31 December
£m £m 2022
(audited)
£m
At the beginning of the period 479.9 212.9 212.9
Bank borrowings drawn in the period under existing facilities 102.0 133.0 319.0
Bank borrowings repaid in the period under existing facilities (150.0) (26.0) (52.0)
Total bank borrowings drawn 431.9 319.9 479.9
Any associated fees in arranging the bank borrowings and loan notes that are
unamortised as at the year end are offset against amounts drawn on the
facilities as shown in the table below:
Bank borrowings drawn
30 June 2022 31 December 2022
30 June 2023 (unaudited) (audited)
(unaudited) £m £m
£m
Bank borrowings drawn: due in more than one year 431.9 319.9 479.9
Less: unamortised costs on bank borrowings (4.1) (5.7) (5.1)
427.8 314.2 474.8
Loan notes
Bonds 31 December
30 June 2023 30 June 2022 2022
(unaudited) (unaudited) (audited)
£m £m £m
2.625% Bonds 2026 249.6 249.5 249.6
3.125% Bonds 2031 247.9 247.7 247.8
2.860% USPP 2028 250.0 250.0 250.0
2.980% USPP 2030 150.0 150.0 150.0
1.500% Green Bonds 2033 246.9 246.6 246.7
Less: unamortised costs on loan notes (4.6) (5.4) (5.0)
1,139.8 1,138.4 1,139.1
The weighted average term to maturity of the Group's debt as at the period end
is 4.9 years (June 2022: 6.2 years and December 2022: 5.4 years).
Maturity of borrowings
30 June 2022 31 December 2022
30 June 2023 (unaudited) (audited)
(unaudited) £m £m
£m
Repayable between one and two years 129.0 - 164.0
Repayable between two and five years 680.0 446.5 443.0
Repayable in over five years 772.9 1,017.2 1,022.9
1,581.9 1,463.7 1,629.9
Set out below is a comparison by class of the carrying amounts and the fair
value of the Group's financial instruments that are carried in the financial
statements:
Book value Fair value Book value Fair value Book value Fair value
30 June 2023 (unaudited) 30 June 2023 (unaudited) 30 June 2022 (unaudited) 30 June 2022 (unaudited) 31 December 2022 31 December 2022
£m £m £m £m (audited) (audited)
£m £m
Financial assets
Interest rate derivatives 22.8 22.8 12.4 12.4 19.9 19.9
Trade and other receivables(1) 9.6 9.6 18.5 18.5 17.2 17.2
Cash held at bank 45.9 45.9 34.8 34.8 47.6 47.6
Financial liabilities
Interest rate derivatives - - - - - -
Trade and other payables(2) 94.2 94.2 92.5 92.5 87.3 87.3
Amounts due to B and C shareholders 45.1 45.1 46.2 46.2 42.2 42.2
Borrowings 1,581.9 1,316.2 1,463.7 1,354.3 1,624.0 1,402.8
1. Excludes certain VAT, prepayments and other debtors.
2. Excludes tax and VAT liabilities.
Interest rate derivatives and amounts due to B and C shareholders are the only
financial instruments measured at fair value through profit and loss. All
other financial assets and all financial liabilities are measured at amortised
cost. All financial instruments were designated in their current categories
upon initial recognition.
The Group has two fixed rate loans totalling £162 million, provided by PGIM
(£90 million) and Canada Life (£72 million). The fair value is determined by
comparing the discounted future cash flows using the contracted yields with
the reference gilts plus the margin implied. The reference gilts used were the
Treasury 1.25% 2027 Gilt and Treasury 4.75% 2030 Gilt respectively, with an
implied margin that is unchanged since the date of fixing. The loans are
considered to be a Level 2 fair value measurement. For all other bank loans
there is considered no other difference between fair value and carrying value.
The fair value of financial liabilities traded on active liquid markets,
including the 2.625% Bonds 2026, 3.125% Bonds 2031, 1.5% Bonds 2033, 2.860%
USPP 2028 and 2.980% USPP 2030, is determined with reference to the quoted
market prices. These financial liabilities are considered to be a Level 1 fair
value measure.
The fair value of the financial liabilities at Level 1 fair value measure were
£907.3 million (Dec 2022: £941.1 million and June 2022: £1,041.3 million)
and the financial liabilities at Level 2 fair value measure were £139.1
million (Dec 2022: £143.8 million and June 2022: £155.1 million).
14. Amounts due to B and C Shareholders
Amounts due to B and C Shareholders comprise the fair value of the contingent
consideration element of B and C Shares along with the fair value of the
obligation under the cash settled share-based payment element of B and C
Shares.
