Urban Logistics REIT - RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2024
07/11/2024 07:00
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RNS Number : 2680L Urban Logistics REIT PLC 07 November 2024
7 November 2024
LEI: 213800P6ODJW2UFNDC37
Urban Logistics REIT PLC
("Urban Logistics" or the "Company")
RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2024
Growing rental values support future growth
Commenting on the results, Richard Moffitt, Investment Adviser CEO, said:
"The first half of the financial year has been a highly active period for
Urban Logistics, which has not only delivered a refinancing of one of its debt
facilities, but also demonstrated the Company's ability to make attractive
acquisitions in the current market place. The refinancing has delivered a
47bps reduction in the margin the Company pays, extended the maturity of the
near term debt and provided additional investment capital at attractive rates.
Urban Logistics has utilised this capacity to acquire assets with a
significant arbitrage between day one Net Initial Yield (NIY) and debt cost,
providing not only EPS enhancement but also increasing the portfolio weighting
to the Asset Management segment, which provides the team with the opportunity
to deliver a strong total return for shareholders."
"Seeing attractive acquisition opportunities in the current marketplace Urban
Logistics has also initiated a selective recycling programme and post period
end has unconditionally exchanged on the first of these planned disposals - a
£7.7 million property, at a NIY of 4.85%, representing an ungeared internal
rate of return (IRR) of over 12%. The capital released will be recycled into
higher yielding opportunities. Underpinning all of this is of course active
asset management, as we continue to let vacant units, settle rent reviews and
capture the reversion that exists in the portfolio."
"Looking forward we see significant value potential within the portfolio,
which the Company will continue to realise through the team's hands on
approach to asset management as well as the recycling of the value created in
'Core' Assets into higher yielding assets as the Company drives for full
dividend cover."
HIGHLIGHTS
Resilient Financial Performance
· Gross rental income of £30.6 million +3.0% (Sept 2023: £29.7
million)
· Adjusted EPS(1) of 3.57 pence +3.2% (Sept 2023: 3.46 pence)
· IFRS profit of £10.2 million -39.6% (Sept 2023: £16.9 million)
· Interim Dividend per share of 3.25 pence (Sept 2023: 3.25 pence)
· EPRA net tangible assets(2) ("NTA") of 158.05 pence per share -1.4%
since March 2024 (Mar 2024: 160.27 pence per share)
· IFRS net assets of £748.4 million, -1.3% since March 2024 (Mar
2024: £758.6 million)
· 99.6% of H1 rents demanded were collected (Sept 2023: 99.1%)
· Total Property Return of 2.4% for the period (Sept 2023: 2.3%)
Robust Balance Sheet
· On 7 August 2024 refinanced a lending facility which was £86.5
million drawn at the start of the period with an ongoing interest cost in
March 2024 of 5.0% with a £140 million term loan at an ongoing interest cost
of 4.5%, rising to 5.0% in August 2025
· Earliest debt maturity August 2027 (Mar 2024: August 2025)
· All debt 100% fixed or hedged through to term (Mar 2024: 96.9%)
· Loan to value ("LTV") of 33.2%, remaining at the lower end of the
stated 30-40% range (Mar 2024: 29.3%)
· £407.2 million of debt with a weighted average maturity of 5.1
years (Mar 2024: £353.8 million with a weighted average maturity of 5.4
years)
· Undrawn and available facilities of £50.0 million (Mar 2024:
£64.5 million)
· Weighted average debt costs of 4.0% for the period (Mar 2024: 4.0%)
Portfolio with uplift opportunities
· Portfolio Estimated Rental Values (ERV) of £80.1 million providing
a 27% reversion to contracted rent of £63.3 million (Sept 2023: ERV of £73.8
million providing a 23% reversion to contracted rent of £60.0 million)
· Portfolio like-for-like(3) ERV up by 3.5% over the 6 month period
(6 months to Sept 2023 1.4%)
· WAULT(4) of 7.6 years (Sept 2023: 8.0 years), reflecting some
rebalancing of the portfolio towards Asset Management
· 21% like-for-like rental increases across 13 lease events in the
period (Sept 2023: 10% LFL increase across 10 lease events)
· EPRA vacancy rate of 8.1% (Sept 2023: 6.8%), with 3.5% of the
vacancy consisting of assets which were acquired with less than 12 months on
the lease, and 2.3% consisting of assets under offer.
Strong ESG credentials
· 60% of the portfolio with an EPC of A-B (Sept 2023: 55%)
· Scope 1 and 2 operational net zero, with portfolio wide scope three
target under development
Post Period End
· Vacant property in Dunstable acquired for £3.6 million and let
immediately, providing a 7.1% NIY, and bringing total acquisitions to date to
a £45.8 million aggregate purchase price at a NIY of 6.7%; a significant
arbitrage to our cost of debt and therefore providing EPS accretion in the
second half of the year.
· Unconditionally exchanged on the sale of a £7.7 million property
in Peterborough, at a NIY of 4.85%, 2.1% ahead of September 2024 valuation
freeing up further capital for accretive acquisitions
Outlook: Strong potential for income growth from leasing, supported by asset
recycling
· 51% of the portfolio in 'Asset Management' category, with a 43%
reversion to contracted rent providing opportunity for fast rental growth
· Fixed debt costs with no refinancing events until August 2027 gives
security of costs and earnings potential
1. A full reconciliation between IFRS profit and Adjusted
earnings can be found in note 8 of this interim set of Financial Statements.
2. A reconciliation of other financial information can be
found in the Supplementary Information.
3. Like for Like (LFL) figures compare the values for
properties held 31 March 2024 to the same properties on 30 September 2024, and
ignores properties acquired or disposed of in the period.
4. Weighted Average Unexpired Lease Term
CHAIRMAN'S STATEMENT
OVERVIEW
The first half of the year has seen Urban Logistics complete a refinancing and
deploy capital to acquire attractive assets which fall within our 'Active
Asset Management' categorisation. Post period end we have also complemented
these activities with the unconditional exchange of an asset in our "Core
Portfolio". These actions demonstrate how the Company is actively working to
create value for shareholders. Through refinancing the debt we have
strengthened the balance sheet and provided additional firepower to acquire
further assets. We have deployed some of that capital into assets which not
only yield more than the cost of debt, and thereby enhance EPRA EPS, but also
provide ample total return opportunities which our Investment Adviser has
proved adept at capitalising upon.
We firmly believe that the best method for delivering value for our
shareholders is through the active management of the portfolio, the delivery
of earnings accretive acquisitions and the demonstration of the portfolio
value through sales where asset management has been completed.
This will lead to a growth in earnings, allowing us to fully cover and, in due
course, grow our dividend, and support valuation growth in our portfolio. It
is these activities, combined with our continued belief in the single let
logistics sector and strategy, that we believe will help reduce the discount
at which the shares currently trade at, and grow shareholder value.
DIVIDENDS
A first interim dividend of 3.25 pence per share will be paid on 13 December
2024 to shareholders on the record on 22 November 2024. This is unchanged from
the first interim dividend in the prior year, and it is our current intention
to maintain the dividend for the second half of the financial year at 4.35
pence per share, which is the same level as last year. We are confident that
as our vacancies are leased by tenants, earnings will grow to cover the
dividend at this level on an ongoing basis.
BOARD
As previously announced, on 1 July 2024, Cherine Aboulzelof joined the Board,
bringing significant additional real estate expertise, and Bruce Anderson is,
as of the date of this report, stepping down as Chair of the Audit Committee,
to be replaced by Lynda Heywood. Bruce will remain an independent director on
the Board.
OUTLOOK
With the stabilisation of interest rates we are seeing an increase in
transactional activity in the market place, providing us not only with
opportunities to selectively sell Core assets but also to acquire attractive
assets and portfolios of assets which meet our target acquisition criteria,
thereby increasing our portfolio weighting of assets in the Active Asset
Management category.
Our belief in the strong prospects for the sub sector of the property market
in which we operate continues to be validated by growth in rental rates at our
properties, driven by the fundamental supply and demand mismatch for this type
of space.
Nigel Rich CBE, Chairman
6 November 2024
INVESTMENT ADVISER'S REPORT
OVERVIEW
The Company's focus in the first half of this financial year has been to
execute on the plan set out to shareholders at the start of the year to drive
EPS growth on the path to a fully covered dividend. The Company planned to do
this not only through leasing activity, but also through the use of capital
available from selective recycling to drive earnings, as well as rebalancing
the portfolio towards assets with strong reversion and asset management
potential. A good example of this is the disposal, post period end, of a £7.7
million property in Peterborough, at a NIY of 4.85%, which will free up
further capital for accretive acquisitions and drive earnings. Over the medium
term we would like to see the portfolio rebalanced to circa 35% Core assets,
with 65% in the Active Management and Development categories.
The first half of the year has seen a number of key milestones achieved: the
Company has refinanced bank debt at attractive rates and increased the size of
the facility. The capital released has been deployed into new assets, taking
advantage of a dislocated and quiet market in the summer to acquire a number
of properties which provide a day one arbitrage to the debt costs, as well as
a longer-term reversion and growth opportunities. This can be seen in the day
one yield of the recent acquisitions, at 6.7% NIY with asset management taking
them to 7.3%.
Underlying all of this has been our ongoing active asset management - settling
rent reviews, leasing vacant properties and regearing leases, with 13 lease
events completed in the period.
DEBT AND BALANCE SHEET
Urban Logistics has always chosen to run a very conservative balance sheet,
with net LTV at the lower end of the stated 30-40% target range. The debt book
is underpinned by long term gilt linked lending, with more flexible bank
lending on a shorter maturity. The shorter term lending had a maturity date of
August 2025, so during the period the Company refinanced and extended the debt
through to a 2027 maturity, and at the same time reduced the margin by 47 bps
and increased the size of the facility from £151m to £190m.
The new facility has an interest cost of 4.5% for the first 12 months, rising
to 5% thereafter, and features sustainability links, in line with the
Company's ESG targets.
ASSET ACQUISITION AND RECYCLING
A low LTV of 29.3% at the start of the period provided flexibility to acquire
assets, and at the publication of the annual report the Company signalled its
intention to use that firepower to acquire EPS accretive assets. As part of
the bank debt refinancing, the Company drew additional debt, raising LTV to
33.2%. During August and September, 4 assets were acquired off market at a NIY
of 6.6%, rising to 7.1% following execution of the near term asset management
plans.
Acquisition price Rental NIY Reversionary Yield Years Years to first break/expiry
Income to expiry
Crayford £5.2m £0.3m 6.2% 6.8% 9.3 9.3
Wolverhampton £17.0m £1.1m 6.3% 6.9% 8.6 3.6
Doncaster £11.7m £0.9m 7.5% 8.3 1.8 1.8
Peterlee £8.3m £0.6m 6.6% 7.4% 5.6 5.6
Total £42.2m £2.9m 6.7% 7.3% 5.9 4.0
Post period end, the Company acquired an additional property, in Dunstable,
for £3.6 million. The property was vacant, however between exchange and
completion the Company has let the asset to a local occupier resulting in a
7.1% NIY. This brings the total acquisitions in the financial year to date to
£45.8 million, at a NIY of 6.7%, a significant arbitrage to the cost of debt
and therefore providing EPS accretion in the second half of the year.
