REG - Warehouse REIT PLC - Final Results for Year Ended 31 March 2024
25/06/2024 07:00
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RNS Number : 6791T Warehouse REIT PLC 25 June 2024
25 June 2024
Warehouse REIT plc
(the "Company" or "Warehouse REIT", together with its subsidiaries, the
"Group")
FULL YEAR RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2024
Robust occupational demand and multi-let focus underpins rising values and
continued leasing momentum
Neil Kirton, Chairman of Warehouse REIT commented: "The standout feature of
this year has been the resilience of the industrial occupational markets,
reinforcing our conviction in the multi-let asset class and driving a 5.1%
increase in like-for-like rental growth. This part of the market remains
structurally under-supplied in terms of well-located, quality assets,
supporting an increase in our valuation and enabling us to capture an uplift
on previous rents of nearly 30%.
We have continued to execute on our disposal strategy, with £165.2 million of
non-core assets sold since our disposal plan was announced in November 2022.
This includes Barlborough Links, Chesterfield, a single-let asset which sold
for £46.0 million in June. Releasing capital from Radway Green in Crewe
will complete that plan and negotiations are well advanced.
This strong progress provides us with the flexibility to undertake selective
value accretive acquisitions, and today we are pleased to announce the
acquisition of part of the Ventura Retail Park in Tamworth for £38.6 million,
a retail warehousing asset which is highly complementary to our business and
our skill set."
High-quality, strategically located assets delivering strong valuation
performance
· Portfolio value up 2.0% on a like-for-like basis to £810.2
million (31 March 2023: £828.8 million)
o Investment Portfolio value up 2.6%; multi-let portfolio, up 3.1%,
like-for-like
o Strong performance driven by growth in estimated rental values of 7.7%
with equivalent yields broadly flat
· EPRA NTA per share up 1.5% to 124.4p (31 March 2023: 122.6p)
· Total accounting return of 6.7% (31 March 2023: -25.7%)
Resilient occupational market supporting leasing activity with rents 28.6%
ahead of previous rents
· 103 lease events over 1.5 million sq ft securing £10.0 million of
contracted rent, 28.6% ahead of previous passing rents and 8.6% ahead of March
2023 ERV's including:
o £1.6 million from 45 new lettings, 37.7% ahead of previous contracted
rent;
o £2.8 million from 36 renewals, 36.7% ahead of previous contracted rent;
and
o £5.6 million from 22 rent reviews, 23.9% ahead of previous contracted
rent
· 5.1% like-for-like growth in contracted rents, with portfolio
reversion increased to 13.1%
· Occupancy at 96.4% with c.99% of FY24 rent already collected
· Post period-end, a further 21 lease events over 0.6 million sq ft,
securing £0.6 million of contracted rent, 13.1% ahead of previous contracted
rent
Disposal plan near completion, focused on lower yielding, non-core assets and
demonstrating liquidity
· £110.5 million of asset sales exchanged or completed since 1 April
2023, comprising:
o £53.0 million in FY24, 15.6% ahead of March 2023 book value; generating
£5.5 million of profit
o £57.5 million post year end sales, including Barlborough Links, a
single-let asset in Chesterfield
· Negotiations well advanced to release capital from Radway Green,
Crewe, completing our disposal plan
£38.6 million acquisition of Phase 2 of the Ventura Retail Park, Tamworth
· Retail warehousing highly complementary to multi-let industrial and
leverages Tilstone's expertise and experience
· Attractive entry point with a net initial yield of 7.4%, ahead of our
cost of debt
Robust operational performance driving improved earnings
· Operating profit up 8.7% to £35.0 million (31 March 2023: £32.2
million), reflecting leasing momentum and reduction in EPRA cost ratio of 640
basis points to 24.4%, our lowest ever
· Adjusted earnings of £20.6 million (31 March 2024: £19.8 million)
· Adjusted EPS up 2.1% to 4.8p (31 March 2023: 4.7p)
· Dividend maintained at 6.4p; 95% covered when profits on disposals
included
· £320.0 million of debt refinanced with more favourable covenants and
additional interest rate caps of £50.0 million acquired
· 88.0% of debt hedged at year end, rising to over 90% post year end
capital activity; no major refinancing until 2028
· LTV at 33.1% as at 31 March 2024, (31 March 2023: 33.9%)
Progressing our sustainability strategy
· 66.6% of the portfolio now EPC A-C rated (31 March 2023: 60.2%)
Financial highlights
Year ended 31 March 2024 2023
Gross property income £47.1m £47.8m
Operating profit before change in value of investment properties £35.0m £32.2m
IFRS profit/(loss) before tax £34.3m (£182.8m)
IFRS earnings per share 8.1p (43.0)
Adjusted earnings per share 4.8p 4.7p
Dividends paid per share 6.4p 6.4p
Total accounting return 6.7% (25.7%)
Gross to net rental income ratio 96.8% 91.7%
Total cost ratio 24.4% 28.4%
As at 31 March 2024 31 March 2023
Portfolio valuation £810.2m £828.8m
IFRS net asset value £535.6m £528.5m
IFRS net asset value per share 126.1 124.4p
EPRA net tangible assets ("NTA") per share 124.4p 122.6p
Loan to value ("LTV") ratio 33.1% 33.9%
Investment portfolio statistics
As at 31 March 2024 31 March 2023
Contracted rent £44.6m £45.3m
ERV £53.5m £53.3m
Passing rent £42.9m £41.2m
WAULT to expiry 5.0 years 5.5 years
WAULT to first break 4.1 years 4.5 years
EPRA topped up yield 5.6% 5.5%
Equivalent yield 6.5% 6.5%
Occupancy 96.4% 95.8%
Meeting
A meeting for professional investors and analysts will be held at 9am on 25
June 2024. Registration is required for this event, please email FTI
Consulting at warehousereit@fticonsulting.com
(mailto:warehousereit@fticonsulting.com) should you wish to attend.
The results presentation will also be available in the Investor Centre section
of the Group's website.
Enquiries
Warehouse REIT plc
via FTI Consulting
Tilstone Partners Limited
Simon Hope, Peter Greenslade, Paul Makin, Jo Waddingham
+44 (0) 1244 470 090
G10 Capital Limited (part of the IQEQ Group, AIFM)
Maria Baldwin
+44 (0) 207 397 5450
FTI Consulting (Financial PR & IR Adviser to the Company)
Dido Laurimore, Richard Gotla
+44 (0) 7904 122207 / WarehouseReit@fticonsulting.com
(mailto:WarehouseReit@fticonsulting.com)
Further information on Warehouse REIT is available on its
website: warehousereit.co.uk
(https://tilstone.sharepoint.com/whreit/corp/finance/annacc/2024/H1/warehousereit.co.uk)
Notes
Warehouse REIT is a UK Real Estate Investment Trust that invests in UK
warehouses, focused on multi-let assets in industrial hubs across the UK.
We provide a range of warehouse accommodation in key locations which meets the
needs of a broad range of occupiers. Our focus on multi-let assets means we
provide occupiers with greater flexibility so we can continue to match their
requirements as their businesses evolve, encouraging them to stay with us for
longer.
We invest in our business by selectively acquiring assets with potential and
by delivering opportunities we have created. Through pro-active asset
management we unlock the value inherent in our portfolio, helping to capture
rising rents and driving an increase in capital values to deliver strong
returns for our investors over the long term.
Sustainability is embedded throughout our business, helping us meet the
expectations of our stakeholders today and futureproofing our business for
tomorrow.
The Company is an alternative investment fund ("AIF") for the purposes of the
AIFM Directive and as such is required to have an investment manager who is
duly authorised to undertake the role of an alternative investment fund
manager ("AIFM"). The AIFM and the Investment Manager is currently G10 Capital
Limited (Part of the IQEQ Group).
CHAIRMAN'S STATEMENT
In many respects the standout feature of the year has been the resilience and
strength of our occupational markets. The multi-let industrial sector, which
remains critically undersupplied in terms of well-located, quality assets has
continued to perform well. We have maintained our strong track record of
successfully capturing reversion and generating significant rental growth and
I am pleased to say that this has underpinned an increase in the net asset
valuation for the year under review.
In addition to maximising returns from the existing portfolio, we have
continued to focus on reshaping the balance sheet to create a platform that is
appropriate for your business. We have sold £165.2 million of assets since
the disposal plan was announced in November 2022 but importantly, we have not
sold any flagship estates.
We know what our assets are worth and have been patient but proactive in our
approach. Releasing capital from Radway Green, our 100-acre site adjacent to
the M6 is a very good example of that. We have refused to move with undue
haste, recognising the unrealised strategic value in this development and
during the year, have seen significant interest develop from various parties
with negotiations now well advanced. A successful conclusion completes our
disposal plan.