Amounts due to B and C Shareholders are detailed in the table below:
30 June 2023 (unaudited) Contingent consideration Share-based payment Fair value
£m £m £m
Opening balance 25.6 16.6 42.2
Fair value movement recognised 0.4 - 0.4
Share-based payment charge - 2.5 2.5
Closing balance 26.0 19.1 45.1
30 June 2022 (unaudited) Contingent consideration Share-based payment Fair value
£m £m £m
Opening balance 26.7 14.7 41.4
Fair value movement recognised 4.8 - 4.8
Share-based payment charge - 4.5 4.5
Closing balance 31.5 19.2 50.7
31 December 2022 (audited) Contingent consideration Share-based payment Fair value
£m £m £m
Opening balance 26.7 14.7 41.4
Fair value movement recognised (1.1) - (1.1)
Share-based payment charge - 1.9 1.9
Closing balance 25.6 16.6 42.2
The Group considers that the amounts due to the B and C Shareholders fall
within Level 3 of the fair value hierarchy as defined by IFRS 13. There have
been no transfers between Level 1 and Level 2 during any of the periods, nor
have there been any transfers between Level 2 and Level 3 during any of the
periods.
1. Contingent consideration
The B and C Shares vest over a five-year period and require the Symmetry
Management Shareholders to, amongst other things, remain in the employment of
the Symmetry ManCo for the vesting period. The value of the amount due
(subject to certain vesting conditions) is the lower of 50% of the Adjusted
NAV of Tritax Symmetry at the relevant future point in time and the value of
the B and C Shares at the original completion date. In accordance with IFRS 3
"Business Combinations" the unconditional amount due under Shareholders
agreement is accounted for as contingent consideration.
The Adjusted NAV of Tritax Symmetry is the NAV of Tritax Symmetry at the
reporting date, adjusted for various matters impacting on the fair value of
those land options where planning permission has been obtained but the land
has not been acquired along with the elimination of profits created from the
Tritax Symmetry investment assets.
2. Share-based payment
In accordance with IFRS 3 "Business Combinations" the requirement to remain in
continued employment in order to realise the full value of the B and C Shares
has resulted in the excess value (over and above the amount recognised as
contingent consideration) being accounted for as payments for post combination
services which reflect the 13% economic right held to their share of future
performance of the Tritax Symmetry Development assets over and above the
completion NAV. The amount due to Symmetry Management Shareholders is based on
the Adjusted NAV of Tritax Symmetry and is settled in cash to the value of 25%
with the balance settled in either cash and/or shares in the Company, at the
sole discretion of the Company.
The fair value of the B and C Shares has been calculated using a Monte Carlo
simulation model, for the cash settled element of the liability. This approach
has the benefits of being flexible, not reliant on a single case scenario and
removes the inherent difficulties with determining discount rate to assign to
a particular class of share as the risk would change every time the NAV moved.
The change in volatility assumptions does not lead to a significant change in
the resulting fair values of the B and C Shares because there are limited
hurdles attached to them and it is assumed that all will be exercised at some
point over the eight-year horizon. The key unobservable inputs for the
Monte-Carlo simulation purposes are the net initial yield of completed
developments, future costs of debt and the timing of the completion of the
developments.
The Company has the legal option of settling the share-based payment either
via cash or equity, with a minimum of 25% being settled in cash. The Directors
have a current intention to maximise the cash element of the settlement as
they believe this would minimise dilution to existing shareholders. The
Directors will endeavour to settle all of the B and C Shares in cash, subject
to sufficient funds being available to the Group at the time of settlement
without adversely impacting the operations of the Group.
Amounts due to B and C Shareholders are shown as a liability at fair value in
the Group Statement of Financial Position. The liability is fair valued at
each reporting date with a corresponding charge recognised in the Group profit
or loss over the vesting period. For the period ended 30 June 2023 £2.5
million (December 2022: £1.9 million and June 2022: £4.5 million) was
charged in the Group profit or loss for the share-based payment.
15. Equity reserves
Share capital
The share capital relates to amounts subscribed for share capital at its
nominal value. The Company had 1,868,826,992 shares of nominal value of 1
pence each in issue at the end of the period 30 June 2023 (30 June 2022:
1,868,826,992 shares and 31 December 2022: 1,868,826,992 shares).
Issued and fully paid at 1 pence each 30 June 2023 (unaudited) 30 June 2022 (unaudited) 31 December 2022 (audited)
£m £m £m
Balance at the beginning and end of period 18.7 18.7 18.7
Share premium
The share premium relates to amounts subscribed for share capital in excess of
its nominal value.
On 5 June 2023, the Company by way of Special Resolution, cancelled the then
value of its share premium account, by an Order of the High Court of Justice,
Chancery Division. As a result of this cancellation, £764.3 million has been
transferred from the share premium account, into the capital reduction reserve
account. The capital reduction reserve account is classed as a distributable
reserve.
Capital reduction reserve
The capital reduction reserve account is classed as a distributable reserve.
Movements in the current period relate to dividends paid.
Also see above within Share premium.
Retained earnings
Retained earnings relates to all net gains and losses not recognised
elsewhere.
16. Net asset value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the Group
Statement of Financial Position attributable to ordinary equity holders of the
Parent by the number of Ordinary Shares outstanding at the end of the period.
As there are no dilutive instruments outstanding, both basic and diluted NAV
per share are shown below.