In the second half of the year, as the market strengthens, the Company intends
to recycle low yielding assets where the asset management has been largely
completed to provide capital to acquire higher yielding assets from which we
can realise value through active asset management.
This process has started post period end, and at the date of this report the
Company has exchanged on its first sale, an asset at Peterborough, let to
Anglian Water, for a sum of £7.7 million, at a NIY of 4.85%. This asset was
developed by the Company in 2020, at a total cost of £5.8 million, providing
a 33% profit on cost and an ungeared IRR of 12.3%. The site was part of the
'Core' portfolio, where the asset management plan had been enacted, and the
sale allows the capital to be recycled into further acquisitions, at strong
initial yields, from which the asset management team will be able to realise
value.
THE MARKET
Real estate pricing across the UK and the Company's sector has remained
steady in the period, tracking the 10 year gilt which showed little movement
in the period. The budget in October removed a level of uncertainty, but has
resulted in the 10 year gilt rising from 4.1% at period end to 4.5 at the time
of this report, reflecting the expectation of higher inflation and a slower
reduction in interest rates.
Investment market and rental rates
Against this backdrop, the transactional market was muted, with trading
volumes across real estate their quietest since 2012. Even within this context
however, the Industrial and Logistics segment increased its share of the real
estate market to 27%, the highest proportion ever recorded. This is driven by
a continued investor commitment to the wider structural thesis that has driven
the sector's performance over the last decade. Data for the first half of 2024
from Savills shows that within UK distribution, investment volumes reached
£1.4bn, 41% up on the same period in 2023, and a 47% increase on the
pre-covid H1 average.
This further supports our conviction that the growth case for this sector
remains one of the strongest in the real estate market. This investment case
is built on the rising rental rates driven by underlying demand for this asset
class from occupiers, which is forecast to continue to outstrip supply,
leading to rental rates growing faster than inflation. This can be seen in
Knight Frank's average rental growth forecast from Q2 2024 below:
Knight Frank: Average Rental Growth forecast (%age) Q2 2024
2024 2025 2026 2027 2028 2024-28 CAGR
London 6.0 4.4 3.5 3.5 3.7 4.2
South East 4.4 3.3 2,7 2.9 3.1 3.3
South West 6.2 3.6 2.3 2.0 2.1 3.2
Eastern 4.8 3.5 2.9 3.0 3.3 3.5
East Midlands 4.3 3.2 2.3 2.3 2.4 2.9
West Midlands 5.3 3.5 2.6 2.6 2.7 3.3
North West 5.5 3.6 2.7 2.7 2.8 3.5
Yorks & Humber 4.6 2.9 2.1 2.2 2.3 2.8
North East 4.1 3.0 2.4 2.4 2.5 2.9
Scotland 4.2 2.6 1.9 2.0 2.2 2.6
Wales 4.0 2.6 2.0 2.2 2.4 2.6
UK 4.7 3.4 2.7 2.8 3.0 3.3
This forecast rental growth, and the increased activity in the investment
market has seen prime yields come in slightly to 5.0%, according to Savills
data.
Occupier Take up and vacancy
2023 saw significant uncertainty around interest rates and the broader
economic picture. In that environment, occupiers as far as they could, chose
not to make long term leasing decisions. The data from Savills shows that this
has, to some extent rebounded, with take up in H1 2024 recorded at 16.8m sq ft
in UK Logistics above 100k sq ft, 44% ahead of H1 2023, with 62% of that take
up in Q2, reflecting improving economic confidence.
The mix of occupiers remains diversified, with manufacturing accounting for
28% of uptake, third party logistics 33%, with the remainder from a range of
occupiers. Online retail was subdued at just 5%, showing the breadth of demand
from the occupier market.
Despite this activity, additional supply coming onto the market, often in the
form of speculatively built larger box sizes of 300-400,000 sq ft, is driving
up headline vacancy rates to 6.95% (Savills). It is important to note however
that there are significant variances within that figure depending on
geographic location, asset size and building specification.
PORTFOLIO VALUATION
As previously announced the Company has chosen to rotate its valuers this year
in the interests of good governance, and CBRE have been replaced by JLL.
The external property valuation over the last 6 months has been stable, with a
like for like (LFL) property revaluation increase of 0.2% and 4 acquisitions
helping to increase total portfolio value to £1.14 billion, from £1.10
billion at the year end.
Looking more closely at the LFL valuation change the Company saw a very strong
increase in LFL Estimated Rental Values (ERV) of 3.5% in just 6 months, while
the yield was largely flat, at 6.4% against 6.3% at 31 March 2024.
Breaking the valuation movement down, it is clear that while the Core
properties have increased in value, there has been a small decline in the
valuations of the Asset Management portion of the portfolio. This is
consistent with the higher than usual vacancy and slower decision making in
the occupational market holding back the Asset Management portion of the
portfolio.
As at 30 September As at 31 March
2024 2024
Portfolio value(1) £1,140m £1,100m
Equivalent yield 6.4% 6.3%
WAULT (to expiry) 7.6 years 7.5 years
Area 10.1 million sq ft 9.7 million sq ft
Contracted rent £63m £62m
EPC ratings: A-B 60% 60%
1. As per JLL valuation, September 2024, (CBRE valuation, March 2024)
The Company continues to focus on a portfolio balanced across three key areas:
'Core' assets, with long term secure income underpinning the dividend, 'Active
Asset Management' opportunities where we can apply our expertise to improve
leases and buildings, and a carefully selected limited pool of 'Development'
opportunities. The Company's aim over the short to medium term is to rebalance
the portfolio towards Asset Management opportunities.
Core Active Asset Management Development Total
Land(1)
Capital Value £549m £584m £7m £1,140m
Percentage of portfolio 48% 51% 1% 100%
Area 4.4m sq ft 5.7m sq ft n/a 10.1m sq ft
Contracted rent £32.8m £30.5m n/a £63.3m
ERV/Expected rent £36.6m £43.5m n/a £80.1m
Reversion to ERV 12% 43% n/a 27%
WAULT 10.3 years 4.7 years n/a 7.6 years
EPC A-B 80% 45% n/a 60%
Equivalent yield/yield on cost 6.13% 6.56% n/a 6.35%
1. Made up of plots of stand alone development land, with or without
planning permission.
At 31 March 2024, the portfolio was split 51% in Core assets and 48% in Active
asset management. During the period the Company has used acquisitions and one
disposal to rebalance the portfolio to 51% Active asset management and reduce
the core exposure to 48%. Over the medium term we would like to see this
percentage of the portfolio in Core Assets fall to circa 35%. The rebalancing
will be achieved by further capital recycling, and will see opportunities for
stronger rental growth, as evidenced by the 43% reversion to ERV in the Active
Asset Management portion of the portfolio.
Also contained within the portfolio are a number of plots of development land,
with or without planning permission, in the "Development" category. While
these provide opportunities for outsized development returns, the Company has
no current active developments given the attractiveness of the market for
acquiring income producing assets and our desire to drive immediate rental
growth to support the Company's dividend cover goals.
ASSET MANAGEMENT
Asset management is core to the business model and allows the Company to add
value to properties at any time in the cycle, by extending leases, improving
rental rates, improving tenant covenants, driving ESG change or refurbishing
buildings. In the period the Company has completed 13 lease events, and
weighted average like for like rental uplift of 21%.
No. of Additional LFL rental WAULT
deals rent Uplift (to expiry)
New lettings 3 £1.1m 7% 10.0
Lease re-gears/assignments 4 £(0.1)m - 4.9
Rent reviews 6 £0.2m 22% -
Total 13 £1.2m 21% 7.0
In the coming months the Company has a low level of lease expiry and revenue
at risk, giving a strong foundation for near term growth in rental rates. In
addition, two of the vacant assets, with an ERV of £1.8 million, representing
2.3% of the 8.1% vacancy figure, have been put under offer, and leases are
expected to complete in the coming months.
Tenant diversity and covenant strength are key to tenant selection, with the
largest tenant providing just 5% of contracted rent roll, and the top ten
tenants providing for 32%. The remaining 68% of contracted rent is made up of
110 different tenants, and Dunn and Bradstreet report that 80% of the
Company's tenants are classified as Low to Low-Moderate risk.
Despite this, the smaller end of the 3PL market has been under pressure. This
was caused by a market which expanded rapidly during Covid, followed by an
extended period of higher interest rates, combined with more normalised
package delivery numbers (down from the elevated volumes seen during the
pandemic).
The Company has therefore seen four tenant administrations in the period and
post period end, most notably Shift and Carlton Forest. These administrations
have created vacancies at seven generally smaller assets with contracted rent
of £1.1 million, representing 1.7% of the portfolio's contracted rent. At the
date of this report, 48% of this contracted rent, or £0.5m, had either been
relet or is under offer, at a new rent 10% above the previous contracted rent.
These administrations therefore allow us to capture reversion significantly
earlier than would otherwise have been achievable.
The remaining assets have a 20% reversion between previous contracted rent and
ERV, again, allowing earlier capture of rental uplift. While administrations
are never welcome, and act as a short term drag on earnings, the quality of
the real estate is the ultimate backstop in the case of tenant failures, and
we anticipate higher medium term earnings because of them.
The overall vacancy rate of 8.1% can be broken down as below:
DEVELOPMENTS
Since IPO, developments have been a small but important contributor to overall
performance. In September 2023 the Company took the decision to pull back from
future developments for the time being as we saw more risk than reward given
land and construction costs, and the subdued state of the leasing market.
In due course we would expect the Company to return to its development model:
Forward funding developers with strong balance sheets to protect investors
from cost overruns, and taking only leasing risk in geographies where there is
a clear undersupply of the type of property being developed.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
We strive to ensure that the drivers of the Company's ESG performance are
deeply woven into the business model. All of the Company's debt now has
sustainability links, and we work closely with tenants to understand their ESG
risks and opportunities.
The Company programme of installing solar on its assets both reduces occupier
costs and increases asset value. The Company focus on EPC improvements allows
it to stay ahead of MEES regulations as well as make its assets more
attractive to future tenants and support corporate level targets around
emissions.
Our guiding philosophy however is that it is better to buy a poor performing
building and improve it over time than to shun poor performing buildings which
offer significant opportunities for value creation due to improvements in ESG
credentials. The Company's EPRA sBPR score remain gold, and our MSCI ESG
rating was an "A". We are working through GRESB scoring changes in terms of
standing assets, which has fallen from three stars to two, despite improved
performance, and we will continue to work with GRESB to help them better
reflect the Company's underlying performance which has remained strong, with
increased data coverage, reduced CO2 emissions per sq ft of the portfolio,
improved EPCs and increased PV capacity.
EPC across the portfolio Sept 2024 March 2024 Sept 2023
A 14% 15% 14%
B 46% 45% 41%
C 31% 30% 32%
D 9% 10% 13%
E 0% 0% 0%
F 0% 0% 0%
Total 100% 100% 100%
Based on percentage of the portfolio by floor area
In June the Company published its ESG targets and will execute against them
and report on progress in the coming months. In September we also saw the
Building Sector methodology published by the SBTi; we look forward to
submitting the Company's SBTi aligned scope 3 reduction target in the coming
months.