This strategy is consistent not only with a higher interest rate environment
but also, with sales being accretive to earnings, a commitment to move our
shareholders back towards a covered dividend. Reflecting the good progress we
have made, the Board is comfortable that the Group now has the flexibility to
selectively undertake value accretive acquisitions, and accordingly is pleased
to have acquired part of the Ventura Retail Park in Tamworth, a retail
warehousing asset which is highly complementary to our business and our skill
set.
Operational review
Our asset management in the year has driven a 5.1% increase in like-for-like
contracted rent, bringing total contracted rent to £44.6 million. We are
successfully capturing reversion, with deals on average 28.6% ahead of prior
rents, equating to £2.1 million of new rent and including the letting of
vacant space, £3.0 million of new rent was added in the year. Post year end
activity adds a further £0.6 million to contracted rent.
With over 100 deals completed in the year, our leasing activity also provides
strong evidence of rental growth, supporting our valuation. ERV growth across
the portfolio was 7.7%, exceeding our own expectations, and driving a
like-for-like portfolio valuation uplift of 2.0%, (with an increase of 3.1% in
our multi-let portfolio), taking the total value of our assets to £810.2
million.
This performance is a strong endorsement of our strategic focus on multi-let
industrials. As well as providing more opportunities to capture reversion,
this is a highly scarce asset class, with rebuild costs well above capital
values due to expensive development finance and a strict planning regime. Our
capital value of £93.5 per sq ft compares to a reinstatement value of
c.£116.2 per sq ft. At the same time, demand for multi-let space is more
resilient given the diversity of its occupier base and together these dynamics
support our continuing high occupancy of 96.4%, driving future rental growth.
CAPITAL ACTIVITY
Our disposal programme has targeted assets that are non-core or where our
asset management plans have been substantially delivered. We executed on
£53.0 million of sales in the year, in many cases successfully selling into
pockets of demand to achieve a price ahead of book value with an average
premium of 15.6%. This crystallised a profit on sale of £5.5 million.
Post year end sales totalled £57.5 million and comprised the £46.0 million
disposal of Barlborough Links in Chesterfield, a single-let property with
rental growth capped through indexation, as well as two other single-let
assets in Plymouth and Newport . These transactions increase our pro forma
weighting towards multi-let assets to c.78% from c.72% at year end and further
focus the portfolio on our core assets where we see opportunities to drive
value for shareholders.
FINANCIAL PERFORMANCE
At £35.0 million, operating profits were 8.6% ahead of last year, with our
leasing activity and the fall in operating costs more than offsetting the
impact of disposals. Adjusted earnings per share were 4.8 pence, 2.1% ahead of
last year and rise to 6.1 pence when profits from disposals are taken into
account, meaning that on a cash basis, the full year dividend of 6.4 pence is
95.3% covered.
The uplift in valuation has driven an increase in our EPRA NTA per share of
1.5% to 124.4 pence (31 March 2023: 122.6 pence), contributing to a total
accounting return of 6.7%.
BALANCE SHEET
In addition to the disposals programme, in June 2023 we completed a successful
refinancing of our previous £320.0 million facility to further optimise our
balance sheet. The new facility comprises a £220.0 million term loan and a
£100.0million revolving credit facility with a club of four lenders: HSBC,
Bank of Ireland, NatWest and Santander. The new facility was agreed on more
favourable covenants, reflecting the strength of our banking relationships as
well as the quality of the portfolio, and the tenure has been extended from
January 2025 to June 2028.
In November 2023, we acquired a further £50.0 million of interest rate caps,
replacing the £30.0 million of caps expiring and fixing SONIA at 2.0%. This
is in addition to the £200.0 million of interest rate caps acquired in the
last financial year. As a result, 88.0% of our debt was hedged at year end and
our weighted average cost of debt was 4.2%.
As at 31 March 2024, the Group's loan to value of 33.1% remains well within
our target range of 30% to 40%, with £36.0 million of headroom within our new
facilities.
ESG
We have continued to progress our ESG agenda. Last year we set out a
commitment to be net zero in scope 1 and 2 greenhouse gas emissions by 2030
alongside a framework for reducing our wider carbon footprint. Sustainability
is firmly embedded in the way we manage our portfolio with each refurbishment
aiming to remove gas, electrify heating and lighting and deliver a minimum EPC
B rating. This has driven a significant increase in our EPC A-C rated space,
which now accounts for 66.6% of the portfolio compared to 60.2% at the start
of the year and, in addition, makes our space more attractive to occupiers,
supporting leasing and valuation.
This year, we have also reported some scope 3 emissions for the first time.
Looking forward, improving our visibility over, and ultimately setting a
target for the reduction of scope 3 emissions is an important priority for the
business. Our close engagement with occupiers and the steps we have taken to
introduce green leases, which encourage data sharing wherever possible, are
already having a positive impact in this respect.
On the Governance side, as previously announced, Martin Meech stepped down
from the Board at the Annual General Meeting ("AGM") in September 2023.
Following a comprehensive search, Dominic O'Rourke joined the Board as a
Non-Executive Director in the same month. He is currently Group Property
Director for FTSE 100 retailer Next plc, a role he has held since 2014. His
customer-facing experience in a sector that is key for our business is proving
to be a highly positive and complementary addition to the Board's expertise.
CONCLUSION AND OUTLOOK
Our disposal plan was announced in November 2022, when the rapid adjustment in
interest rates impacted our financing costs, and in turn our earnings. We have
largely delivered on that plan and are optimistic of a positive outcome on the
Radway process in the coming months.
Thereafter, capturing reversion becomes our primary tool for rebuilding
dividend cover. Our focus on what is a resilient part of the market and our
active asset management has created more rental upside in our portfolio which
is now 13.1% reversionary and looking forward, we believe attractive levels of
rental growth will continue.
We are also identifying opportunities to selectively make acquisitions of
higher yielding warehousing assets. Retail warehousing is an area in which
Tilstone Partners has experience and represents a highly attractive
opportunity at this time. We are very well placed to source value accretive
opportunities in this space and the Ventura Retail Park is an excellent
example of that.
This year, it feels appropriate to comment on the equity market context, which
has seen an increase in the level of corporate activity, both in our sector
and across listed investment trusts more generally. Our conviction, as a
Board, is that this Company owns high-quality, strategically-located assets,
but we are acutely aware that that is not reflected in the price at which our
equity currently trades. We believe that rebuilding dividend coverage is an
important first step in narrowing that discount and are confident the Company
has in place a strategy that will deliver this.
In summary, commercial real estate is a sector that has been, and may continue
to be, challenged by higher interest rates. We are successfully managing our
way through that and the Board are committed to making the decisions and
taking the steps that are necessary to create a sound platform from which our
operational strength can drive value for all our shareholders.
Neil Kirton
Chairman
We use the following key performance indicators ("KPIs") to monitor our
performance and strategic progress
OCCUPANCY LIKE-FOR-LIKE RENTAL INCOME GROWTH
96.4% 5.1%
Description Description
Total open market rental value of the units leased divided by total open The increase in contracted rent of units owned throughout the period,
market rental value, excluding development property and land, and equivalent expressed as a percentage of the contracted rent at the start of the period,
to one minus the EPRA vacancy rate. excluding development property, land and units undergoing refurbishment.
Why is this important? Why is this important?
Shows our ability to retain occupiers at renewal and to let vacant space, Shows our ability to identify and acquire attractive properties and grow
which in turn underpins our income and dividend payments. average rents over time.
How we performed How we performed
Active asset management, asset disposals and the robust occupational market We delivered further good rental growth, as we continued to capture the
helped us to increase occupancy by 6 bps during the year to 96.4%. reversionary potential in the portfolio through active asset management.
RENTAL INCREASES AGREED VERSUS VALUER'S ERV LIKE-FOR-LIKE VALUATION CHANGE
8.6% 2.0%
Description Description
The difference between the rent achieved on new lettings and renewals and the The change in the valuation of properties owned throughout the period under
ERV assessed by the external valuer, expressed as a percentage above the ERV review, expressed as a percentage of the valuation at the start of the period,
at the start of the period. and net of capital expenditure.
Why is this important? Why is this important?
Shows our ability to achieve rental growth ahead of ERV through asset Shows our ability to acquire the right quality of assets at attractive
management and the attractiveness of our assets to potential occupiers. valuations, add value through asset management and drive increased capital
values by capturing rental growth.
How we performed
How we performed
We let space overall 8.6% ahead of ERV, maintaining our strong track record of
exceeding valuers expectations. After last year's adverse market conditions, we have seen a 2.0% increase in
the like-for-like valuation as general market conditions improve and
reflecting the quality of our portfolio.
TOTAL ACCOUNTING RETURN TOTAL COST RATIO
6.7% 24.4%
Description Description
The movement in EPRA NTA over a period plus dividends paid in the period, The total cost ratio is the sum of property expenses and administration
expressed as a percentage of the EPRA NTA at the start of the period. expenses (ex one-off costs) as a percentage of gross rental income.
Why is this important? Why is this important?