31 December 2022
30 June 2023 30 June 2022 (audited)
(unaudited) (unaudited) £m
£m £m
Net assets per Condensed Group Statement of Financial Position 3,381.1 4,470.7 3,350.0
EPRA NTA (see table below) 3,420.4 4,539.1 3,370.8
Ordinary Shares:
Issued share capital (number) 1,868,826,992 1,868,826,992 1,868,826,992
Basic net asset value per share 180.92p 239.23p 179.25p
Dilutive shares in issue (number) - - -
Diluted NAV per share 180.92p 239.23p 179.25p
The Group considered EPRA NTA to be the most relevant NAV measure for the
Group and we are now reporting this as our primary NAV measure.
30 June 2023 30 June 2022 31 December 2022
(unaudited) (unaudited) (audited)
EPRA NTA EPRA NRV EPRA NDV EPRA NTA EPRA NRV EPRA NDV EPRA NTA EPRA NRV EPRA NDV
£m £m £m £m £m £m £m £m £m
NAV attributable to shareholders 3,381.1 3,381.1 3,381.1 4,470.7 4,470.7 4,470.7 3,350.0 3,350.0 3,350.0
Revaluation of land options 41.4 41.4 41.4 60.5 60.5 60.5 20.4 20.4 20.4
Mark-to-market adjustments of derivatives (0.9) (0.9) - 9.5 9.5 - 1.8 1.8 -
Intangibles (1.2) - - (1.6) - - (1.4) - -
Fair value of debt - - 260.2 - - 109.3 - - 221.1
Real estate transfer tax(1) - 353.6 - - 412.3 - - 387.4 -
NAV 3,420.4 3,775.2 3,682.7 4,539.1 4,953.0 4,640.5 3,370.8 3,759.6 3,591.5
NAV per share 183.02p 202.01p 197.06p 242.88p 265.03p 248.31p 180.37p 201.17p 192.17p
Dilutive NAV per share 183.02p 202.01p 197.06p 242.88p 265.03p 248.31p 180.37p 201.17p 192.17p
(1)EPRA NTA and EPRA NDV reflect IFRS values which are net of RETT (real
estate transfer tax). RETT are added back when calculating EPRA NRV.
17. Transactions with related parties
For the half year 30 June 2023, all Directors and some of the Members of the
Manager are considered key management personnel. The terms and conditions of
the Investment Management Agreement are described in the Management Engagement
Committee Report within the 2022 Annual Report.
The total amount payable in the period relating to the Investment Management
Agreement was £10.8 million (30 June 2022: 12.6 million, 31 December 2022:
£26.0 million), with the total amount outstanding at the period end was £5.4
million (30 June 2022: £6.3 million and 31 December 2022: £6.7 million).
The Manager receives a net fee relating to asset management services provided
to three properties which are 4% owned by the Group, amounting to £0.05m for
the period ended 30 June 2023.
The amounts paid to Directors for their services for the period to 30 June
2023 was £0.2 million (30 June 3022: £0.2 million and 31 December 2022:
£0.4 million).
The total expense recognised in the Group profit or loss relating to
share-based payments under the Investment Management Agreement was £1.1
million (30 June 2022: £2.6 million and 31 December 2022: £5.3 million), of
which £1.1 million (30 June 2022: £2.6 million and 31 December 2022: £2.7
million) was outstanding at the period end.
The Members of the Manager who are considered as key management personnel are
Colin Godfrey, James Dunlop, Henry Franklin, Petrina Austin, Bjorn Hobart, and
Frankie Whitehead. The other Members of the Manager are Alasdair Evans, James
Watson, Philip Redding and Abrdn Holdings Limited
During the period the Directors who served during the period received the
following dividends: Aubrey Adams: £8,940 (June 2022: £8,200 and December
2022: £16,240), Alastair Hughes: £1,731 (June 2022: £1,444 and December
2022: £3,001), Richard Laing: £1,863 (June 2022: £1,788 and December 2022:
£3,463), Karen Whitworth: £1,144 (June 2022: £1,098, December 2022:
£2,126), Wu Gang £97 (June 2022: £nil, December 2022: £87) and Elizabeth
Brown £541 (June 2022: £156, December 2022: £469).
During the period the Members of the Manager, who are considered key
management personnel, received the following dividends: Colin Godfrey:
£100,578 (June 2022: £88,359 and December 2022: £174,834), James Dunlop:
£98,255 (June 2022: £86,129 and December 2022: £170,516), Henry Franklin:
£73,185 (June 2022: £64,477 and December 2022: £127,643), Petrina Austin:
£12,893 (June 2022: £10,927 and December 2022: £21,777), Bjorn Hobart:
£14,626 (June 2022: £12,347 and December 2022: £24,623) and Frankie
Whitehead £6,760 (June 2022: £5,135 and December 2022: £10,470).
18. Capital commitments
The Group had capital commitments of £141.3 million in relation to its
development assets, active asset management initiatives and commitments under
development land, outstanding as at 30 June 2023 (30 June 2022: £191.5
million 31 December 2022: 99.9 million). All commitments fall due within
eighteen months from the date of this report.
In addition, the Group had exchanged on an asset for sale, where £84.3
million of proceeds were due to be received in August 2023.
19. Subsequent events
On 20 July 2023, the Group completed on the purchase of an asset at Junction
6, Birmingham for £58.0 million.