OUTLOOK
Urban Logistics is focused on controlling the controllable: implementing the
asset recycling programme, managing debt, rebalancing the portfolio towards
Asset Management opportunities and above all else achieving the reversionary
potential in the existing portfolio. The portfolio under management today is
capable of delivering significantly higher rental income in the short term
through leasing up of vacant assets, while ongoing rental growth in the
Company's sector supports longer term value enhancement. Costs, including
interest costs, are largely fixed, meaning this rental growth supports higher
ongoing earnings, and is at the core of the Company's drive for full dividend
cover, and in time, dividend growth.
THE INVESTMENT ADVISER
6 November 2024
FINANCIAL REVIEW
Financial Review
IFRS profit
30 Sep 2024 30 Sep 2023 31 Mar 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Revenue 30,636 29,731 59,951
Property operating costs (1,641) (1,218) (2,511)
Net rental income 28,995 28,513 57,440
Other operating income 310 88 147
Administrative and other expenses (4,312) (4,487) (9,191)
Net finance expense (8,130) (7,769) (15,896)
Adjusted earnings 16,863 16,345 32,500
Long-term incentive plan charge - (11) (11)
Loss on early extinguishment of debt (978) - -
Exceptional items - (391) (1,125)
Changes in fair value of investment property (3,369) 940 (5,810)
(Loss)/profit on disposal of investment property (166) 56 55
Changes in fair value of interest rate derivatives (2,102) (68) (865)
Profit before taxation 10,248 16,871 24,744
Net rental income
Net rental income for the first half of the financial year ending 31 March
2025 totalled £29.0 million (30 September 2023: £28.5 million), an increase
of £0.5 million or 1.8% compared to the prior period. Whilst there has been
successful asset management during the period, it has taken longer to lease
voids than anticipated. This, combined with a number of tenant
administrations, has increased the vacancy rate to 8.1% (30 September 2023:
6.8%) which has impacted revenue growth, and has increase property operating
costs by £1.4m, driven by increased security costs at vacant sites.
Despite this, the gross to net rental income ratio remains high at 95.2% (30
September 2023: 96.5%), illustrating the strength of our core strategy.
Administrative expenses
A reduced Net Asset Value (NAV), and the new advisory fee structure that came
into effect from 12 May 2024, has led to a £0.2 million reduction in
administrative expenses when compared to the prior period; these include all
operational costs of running the business, and totalled £4.3 million for the
first six months of the financial year (30 September 2023: £4.5 million).
Total cost ratio
Total cost ratio is used as a measure of the Company's operational efficiency,
it has increased slightly to 18.8% (30 September 2023: 18.5%). Further detail
on cost ratios can be found in EPRA supplementary information, note VI. This
movement has been largely driven by rising vacant property costs, as shown by
the cost ratio excluding vacant property costs falling to 14.9%.
30 Sep 2024 30 Sep 2023 31 Mar 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total costs including vacant property costs 18.8% 18.5% 18.9%
Total cost excluding vacant property costs 14.9% 16.0% 16.2%
Net finance costs
Net finance costs for the period, excluding fair value movement of our
interest rate derivatives, totalled £8.1 million (30 September 2023: £7.8
million), an increase of £0.3 million compared to the prior period. The
increased costs were primarily driven by the higher gross debt position during
the period. At the period end gross debt was £407.2 million, compared with
£353.7 million at 30 September 2023.
The weighted average cost of debt for the period was very marginally higher
than the previous period at 3.99% (30 September 2023: 3.86%). This rise is
driven by small changes in levels of unhedged debt during the period. Interest
cover has remained stable at 3.2x (30 September 2023: 3.3x), while the
weighted average debt maturity is 5.1 years (30 September 2023: 6.0 years),
with the earliest refinance now pushed back to August 2027.
IFRS profit and adjusted earnings
IFRS profit after tax for the period was £10.2 million (30 September 2023:
£16.9 million), representing a basic and diluted earnings per share of 2.17
pence (30 September 2023: 3.57 pence), with the change largely driven by
portfolio valuation movements and changes in the fair value of interest rate
derivatives.
Adjusted earnings for the period were £16.9 million representing an increase
of £0.6 million when compared to the prior period (30 September 2023: £16.3
million), resulting in an improvement in adjusted earnings per share to 3.57
pence (30 September 2023: 3.46 pence).
The Directors consider adjusted earnings as a key measure of the Company's
underlying operating results, and therefore exclude non-cash and exceptional
items. A full reconciliation between IFRS profit and Adjusted earnings can be
found in note 8 of the interim financial statements.
Dividend
In relation to the period to 30 September 2024, the Company paid and declared
the following interim dividends:
Amount In respect of
pence financial year Paid/
Declared per share ended to be paid
19 June 2024 4.35p 31 March 2024 19 July 2024
6 November 2024 3.25p 31 March 2025 13 December 2024
An interim dividend of 3.25 pence per share will be paid on 13 December 2024
to shareholders on the register at the close of business 22 November 2024, and
the full amount is a property income distribution ("PID").
IFRS net assets
30 Sep 2024 30 Sep 2023 31 Mar 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment property 1,140,033 1,103,609 1,099,547
Bank and other borrowings (402,595) (348,970) (348,986)
Cash 29,260 30,853 30,274
Other net liabilities (20,741) (22,373) (24,380)
EPRA net tangible assets 745,957 763,119 756,455
Interest rate derivatives 2,389 2,966 2,169
Intangible assets 16 26 21
IFRS net assets 748,362 766,111 758,645
At 30 September 2024, IFRS net assets attributable to Ordinary Shareholders
were £748.4 million (31 March 2024: £758.6 million), representing a basic
and diluted net asset value per share of 158.56 pence (31 March 2024: 160.74
pence).
The Company considers EPRA net tangible assets ("NTA") a key measure of
overall performance. At 30 September 2024, NTA was £746.0 million (31 March
2024: £756.5 million), representing an EPRA NTA per share of 158.05 pence (31
March 2024: 160.27 pence), a decrease of 1.4%. The reduction in the EPRA NTA
primarily relates to the acquisition costs associated with the purchase of new
properties in the year.
The Total Accounting Return ("TAR") for the period, which reflects change in
EPRA NTA plus dividends paid in the period, was 1.3% (30 September 2023:
2.2%). The average annualised Total Accounting Return since IPO in 2016 has
been 10.9%, including dividends paid and declared.
Portfolio valuation
The value of our portfolio at 30 September 2024, which includes land for
future development, was £1,140 million, an increase £40.5 million, or 3.7%,
over the six month period. This was driven by the acquisition of four assets
in the period with a combined purchase price (excluding acquisition costs) of
£42.2 million; the Company also disposed of one property with a net book
value of £3.8m. The like-for-like property valuation increase was 0.2%. In
addition, the Company incurred capital expenditure of £1.0 million, which was
largely comprised of refurbishments at vacant assets.
The portfolio delivered a Total Property Return ("TPR") of 2.4% for the
six-months to 30 September 2024 (30 September 2023: 2.3%).
Financing
At 30 September 2024, the Company had drawn debt totalling £407.2 million (30
September 2023: £353.7 million).
On 7 August 2024, the Group completed the refinancing of a £151.0 million
loan facility. This resulted in the appointment of ING Bank N.V. as a lender,
alongside existing lenders Barclays Bank plc and Santander Bank Plc. The new
agreement provides a £190.0 million loan facility over a three-year term,
with the option to extend for a further two years. Interest is charged at a
fixed margin of 1.75% plus SONIA. Interest rate swaps have been entered into
to fix SONIA at 2.73% until August 2025, and at 3.23% thereafter until August
2027.
Loan Drawn at % Fixed /
Maturity Commitment 30 Sep 2024 Hedged at
Lender Date (£m) (£m) 30 Sep 2024
Barclays, Santander and ING (syndicate of 3 banks) Aug 2027 190.0 140.0 100.0%
Aviva Investors (7-years) Mar 2028 88.4 88.4 100.0%
Aviva Investors (10-years) May 2032 178.8 178.8 100.0%
Total 457.2 407.2 100.0%
At 30 September 2024, the weighted average cost of debt across all drawn
facilities is 4.0% (30 September 2023: 4.1%), of which 100.0% (30 September
2023: 96.9%) is either fixed or hedged to term.
Cash and net debt
The Company's cash balances decreased by £1.0 million to £29.3 million at 30
September 2024, as illustrated in the table below:
30 Sep 2024 30 Sep 2023 31 Mar 2024
(unaudited) (unaudited) (audited)
£m £m £m
Cash generated from operations 20.9 21.6 46.6
Cash (used in)/generated from investing activities (42.7) 5.2 3.3
Cash generated from/(used in) financing activities 20.8 (26.1) (49.8)
Net (decrease)/increase in cash (1.0) 0.7 0.1
Opening cash balance 30.3 30.2 30.2
Closing cash balance 29.3 30.9 30.3
At 30 September 2024, the Company's cash balance was £29.3 million, of which
£1.4 million is earmarked for committed capex and £6.1 million is restricted
in the form of long-term rental deposits. Over the six-month period, debt
increased by £53.5 million to £407.2 million, representing a loan to value
("LTV") of 33.2% (30 September 2023: 29.3%).
PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets are made up of UK commercial property. Its principal
risks are therefore related to the commercial property market in general and
also to the particular circumstances of the individual properties and the
tenants within the properties. Taking this into account, the Company's risk
appetite policies and procedures, alongside the appropriate controls and
financial reporting, are regularly reviewed and updated to ensure they remain
in line with regulation, corporate governance and expected industry practice.
The Board has performed a robust assessment of the principal strategic, ESG
and operational risks facing the Company as well as assessing identifiable
emerging risks. The Board formally reviews its risk matrix twice yearly but is
made aware of any risk exposure either as and when it happens or at the
regular Board meetings. The Audit Committee, which I chair, reviews the
matrix, and oversees the process of assigning operational responsibility for
risk mitigation processes to Board Committees or the Investment Adviser.
Urban Logistics utilises a multi-layered defence in terms of risk management.
The first line of defence comprises the management team at Logistics Asset
Management LLP (the "Investment Adviser"), who take ownership of the risk,
manage and report against the internal controls to mitigate it, and report to
the Board or Board Committees against the agreed risk matrix. The second line
of defence is built around oversight and challenge, which is the
responsibility of the Board and reported on by the independent Directors who
make up the Audit Committee.
In addition to these internal lines of defence, the Board also takes comfort
from compliance reports delivered by a number of external professional
advisers. These include our external auditors RSM, who provide a report on
their audit of the Financial Statements and published accounts, our tax
advisers BDO, who provide a report on tax status and REIT compliance, our
external AIFM, G10, who report on regulatory compliance, our external Company
Secretary, Link Company Matters, who provide a report on compliance with
governance requirements and our depository, Indos, who provide a report on
cash compliance.