Demonstrates the Group's success at creating value for shareholders. Shows our ability to effectively control our cost base, which in turn supports
dividend payments to shareholders.
How we performed
How we performed
We delivered a total accounting return of 6.7% in the year, below our target
as ongoing economic uncertainty continues to weigh on the sector but The total cost ratio improved further in the year due to non-recoverable
significantly ahead of last year reflecting a increase in our valuation. holding costs on larger vacant buildings and a lower investment advisor fee.
Excluding vacancy costs, the total cost ratio was 23.4%.
EPRA NTA PER SHARE LOAN TO VALUE RATIO
124.4p 33.1%
Description Description
The EPRA net asset value measure assumes entities buy and sell assets, thereby Gross debt less cash, short-term deposits and liquid investments, divided by
crystallising certain levels of deferred tax liability. This is expressed on a the aggregate value of properties and investments.
per share basis.
Why is this important?
Why is this important?
Shows our ability to balance the additional portfolio diversification and
Shows our ability to acquire well and to increase capital values through returns that come from using debt, with the need to manage risk through
active asset management. prudent financing.
How we performed How we performed
The increase in capital values relative to the market contributed to a 1.5% The decrease in the LTV primarily reflects our proceeds from asset disposals
increase in EPRA NTA per share to 124.4pence per share. reducing our level of debt as well as an increase in portfolio value.
INVESTMENT ADVISOR'S REPORT
GOOD PROGRESS WITH OUR PRIORITIES
At the start of the financial year, we set ourselves four priorities for FY24.
These were to:
• capture the reversionary potential in the portfolio;
• recycle capital by disposing of assets, enabling us to pay down the
Group's floating rate debt, strengthen the balance sheet and support earnings;
• progress the Radway Green development scheme; and
• increase dividend cover, by driving earnings through these actions.
We made good progress with the first two of these priorities, and we have a
clear plan in place to deliver value from Radway Green, Crewe, which will
position the Group to increase its dividend cover over time.
PRIORITY: CAPTURING REVERSION
At the year end, the contracted rent roll for the investment portfolio
(excluding developments) was £44.6 million, compared to an ERV of £53.5
million. The difference reflects £7.0 million (or 13.1%) of portfolio
reversion and £1.9 million of potential rent on vacant space.
The structure of the Group's leases supports capturing this reversion, with
less than 10% being index linked through either a cap or collar arrangement.
This flexibility is an important advantage in a more inflationary environment
We made good progress capturing reversion in FY24, with a total of 103 lease
events completed, covering 1.5 million sq ft. As a result, we were able to
capture £3.0 million of new contracted rent for the year, with £0.9 million
of contracted rent coming from the letting vacant space.
Total contracted rents for the investment property portfolio stood at £44.6
million at year end, an increase of 5.1% on a like-for-like basis during the
year.
The table following demonstrates the potential for continuing to capture
reversion in the years ahead. These represent good opportunities for further
rental growth and reflects the position before any further ERV growth or
outperformance.
Rent subject to review or lease expiry Contracted rent (£m) ERV (£m)
FY25 12.6 16.1
FY26 8.0 9.1
FY27 5.7 6.5
FY28 5.4 5.6
FY28+ 12.9 14.3
PRIORITY: CAPITAL RECYCLING
We keep the portfolio under constant review, to identify mature or non-core
assets that are candidates for disposal. This has been a particular focus in
FY24.
During the year, the Group sold seven estates for £53.0 million. This was
15.6% ahead of their aggregate book value, crystallising a profit on disposal
of £5.5 million in the year, and reflecting a blended net initial yield of
5.0%. Sales have focused on single-let assets, or assets where we have
substantially completed our asset management initiatives leaving little
further upside. This good performance demonstrates our ability to match assets
that are non-core for Warehouse REIT with pockets of demand across the market.
We will continue to rigorously assess our portfolio to ensure we remain
focused on the highest returning opportunities to maximise value for
shareholders.
The assets sold in FY24 were:
• Dales Manor Business Park, Cambridge for £27.0 million;
• Warrington South Industrial Estate, for £11.6 million; and
• smaller assets in Ipswich, Ellesmere Port, the Isle of Wight,
Cardiff and Halifax totalling £14.4 million.
The Group's total asset sales since we announced the disposal plan in November
2022 stood at £107.7 million at 31 March 2024. Since the year end, we have
announced further disposals totalling £57.5 million. This takes total
disposals since November 2022 to £165.2 million demonstrating the liquidity
of the Group's portfolio. See Post-Period End Activity for more information.
PRIORITY: PROGRESSING RADWAY GREEN
Radway Green is the Group's key logistics development opportunity, in a
premier location just 1.5 miles from Junction 16 of the M6 near Crewe. At the
interim results in November 2023, the Group announced that it was evaluating
options for the scheme, including the sale of all or part of Radway Green, and
that it would not progress the development alone. Negotiations are now well
advanced.
This is a highly attractive scheme, with full planning permission and the
potential to deliver at least 1.8 million sq ft of space, across two phases of
0.8 million sq ft and 1.0 million sq ft.
PRIORITY: INCREASE DIVIDEND COVER
Adjusted earnings per share was 4.8 pence for the year (FY23: 4.7 pence),
representing cover of 75.0% of the total dividend for the year of 6.4 pence.
The table below reconciles the movement in adjusted EPS between the two years:
Adjusted earnings per share Pence
For the year ended 31 March 2023 4.7
Rental income and dilapidations (0.1)
Reduced non-recoverable property expenses 0.2
Reduced investment management fee and other administrative expenses 0.2
Net finance costs (0.2)
For the year ended 31 March 2024 4.8
The actions we have taken in FY24 position the Group to deliver rising
earnings and dividend cover moving forwards.
In FY24, the Group generated profits on disposals of £5.5 million or 1.3
pence per share. Adding these profits to adjusted EPS results in earnings of
6.1 pence per share, increasing dividend cover on a cash basis to 95.3% for
the year.
AN ATTRACTIVE AND RESILIENT PORTFOLIO
Focus on multi-let estates
The Group is highly focused on multi-let estates, which made up 71.6% of the
portfolio by value at the year end (excluding development land). We favour
these estates because they:
• offer more asset management opportunities than single-let assets,
helping us to raise the rental tone more quickly and capture the reversion
created;
• reduce risk by having a more diverse range of occupiers, spread
across different industries;
• provide flexibility for occupiers with a range of unit sizes to suit
the life cycle of a company and the ability to scale up by taking multiple
units; and
• are a scarce asset class, with rebuild costs generally below capital
values, constraining supply and supporting rental growth.
The portfolio analysis table below provides more information on the split
between multi-let and single-let assets at the year end.
A strategically located portfolio
The portfolio is spread across important economic hubs, in gateway locations
with access to major arterial routes and a plentiful local labour force. This
contributes to occupier demand and the potential for long-term rental growth.
In particular, the portfolio has exposure to key industrial hubs in:
• the North West (25.1% of the investment portfolio);
• the Midlands (22.7%); and
• the Oxford-Cambridge Arc, centred on Milton Keynes (24.2%).
Portfolio analysis
At the year end, the investment portfolio comprised 642 units across 7.8
million sq ft of space (31 March 2023: 833 units across 8.2 million sq ft).
The table below analyses the portfolio as at 31 March 2024:
Value (£m) Occupancy by ERV (%) NIY (%) Equivalent yield (%) Average rent (£ per sq ft) ERV (£ per sq ft) Capital value (£ per sq ft)
Multi-let more than 100k sq ft 373.5 96.1 5.6 6.4 5.84 6.82 90.93
Multi-let less than 100k sq ft 150.4 92.7 6.0 6.8 6.89 7.58 99.32
Single-let regional distribution 129.9 100.0 5.5 6.1 5.54 6.55 94.09
Single-let last mile 78.0 100.0 6.0 6.6 6.49 7.48 94.79
Total 731.8 96.4 5.7 6.5 6.05 6.99 93.52
Development land 78.4
Total portfolio 810.2
Capital values show upside potential
The NIY of the investment portfolio was 5.7% at 31 March 2024, with a
reversionary yield of 6.8%. The average capital value across the portfolio was
£93.52 per sq ft, which remains well below the reinstatement value for this
type of asset, which is £116.16 per sq ft on our portfolio.
Occupancy remains high
Occupancy across the investment portfolio remained high at 96.4% at the year
end (31 March 2023: 95.8%). Effective occupancy, which excludes units under
offer to let or undergoing refurbishment, was 97.6% (31 March 2023: 98.4%),
with 0.4% of the investment portfolio under offer to let and a further 0.8%
undergoing refurbishment at that date.
The weighted average unexpired lease term for the investment portfolio stood
at 5.0 years (31 March 2023: 5.5 years).
DIVERSE OCCUPIER BASE INCREASES RESILIENCE
The Group has a diverse occupier base of 445 businesses, with around 73.8%
generating revenues of more than £10 million and around 89.2% exceeding £1
million of revenues.