Tritax Symmetry
On 31 July 2023, we agreed with the founding directors of Tritax Symmetry, to
acquire their 13% retained equity interest in Tritax Symmetry Holdings Limited
(TSHL) which formed part of the contingent consideration following its
acquisition in February 2019.
The B and C Non-Hurdle shares in TSHL, are being acquired for a total
consideration of £65.0 million, and will be settled through a combination of
cash and the issue of new ordinary shares in the Company (Ordinary Shares).
In conjunction, the Company will also purchase the remaining C Hurdle shares
in TSHL, awarded under the previous arrangements, valued at £1.6 million as
at 30 June 2023, also for a combination of cash and the issue of new
Ordinary Shares.
Post settlement, the full quota of B and C shares (equivalent to the 13%
equity interest) will be extinguished and the Company will own 100% of TSHL.
The B and C share liability recognised within the Statement of Financial
Position, as at 30 June 2023, was £45.1 million.
Under the previous arrangement, the Company had an ability to buyback the
remaining B and C shares post December 2026, therefore this, is in part, an
acceleration of the charge to EPRA NTA that would have been expected to be
charged during the period June 2023 to December 2026.
The charge expected to EPRA NTA resulting from the early settlement, including
the issue of the new ordinary shares to both the founding directors and other
C shareholders, would amount to approximately 1.0% of EPRA NTA as at 30 June
2023.
NOTES TO THE EPRA AND OTHER KEY PERFORMANCE INDICATORS (UNAUDITED)
1. Adjusted earnings - income statement
The Adjusted earnings reflects our ability to generate earnings from our
portfolio, which ultimately underpins dividend payments.
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
£m £m £m
Gross rental income 109.3 101.5 206.2
Service charge income 3.1 2.6 6.3
Service charge expense (3.1) (2.6) (6.5)
Fixed rental uplift adjustments (2.9) (2.3) (6.1)
Net rental income 106.4 99.2 199.9
Other operating income - 2.6 9.3
Administrative expenses (13.8) (15.3) (32.2)
Licence fee receivable on forward funded developments - - -
Amortisation of other property assets - 0.9 1.7
Adjusted operating profit before interest and tax 92.6 87.4 178.7
Net finance costs (20.7) (18.4) (37.8)
Amortisation of loan arrangement fees 1.7 0.7 3.1
Adjusted earnings before tax 73.6 69.7 144
Tax on adjusted profit - - 1.6
Adjusted earnings after tax 73.6 69.7 145.6
Adjustment to remove additional DMA income - - (5.3)
Adjusted earnings (Exc. additional DMA income) 73.6 69.7 140.3
Weighted average number of Ordinary Shares 1,868,826,992 1,868,445,694 1,868,637,910
Adjusted earnings per share 3.94p 3.73p 7.79p
Adjusted earnings per share (Exc. additional DMA income) 3.94p 3.73p 7.51p
2. EPRA earnings per share
Six months ended Six months Year ended
30 June 2023 ended 31 December
£m 30 June 2022 2022
£m £m
Total comprehensive income (attributable to shareholders) 100.7 458.7 (599.4)
Adjustments to remove:
Changes in fair value of investment properties (29.9) (390.5) 759.5
Changes in fair value of interest rate derivatives (2.9) (7.4) (14.9)
Finance income received on interest rate derivatives (4.6) - -
Share of loss from joint ventures - - (0.5)
Loss on disposal of investment properties 2.0 - -
Tax on profits or losses on disposals 1.7 - -
Amortisation of other property assets - 0.9 1.7
Impairment of intangible contract and other property assets 0.2 0.3 1.5
Tax refund - - -
Profits to calculate EPRA earnings per share 67.2 62.0 147.9
Add back: Dilutive share based payment charge - - (2.0)
Changes in fair value of contingent consideration payable - - (1.1)
Profits to calculate EPRA diluted earnings per share 67.2 62.0 144.8
Weighted average number of Ordinary Shares 1,868,826,992 1,868,445,694 1,868,637,910
EPRA earnings per share - basic 3.60p 3.32p 7.92p
Dilutive shares to be issued - - 22,814,350
EPRA earnings per share - diluted 3.60p 3.32p 7.66p
3. EPRA NAV per share
The Group considered EPRA Net Tangible Assets (NTA) to be the most relevant
NAV measure for the Group. EPRA NTA excludes the intangible assets and the
cumulative fair value adjustments for debt-related derivatives which are
unlikely to be realised.