Risks are measured based on probability and potential impact using a scoring
matrix. I, as Chair of the Audit Committee review the risk matrix to establish
movements in risks, and to identify new risks, before the Audit Committee and
Board proposes any changes. The output from the discussion draws out the risks
which the Committee and Board deem to be the principal risks facing the
Company, the number of which will change from period to period, depending on
the perceived severity of the risk. The commentary below discusses the six key
risks, and how the Board sees both the potential impact of the risk, as well
as actions being taken to mitigate the risk.
Bruce Anderson ACMA FCIOBS
Chair of the Audit Committee
Rank Risk Impact Mitigation
1 Subdued UK macroeconomic environment impacting consumer confidence & Impact on financial performance In individual tenant failure scenario, asset quality and location mitigates
tenant business plans, heightening default risk. risk as assets are able to be relet quickly.
In the case of a sector specific downturn scenario the Company has a diverse
tenant base and is not over exposed to any one tenant.
In a systemic failure scenario the Company maintains a low LTV and high fixed
debt proportion, allowing headroom in the case of significant numbers of
tenant failures".
2 Inability to raise new money to develop the business. Impact on ability to execute against pipeline and grow the business LTV levels are currently below the maximum allowed for the REIT, giving
headroom for further debt is needed or deemed desirable.
We are able to stop all new development and new acquisitions, but could
continue asset management within the existing portfolio to enable growth.
We regularly review alternate methods of growing the business, included
M&A and structures with private capital.
3 Increased costs as a result of vacant properties. Impact on costs and reduced income Where properties are acquired with vacant possession, rent guarantees have
been negotiated where possible.
Active marketing carried out on vacant sites by experienced asset managers and
agents.
4 Failure to attract and retain talent in the LLP, including key personnel. Impact on our ability to effectively manage the fund without the services of New investment advisory contract has been awarded, and Pacific Investments has
key personnel who are contracted to the advisor. been bought out of the adviser, meaning the day to day management team have
full ownership of the Adviser.
Impact on our Adviser's ability to grow the team in line with the REIT.
The Adviser has added additional staff in depth within the Company.
Staff members are supported in the pursuit of professional qualifications.
Regular informal feedback & annual reviews to focus on long-term career
goals.
Market aligned compensation and benefits packages.
Staff satisfaction surveys conducted periodically.
5 Cyber security attack. Risk of loss of Company funds or data following an attack. The Adviser undergoes mandatory cyber security training on an annual basis.
Phishing security tests are performed by Sereno IT. Any employees failing
these random tests are required to undertake further training.
Firewall in place as a defence against cyber attacks.
6 Risk of elevated interest rates affecting financial performance and banking Impact on financial returns. Mitigated by use of long term debt and hedging of interest rates.
covenants
Interest cover is monitored by the Board on a quarterly basis
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
· that these condensed interim financial statements have been
prepared in accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and Transparency
sourcebook of the United Kingdom's Financial Conduct Authority; and
· this Interim 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 period under
review 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 during the period ended 30
September 2024 and that have materially affected the financial position or
performance of the Company during that period and any material changes in the
related party transactions described in the last Annual Report.
This Interim Report was approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
Nigel Rich
Chairman
6 November 2024
INDEPENDENT REVIEW REPORT TO URBAN LOGISTICS REIT PLC
Conclusion
We have been engaged by Urban Logistics REIT PLC ("the Company") to review the
condensed set of financial statements of the Company and its subsidiaries (the
'Group') in the interim financial report for the six months ended 30 September
2024 which comprises condensed consolidated statement of comprehensive income,
condensed consolidated statement of financial position, condensed consolidated
cash flow statement, condensed consolidated statement of changes in equity and
the notes to the interim financial report. We have read the other
information contained in the interim financial report and considered whether
it contains any apparent material misstatements of fact or material
inconsistencies with the information in the condensed set of financial
statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the six months ended 30 September 2024 is not prepared,
in all material respects, in accordance with International Accounting Standard
34, "Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards, and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
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') issued for use in
the United Kingdom. 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 2, 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 interim financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards.
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 management have
inappropriately adopted the going concern basis of accounting or that
management 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 and
the Company to cease to continue as a going concern.
Responsibilities of Directors
The interim financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with International Accounting Standard 34,
"Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the interim financial report, the directors are responsible for
assessing the Group's and 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 Group 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 interim financial report, we are responsible for expressing
to the Company a conclusion on the condensed set of financial statements in
the interim 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
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information performed by the Independent Auditor of the Entity". Our review
work has been undertaken so that we might state to the Company those matters
we are required to state to them in an independent review report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
6 November 2024
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Revenue 5 30,636 29,731 59,951
Property operating expenses (1,641) (1,218) (2,511)
Net rental income 28,995 28,513 57,440
Administrative and other expenses (4,312) (4,487) (9,191)
Other operating income 310 88 147
Long-term incentive plan charge - (11) (11)
Operating profit before changes in fair value of investment properties 24,993 24,103 48,385
Changes in fair value of investment property 6, 10 (3,369) 940 (5,810)
(Loss)/profit on disposal of investment property (166) 56 55
Exceptional items - (391) (1,125)
Operating profit 21,458 24,708 41,505
Finance income 292 71 243
Finance expense 7 (8,422) (7,840) (16,139)
Loss on early extinguishment of debt 7 (978) - -
Changes in fair value of interest rate derivatives (2,102) (68) (865)
Profit before taxation 10,248 16,871 24,744
Tax charge for the period - - -
Profit and total comprehensive income (attributable to the shareholders) 10,248 16,871 24,744
Earnings per share - basic 8 2.17p 3.57p 5.24p
Earnings per share - diluted 8 2.17p 3.57p 5.24p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Non-current assets
Investment property 10 1,142,216 1,113,149 1,105,587
Intangible assets 16 26 21
Interest rate derivatives 12 562 876 1,436
Total non-current assets 1,142,794 1,114,051 1,107,044
Current assets
Assets held for sale 10 7,575 - 3,770
Trade and other receivables 7,946 8,956 6,121
Interest rate derivatives 12 1,827 2,090 733
Cash and cash equivalents 29,260 30,853 30,274
Total current assets 46,608 41,899 40,898
Total assets 1,189,402 1,155,950 1,147,942
Current liabilities
Trade and other payables (8,497) (12,393) (11,300)
Deferred rental income (13,820) (12,688) (13,198)
Total current liabilities (22,317) (25,081) (24,498)
Non-current liabilities
Long-term rental deposits (6,109) (5,989) (6,049)
Lease liability 11 (10,019) (9,799) (9,764)
Bank borrowings 11 (402,595) (348,970) (348,986)
Total non-current liabilities (418,723) (364,758) (364,799)
Total liabilities (441,040) (389,839) (389,297)
Total net assets 748,362 766,111 758,645
Equity
Share capital 14 4,720 4,720 4,720
Share premium 438,418 438,418 438,418
Capital reduction reserve 228,760 228,760 228,760
Retained earnings 76,464 94,213 86,747
Total equity 748,362 766,111 758,645
Net asset value per share - basic 16 158.56p 162.32p 160.74p
Net asset value per share - diluted 16 158.56p 162.32p 160.74p
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Cash flows from operating activities
Profit for the period (attributable to equity shareholders) 10,248 16,871 24,744
Add: amortisation and depreciation 56 55 113
Add/(less): changes in fair value of investment property 6, 10 3,369 (940) 5,810
Add: changes in fair value of interest rate derivatives 2,102 68 865
Add/(less): loss/(profit) on disposal of investment property 166 (56) (55)
Add: finance expense 7 8,422 7,840 16,139
Add: loss on extinguishment of debt 978 - -
Long-term investment plan charge - 11 11
Movement in trade and other financial liabilities (2,604) (1,945) (1,065)
Movement in trade and other financial assets (1,842) (263) 25
Cash generated from operations 20,895 21,641 46,587
Net cash flow generated from operating activities 20,895 21,641 46,587
Investing activities
Purchase of investment properties (45,088) - -
Capital expenditure on investment properties 10 (1,185) (9,397) (11,230)
Disposal of investment properties 3,604 14,556 14,555
Net cash flow (used in)/generated from investing activities (42,669) 5,159 3,325
Financing activities
Bank borrowings drawn 11 53,500 57,250 69,203
Bank borrowings repaid - (54,500) (66,453)
Loan arrangement fees paid (1,926) (1,179) (1,843)
Interest paid (8,422) (7,056) (14,537)
Sale of interest rate derivative 561 - -
Purchase of interest rate derivatives (2,285) - -
Finance lease payments (137) (90) (297)
Dividends paid to equity holders 9 (20,531) (20,531) (35,870)
Net cash flow generated from/(used in) financing activities 20,760 (26,106) (49,797)
Net (decrease)/ increase in cash and cash equivalents for the period (1,014) 694 115
Cash and cash equivalents at start of period 30,274 30,159 30,159
Cash and cash equivalents at end of period 29,260 30,853 30,274
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Share Share reduction Other Retained
Six months ended 30 September capital premium reserve reserves earnings Total
2024 (unaudited) £'000 £'000 £'000 £'000 £'000 £'000
1 April 2024 4,720 438,418 228,760 - 86,747 758,645
Profit for the period - - - - 10,248 10,248
Total comprehensive income - - - - 10,248 10,248
Transactions with shareholders in their capacity as owners
Dividends to shareholders - - - - (20,531) (20,531)
30 September 2024 4,720 438,418 228,760 - 76,464 748,362
Six months ended 30 September 2023 (unaudited)
1 April 2023 4,720 438,418 228,760 120 97,742 769,760
Profit for the period - - - - 16,871 16,871
Total comprehensive income - - - - 16,871 16,871
Transactions with shareholders in their capacity as owners
Dividends to shareholders - - - - (20,531) (20,531)
Long-term incentive plan - - - 11 - 11
Transfer between reserves - - - (131) 131 -
30 September 2023 4,720 438,418 228,760 - 94,213 766,111
Year ended 31 March 2024 (audited)
1 April 2023 4,720 438,418 228,760 120 97,742 769,760
Profit for the year - - - - 24,744 24,744
Total comprehensive income - - - - 24,744 24,744
Transactions with shareholders in their capacity as owners
Dividends to shareholders - - - - (35,870) (35,870)
Long-term incentive plan - - - 11 - 11
Transfer between reserves - - - (131) 131 -
31 March 2024 4,720 438,418 228,760 - 86,747 758,645
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
Urban Logistics REIT PLC (the "Company") and its subsidiaries (the "Group")
carry on the business of property lettings throughout the United Kingdom. The
Company is a public limited company incorporated and domiciled in England and
Wales and listed on the Main Market of the London Stock Exchange. The
registered office address is Central Square, 29 Wellington Street, Leeds,
United Kingdom, LS1 4DL.
These condensed interim financial statements were approved for issue on 6
November 2024.
These condensed interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 March 2024 were approved by the board
of directors on 19 June 2024 and delivered to the Registrar of Companies. The
report of the auditors on those accounts were unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under section
498 of the Companies Act 2006. The interim financial statements for the period
to 30 September 2024 have been reviewed, not audited.
2. BASIS OF PREPARATION
This condensed interim financial report for the half-year ended 30 September
2024 has been prepared in accordance with the UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 31 March 2024, which
has been prepared in accordance with UK-adopted International Accounting
Standards and the requirements of the Companies Act 2006.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period, except for the
adoption of new and amended standards as set out below.