The table below shows the occupier split by sector at the year end:
Occupier base by sector at 31 March 2024 Contracted rent %
Wholesale and trade distribution 35.0
Food and general manufacturing 28.0
Services and utilities 17.8
Transport and logistics 11.8
Technology, media and telecoms 3.1
Construction 2.9
Other 1.4
100
The Group's rent roll is also well diversified. The top 15 occupiers account
for 36.3% of the contracted rents from the investment portfolio, with the top
100 generating 77.7%.
Top 15 occupiers at 31 March 2024 Rent £m % of total rent D&B score
Amazon UK Services Limited 3.2 7.3 5A2
John Lewis plc 1.9 4.3 5A1
Wincanton Holdings Limited 1.9 4.2 5A1
DFS Limited 1.3 3.0 5A2
Direct Wines Limited 1.2 2.6 N2
Alliance Healthcare (Distribution) Limited 0.9 2.1 5A2
Argos Limited 0.8 1.9 5A2
Magna Exteriors (Liverpool) Limited 0.8 1.9 N-
International Automotive Components Limited 0.8 1.8 4A4
Evtec Aluminium Technologies Limited 0.7 1.4 N4
Emerson Process Management Limited 0.7 1.4 5A2
Howden Joinery Properties Limited 0.5 1.1 N3
A. Schulman Thermoplastics Limited 0.5 1.1 4A2
Colormatrix Europe Limited 0.5 1.1 5A2
Magna Exteriors (Banbury) Limited 0.5 1.1 C3
Total 16.2 36.3
This spread of occupiers across industries and business sizes means the Group
is not reliant on any one occupier or industry. This increases the Group's
resilience and helps to mitigate both financial and leasing risks.
Contracted rent by occupier size %
Top 15 occupiers 36.3
Occupiers 16 - 25 9.2
Occupiers 26 - 50 15.9
Occupiers 51 - 100 16.2
Others 22.4
100.0
Occupiers remain in robust shape
We monitor the strength of the occupiers' covenants by using credit software
such as Dun & Bradstreet, anti-money laundering software such as Dow
Jones, monitoring news flow and analysing company reports. This keeps us
informed of how evolving macroeconomic conditions are affecting their
businesses. For smaller occupiers, the Group also often has the benefit of
rent deposits, giving it additional protection from bad debts.
Overall, the Group's occupiers appear well placed in the current environment,
which is reflected in our rent collection and the continued low level of bad
debts (see the Financial Review). As at 17 June 2024, we had collected 99.3%
of the rent due in respect of the year and we expect this to increase further
as we work with occupiers to collect the outstanding amount.
Working with occupiers
While the Group's outsourced property managers handle some day-to-day
administrative tasks with occupiers, we ensure that we always own the occupier
relationship. Our asset management team regularly visits sites, meets
occupiers face to face and holds calls with them. Initiatives such as the
recently opened estate office at Bradwell Abbey in Milton Keynes enable our
team to be on site, build stronger relationships and helps develop letting
interest.
We also run surveys to obtain insights from occupiers, so we can support them
better and to inform our asset management plans. These typically cover current
and future space requirements, the number of people on site, where their stock
comes from and goes to, what, if any, on site amenities they would value and
what their ESG priorities are. This year our occupier survey covered the top
25 occupiers and two of the Group's largest estates; responses covered around
19% of contracted rents. It was conducted in person, providing an excellent
opportunity to develop these key relationships.
LEASING ACTIVITY
Robust occupier demand has helped us to continue to capture the reversion in
the portfolio through lease renewals and new lettings. New leases were ahead
of ERVs, while lease renewals and rent reviews are achieving strong average
uplifts against previous rental levels.
New leases
The Group completed 45 new leases on 0.2 million sq ft of space during the
year, which will generate annual rent of £1.6 million, 37.7% ahead of the
previous contracted rent and 8.7% ahead of the 31 March 2023 ERV. The level of
incentives has reduced compared with the prior year.
Highlights are shown in the table below:
Increase over
Estate Lease length (years) Annual rent (£) Previous rent ERV at 31/3/23
Halebank Industrial Estate, Widnes 5 325,000 +50.2% +1.6%
Delta Court Industrial Estate, Doncaster 5 138,800 +15.7% +12.0%
Bradwell Abbey, Milton Keynes 3 97,000 - +10.5%
Delta Court Industrial Estate, Doncaster 10 89,100 +31.0% +40.6%
Lease renewals
The Group continues to retain the majority of its occupiers, with 76.7%
remaining in occupation at lease expiry and 74.3% with a break arising in the
year.
There were 36 lease renewals on 0.4 million sq ft of space during FY24, with
an average uplift of 36.7% above the previous passing rent and 9.9% above the
ERV.
Highlights are shown in the table below:
Increase over
Estate Lease length (years) Annual rent (£) Previous rent ERV at 31/3/23
Kingsland Grange, Warrington 5 498,000 +42.3% +27.3%
Matrix Park, Eaton Point 5 320,500 +22.7% In-line
South Fort Street, Edinburgh 10 200,200 +30.1% +5.5%
Knowsley Business Park, Knowsley 10 118,900 +37.5% In-line
Rent reviews
During the year, we completed 22 rent reviews, generating an additional £5.6
million per annum, 23.9% ahead of previous rent and 8.0% ahead of the March
2023 ERV.
Highlights are shown in the table below:
Increase over
Estate Agreed passing rent (£) Previous rent ERV at 31/3/23
Chittening Industrial Estate, Bristol 390,000 +51.0% +3.2%
Lynx Business Park, Newmarket 334,500 +28.6% +28.6%
Howley Park Industrial Estate, Morley 304,500 +31.5% +15.0%
TARGETED CAPITAL EXPENDITURE DRIVING RENTAL GROWTH AND IMPROVED ENERGY
PERFORMANCE
On average, the Group budgets to invest around 0.75% of its gross asset value
("GAV") in capital expenditure each year. This excludes development projects
and is therefore based on GAV excluding developments. Our priorities when
investing in the estate are to drive rental growth, improve EPC ratings and
secure other ESG improvements. Approximately 20% of capex is typically
directed to EPC-related improvements and all capex must generate a minimum
return of 10% on the capital deployed. Our capital expenditure plans also take
account of local demand and supply, the requirements of individual units
versus the overall estate, and our longer-term aspirations to hold or sell the
asset.
Total capital expenditure in the year was £3.3 million, equivalent to 0.4% of
GAV excluding developments. At the year end, approximately 0.8% of the
portfolio's ERV was under refurbishment (31 March 2023: 1.3%).
FINANCIAL REVIEW
Performance
Rental income for the year was £44.0 million (FY23: £45.8 million), with the
reduction reflecting the impact of asset disposals, partially offset by the
Group's leasing activity, EPRA like-for-like rental growth of 5.7% and a full
year contribution from Bradwell Abbey (acquired in the first half of FY23).
The Group's operating costs include its running costs (primarily the
management, audit, company secretarial, other professional, and Directors'
fees), and property-related costs (including legal expenses, void costs and
repairs). Total operating costs for the year were £16.0 million (FY23: £18.9
million), with the cost base benefiting from a reduction in the Investment
Advisor's fee of £1.2 million to £5.7 million (FY23: 6.9 million) and lower
vacancy costs, following successful lettings activity in the year.
The net increase in the expected credit loss allowance remained low at £0.2
million (FY23: £0.2 million). This reflects the diversity and quality of the
Group's occupiers and our close relationships with them.
The total cost ratio, which is the adjusted cost ratio including direct
vacancy costs, was 24.4% (FY23: 28.4%). The ongoing charges ratio,
representing the costs of running the REIT as a percentage of NAV, was 1.4%
(FY23: 1.3%).
The Group disposed of assets totalling £53.0 million in the year, resulting
in a net profit on disposal of £5.5 million.
At 31 March 2024, the Group recognised a gain of £15.1 million on the
revaluation of its portfolio (FY23: loss of £193.4 million). See the
Valuation section below for more information.
Financing income in the year was £8.5 million (FY23: £6.9 million),
including £8.2 million (FY23: £2.0 million) of interest receipts from
interest rate derivatives.
Financing costs include the interest and fees on the Group's revolving credit
facility ("RCF") and term loan (see Debt Financing and Hedging). The finance
expenses were £24.6 million (FY23: £15.5 million). While the impact has been
partly mitigated by the Group's interest rate caps (see below), the all-in
cost of debt for the year reduced to 4.2% (FY23: 4.3%). The Group also had a
£5.2 million change in fair value of derivatives (FY23: £4.9 million gain),
as well as £1.7 million related to the accelerated amortisation of loan issue
costs, as a result of the debt refinancing in the first half of the year.
The statutory profit before tax was £34.3 million (FY23: £182.9 million
loss).