30 June 2023
Note EPRA NTA EPRA NRV EPRA NDV
£m £m £m
NAV attributable to shareholders 3,381.1 3,381.1 3,381.1
Revaluation of land options 41.4 41.4 41.4
Mark-to-market adjustments of derivatives (0.9) (0.9) -
Intangibles (1.2) - -
Fair value of debt - - 260.2
Real estate transfer tax(1) - 353.6 -
At 30 June 2023 16 3,420.4 3,775.2 3,682.7
NAV per share 183.02p 202.01p 197.06p
Dilutive NAV per share 183.02p 202.01p 197.06p
30 June 2022
Note EPRA NTA EPRA NRV EPRA NDV
£m £m £m
NAV attributable to shareholders 4,470.7 4,470.7 4,470.7
Revaluation of land options 60.5 60.5 60.5
Mark-to-market adjustments of derivatives 9.5 9.5 -
Intangibles (1.6) - -
Fair value of debt - - 109.3
Real estate transfer tax(1) - 412.3 -
At 30 June 2022 16 4,539.1 4,953.0 4,640.5
NAV per share 242.88p 265.03p 248.31p
Dilutive NAV per share 242.88p 265.03p 248.31p
31 December 2022
Note EPRA NTA EPRA NRV EPRA NDV
£m £m £m
NAV attributable to shareholders 3,350.0 3,350.0 3,350.0
Revaluation of land options 20.4 20.4 20.4
Mark-to-market adjustments of derivatives 1.8 1.8 -
Intangibles (1.4) - -
Fair value of debt - - 221.1
Real estate transfer tax(1) - 387.4 -
At 31 December 2022 16 3,370.8 3,759.6 3,591.5
NAV per share 180.37 201.17 192.18
Dilutive NAV per share 180.37 201.17 192.18
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of RETT. RETT are
added back when calculating EPRA NRV.
4. EPRA net initial yield (NIY) and EPRA "topped up" NIY
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
£m £m £m
Investment property - wholly owned 4,978.4 5,844.4 4,872.4
Investment property - share of joint venture 4.2 4.3 4.2
Less: development properties (318.8) (512.8) (403.2)
Completed property portfolio 4,663.8 5,335.9 4,473.4
Allowance for estimated purchasers' costs 316.2 361.7 303.3
Gross up completed property portfolio valuation (B) 4,980.0 5,697.6 4,776.7
Annualised passing rental income 224.0 216.6 224.0
Less: contracted rental income in respect of development properties (12.5) (16.9) (18.8)
Property outgoings - (0.1) (0.2)
Less: contracted rent under rent-free period (9.6) (8.4) (4.9)
Annualised net rents (A) 201.9 191.2 200.1
Contractual increases for fixed uplifts and rent free periods 14.3 14.0 9.7
Topped up annualised net rents (C) 216.2 205.2 209.8
EPRA net initial yield (A/B) 4.05% 3.36% 4.19%
EPRA topped up net initial yield (C/B) 4.34% 3.60% 4.39%
5. EPRA vacancy rate
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
£m £m £m
Annualised estimated rental value of vacant premises 4.8 - 5.3
Portfolio estimated rental value(1) 255.5 229.7 247.2
EPRA vacancy rate 1.9% 0% 2.1%
1 Excludes land held for development.
6. EPRA cost ratio
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
£m £m £m
Property operating costs - 0.1 0.2
Administration expenses 13.8 15.3 32.2
Service charge costs recovered through rents but not separately invoiced - - -
Total costs including and excluding vacant property costs (A) 13.8 15.4 32.4
Vacant property cost - - -
Total costs excluding vacant property costs (B) 13.8 15.4 32.4
Gross rental income - per IFRS 109.3 101.5 206.2
Less: Service charge cost components of gross rental income - - -
Gross rental income (C) 109.3 101.5 206.2
Total EPRA cost ratio (including vacant property costs) (A/C) 12.6% 15.2% 15.7%
Total EPRA cost ratio (excluding vacant property costs) (B/C) 12.6% 15.2% 15.7%
7. EPRA like-for-like rental income
Six months Six months Change Change
ended ended £m %
30 June 2023 30 June 2022
£m £m
Like-for-like rental income 98.6 95.3
Other rental income - -
Like-for-like Gross rental income 98.6 95.3 3.4 3.5
Irrecoverable property expenditure - (0.1)
Like-for-like Net rental income 98.6 95.2 3.5 3.6
Reconciliation to Net rental income per Statement of Comprehensive Income:
Development properties 2.3 -
Properties acquired - -
Properties disposed 1.7 3.5
Properties under rent free periods (0.7) (2.4)
Spreading of tenant incentives and guaranteed rental uplifts 7.4 5.2
Total per statement of comprehensive income 109.3 101.5
8. EPRA property-related capital expenditure
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
£m £m £m
Acquisition(1) 0.3 4.4 4.9
Development(2) 99.1 203.0 375.1
Transfers to Investment Property - (57.1) (57.1)
Investment properties:
Tenant incentives(3) 7.4 5.2 11.1
Capitalised interest 2.1 1.3 4.7
Total 108.9 156.8 338.7
(1) See note 8
(2) See note 8 and note 9
(3) Fixed rental uplift and tenant lease incentives after adjusting for
amortisation on rental uplift and tenant lease incentives.
9. Total Accounting Return (TAR)
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
£m £m £m
Opening EPRA NTA 180.37p 222.60p 222.60p
Closing EPRA NTA 183.02p 242.88p 180.37p
Change in EPRA NTA 2.65p 20.28p (42.23p)
Dividends paid 3.725p 3.575p 6.93p
Total growth in EPRA NTA plus dividends paid 6.38p 23.86p (35.30p)
Total return 3.5% 10.7% (15.9%)
10 . Loan to value ratio
The proportion of our gross asset value that is funded by net borrowings.