The Group's financial information has been prepared on a historical cost
basis, except for investment property and derivative interest rate swaps which
have been measured at fair value.
The functional currency of the Group is considered to be pounds sterling as
this is the currency of the primary environment in which the Group operates.
GOING CONCERN
The Directors have reviewed the current and projected financial position of
the Group, making reasonable assumptions about future trading performance. As
part of the review, the Group has considered its cash balances, its debt
maturity profile, including undrawn facilities, and the long-term nature of
the tenant leases.
The Group has undertaken risk assessments in respect of the impact on key
objectives and has appropriate response plans such as stress testing,
monitoring of tenant performance and financial reviews. On the basis of this
review, and after making due enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the Interim
Financial Statements.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Interim Financial Statements in conformity with the
generally accepted accounting practices requires management to make estimates
and judgements that affect the reported amounts of assets and liabilities as
well as the disclosure of contingent assets and liabilities at the Statement
of Financial Position date and the reported amounts of revenue and expenses
during the reporting period.
FAIR VALUE OF INVESTMENT PROPERTY AND PROPERTIES UNDER CONSTRUCTION
The Group values its investment properties using a yield capitalisation
methodology. Principal assumptions and management's underlying estimation of
the fair value of those relate to: capitalised occupancy levels; expected
future growth in rental income and operating costs; maintenance requirements;
capitalisation rate; and discount rates. There are inter-relationships between
the valuation inputs and they are primarily determined by market conditions.
The effect of an increase in more than one input could be to magnify the
impact on the valuation. However, the impact on the valuation could be offset
by the inter-relationship of two inputs moving in opposite directions, e.g.
an increase in rent may be offset by a decrease in occupancy, resulting in a
minimal net impact on the valuation. A more detailed explanation of the
background, methodology and judgements made by management that are adopted in
the valuation of the investment properties is set out in note 10 to the
interim Financial Statements.
The market value of an investment property is determined by real estate
valuation experts, to be the estimated amount for which a property should
exchange on the date of the valuation in an arm's-length transaction. Each
property has been valued on an individual basis. The valuation experts use
recognised valuation techniques and the principles of IFRS 13.
The valuations have been prepared in accordance with RICS Valuation - Global
Standards January 2022 (the "Red Book"). Factors reflected include current
market conditions, annual rentals, lease lengths and location. The significant
methods and assumptions used by the valuers in estimating the fair value of
investment property, including sensitivities, are set out in note 10.
4. PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
Financial Statements are consistent with those applied within the Company's
Annual Report and Financial Statements for the year ended 31 March 2024.
BASIS OF CONSOLIDATION
The Financial Statements consolidate the accounts of the Company and all
subsidiary undertakings drawn up to the same year end.
INVESTMENT IN SUBSIDIARIES
Investments in subsidiaries are stated at cost less any provision for
permanent diminution in value. Realised gains and losses are dealt with
through the Statement of Comprehensive Income. A review for impairment is
carried out if events or changes in circumstances indicate that the carrying
amount may not be recoverable, in which case an impairment provision is
recognised and charged to the Statement of Comprehensive Income.
BORROWINGS
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit and loss over the borrowings period using the
effective interest method.
Amendments to existing debt facilities will be treated as a modification of
existing debt or, where the changes in debt terms are considered substantial,
as an extinguishment of the existing debt and issuance of new debt, in
accordance with IFRS 9.
BORROWING COSTS
Borrowing costs in relation to interest charges on bank borrowings are
expensed in the period to which they relate. Fees incurred in relation to the
arrangement of bank borrowings are capitalised and expensed on a
straight-line basis over the term of the loan.
On extinguishment, any remaining arrangement fees will be released to the
statement of comprehensive income and recognised as a loss on extinguishment
of debt.
SEGMENTAL REPORTING
IFRS 8 requires operating segments to be identified on the basis of internal
reports that are regularly reported to the Board to allocate resources to the
segments and to assess their performance. The Directors consider there to be
only one reportable segment, being the investment in the United Kingdom into
small logistics warehouses.
INVESTMENT PROPERTIES
Investment properties comprises completed property that is held to earn
rentals or for capital appreciation, or both, and development properties that
are under development or available for development.
Investment properties are initially recognised at cost including transaction
costs. Transaction costs include transfer taxes and professional fees for
legal services. Subsequent to initial recognition, investment properties are
carried at fair value, as determined by real estate valuation experts. Gains
or losses arising from changes in fair value are recognised in the Statement
of Comprehensive Income in the period in which they arise.
In accordance with IAS 40, investment property held as a leasehold is stated
gross of the recognised lease liability. Leasehold properties are classified
as investment properties and included in the balance sheet at fair value. The
obligation to the lessor for the leasehold is included in the balance sheet at
the present value of minimum lease payments.
Investment properties cease to be recognised when they have been disposed of.
The difference between the disposal proceeds and the carrying amount of the
asset is recognised in the Statement of Comprehensive Income. A disposal is
recognised on exchange if the sale contract is unconditional; if the sale
contract on exchange is conditional, the disposal is recognised on legal
completion. An investment property will be classified as held for sale, in
line with IFRS 5: Non-Current Assets Held for Sale and Discontinued
Operations, if its carrying value is expected to be recovered through a sale
transaction rather than through continuing use.
An investment property will be classified in this way when a sale is highly
probable, management are committed to selling the asset at the year-end date,
the asset is available for immediate sale in its current condition and the
asset is expected to be disposed of within twelve months after the date of the
Consolidated Statement of Financial Position.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the Statement of
Financial Position when the Group becomes a party to the contractual
provisions of the instrument.
FINANCIAL ASSETS
Trade receivables are held in order to collect the contractual cash flows and
are initially measured at the transaction price as defined in IFRS 15, as the
contracts of the Group do not contain significant financing components.
Impairment losses are recognised based on lifetime expected credit losses in
profit or loss.
Other receivables are held in order to collect the contractual cash flows and
accordingly are measured at initial recognition at fair value, which
ordinarily equates to cost, and are subsequently measured at cost less
impairment due to their short-term nature.
FINANCIAL LIABILITIES
Financial liabilities and equity instruments issued by the Group are
classified in accordance with the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity
instrument. An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
Trade and other payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate
method.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments, comprising of interest rate swaps for
hedging purposes, are initially recognised at cost and are subsequently
measured at fair value, being the estimated amount that the Group would
receive or pay to terminate the agreement at the period end date, taking into
account current interest rate expectations and the current credit rating of
the Group and its counterparties.
The gain or loss at each fair value measurement date is recognised in the
Statement of Comprehensive Income. Premiums payable under such arrangements
are initially capitalised into the Statement of Financial Position,
subsequently they are remeasured and held at their fair values.
Hedge accounting has not been applied in these Interim Financial Statements.
LONG TERM RENT DEPOSITS
Long-term rent deposits are held by the Group in separate designated bank
accounts where the use of the monies is restricted and defined in the lease
agreements, however the access to these monies by the Group is not restricted.
Rent deposits are typically held for the term of the lease, and recognised as
a separate liability on the Statement of Financial Position. The rent deposit
is classified as non-current until there is less than twelve months remaining
on the lease, when the balance is then recognised as a current liability.
REVENUE RECOGNITION
Rental income and service charge income from operating leases on properties
owned by the Group is accounted for on a straight-line basis over the term on
the lease. Rental income excludes service charges and other costs directly
recoverable from tenants.
Lease incentives are amortised on a straight-line basis over the term of the
lease.
EXCEPTIONAL ITEMS
The Group defines exceptional items to be those that warrant, by virtue of
their nature, size or frequency, separate disclosure on the face of the income
statement where, in the opinion of the Directors, this enhances the
understanding of the Group's financial performance.
LEASES
At inception, the Group assesses whether a contract is or contains a lease.
This assessment involves the exercise of judgement about whether the Group
obtains substantially all the economic benefits from the use of that asset,
and whether the Group has the right to direct the use of the asset.
The Group recognises a right-of-use ("ROU") asset and a corresponding lease
liability at the commencement date of the lease. The ROU asset is initially
measured based on the present value of lease payments, plus initial direct
costs and the cost of obligations to refurbish the asset, less any incentives
received.
Lease payments include fixed payments. When the lease contains an extension or
purchase option that the Group considers reasonably certain to be exercised,
the cost of the option is included in the lease payments.
Each lease payment is allocated between the liability and finance cost. The
lease payments are discounted using the interest rate implicit in the lease if
that rate can be readily determined or, if not, the incremental borrowing rate
is used which is the weighted average cost of debt. The finance cost is
charged to profit or loss over the lease period so as to produce a constant
rate of interest on the remaining balance of the liability for each period.
As the head leases meet the definition of investment property, it is initially
recognised in accordance with IFRS 16, and then subsequently accounted for as
if it was an investment property in accordance with the Group's accounting
policy.
ROU assets are included in investment properties and the lease liability
included in the Statement of Financial Position.
TAXATION
Taxation on the profit or loss for the period that is not exempt under UK REIT
regulations comprises current and deferred tax. Current tax is expected tax
payable on any non-REIT taxable income for the period, using tax rates enacted
or substantively enacted at the period end date, and any adjustment to tax
payable in respect of previous years.
DIVIDENDS
Dividends on equity shares are recognised when they become legally payable. In
the case of interim dividends, this is when paid. In the case of final
dividends, this is when approved by the shareholders at the Annual
General Meeting.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and short-term deposits with
banks and other financial institutions, with an initial maturity of three
months or less.
STANDARDS IN ISSUE BUT NOT YET EFFECTIVE
In the current year, the following amendments have been adopted which were
effective for the periods commencing on or after 1 January 2023:
· Amendments to IAS 1: Non-current liabilities with covenants, and
classification of liabilities as current or non-current,
· Amendments to IFRS 16 Lease liability in a sale and leaseback;
· Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements;
As a result to the adoption of the amendments to IAS 1, the Group changes its
accounting policy for the classification of borrowings:
'Borrowings are classified as current liabilities unless at the end of the
reporting period, the Group has a right to defer settlement of the liability
for at least 12 months after the reporting period.' This new policy did not
result in a change in the classification of the Group's borrowings. The Group
did not make any retrospective adjustments as a result of adopting the
amendments to IAS 1.
STANDARDS AND INTERPRETATIONS IN ISSUE BUT NOT YET EFFECTIVE
At the date of authorisation of these Financial Statements there were
standards and amendments which were in issue but not yet effective and which
have not been applied.
The principal ones were:
• Amendments to IAS 21: Accounting where there is a lack of exchangeability
(effective 1 January 2025); and
• IFRS 18: Presentation and Disclosure in Financial Statements (effective 1
January 2027 - subject to endorsement by the UKEB).
The Directors do not expect the adoption of these standards and amendments to
have a material impact on the Financial Statements.
5. REVENUE
The Group is involved in UK property ownership and letting and is considered
to operate in a single geographical and business segment. The total revenue of
the Group for the period was derived from its principal activity, being that
of property lettings. No single tenant accounted for more than 10% of the
Group's gross rental income in either period.