The Group has continued to comply with its obligations as a REIT and the
profits and capital gains from its property investment business are therefore
exempt from corporation tax. The corporation tax charge for the year was
therefore £nil (FY23: £nil).
Earnings per share under IFRS was 8.1 pence (FY23: 43.0 pence loss per share).
EPRA EPS was 2.9 pence (FY23: 3.9 pence). Adjusted earnings per share was 4.8
pence (FY23: 4.7 pence).
Dividends
The Company has declared the following interim dividends in respect of the
year:
Quarter to Declared Paid/to be paid Amount (pence)
30 June 2023 31 August 2023 6 October 2023 1.6
30 September 2023 15 November 2023 29 December 2023 1.6
31 December 2023 26 January 2024 2 April 2024 1.6
31 March 2024 25 June 2024 26 July 2024 1.6
Total 6.4
The total dividend was therefore in line with the Group's target for the year
of 6.4 pence and was 95.3% covered by adjusted EPS and profit on sale of
investment properties. Three dividends were property income distributions and
one was a non-property income distribution. The cash cost of the total
dividend for the year will be £27.2 million (FY23: £27.6 million).
Valuation
The portfolio was independently valued by CBRE as at 31 March 2024, in
accordance with the internationally accepted RICS Valuation - Global Standards
2020 (incorporating the International Valuation Standards) (the "Red Book"),
and the RICS Valuation - Global Standards 2021 - UK national supplement.
The portfolio valuation was £810.2 million (31 March 2023: £828.8 million),
representing a 2.0% like-for-like valuation increase. The value of the
investment portfolio was up 2.6% on a like-for-like basis with development
land down 2.5% reflecting the impact of higher interest rates on financing
development schemes.
The EPRA NIY at the year end was 5.4% (31 March 2023: 5.0%) and the EPRA
topped up NIY was 5.6% (31 March 2023: 5.5%). Whilst there was some softening
in valuation yields in the December 2023 quarter across the whole, FY24
valuation yields for mulit-let warehouses generally remained flat. The
increase in valuation was therefore driven by an increase in rental levels and
ERVs brought about by a combination of market forces and active asset
management.
Net asset value
EPRA Net Tangible Assets ("NTA") per share was 124.4 pence at 31 March 2024
(31 March 2023: 122.6 pence.) The table below reconciles the movement in the
EPRA NTA in FY24:
EPRA NTA per share Pence
As at 31 March 2023 122.6
Adjusted earnings 4.8
Profit on disposals 1.3
Dividends (6.4)
Valuation movement 3.5
Accelerated borrowing costs (0.4)
Cost of interest rate caps taken out in the year (1.0)
As at 31 March 2024 124.4
Debt financing and hedging
The Group refinanced its debt facilities in the first half of FY24, extending
the term and improving the covenants. The new £320.0 million facility
comprises a £220.0 million term loan and a £100.0 million RCF. It replaces
the Company's previous £320.0 million debt facility and extends the tenure
from January 2025 to June 2028. The facility is provided by a club of four
lenders: HSBC, Bank of Ireland, NatWest and Santander. The minimum interest
cover is 1.5 times, compared to 2.0 times under the previous facility, and the
maximum LTV has been extended from 55% to 60%. Both the term loan and the RCF
attract a margin of 2.2% plus SONIA for an LTV below 40% or 2.5% if the LTV is
above 40%.
At 31 March 2024, £64.0 million was drawn against the RCF and £220.0 million
against the term loan. This gave total debt of £284.0 million (31 March 2023:
£306.0 million), with the Group also holding cash balances of £16.0 million
(31 March 2023: £25.1 million). The LTV ratio at 31 March 2024 was therefore
33.1% (31 March 2023: 33.9%). Interest cover for the period was 3.1 times,
meaning the Group was substantially within the covenants in the debt facility.
At the year end, the Group had £250.0 million of interest rate caps in place,
of which £200.0 million fixed SONIA at 1.5% and £50.0 million fixed SONIA at
2.0%. The Group took out the £50.0 million cap in November 2023, to replace a
£30.0 million cap that expired in the month.
We continue to explore opportunities to diversify the Group's sources of debt
funding, extend the average maturity of its debt and further reduce the
average cost of debt.
TILSTONE PARTNERS LIMITED
As the Investment Advisor, our team plays a crucial role in the Group's
success. Our people have a range of relevant skills, including real estate
investment, asset management, finance and sustainability.
While everyone who joins us has the experience and qualifications they need
for their role, we are committed to supporting professional and personal
development and training. We therefore run an annual appraisal process and
provide both statutory and individual training, according to each person's job
or personal requirements. This year we have provided some additional
disclosure on training and development within our EPRA Sustainability tables.
In March 2024 we also conducted our first employee survey. We had a 100%
participation rate and were particularly pleased that over 90% rated their
overall working environment as Very Good or Good. Responding to the survey, we
have introduced a number of benefits, including employee volunteering days and
match funding. We set annual objectives which align to our values and every
employee has at least one ESG-related objective. Diversity and inclusion are
important to us, as we recognise the benefits of diverse viewpoints and life
experiences. At the year end, our gender diversity was 55% male, 45% female
across the Investment Advisor.
POST-PERIOD END ACTIVITY
The Group exchanged or completed on the sale of £57.5 million of single-let
assets in three separate transactions. These sales bring the total since 1
April 2023 to £110.5 million.
The transactions comprise Barlborough Links in Chesterfield, which has
exchanged for £46.0 million, Parkway Industrial Estate in Plymouth sold for
£6.3 million and Celtic Business Park, Newport sold for £5.2 million.
Also in June 2024, the Group exchanged contracts to acquire Ventura Retail
Park in Tamworth, a retail warehousing asset for £38.6 million, representing
a net initial yield of 7.4% Ventura is one of the top 20 shopping parks in the
UK with an excellent occupier line up including Boots, Sports Direct and
H&M. Comprising 13 units and covering 119,000 sq ft, it is part of a
larger retail cluster including M&S and Asda, adjacent to the A5.
COMPLIANCE WITH THE INVESTMENT POLICY
The investment policy is summarised below. The Group continued to comply in
full with this policy throughout the year.
Investment policy Status Performance
The Group will only invest in warehouse assets in the UK. þ All of the Group's estates are UK-based warehouses.
No individual warehouse will represent more than 20% of the Group's last þ The largest individual warehouse represents 5.8% of GAV.
published gross asset value ("GAV"), at the time it invests.
The Group will target a portfolio with no one occupier accounting for more þ The largest occupier accounts for 7.3% of gross contracted rents and 6.4% of
than 20% of its gross contracted rents at the time of purchase. No more than gross assets.
20% of its gross assets will be exposed to the creditworthiness of a single
occupier at the time of purchase.
The Group will diversify the portfolio across the UK, with a focus on areas þ The portfolio is well balanced across the UK.
with strong underlying investment fundamentals.
The Group can invest no more than 10% of gross assets in other listed þ The Group held no investments in other funds during the year.
closed-ended investment funds.
The Group's exposure to assets under development (including pre-let assets, þ The Group's exposure to developments at the year end was 9.7% of GAV.
forward fundings or assets which have been at least partially de-risked),
assessed on a cost basis, will not exceed 20% of gross assets at the time of
purchase.
The Group may invest directly, or through forward funding agreements or
commitments, in developments (including pre-developed land), where:
• the structure provides us with investment risk rather than
development risk;
• the development is at least partially pre-let, sold or de-risked in a
similar way; and
• we intend to hold the completed development as an investment asset.
The Group may, where considered appropriate, undertake an element of
speculative development, provided that the exposure to these assets, assessed
on a cost basis, does not exceed 10% of gross assets. Speculative developments
are those which have not been at least partially leased, pre-leased or
de-risked in a similar way.
The Group views an LTV of between 30% and 40% as optimal over the longer term þ The LTV at 31 March 2024 was 33.1%.
but can temporarily increase gearing up to a maximum of LTV of 50% at the time
of an arrangement, to finance value-enhancing opportunities.
GOING CONCERN
In preparing the financial statements, we and the Company's Board are required
to assess whether the Group remains a going concern. During the year, the
Group generated total property income of £51.0 million and operating profits
of £35.0 million, showing that rents would have to fall by approximately
31.4% before the business became loss-making. This is considered highly
unlikely given the high occupational demand for warehouse assets, our strong
relationships with the broad range of occupiers across the portfolio, the
level of rent collection and the fact that the portfolio ERV exceeds the
year-end contracted rent roll by 20.0%.
At the same time, the Group has a strong balance sheet, with substantial cash
and headroom within its facilities at the year end of £45.9 million. The
Group has refinanced its debt facilities, extending the term by more than
three years to June 2028, and at the date of this report has interest rate
caps on £250.0 million of debt.
We and the Company's Board have also carefully reviewed the risk landscape and
do not believe that the risks facing the Group have materially increased. As a
result, we are confident that the Group remains a going concern.