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022 2022
£m £m £m
Gross debt drawn 1,576.3 1,463.7 1,624.0
Less: Cash (45.9) (34.8) (47.6)
Net Debt 1,530.4 1,428.9 1,576.4
Gross property value 5,043.4 6,030.7 5,059.3
Loan to value ratio 30.3% 23.7% 31.2%
11 . EPRA Loan to value ratio
The proportion of our gross asset value that is funded by net borrowings.
Six months Six months Year ended
ended ended 31 December
30 June 2023 30 June 2022(1) 2022(1)
£m £m £m
Gross debt drawn 1,576.3 1,463.7 1,623.9
Add: Net Payables(2) 91.0 67.8 87.5
Less: Cash (45.9) (34.8) (47.6)
Net Debt 1,621.4 1,496.7 1,663.8
Gross property value 5,043.4 6,030.7 5,059.3
EPRA Loan to value ratio 32.1% 24.8% 32.9%
(1) The data for 30 June 2022 and 31 December 2022 were not previously
reported and have been provided for comparability purposes.
(2) Net payables is calculated as the net position of the following line items
shown on the Balance Sheet: Current trade and other receivables, current trade
and other payables and current tax liabilities.
The financial information contained in this results announcement has been
prepared in accordance with the measurement and recognition principles of UK
adopted international accounting standards. Whilst the financial information
included in this announcement has been computed in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006, this announcement does not itself contain sufficient
disclosures to comply with IFRS. The financial information does not constitute
the Group's statutory financial statements for the years ended 31 December
2022 or 31 December 2021, but is derived from those financial statements.
Financial statements for the year ended 31 December 2022 have been delivered
to the Registrar of Companies and those for the year ended 31 December 2023
will be delivered following the Company's Annual General Meeting. The
auditors' reports on both the 31 December 2022 and 31 December 2021 financial
statements were unqualified; did not draw attention to any matters by way of
emphasis; and did not contain statements under section 498 (2) or (3) of the
Companies Act 2006.
Glossary of Terms
"Adjusted Earnings" Post-tax earnings attributable to shareholders, adjusted
to include licence fees receivable on forward funded development assets and
adjusts for other earnings not supported by cash flows. "Adjusted Earnings per
share" or "Adjusted EPS" on a per share basis.
"B and C Shares" The B and C Shares in Tritax Symmetry issued to the Symmetry
Management shareholders.
"Big Box" A "Big Box" property or asset refers to a specific subsegment of the
logistics sector of the real estate market, relating to very large logistics
warehouses (each with typically over 500,000 sq ft of floor area) with the
primary function of holding and distributing finished goods, either downstream
in the supply chain or direct to consumers, and typically having the following
characteristics: generally a modern constructed building with eaves height
exceeding 12 metres; let on long leases with institutional-grade tenants; with
regular, upward-only rental reviews; having a prime geographical position to
allow both efficient stocking (generally with close links to sea ports or rail
freight hubs) and efficient downstream distribution; and increasingly with
sophisticated automation systems or a highly bespoke fit out.
"Board" The Directors of the Company.
"BREEAM" The Building Research Establishment Environmental Assessment Method
certification of an asset's environmental, social and economic sustainability
performance, using globally recognised standards.
"Company" Tritax Big Box REIT plc (company number 08215888).
"CPI" Consumer Price Index, a measure that examines the weighted average of
prices of a basket of consumer goods and services, such as transportation,
food and medical care as calculated on a monthly basis by the Office of
National Statistics.
"Current Development Pipeline" Assets that are in the course of construction
or assets for which we have made a construction commitment.
"CVA" A company voluntary liquidation, a legally binding agreement between a
business and its creditors which sets out a debt repayment plan and enables a
viable business to avoid insolvency.
"db Symmetry" db Symmetry Group Ltd and db symmetry BVI Limited, together with
their subsidiary undertakings and joint venture interests, which were acquired
by the Group in February 2019.
"Directors" The Directors of the Company as of the date of this report being
Aubrey Adams, Elizabeth Brown, Alastair Hughes, Richard Laing, Karen Whitworth
and Wu Gang.
"Development Management Agreement" or "DMA" An agreement between the Group and
a developer setting out the terms in respect of the development of an asset.
In particular, the development of the Symmetry Portfolio is the subject of a
DMA between Tritax Symmetry and Symmetry ManCo.
"Development portfolio" or "Development assets" The Group's Development
portfolio comprises its property assets which are not Investment assets,
including land, options over land as well as any assets under construction on
a speculative basis.
"EPC rating" A review of a property's energy efficiency.
"EPRA" European Public Real Estate Association.
"EPRA Earnings" Earnings from operational activities (which excludes the
licence fees receivable on our Forward Funded Development assets).
"EPRA NAV" or "EPRA Net Asset Value" The Basic Net Asset Value adjusted to
meet EPRA Best Practices Recommendations Guidelines (2016) requirements by
excluding the impact of any fair value adjustments to debt and related
derivatives and other adjustments and reflecting the diluted number of
Ordinary Shares in issue.
"EPRA Triple Net Asset Value (NNNAV)" EPRA NAV adjusted to include the fair
values of financial instruments, debt and deferred taxes.