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Rental income 30,318 29,292 59,263
Service charge income 191 197 347
Licence fee 127 242 341
Total revenue 30,636 29,731 59,951
6. CHANGES IN FAIR VALUE OF INVESTMENT PROPERTY
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Revaluation (deficit)/surplus (3,369) 886 (5,841)
Movement in expected profit share - 54 31
Total changes in fair value of investment property (3,369) 940 (5,810)
7. FINANCE EXPENSE
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest paid on bank borrowings 8,945 8,624 17,153
Swap interest received (1,218) (1,568) (2,616)
Loan arrangement fee amortisation 540 625 1,328
Interest on lease liabilities 155 159 274
Total 8,422 7,840 16,139
Loss on early extinguishment of debt
The refinancing of the £151.0 million loan facility has been treated as an
extinguishment in accordance with IFRS 9. Costs associated with the original
facility were net against the borrowings on the balance sheet and amortised
over the life of the original facility. The £978k 'Loss on early
extinguishment of debt' recognised in the statement of comprehensive income is
made up of the costs left to be released and the loss on disposal of the
interest rate SWAP that happened as part of the extinguishment.
8. EARNINGS PER SHARE
The calculation of the basic earnings per share ("EPS") was based on the
profit attributable to Ordinary Shareholders divided by the weighted average
number of Ordinary Shares outstanding during the period, in accordance with
IAS 33.
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit attributable to Ordinary Shareholders
Total comprehensive income 10,248 16,871 24,744
Weighted average number of Ordinary Shares in issue 471,975,411 471,975,411 471,975,411
Basic earnings per share 2.17p 3.57p 5.24p
Number of diluted shares under option/warrant - - -
Weighted average number of Ordinary Shares
for the purpose of dilutive earnings per share 471,975,411 471,975,411 471,975,411
Diluted earnings per share 2.17p 3.57p 5.24p
Adjustments to remove:
Changes in fair value of investment property 3,369 (940) 5,810
Changes in fair value of interest rate derivatives 2,102 68 865
Loss on extinguishment of debt 978 - -
Loss/(profit) on disposal of investment property 166 (56) (55)
EPRA earnings 16,863 15,943 31,364
EPRA earnings per share 3.57p 3.38p 6.65p
Adjustments to add back:
LTIP charge - 11 11
Exceptional items - 391 1,125
Adjusted earnings 16,863 16,345 32,500
Adjusted earnings per share 3.57p 3.46p 6.89p
9. DIVIDENDS
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Ordinary dividends paid
2023: Second interim dividend: 4.35p per share - 20,531 20,531
2024: First interim dividend: 3.25p per share - - 15,339
2024: Second interim dividend: 4.35p per share 20,531 - -
Total dividends paid in the period 20,531 20,531 35,870
Total dividends paid in the period 4.35p 4.35p 7.60p
10. INVESTMENT PROPERTIES
In accordance with IAS 40: Investment Property, investment property is carried
at its fair value as determined by an external valuer. This valuation has been
conducted by JLL and has been prepared as at 30 September 2024, in accordance
with the RICS Valuation - Professional Standards UK January 2022 (the "Red
Book").
The valuations have been prepared in accordance with those recommended by the
International Valuation Standards Committee and are consistent with the
principles in IFRS.
Investment Development
properties properties Total
£'000 £'000 £'000
At 1 April 2024 1,092,862 6,685 1,099,547
Property acquisitions 45,088 - 45,088
Capital expenditure 1,184 1 1,185
Property disposal (3,770) - (3,770)
Movement in tenant lease incentives 1,352 - 1,352
Revaluation (deficit)/surplus (3,578) 209 (3,369)
Investment property valuation at 30 September 2024 1,133,138 6,895 1,140,033
Transfer of asset held for sale (7,575) - (7,575)
Add: right-of-use asset 9,758 - 9,758
Carrying value at 30 September 2024 1,135,321 6,895 1,142,216
At 30 September 2024, the development properties category represented land
plots, there are no active developments.
Assets held for sale
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Assets held for sale 7,575 - 3,770
Assets held for sale represent one investment property that was under offer at
the period end. The asset has been classified as held for sale due to meeting
the criteria detailed in the Group's accounting policy, which can be found
under 'Investment properties' within note 4. On 1 November 2024, the Company
unconditionally exchanged on the disposal of the asset. See note 17: Post
balance sheet events.
Investment property - level 3
The Group's investment property assets are classified as level 3, as defined
by IFRS 13, in the fair value hierarchy. Level 3 inputs for the asset or
liability that are derived from formal valuation techniques include inputs for
the asset or liability that are not based on observable market data.
The valuation has been prepared on the basis of fair value ("FV"), in
accordance with IFRS 13, which is defined as:
"The price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date."
Fair value, for the purpose of financial reporting under IFRS 13, is
effectively the same as market value, which is defined as:
"The estimated amount for which an asset or liability should exchange on the
valuation date between a willing buyer and a willing seller in an arm's-length
transaction, after proper marketing and where the parties had acted
knowledgeably, prudently and without compulsion."
The table below analyses:
· the fair value measurement at the end of the reporting year;
· a description of the valuation techniques applied;
· the inputs used in the fair value measurement, including the ranges
of rent charged to different units within the same building; and
· for level 3 fair value measurements, quantitative information about
significant unobservable inputs used in the fair value measurement.
Valuation techniques
The yield capitalisation approach is used when valuing the Group's commercial
investment properties which uses market rental values with a market
capitalisation rate. The resulting valuations are cross-checked against the
net initial yields and the fair market values based on recent market
transactions.
For investment properties under development, properties are valued using a
residual values method approach. The fair value is calculated by estimating
the fair value of the completed property using the yield capitalisation
approach less estimated costs to complete and a risk premium.
The tables below illustrate the impact of changes in key unobservable inputs,
in isolation, on the fair value of the Group's portfolio:
30 September 2024: ERV (pa) Equivalent yield
Fair Value Min Max Average Min Max Average
£'000 £ £ £ % % %
Completed investment property 1,133,138 50,463 3,604,200 589,091 4.9% 9.7% 6.4%
Development property 6,895 n/a n/a n/a n/a n/a n/a
Total 1,140,033
ERV (pa) Equivalent yield
Asset size Fair Value Min Max Average Min Max Average
(Sq ft) £'000 £ £ £ % % %
0 - 50,000 211,832 5.00 16.75 9.27 5.5% 9.7% 6.4%
50,001 - 100,000 308,095 4.00 25.00 8.70 4.9% 9.1% 6.2%
100,001 - 150,000 319,046 4.25 12.76 7.39 5.5% 9.7% 6.5%
150,001+ 278,420 3.50 15.75 6.98 5.7% 7.6% 6.4%
Developments 6,895 n/a n/a n/a n/a n/a n/a
Other 15,745 8.50 8.50 19.90 5.4% 6.0% 5.7%
Total 1,140,033
ERV per sq ft Equivalent yield
Fair Value Min Max Average Min Max Average
Region £'000 £ £ £ % % %
Midlands 411,905 4.25 12.79 7.13 5.4% 8.3% 6.4%
South East 320,038 6.75 25.00 12.20 4.9% 8.0% 5.8%
South West 66,610 4.50 14.24 8.26 6.0% 8.2% 6.6%
North East 117,835 3.50 11.00 5.94 5.8% 7.4% 6.6%
North West 151,160 4.63 12.50 7.56 5.5% 8.5% 6.4%
Scotland 63,520 5.00 12.09 7.30 6.7% 9.7% 7.8%
Wales 2,070 8.25 8.25 8.25 6.7% 6.7% 6.7%
Developments 6,895 n/a n/a n/a n/a n/a n/a
Total 1,140,033
Sensitivities
Significant increases/decreases in the ERV (per sq ft per annum) and rental
growth per annum in isolation would result in a significantly higher/lower
fair value measurement. Significant increases/decreases in the long-term
vacancy rate and discount rate (and exit yield) in isolation would result in a
significantly higher/lower fair value measurement.
Generally, a change in the assumptions made for the ERV (per sq ft per annum)
is accompanied by:
· a similar change in the rent growth per annum and discount rate
(and exit yield); and
· an opposite change in the long-term vacancy rate.
Fair Value at Impact on valuations Impact on valuations
Asset size 30 September 2024 ERV + 5% ERV - 5% ERV -25bps EY +25bps EY
(Sq ft) £'000 £'000 £'000 £'000 £'000 £'000
0 - 50,000 211,832 14,882 10,592 (10,592) 8,360 (7,749)
50,001 - 100,000 308,095 21,242 15,405 (15,405) 12,400 (11,476)
100,001 - 150,000 319,046 23,233 15,952 (15,952) 12,131 (11,274)
150,001+ 278,420 19,847 13,921 (13,921) 10,824 (10,043)
Developments 6,895 n/a n/a n/a n/a n/a
Other 15,745 913 787 (787) 760 (693)
Total 1,140,033 80,116 56,657 (56,657) 44,475 (41,235)
Fair Value at Impact on valuations Impact on valuations
30 September 2024 ERV + 5% ERV - 5% ERV -25bps EY +25bps EY
Region £'000 £'000 £'000 £'000 £'000 £'000
Midlands 411,905 29,630 20,595 (20,595) 15,863 (14,728)
South East 320,038 20,536 16,002 (16,002) 13,881 (12,773)
South West 66,610 4,832 3,331 (3,331) 2,543 (2,363)
North East 117,835 8,565 5,892 (5,892) 4,489 (4,171)
North West 151,160 10,754 7,558 (7,558) 5,888 (5,463)
Scotland 63,520 5,672 3,176 (3,176) 1,956 (1,842)
Wales 2,070 127 104 (104) 94 (86)
Developments 6,895 - n/a n/a n/a n/a
Total 1,140,033 80,116 56,657 (56,657) 44,715 (41,427)
31 March 2024: ERV (pa) Equivalent yield
Fair Value Min Max Average Min Max Average
£'000 £ £ £ % % %
Completed investment property 1,092,862 66,984 3,441,936 588,745 5.3% 12.5% 6.3%
Development property 6,685 30,000 30,000 30,000 4.0% 6.4% 5.2%
Total 1,099,547
ERV (pa) Equivalent yield
Asset size Fair Value Min Max Average Min Max Average
(Sq ft) £'000 £ £ £ % % %
0 - 50,000 214,380 4.99 15.32 8.64 5.5% 12.5% 6.0%
50,001 - 100,000 313,791 4.50 14.82 7.54 5.3% 9.2% 6.0%
100,001 - 150,000 277,095 0.88 10.92 5.93 5.5% 9.1% 6.5%
150,001+ 252,126 3.38 23.27 8.18 5.5% 7.3% 6.0%
Developments 6,685 n/a n/a n/a n/a n/a n/a
Other 35,470 7.61 15.92 10.08 5.5% 6.0% 5.7%
Total 1,099,547
ERV per sq ft Equivalent yield
Fair Value Min Max Average Min Max Average
Region £'000 £ £ £ % % %
Midlands 400,015 5.25 23.27 8.08 5.5% 9.0% 6.1%
South East 319,086 6.00 15.34 10.51 5.3% 6.5% 5.6%
South West 66,445 4.50 15.92 7.39 5.5% 7.1% 6.1%
North East 114,323 0.88 11.00 3.98 5.5% 7.5% 6.3%
North West 127,930 4.99 11.83 7.31 5.5% 6.8% 6.1%
Scotland 63,208 5.25 11.51 6.86 6.5% 12.5% 7.8%
Wales 1,855 8.25 8.25 8.25 7.0% 7.0% 7.0%
Developments 6,685 n/a n/a n/a 4.0% 6.4% 5.2%
Total 1,099,547
Sensitivities
Significant increases/decreases in the ERV (per sq ft per annum) and rental
growth per annum in isolation would result in a significantly higher/lower
fair value measurement. Significant increases/decreases in the long-term
vacancy rate and discount rate (and exit yield) in isolation would result in a
significantly higher/lower fair value measurement.