INVESTMENT MANAGER
The Company is an alternative investment fund for the purposes of the
Alternative Investment Fund Managers Directive ("AIFMD") and, as such, is
required to have an Investment Manager who is duly authorised to undertake
that role. G10 Capital Limited ("G10") is the Company's AIFM and Investment
Manager and is authorised and regulated by the Financial Conduct Authority.
INVESTMENT ADVISOR
Tilstone Partners Limited is Investment Advisor to the Company.
Simon Hope
Tilstone Partners Limited
24 June 2024
PRINCIPAL RISKS AND UNCERTAINTIES
BUSINESS
A Economic downturn impacting on the warehouse market B Poor returns on the portfolio
A general downturn in the UK economy could have a negative impact on the Risk mitigation: There is a risk that the returns generated by the portfolio may not be in line Risk mitigation:
warehouse market. In particular, the exposure would be increased if there was
with our plans and forecasts. There are many factors that could drive this,
a decline in specific markets, for example logistics. The Investment Advisor maintains detailed forecasts of the property portfolio, including an inappropriate investment strategy set by the Board; poor delivery The investment strategy is set by the Board, and performance against key
which is subject to regular scenario testing. of the strategy; or poor yields from the property portfolio because of reduced targets and KPIs is reviewed and reported to the Board on an ongoing basis.
capital valuations or rental income.
Metrics in key areas e.g. rent collection, credit risk ratings are monitored
Significant decisions, relating to assets or occupiers, follow established
monthly to enable prompt identification of changes or trends. This would have an impact on the financial performance of the REIT, and protocols, ensuring there is proper assessment, at the right levels.
returns for our investors.
We have a robust and diverse occupier base and our annual review of the
occupier mix informs our leasing approach. We conduct a portfolio risk review
monthly.
We also stress test the working capital model and associated assumptions are
reviewed biannually.
Change from previous year New Change from previous year No Change
This was previously included in the corporate risk register, but during 2023,
it was escalated to the list of principal risks.
BUSINESS COMPLIANCE
C Poor performance of the Investment Advisor or Investment Manager D Loss of REIT status
The Group outsources its activities and is reliant on the performance of Risk mitigation: Loss of our REIT status, through failing to meet regulatory requirements or Risk mitigation:
third‑party service providers.
listing rules would have a significant impact on our reputation and the
There are contracts in place between the Company, the Investment Advisor and financial returns for our investors. The Board has approved a clear governance framework that incorporates the
In particular, poor performance of the Investment Advisor could have a the Investment Manager, setting out responsibilities. Matters Reserved for the Board and delegated authorities, which are further
significant impact on the performance of the Group, as it is fundamental to
supported by the clear, contracted allocation of responsibilities to our
the management and delivery of all aspects of the business. The Group has a clear scheme of delegation, approved by the Board. Significant third-party service providers.
decisions are the responsibility of the Board.
The Investment Advisor reviews the position against REIT legislation with the
The Investment Advisor and Investment Manager provide regular quarterly Company Secretary quarterly.
reports to the Board, which include key performance targets and KPIs.
Dividend cover and cash are continuously monitored against forecasts, and the
The Management Engagement Committee carries out an annual service review, position reported to the Audit and Risk Committee, and Board.
which is reported to the Board.
Members of the Investment Advisor team have an equity investment in the Group,
ensuring incentives are aligned and minimising the risk of reduced or poor
service levels.
Change from previous year No change Change from previous year No change
COMPLIANCE CLIMATE
E Breach of loan covenants or our borrowing policy F Impact of climate change on our portfolio
Our loan funding is subject to conditions, and breach of those could result in Risk mitigation: Climate change may have an impact across the business, including both physical Risk mitigation:
restrictions to funding and activities going forwards. In addition to the loan
risks - e.g. extreme weather events impacting on properties - and transitional
covenants, the Board approved and communicated our borrowing policy, and Our financial position is closely monitored, with the Investment Advisor risks - such as properties not meeting occupier requirements relating to The Sustainability Committee approves and monitors progress on our
breach of those limits may risk financial and reputational damage. monitoring loan-to-value percentages and interest cover ratios against the energy efficiency, or the increasing costs of compliance as requirements sustainability strategy.
loan covenant and borrowing policy on an ongoing basis. around energy efficient solutions and building standards increase.
Our Investment Advisor, along with our property managers, are working with
In addition, forecasts are prepared and reviewed both to assess the business's It is important to our investors that we manage our portfolio responsibly, occupiers to understand their energy usage, and how we can support them to
position, and to ensure that any acquisition decisions include consideration which may also increase opportunities for access to green financing. meet their sustainability objectives and net zero plans. We are also working
of the cash and funding impact. with external specialists to refine our ambitions and targets, and enhance our
climate-related governance and reporting.
The Board receives a formal update each quarter, and there is a quarterly
compliance letter prepared for the bank. Capital development and refurbishment works include consideration of energy
efficient solutions, emissions management, and options to reduce waste and
resource usage, and we are building these into our standard processes through
the use of our Environmental Refurbishment and Development standards.
More details of our plans and progress are included in the sustainability
report.
Change from previous year No change Change from previous year No change
OPERATIONAL
G Significant rent arrears/irrecoverable bad debt H Inappropriate acquisitions, breach of the investment policy
A substantial increase in our bad debt, or the level of arrears and slow Risk mitigation: Inappropriate acquisitions could increase risk in relation to portfolio Risk mitigation:
payment, could have a direct impact on cash flow and profitability. This may
returns, as properties may be harder to let, may not generate appropriate
also have an impact on average lease lengths, and void levels and costs. Our diverse portfolio of assets and wide range of occupiers is a key driver of revenues, or may require additional costs to support. We have a comprehensive acquisition protocol which is linked to the Matters
our performance and risk profile in relation to bad debts. Reserved for the Board and the delegated authority matrix.
We have approximately 445 occupiers across our portfolio of 69 estates, and The protocol sets out detailed due diligence steps (including environmental
our top ten occupiers generate less than 35% of our rent roll. due dilligence), which must be completed and fully evidenced as part of the
decision-making process. Acquisition decisions are approved by the Investment
Our occupier portfolio risk is monitored to ensure that commitments to / Advisor Investment Committee and the Investment Manager Investment Committee,
reliance on different sectors and business types is understood. and any higher risk acquisition decisions (by value or complexity) are
escalated to the Board.
At an operational level, we have robust processes in place to ensure that we
accurately record, invoice and collect amounts due. Working with the property The REIT's Depositary, Gen II, is also required to approve acquisition
managers, our credit control processes identify any potential arrears problems decisions.
to enable action to be taken at an early stage.
There is a rigorous due diligence process prior to the acceptance of
occupiers, with rent guarantees or rent deposits taken where appropriate. We
also have ongoing automated credit risk monitoring on the occupier portfolio.
Change from previous year No change Change from previous year No change
FINANCIAL
I Unable to raise funding through equity, debt or asset disposals sufficient to J Interest rate changes
raise capital and finance the Group's activities.
There are three areas of potential risk: Risk mitigation: Changes in interest rates could directly impact on our cost of capital, and Risk mitigation:
indirectly may impact on market stability.
inability to attract additional equity investment; We recognise that market conditions remain challenging and in particular Changes in interest rates are not in our control, and our focus is therefore
impact our ability to raise equity but we have a range of alternative funding on mitigation of the impact. A five-year funding agreement was agreed during
difficulty in securing new loan funding for the business, at an affordable options at our disposal. the year and the Group has £250.0m of interest rate caps in place.
rate; and
The Group's refinancing was completed during the year, which improved the The Investment Advisor maintains detailed records of the property portfolio,
our ability to raise funds through the disposal of assets could be impacted by headroom in the loan-to-value percentage and the interest cover ratio. and financial scenario testing is undertaken to assess the potential impact of
a hardening market if the economy weakens.
changes in financing costs.
We have successfully completed a number of disposals during the year. The
Investment Advisor maintains close contact with agents to ensure that disposal
proceeds and the timing of sales are optimised. The monitoring of financial
covenants also enables efficient disposal planning.
Regular investor communications ensure we receive timely feedback on our
strategy and performance, informing decision-making around potential future
capital raisings.
Change from previous year No change Change from previous year Increase
While interest rates have stabilised during the year, they remain high,
increasing our cost of capital, and increasing our financial exposure.
GOING CONCERN AND VIABILITY STATEMENT
GOING CONCERN
The Board monitors the Group's ability to continue as a going concern.
Specifically, at quarterly Board meetings, the Board reviews summaries of the
Group's liquidity position and compliance with loan covenants, as well as
forecast financial performance and cash flows. Throughout the year, the Board
met, in conjunction with the Investment Advisor, Tilstone, to review the
uncertainties created by geopolitical tensions and inflation and interest
rates, and specifically their potential impact on rent collection, cash
resources, loan facility headroom, covenant compliance, acquisitions and
disposals of investment properties, discretionary and committed capital
expenditure and dividend distributions.