"EPRA Net Tangible Asset (NTA)" The Basic Net Asset Value adjusted to meet
EPRA Best Practices Recommendations Guidelines (2019) requirements by
excluding intangibles and the impact of any fair value adjustments to related
derivatives. This includes the revaluation of land options.
"EPRA Net Reinstatement Value (NRV)" IFRS NAV adjusted to exclude the impact
of any fair value adjustments to related derivatives. This includes the
revaluation of land options and the Real estate transfer tax (RETT).
"EPRA Net Disposal Value (NDV)" IFRS NAV adjusted to include the fair values
of debt and the revaluation of land options.
"EPRA Net Initial Yield (NIY)" Annualised rental income based on the cash
rents passing at the balance sheet date, less non-recoverable property
operating expenses, divided by the market value of the property, increased
with (estimated) purchaser's costs.
"EPRA 'Topped-Up' NIY" This measure incorporates an adjustment to the EPRA NIY
in respect of the expiration of rent-free periods (or other unexpired lease
incentives, such as discounted rent periods and step rents).
"EPRA Vacancy" Estimated market rental value (ERV) of vacant space divided by
the ERV of the whole portfolio.
"EPRA Cost Ratio" Administrative and operating costs (including and excluding
costs of direct vacancy) divided by gross rental income.
"Estimated cost to completion" Costs still to be expended on a development or
redevelopment to practical completion, including attributable interest.
"Estimated rental value" or "ERV" The estimated annual market rental value of
lettable space as determined biannually by the Group's valuers. This will
normally be different from the rent being paid.
"FCA" The United Kingdom Financial Conduct Authority (or any successor entity
or entities).
"Forward Funded Development" Where the Company invests in an asset which is
either ready for, or in the course of, construction, pre-let to an acceptable
counterparty. In such circumstances, the Company seeks to negotiate the
receipt of immediate income from the asset, such that the developer is paying
the Company a return on its investment during the construction phase and prior
to the tenant commencing rental payments under the terms of the lease. Expert
developers are appointed to run the development process.
"Foundation asset" Foundation assets provide the core, low-risk income that
underpins our business. They are usually let on long leases to customers with
excellent covenant strength. These buildings are commonly new or modern and in
prime locations, and the leases have regular upward only rent reviews, often
either fixed or linked to Inflation Indices.
"FRI Lease" Full Repairing and Insuring Lease. During the lease term, the
tenant is responsible for all repairs and decoration to the property, inside
and out, and the building insurance premium is recoverable from the tenant.
"Future Development Pipeline" The Group's land portfolio for future
development typically controlled under option agreements which do not form
part of the Current or Near Term development pipelines.
"Gearing" Net borrowings divided by total shareholders' equity excluding
intangible assets and deferred tax provision.
"GIA" Under the RICS Code of Measuring Practice (6th Edition) the Gross
Internal Area (GIA) is the basis of measurement for valuation of industrial
buildings (including ancillary offices) and warehouses. The area of a building
measured to the internal face of the perimeter walls at each floor level
(including the thickness of any internal walls). All references to building
sizes in this document are to the GIA.
"GAV" The Group's gross asset value.
"Global Real Estate Sustainability Benchmark (GRESB) Assessment" GRESB
assesses the ESG performance of real estate and infrastructure portfolios and
assets worldwide, providing standardised and validated data to the capital
markets.
"Gross rental income" Contracted rental income recognised in the period, in
the income statement, including surrender premiums and interest receivable on
finance leases. Lease incentives, initial costs and any contracted future
rental increases are amortised on a straight-line basis over the lease term.
"Group" or "REIT Group" The Company and all of its subsidiary undertakings.
"Growth Covenant asset" Growth Covenant assets are fundamentally sound assets
in good locations, let to customers we perceive to be undervalued at the point
of purchase and who have the potential to improve their financial strength,
such as young e-retailers or other companies with growth prospects. These
assets offer value enhancement through yield compression.
"IMA" The Investment Management Agreement between the Manager and the Company.
"Investment portfolio" or "Investment assets" The Group's Investment Portfolio
comprises let or pre-let (in the case of Forward Funded Developments) assets
which are income generating, as well as any speculative development assets
which have reached practical completion but remain unlet.
"Investment property" Completed land and buildings held for rental income
return and/or capital appreciation.
"Land asset" Opportunities identified in land which the Manager believes will
enable the Company to secure, typically, pre-let Forward Funded Developments
in locations which might otherwise attract lower yields than the Company would
want to pay, delivering enhanced returns but controlling risk.
"LIBOR" London Interbank Offered Rate.
"Link" or "Link Asset Services" A trading name of Link Market Services Limited
(company number 2605568).
"Listing Rules" The listing rules made by the Financial Conduct Authority
under section 73A of FSMA.
"Loan Notes" The loan notes issued by the Company on 4 December 2018.
"Loan to Value (LTV)" The proportion of our gross asset value that is funded
by net borrowings.
"London Stock Exchange" London Stock Exchange plc.
"Manager" Tritax Management LLP (partnership number 0C326500).