Generally, a change in the assumptions made for the ERV (per sq ft per annum)
is accompanied by:
· a similar change in the rent growth per annum and discount rate
(and exit yield); and
· an opposite change in the long-term vacancy rate.
Fair Value at Impact on valuations Impact on valuations
Asset size 31 March 2024 ERV + 5% ERV - 5% ERV -25bps EY +25bps EY
(Sq ft) £'000 £'000 £'000 £'000 £'000 £'000
0 - 50,000 214,380 13,847 10,719 (10,719) 9,235 (8,502)
50,001 - 100,000 313,791 20,359 15,690 (15,690) 13,455 (12,392)
100,001 - 150,000 277,095 19,920 13,855 (13,855) 10,678 (9,914)
150,001+ 252,126 17,458 12,606 (12,606) 10,102 (9,353)
Developments 6,685 30 334 (334) 9,797 (2,492)
Other 35,470 3,157 1,774 (1,774) 1,096 (1,032)
Total 1,099,547 74,771 54,978 (54,978) 54,363 (43,685)
Fair Value at Impact on valuations Impact on valuations
31 March 2024 ERV + 5% ERV - 5% ERV -25bps EY +25bps EY
Region £'000 £'000 £'000 £'000 £'000 £'000
Midlands 400,015 27,793 20,001 (20,001) 15,971 (14,790)
South East 319,086 20,226 15,954 (15,954) 14,018 (12,886)
South West 66,445 4,438 3,322 (3,322) 2,764 (2,552)
North East 114,323 7,797 5,716 (5,716) 4,653 (4,303)
North West 127,930 8,738 6,397 (6,397) 5,199 (4,809)
Scotland 63,208 5,622 3,160 (3,160) 1,954 (1,840)
Wales 1,855 127 93 (93) 75 (70)
Developments 6,685 30 334 (334) 9,797 (2,492)
Total 1,099,547 74,771 54,977 (54,977) 54,431 (43,742)
11. BANK BORROWINGS AND RECONCILIATION OF LIABILITIES TO CASH FLOWS FROM
FINANCING ACTIVITIES
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method.
Bank Lease
borrowings Liability Total
£'000 £'000 £'000
Balance at 1 April 2024 353,714 10,043 363,757
Bank borrowings drawn in period 53,500 - 53,500
Rental payments - (137) (137)
Non-cash movements:
Interest on lease liability - 113 113
Total 407,214 10,019 417,233
Less: unamortised loan arrangement fees (4,619) - (4,619)
402,595 10,019 412,614
On 7 August 2024, the Group completed the refinancing of a £151.0 million
loan facility. This resulted in the appointment of ING Bank N.V. as a lender,
alongside existing lenders Barclays Bank plc and Santander Bank Plc. The new
agreement provides a £190.0 million loan facility over a three-year term,
with the option to extend for a further two years. Interest is charged at a
fixed margin of 1.75% plus SONIA. This facility includes, inter alia, margin
rate improvement available on achieving environmental targets across the
assets charged.
The bank borrowings from all facilities are secured over the investment
properties owned by the Group.
12. INTEREST RATE DERIVATIVES
The Group has used interest rate swaps to mitigate exposure to interest rate
risk. The total fair value of these contracts is recorded in the Statement of
Financial Position. The interest rate derivatives are marked to market by the
relevant counterparty banks on a quarterly basis in accordance with IFRS 9.
Any movements in the fair value of the interest rate derivatives are taken to
finance expense in the Statement of Comprehensive Income.
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest rate swaps:
At beginning of period 2,169 3,034 3,034
Acquisition of interest rate derivative 2,285 - -
Disposal of interest rate derivative (561) - -
Reclassification of interest rate derivative premium 598 - -
Change in fair value in the period (2,102) (68) (865)
Total 2,389 2,966 2,169
Current derivative interest rate swaps 1,827 2,090 733
Non-current derivative interest rate swaps 562 876 1,436
Total 2,389 2,966 2,169
13. FINANCIAL RISK MANAGEMENT
Financial instruments - Group
The Group's financial instruments comprise financial assets and liabilities
that arise directly from its operations: cash and cash equivalents, trade and
other receivables, trade and other payables, lease liabilities and accruals,
interest rate derivatives and bank borrowings. The main purpose of these
financial instruments is to provide finance for the acquisition and
development of the Group's investment property portfolio.
Book value Fair value Book value Fair value
30 September 30 September 31 March 31 March
2024 2024 2024 2024
(unaudited) (unaudited) (audited) (audited)
£'000 £'000 £'000 £'000
Financial assets
Trade and other receivables 4,109 4,109 3,239 3,239
Cash and short-term deposits 29,260 29,260 30,274 30,274
Interest rate derivatives 2,389 2,389 2,169 2,169
Financial liabilities
Trade and other payables (8,497) (8,497) (9,180) (9,180)
Bank loans (407,214) (382,718) (353,714) (339,123)
Lease liabilities (10,030) (10,030) (10,043) (10,043)
Rent deposits (6,109) (6,109) (6,049) (6,049)
The fair value of the non-current borrowings are based on discounted cash
flows using a current borrowing rate. They are classified as level 3 fair
values.
14. SHARE CAPITAL
30 September 30 September
2024 2024
(unaudited) (unaudited)
Number £'000
Issued and fully paid up at 1p each
At beginning of period 471,975,411 4,720
At 30 September 2024 471,975,411 4,720
30 September 30 September
2023 2023
(unaudited) (unaudited)
Number £'000
Issued and fully paid up at 1p each
At beginning of period 471,975,411 4,720
At 30 September 2023 471,975,411 4,720
31 March 31 March
2024 2024
(audited) (audited)
Number £'000
Issued and fully paid up at 1p each
At beginning of period 471,975,411 4,720
At 31 March 2024 471,975,411 4,720
15. RELATED PARTY TRANSACTIONS
During the interim period, the amount paid for services provided by Logistics
Asset Management LLP (the current Investment Adviser) or PCP2 Limited (the
former AIFM) totalled £3,197,454 (30 September 2023: £3,408,445).
M1 AGENCY LLP
During the interim period, the Group incurred fees totalling £380,469 (30
September 2023: £266,554) from M1 Agency LLP, a partnership in which Richard
Moffitt is a member. These fees were incurred in relation to the acquisitions
& lettings of investment properties. £99,600 was due to M1 Agency LLP at
30 September 2024.
For the transactions listed above, Richard Moffitt's benefit is derived from
the profit allocation he receives from M1 Agency LLP as a member and not from
the transaction.
The Board, with the assistance of the AIFM and the Investment Adviser
(excluding Richard Moffitt), reviews the fee payable to M1 Agency LLP, and
ensures the fees are in line with market rates and on standard commercial
property terms.
16. NET ASSET VALUE PER SHARE
Basic NAV per share is calculated by dividing net assets in the Condensed
Consolidated Statement of Financial Position attributable to Ordinary
Shareholders by the number of Ordinary Shares at the end of the period.
Net assets have been calculated as follows:
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Net assets per Condensed Consolidated Statement of Financial Position (£'000) 748,362 766,111 758,645
Adjustments for:
Fair value of interest rate derivatives (£'000) (2,389) (2,966) (2,169)
Intangible assets (£'000) (16) (26) (21)
EPRA net tangible assets (£'000) 745,957 763,119 756,455
Ordinary Shares in issue at period end (basic and diluted) 471,975,411 471,975,411 471,975,411
IFRS NAV per share (basic and diluted) 158.56p 162.32p 160.74p
EPRA NTA per share 158.05p 161.69p 160.27p
17. POST BALANCE SHEET EVENTS
On 16 October 2024, the Company acquired a 19,317 sq ft property in Dunstable
for consideration of £3.6 million, at a 7.11% NIY.
On 1 November 2024, the Company unconditionally exchanged on the disposal of
an asset in Peterborough for £7.7 million, representing an NIY of 4.85%.
On 6 November 2024, the Company declared an interim dividend for the six
months to 30 September 2024 of 3.25 pence per Ordinary Share. The dividend
will be paid as a property income distribution on 13 December 2024 to
shareholders on the register on 22 November 2024.
SUPPLEMENTARY INFORMATION
I. EPRA PERFORMANCE MEASURES SUMMARY
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
EPRA EPS (diluted) 3.57p 3.38p 6.65p
EPRA net tangible asset value 158.05p 161.69p 160.27p
EPRA net reinstatement value 174.24p 177.36p 175.89p
EPRA net disposal value 158.56p 162.32p 160.74p
EPRA net initial yield 5.1% 4.9% 5.0%
EPRA "topped up" net initial yield 5.2% 5.0% 5.1%
EPRA vacancy rate 8.1% 6.8% 5.8%
EPRA cost ratio (including vacant property costs) 18.8% 18.5% 18.9%
EPRA cost ratio (excluding vacant property costs) 14.9% 16.0% 16.2%
EPRA LTV 34.1% 30.3% 30.4%
II. INCOME STATEMENT
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Gross rental income 30,636 29,731 59,951
Property operating costs (1,641) (1,218) (2,511)
Net rental income 28,995 28,513 57,440
Administrative expenses (4,312) (4,487) (9,191)
Other operating income 310 88 147
Long-term incentive plan charge - (11) (11)
Operating profit before interest and tax 24,993 24,103 48,385
Finance income 292 71 243
Finance expense (8,422) (7,840) (16,139)
Exceptional items - (391) (1,125)
Adjusted earnings before tax 16,863 15,943 31,364
Tax on EPRA earnings - - -
EPRA earnings 16,863 15,943 31,364
Weighted average number of Ordinary Shares 471,975,411 471,975,411 471,975,411
EPRA earnings per share 3.57p 3.38p 6.65p
III. BALANCE SHEET
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment properties 1,142,216 1,113,149 1,105,587
Other net assets 8,741 1,932 2,044
Net borrowings (402,595) (348,970) (348,986)
Total shareholders' equity 748,362 766,111 758,645
Adjustments to calculate EPRA NTA:
Fair value of interest rate derivatives (2,389) (2,966) (2,169)
Intangible assets (16) (26) (21)
EPRA net tangible assets 745,957 763,119 756,455
Ordinary Shares in issue at year end (basic and diluted) 471,975,411 471,975,411 471,975,411
EPRA NTA per share 158.05p 161.69p 160.27p
The Group considers EPRA NTA to be the most relevant measure for its operating
activities, it is therefore the Group's primary measure of net asset value. A
reconciliation of the three net asset value measurements is provided in the
table below.