The Group ended the year with £9.9 million of unrestricted cash and £36.0
million of headroom readily available under its facilities. Disposals are an
important part of our approach to portfolio optimisation and we continually
review the portfolio to identify opportunities to increase efficiency and
dispose of any assets that are considered ex-growth or non‑core, recycling
that capital into accretive acquisitions or to reduce debt. The Group made
disposals totalling £53.0 million during the year and completed £61.6
million post year end.
The Group is operating significantly within its covenants and a sensitivity
analysis has been performed to identify the decrease in valuations and rental
income that would result in a breach of the LTV, market value covenants or
interest cover covenants. Valuations would need to fall by c.40% or rents by
c.45%, when compared with 31 March 2024, before these covenants would be
breached, which, based on available market data, is considered unlikely.
As at 21 June 2024, 99.3% of rents invoiced in relation to the year ended 31
March 2024 have been received. Furthermore, current debt and associated
covenants are summarised in note 17, with no covenant breaches during the
period.
Tilstone has prepared projections for the Group covering the going concern
period to 30 June 2025, which have been reviewed by the Directors. As part of
the going concern assessment, and taking the above into consideration, the
Directors reviewed a number of scenarios that included extreme downside
sensitivities in relation to rental cash collection, making no discretionary
capital expenditure, adverse refinancing conditions and minimum dividend
distributions under the REIT rules.
Accordingly, based on this information, and in light of mitigating actions
available and the recent refinancing, the Directors have a reasonable
expectation that the Group and the Company have adequate resources to continue
in business for a period of at least 12 months from the date of approval of
the Annual Report and Financial Statements.
ASSESSMENT OF VIABILITY
In accordance with the AIC Code of Corporate Governance, the Directors have
assessed the Group's prospects over a period greater than the 12 months
considered by the going concern provision.
The Directors have conducted their assessment over a three-year period to June
2027, allowing a reasonable level of accuracy given typical lease terms and
the cyclical nature of the UK property market.
The principal risks summarise the matters that could prevent the Group from
delivering its strategy. The Board seeks to ensure that risks are kept to a
minimum at all times and, where appropriate, the potential impact of such
risks is modelled within its viability assessment.
The nature of the Group's business as the owner of a diverse portfolio of UK
warehouses, principally located close to urban centres or major highways and
let to a wide variety of occupiers, reduces the impact of adverse changes in
the general economic environment or market conditions, particularly as the
properties are typically flexible spaces, adaptable to changes in occupational
demands.
The Directors' assessment takes into account forecast cash flows, debt
maturity and renewal prospects, forecast covenant compliance, dividend cover
and REIT compliance. The model is then stress tested for severe but plausible
scenarios, individually and in aggregate, along with consideration of
potential mitigating factors. The key sensitivities applied to the model are a
downturn in economic outlook and restricted availability of finance,
specifically:
i. increased occupier churn and occupier defaults;
ii. increased void periods following break or expiry;
iii. decreased rental income;
iv. decrease in property valuation; and
v. increased interest rates.
The sensitivity analysis identifies the decrease in valuations and rental
income that would result in a breach of the LTV, market value covenants or
interest cover covenants as set out in the Going Concern section above. Taking
into account mitigating actions, the results of the sensitivity analysis and
stress testing demonstrated that the Group would have sufficient liquidity to
meet its ongoing liabilities as they fall due, maintain compliance with
banking covenants and maintain compliance with the REIT regime over the period
of the assessment.
Furthermore, the Board, in conjunction with the Audit and Risk Committee,
carried out a robust assessment of the principal risks and uncertainties
facing the Group, including those that would threaten its business model,
strategy, future performance, solvency or liquidity over the three-year
period. The risk review process provided the Board with assurance that the
mitigations and management systems are operating as intended. The Board
believes that the Group is well positioned to manage its principal risks and
uncertainties successfully, taking into account the current economic and
political environment.
The Board's expectation is further supported by regular briefings provided by
Tilstone. These briefings consider market conditions, opportunities, changes
in the regulatory landscape and the current economic and political risks and
uncertainties. Additionally, the shortage of supply nationally, is seen as
mitigation. These risks, and other potential risks that may arise, continue to
be closely monitored by the Board.
VIABILITY STATEMENT
The period over which the Directors consider it is feasible and appropriate to
report on the Group's viability is a three-year period to June 2027. This
period has been selected because it is the period that is used for the Group's
medium‑term business plans. Underpinning this plan is an assessment of each
individual unit's performance, driving the overall letting assumptions and
corresponding forecast cash flows.
Having made an assessment of each individual unit's performance, the forecast
cash flows, covenant compliance and the impact of sensitivities in
combination, the Directors confirm that, taking account of the Group's current
position, the principal risks and in light of the current economic
uncertainty, they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over the
three-year period of their assessment.
Neil Kirton
Chairman
24 June 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with UK adopted international accounting standards
and applicable law and regulations. Company law requires the Directors to
prepare financial statements for each financial year. Under that law, the
Directors are required to prepare the financial statements of the Group in
accordance with UK adopted international accounting standards and have elected
to prepare the Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law). Additionally, the Directors must not approve the
financial statements unless they are satisfied that they present fairly the
financial position, financial performance and cash flows of the Group and
Company for that year.
In preparing the financial statements, the Directors are required to:
• select suitable accounting policies and apply them consistently;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with specific
requirements in IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group's
financial position and financial performance;
• state whether the Group financial statements have been prepared in
accordance with UK adopted international accounting standards, subject to any
material departures disclosed and explained in the financial statements;
• state whether the Company financial statements have been prepared in
accordance with Financial Reporting Standard 101 'Reduced Disclosure
Framework' ('FRS101') subject to any material departures disclosed and
explained in the Company financial statements;
• make judgements and estimates that are reasonable and prudent;
• prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group and the Company will continue in
business; and
• prepare a directors' report, a strategic report and directors'
remuneration report which comply with the requirements of the Companies Act
2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website,
including ensuring the Annual Report and Financial Statements are made
available. The work carried out by the Auditor does not involve consideration
of the maintenance and integrity of this website and, accordingly, the Auditor
accepts no responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website. As such, the
Directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein. Financial statements are published on
the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements and
visitors to the website need to be aware that legislation in the UK covering
the preparation and dissemination of the financial statements may differ from
legislation in their jurisdiction.
• The Directors confirm that, pursuant to their responsibilities under
DTR4, to the best of their knowledge: the financial statements, prepared in
accordance with UK adopted international accounting standards and in
conformity with the requirements of the Companies Act 2006, give a true and
fair view of the assets, liabilities, financial position and profit of the
Company (and Group as a whole); and
• this Annual Report includes a fair review of the development and
performance of the business and the position of the Company (and Group as a
whole), together with a description of the principal risks and uncertainties
that it faces.
Having taken advice from the Audit and Risk Committee, the Directors consider
that the Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
On behalf of the Board
Neil Kirton
Chairman
24 June 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2024
All items in the statement derive from continuing operations. No operations
were acquired or discontinued during the year.
There is no other comprehensive income and therefore the profit for the year
after tax is also the total comprehensive income.