"Minimum Energy Efficiency Standards (MEES)" The legal standard for minimum
energy efficiency which applies to rented commercial buildings as regulated by
the Energy Efficiency (Private Rented Property) (England and Wales)
Regulations 2015.
"Near-term Development Pipeline" Sites which have either received planning
consent or sites where planning applications have been submitted prior to the
year end.
"Net Initial Yield (NIY)" The annual rent from a property divided by the
combined total of its acquisition price and expenses.
"Net rental income" Gross rental income less ground rents paid, net service
charge expenses and property operating expenses.
"Net zero carbon" Highly energy efficient and powered from on-site and/or
off-site renewable energy sources, with any remaining carbon balance offset.
"Non-PID Dividend" A dividend received by a shareholder of the principal
company that is not a PID.
"Ordinary Shares" Ordinary Shares of £0.01 each in the capital of the
Company.
"Passing rent" The annual rental income currently receivable on a property as
at the balance sheet date (which may be more or less than the ERV). Excludes
rental income where a rent-free period is in operation. Excludes service
charge income (which is netted off against service charge expenses).
"PID" or "Property income distribution" A dividend received by a shareholder
of the principal company in respect of profits and gains of the Property
Rental Business of the UK resident members of the REIT group or in respect of
the profits or gains of a non-UK resident member of the REIT group insofar as
they derive from their UK Property Rental Business.
"Portfolio" The overall portfolio of the Company including both the Investment
and Development portfolios.
"Portfolio Value" The value of the Portfolio which, as well as the Group's
standing assets, includes capital commitments on Forward Funded Developments,
Land Assets held at cost, the Group's share of joint venture assets and other
property assets.
"Pre-let" A lease signed with a customer prior to commencement of a
development.
"REIT" A qualifying entity which has elected to be treated as a Real Estate
Investment Trust for tax purposes. In the UK, such entities must be listed on
a recognised stock exchange, must be predominantly engaged in property
investment activities and must meet certain ongoing qualifications.
"Rent roll" See "Passing rent".
"RPI" Retail price index, an inflationary indicator that measures the change
in the cost of a fixed basket of retail goods as calculated on a monthly basis
by the Office of National Statistics.
"SDLT" Stamp Duty Land Tax - the tax imposed by the UK Government on the
purchase of land and properties with values over a certain threshold.
"Shareholders" The holders of Ordinary Shares.
"SONIA" Sterling Overnight Index Average
"Speculative development" Where a development has commenced prior to a lease
agreement being signed in relation to that development.
"sq ft" Square foot or square feet, as the context may require.
"Symmetry Management shareholders" The holders of B and C Shares in Tritax
Symmetry.
"Symmetry ManCo" Tritax Symmetry Management Limited, a private limited company
incorporated in England and Wales (registered number 11685402) which has an
exclusive development management agreement with Tritax Symmetry to manage the
development of the Tritax Symmetry Portfolio.
"Topped up net initial yield" Net initial yield adjusted to include notional
rent in respect of let properties which are subject to a rent-free period at
the valuation date thereby providing the Group with income during the
rent-free period. This is in accordance with EPRA's Best Practices
Recommendations.
"Total Expense Ratio" or "TER" The ratio of total administration and property
operating costs expressed as a percentage of average net asset value
throughout the period.
"Total Accounting Return" Net total return, being the percentage change in
EPRA NTA over the relevant period plus dividends paid.
"Total Shareholder Return" A measure of the return based upon share price
movement over the period and assuming reinvestment of dividends.
"Tritax Symmetry" Tritax Symmetry Holdings Limited, a limited company
incorporated in Jersey (registered number 127784).
"Tritax Symmetry Portfolio" The portfolio of assets held through Tritax
Symmetry following the acquisition of db Symmetry in February 2019, including
land, options over land and a number of assets under development.
"True Equivalent Yield (TEY)" The internal rate of return from an Investment
property, based on the value of the property assuming the current passing rent
reverts to ERV on the basis of quarterly in advance rent receipts and assuming
the property becomes fully occupied over time.
"UK AIFMD Rules" The laws, rules and regulations implementing AIFMD in the UK,
including without limitation, the Alternative Investment Fund Managers
Regulations 2013 and the Investment Funds sourcebook of the FCA.
"Value Add asset" These assets are typically let to customers with good
covenants and offer the chance to grow the assets' capital value or rental
income, through lease engineering or physical improvements to the property. We
do this using our asset management capabilities and understanding of customer
requirements. These are usually highly re-lettable. It also includes assets
developed on a speculative basis which have reached practical completion but
remain unlet at the period end.
"WAULT" or "Weighted Average Unexpired Lease Term" The income for each
property applied to the remaining life for an individual property or the lease
and expressed as a portfolio average in years. In respect of Forward Funded
Developments, the unexpired term from lease start date.
"Yield on cost" The expected gross yield based on the estimated current market
rental value (ERV) of the developments when fully let or actual rental value
for completed developments or those pre-let, as appropriate, divided by the
estimated or actual total costs of the development.
1 Source: CBRE (2013-2019)
2 Source: Real Capital Analytics
3 Includes one lease review agreed but undocumented.
4 Excluding exceptional development management agreement income
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