EPRA NTA EPRA NRV EPRA NDV
30 September 2024 £'000 £'000 £'000
IFRS equity attributable to shareholders 748,362 748,362 748,362
Fair value of interest rate derivatives (2,389) (2,389) -
Intangible assets (16) - -
Real estate transfer tax - 76,382 -
EPRA net asset value 745,957 822,355 748,362
Diluted shares (number) 471,975,411 471,975,411 471,975,411
EPRA net asset value per share 158.05p 174.24p 158.56p
EPRA NTA EPRA NRV EPRA NDV
30 September 2023 £'000 £'000 £'000
IFRS equity attributable to shareholders 766,111 766,111 766,111
Fair value of interest rate derivatives (2,966) (2,966) -
Intangible assets (26) - -
Real estate transfer tax - 73,942 -
EPRA net asset value 763,119 837,087 766,111
Diluted shares (number) 471,975,411 471,975,411 471,975,411
EPRA net asset value per share 161.69p 177.36p 162.32p
EPRA NTA EPRA NRV EPRA NDV
31 March 2024 £'000 £'000 £'000
IFRS equity attributable to shareholders 758,645 758,645 758,645
Fair value of interest rate derivatives (2,169) (2,169) -
Intangible assets (21) - -
Real estate transfer tax - 73,670 -
EPRA net asset value 756,455 830,146 758,645
Diluted shares (number) 471,975,411 471,975,411 471,975,411
EPRA net asset value per share 160.27p 175.89p 160.74p
IV. EPRA NET INITIAL YIELD AND "TOPPED UP" NET INITIAL YIELD
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total properties per Financial Statements 1,142,216 1,113,149 1,105,587
Add assets held for sale 7,575 - -
Less head lease right-of-use asset (9,758) (9,540) (9,810)
Less development properties (6,895) (6,796) (6,685)
Completed property portfolio 1,133,138 1,096,813 1,089,092
Add notional purchasers' costs 75,920 73,486 72,969
Gross up completed property portfolio valuation (A) 1,209,058 1,170,299 1,162,061
Annualised passing rent 62,996 58,767 60,574
Less irrecoverable property outgoings (1,349) (1,760) (2,023)
Annualised net rents (B) 61,647 57,007 58,551
Contractual rental increases for rent-free period 659 1,366 744
"Topped up" annualised net rent (C) 62,306 58,372 59,295
EPRA net initial yield (B/A) 5.1% 4.9% 5.0%
EPRA "topped up" net initial yield (C/A) 5.2% 5.0% 5.1%
V. EPRA VACANCY RATE
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Annualised potential rental value of vacant properties 6,476 5,013 4,364
Annualised potential rental value for the completed property portfolio 80,116 73,782 74,770
EPRA vacancy rate 8.1% 6.8% 5.8%
VI. TOTAL COST RATIO/EPRA COST RATIO
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Total cost ratio £'000 £'000 £'000
Costs
Property operating expenses(1) 1,641 1,218 2,511
Administrative expenses 4,312 4,487 9,191
Less: service charge income (191) (197) (347)
Less: ground rents (51) (50) (104)
Total costs including vacant property costs (A) 5,711 5,458 11,251
Group vacant property costs (1,195) (748) (1,623)
Total costs excluding vacant property costs (B) 4,516 4,710 9,628
Gross rental income
Gross rental income 30,636 29,731 59,951
Less: ground rents paid (51) (50) (104)
Less: service charge income (191) (197) (347)
Total gross rental income (C) 30,394 29,484 59,500
Total cost including vacant property costs (A/C) 18.8% 18.5% 18.9%
Total cost excluding vacant property costs (B/C) 14.9% 16.0% 16.2%
EPRA cost ratio
Total costs (A) 5,711 5,458 11,251
EPRA total costs including vacant property costs (D) 5,711 5,458 11,251
Vacant property costs (1,195) (748) (1,623)
EPRA total costs excluding vacant property costs (E) 4,516 4,710 9,628
EPRA cost ratio (including vacant property costs (D/C) 18.8% 18.5% 18.9%
EPRA cost ratio (excluding vacant property costs (E/C) 14.9% 16.0% 16.2%
1. Property operating expenses are cost of sales. These typically
include utilities, business rates, letting fees and other direct costs.
VII. EPRA LTV
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Gross drawn debt 407,214 353,714 353,714
Net payables 13,733 14,663 13,713
Cash and cash equivalents (29,260) (30,853) (30,274)
Net debt (A) 391,687 337,524 337,153
Investment property (excluding ROU asset) 1,140,034 1,103,609 1,099,547
Head lease ROU asset 9,758 9,540 9,810
Intangible assets 16 26 21
Total property value (B) 1,149,808 1,113,175 1,109,378
EPRA LTV (A/B) 34.1% 30.3% 30.4%
VIII. EPRA capital expenditure analysis
Six months to Six months to Year ended
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Acquisitions 45,088 - -
Development - 4,317 4,359
Capital expenditure
- no incremental lettable space 1,185 5,080 6,871
Total 46,273 9,397 11,230
IX. EPRA like-for-like net rental income
Six months to Six months to
30 September 30 September
2024 2023
(unaudited) (unaudited)
£'000 £'000 Change
Like-for-like net rental income 28,390 27,584 2.9%
Other 108 541
Like-for-like net rental income (and other) 28,498 28,125 1.3%
Development lettings 289 83
Like-for-like net rental income plus developments 28,787 28,208 2.0%
Properties acquired 202 -
Properties sold 6 305
Net rental income 28,995 28,513 1.7%
X. Total accounting return
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Opening EPRA NTA 160.27p 162.44p 162.44p
Closing EPRA NTA 158.05p 161.69p 160.27p
Change in EPRA NTA (2.22)p (0.75p) (2.17)p
Dividends paid 4.35p 4.35p 7.60p
Total growth in EPRA NTA plus dividends 2.13p 3.60p 5.43p
Total return 1.3% 2.2% 3.3%
GLOSSARY OF TERMS
ENERGY PERFORMANCE CERTIFICATE ("EPC")
A measure of the energy efficiency of a property on a scale of A (most
efficient) to G (least efficient) and is a legal requirement for a building to
be sold, let or constructed. Once obtained, an EPC is valid for ten years.
EPRA COST RATIO
Administrative and operative costs (including and excluding costs of direct
vacancy) divided by gross rental income.
EPRA EARNINGS PER SHARE ("EPS")
Earnings from continuing operational activities divided by weighted average
number of shares in issue during the year.
EPRA LIKE-FOR-LIKE RENTAL GROWTH
Compares the growth of the net rental income of the portfolio that has been
consistently in operation, and not under development, during the two full
preceding periods that are described.
EPRA NET DISPOSAL VALUE ("NDV")
Represents the shareholders' value under a disposal scenario, where deferred
tax, financial instruments and certain other adjustments are calculated to the
full extent of the liability, net of any resulting tax.
EPRA NET INITIAL YIELD
Annualised rental income based on the cash rent passing at the balance sheet
date, less non-recoverable property operating expenses, divided by the market
value of the property. Increased with (estimated) purchasers' costs.
EPRA NET REINSTATEMENT VALUE ("NRV")
Assumes that entities never sell assets and aims to represent the value
required to rebuild the entity.
EPRA NET TANGIBLE ASSETS ("NTA")
Assumes that entities buy and sell assets, thereby crystallising certain
levels of unavoidable deferred tax.
EPRA "TOPPED-UP" NET INITIAL YIELD
EPRA net initial yield adjusted for expiration of rent-free periods or other
unexpired lease incentives such as discounted rent periods and step rents.
EPRA VACANCY RATE
Estimate market rental value ("ERV") of vacant space divided by ERV of the
whole portfolio.
EUROPEAN PUBLIC REAL ESTATE ASSOCIATION ("EPRA")
The European Public Real Estate Association ("EPRA") is the industry body for
European Real Estate Investment Trusts ("REITs").
LOAN TO VALUE ("LTV")
The Group's net debt expressed as a percentage of the investment portfolio.
NET INITIAL YIELD
Annual rents on investment properties as a percentage of the investment
property portfolio valuation having added notional purchasers' costs.
OCCUPANCY RATE
The ERV of the let units as a percentage of the total ERV of the investment
property portfolio.
PROPERTY INCOME DISTRIBUTION ("PID")
Dividends from the Group's tax-exempt property business.
TOTAL ACCOUNTING RETURN ("TAR")
Represents the movement in EPRA NTA per share plus dividends paid during the
period expressed as a percentage of EPRA NTA per share at the beginning of the
period.
TOTAL PROPERTY RETURN ("TPR")
Capital growth in the portfolio, plus net rental income and gain or loss on
property disposals expressed as a percentage return on the period's opening
value.
WEIGHTED AVERAGE UNEXPIRED LEASE TERM ("WAULT")
The average lease term remaining to expiry across the portfolio weighted by
contracted rental income.
COMPANY INFORMATION
DIRECTORS
Nigel Rich CBE FCA Chairman
Richard Moffitt Director
Bruce Anderson ACMA FCIOBS Director
Heather Hancock LVO DL Director
Lynda Heywood FCA FCT Director
Cherine Aboulzelof Director - appt 1 July 2024
COMPANY SECRETARY
LINK COMPANY MATTERS LIMITED
Central Square, 10th Floor
29 Wellington Street
Leeds
LS1 4DL
REGISTERED OFFICE
Central Square
29 Wellington Street
Leeds
LS1 4DL
MANAGER AND AIFM
G10 CAPITAL LIMITED
4th Floor 3 More London Riverside
London
SE1 2AQ
INVESTMENT ADVISER
Logistics Asset Management LLP
Bond House
19-20 Woodstock Street London
W1C 2AN
JOINT BROKERS
SINGER CAPITAL MARKETS LLP
One Bartholomew Lane
London
EC2N 2AX
PANMURE LIBERUM LTD
Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9LY
JOH. BERENBERG, GOSSLER & CO KG
60 Threadneedle Street
London
EC2R 8HP
LEGAL ADVISERS TO THE COMPANY
GOWLING WLG (UK) LLP
4 More London
London
SE1 2AU
FINANCIAL ADVISER
KINMONT LIMITED
5 Clifford Street
London
W1S 2LG
BANKERS
BARCLAYS BANK PLC
1 Churchill Place
London
E14 5HP
AVIVA PLC
St Helen's
1 Undershaft
London
EC3P 3DQ
ING Bank N.V.
8-10 Moorgate
London
EC2R 6DA
SANTANDER UK PLC
2 Triton Square
Regents Place
London
NW1 3AN
DEPOSITARY
INDOS FINANCIAL LIMITED
The Scalpel, 18(th) Floor
52 Lime Street
London
EC3M 7AF
AUDITOR
RSM UK AUDIT LLP
25 Farringdon Street
London
EC4A 4AB
COMMERCIAL PROPERTY VALUER
JONES LANG LASALLE LIMITED
30 Warwick Street
London
W1B 5NH
REGISTRAR
COMPUTERSHARE INVESTOR SERVICES PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
WEBSITE
www.urbanlogisticsreit.com (http://www.urbanlogisticsreit.com)
LEI: 213800P6ODJW2UFNDC37
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