Continuing operations Notes Year ended 31 March 2024 £'000 Year ended 31 March 2023 £'000
Gross property income 3 47,173 47,845
Service charge income 3 3,853 3,340
Service charge expenses 4 (4,068) (3,767)
Net property income 46,958 47,418
Property operating expenses 4 (4,330) (5,454)
Gross profit 42,628 41,964
Administration expenses 4 (7,605) (9,716)
Operating profit before gains/(losses) on investment properties 35,023 32,248
Fair value gains/(losses) on investment properties 13 15,082 (193,367)
Realised gains/(losses) on disposal of investment properties 13 5,521 (13,105)
Operating profit/(loss) 55,626 (174,224)
Finance income 7 8,460 2,039
Finance expenses 8 (24,566) (15,528)
Changes in fair value of interest rate derivatives 8 (5,214) 4,850
Profit/(loss) before tax 34,306 (182,863)
Taxation 9 - -
Total comprehensive income/(loss) for the period 34,306 (182,863)
Earnings/(loss) per share (basic and diluted) (pence) 12 8.1 (43.0)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2024
These financial statements were approved by the Board of Directors of
Warehouse REIT plc on 24 June 2024 and signed on its behalf by:
Neil Kirton
Company number: 10880317
Notes 31 March 31 March
2024 2023
£'000 £'000
Assets
Non-current assets
Investment property 13 695,345 842,269
Interest rate derivatives 18 5,485 11,228
700,830 853,497
Current assets
Investment property held for sale 14 129,060 625
Interest rate derivatives 18 1,756 -
Cash and cash equivalents 15 15,968 25,053
Trade and other receivables 16 11,519 9,258
158,303 34,936
Total assets 859,133 888,433
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 17 (280,413) (304,093)
Other payables and accrued expenses 20 - (11,300)
Head lease liability 19 (14,235) (14,320)
(294,648) (329,713)
Current liabilities
Interest rate derivatives 18 - (3,841)
Other payables and accrued expenses 20 (20,658) (18,584)
Deferred income 20 (7,251) (7,115)
Head lease liability 19 (987) (705)
(28,896) (30,245)
Total liabilities (323,544) (359,958)
Net assets 535,589 528,475
Equity
Share capital 21 4,249 4,249
Share premium 22 275,648 275,648
Retained earnings 23 255,692 248,578
Total equity 535,589 528,475
Number of shares in issue (thousands) 424,862 424,862
Net asset value per share (basic and diluted) (pence) 24 126.1 124.4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2024
Further details of retained earnings are presented in note 23
Notes Share Share Retained Total
capital premium earnings £'000
£'000 £'000 £'000
Balance at 31 March 2022 4,249 275,648 459,057 738,954
Total comprehensive loss - - (182,863) (182,863)
Dividends paid 11 - - (27,616) (27,616)
Balance at 31 March 2023 4,249 275,648 248,578 528,475
Total comprehensive income - - 34,306 34,306
Dividends paid 11 - - (27,192) (27,192)
Balance at 31 March 2024 4,249 275,648 255,692 535,589
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2024
Notes Year ended Year ended
31 March 31 March
2024 2023
£'000 £'000
Cash flows from operating activities
Operating profit/(loss) 55,626 (174,224)
Adjustments to reconcile profit/ (loss) for the period to net cash flows:
(Gains)/losses from change in fair value of investment properties 13 (15,082) 193,367
Realised (gain)/loss on disposal of investment properties 13 (5,521) 13,105
Head lease movement in asset value (61) (42)
Operating cash flows before movements in working capital 34,962 32,206
(Increase)/decrease in other receivables and prepayments (2,464) 329
(Decrease)/increase in other payables and accrued expenses (1,723) 2,788
Net cash flow generated from operating activities 30,775 35,323
Cash flows from investing activities
Acquisition of investment properties (5,888) (66,053)
Capital expenditure (5,197) (4,628)
Development expenditure (6,974) (7,141)
Purchase of interest rate caps 18 (5,069) (2,200)
Interest received 7,740 989
Disposal of investment properties 51,733 58,101
Net cash flow generated from/(used in) investing activities 36,345 (20,932)
Cash flows from financing activities
Bank loans drawn down 17 323,000 65,000
Bank loans repaid 17 (345,000) (30,000)
Loan interest and other finance expenses paid (21,321) (11,810)
Other finance expenses paid (367) (786)
Non-recurrent loan fees (4,251) -
Head lease payments (1,074) (832)
Dividends paid in the period 11 (27,192) (27,616)
Net cash flow used in financing activities (76,205) (5,648)
Net (decrease)/increase in cash and cash equivalents (9,085) 8,347
Cash and cash equivalents at start of the period 25,053 16,706
Cash and cash equivalents at end of the period 15 15,968 25,053
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2024
1. General information
Warehouse REIT plc is a closed-ended Real Estate Investment Trust ("REIT")
with an indefinite life incorporated in England and Wales on 24 July 2017. The
Company began trading on 20 September 2017. The registered office of the
Company is located at 65 Gresham Street, London EC2V 7NQ. The Company's shares
are admitted to trading on the Premium Listing Segment of the Main Market, a
market operated by the London Stock Exchange.
The Group's consolidated financial statements for the year ended 31 March 2024
comprise the results of the Company and its subsidiaries (together
constituting the "Group") and were approved by the Board and authorised for
issue on 24 June 2024. The nature of the Group's operations and its principal
activities are set out in the strategic report on pages 02 to 62.
2. Basis of preparation
These financial statements are prepared in accordance with UK adopted
international accounting standards and in conformity with the requirements of
the Companies Act 2006. The financial statements have been prepared under the
historical cost convention, except for the revaluation of investment
properties and financial instruments that are measured at revalued amounts or
fair values at the end of each reporting period, as explained in the
accounting policies below. Historical cost is generally based on the fair
value of the consideration given in exchange for goods and services. The
audited financial statements are presented in Pound Sterling and all values
are rounded to the nearest thousand pounds (£'000), except when otherwise
indicated.
Going concern
The Directors have made an assessment of the Group's ability to continue as a
going concern. They carefully considered areas of potential financial risk and
reviewed cash flow forecasts, evaluating a number of scenarios, which included
extreme downside sensitivities in relation to rental cash collection, making
no acquisitions or discretionary capital expenditure and minimum dividend
distributions under the REIT rules.
Accordingly, based on this information, and in light of mitigating actions
available, the Directors have a reasonable expectation that the Group and the
Company have adequate resources to continue in business for a period of at
least 12 months from the date of approval of the Annual Report and Financial
Statements (see the going concern on pages 61 to 62).
Furthermore, the Directors are not aware of any material uncertainties that
may cast significant doubt upon the Group's ability to continue as a going
concern. Therefore, the financial statements have been prepared on the going
concern basis.
2.1 Changes to accounting standards and interpretations
New standards and interpretations effective in the current period
There were a number of new standards and amendments to existing standards that
are required for the Group's accounting period beginning on 1 April 2023,
which have been considered and applied as follows:
• amendments to IAS 1 and IFRS Practice Statement 2 'Presentation of
Financial Statements' clarifies that significant accounting policies has been
replaced with material accounting policies; and
• amendments to IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors' clarifies the distinction between accounting policies
and accounting estimates and also replaces the definition of accounting
estimates. Under the new definition, estimates are 'monetary amounts in
financial statements that are subject to measurement uncertainty'.
There was no material effect from the adoption of the above-mentioned
amendments to IFRS effective in the period. They have no significant impact to
the Group as they are either not relevant to the Group's activities or require
accounting which is already consistent with the Group's current accounting
policies. Other amendments with an effective date this year are not relevant
to the Group.
New and revised accounting standards not yet effective
There are a number of new standards and amendments to existing standards that
have been published and are mandatory for the Group's accounting periods
beginning on or after 1 April 2024 or later. The Group is not adopting these
standards early. There are no accounting standards expected to have a material
impact on the Group.
2.2 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with IFRS requires
the Directors of the Group to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements. However,
uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the asset or
liability in the future.
Judgements
In the course of preparing the financial statements, no judgements have been
made in the process of applying the Group's accounting policies, other than
those involving estimations detailed below, that have had a significant effect
on the amounts recognised in the financial statements.
Estimates
In the process of applying the Group's accounting policies, the Investment
Advisor has made the following estimates, which have the most significant risk
of material change to the carrying value of assets recognised in the
consolidated financial statements:
Valuation of property
The valuations of the Group's investment property are at fair value as
determined by the external independent valuer on the basis of market value in
accordance with the internationally accepted RICS Valuation - Professional
Standards January 2022 (incorporating the International Valuation Standards)
and in accordance with IFRS 13. The key estimates made by the valuer are the
ERV and equivalent yields of each investment property and land values per acre
for development properties. The valuers have the buildings location, building
specification and various other climate-related considerations and have
factored this into the valuation See notes 13 and 25 for further details.
2.3 Summary of material accounting policies
The principal accounting policies applied in the preparation of these
financial statements are stated in the notes to the financial statements.
a) Basis of consolidation
The Company does not meet the definition of an investment entity and therefore
does not qualify for the consolidation exemption under IFRS 10. The
consolidated financial statements comprise the financial statements of the
Group and its subsidiaries as at 31 March 2024.
b) Functional and presentation currency
The overall objective of the Group is to generate returns in Pound Sterling
and the Group's performance is evaluated in Pound Sterling. Therefore, the
Directors consider Pound Sterling as the currency that most faithfully
represents the economic effects of the underlying transactions, events and
conditions and have therefore adopted it as the functional and presentation
currency.
c) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being the investment in, and provision of, UK urban warehouses.
3. Property income
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Rental income 44,025 45,750
Insurance recharged 1,496 1,592
Dilapidation income 1,652 503
Gross property income 47,173 47,845
Service charge income 3,853 3,340
Total property income 51,026 51,185
No occupier accounts for more than 10% of rental income.
Accounting policy
Rental income arising from operating leases on investment property is
accounted for on a straight-line basis over the lease term and is included in
gross property income in the Group statement of comprehensive income. Initial
direct costs incurred in negotiating and arranging an operating lease are
recognised as an expense over the lease term on the same basis as the lease
income. Rental income is invoiced in advance and for all rental income that
relates to a future period, this is deferred and appears within current
liabilities in the Group statement of financial position.
For leases that contain fixed or minimum uplifts, the rental income arising
from such uplifts is recognised on a straight-line basis over the lease term.
A rental adjustment is recognised from the rent review date in relation to
unsettled rent reviews, once the rental uplifts are agreed.
Occupier lease incentives are recognised as an adjustment of rental revenue on
a straight-line basis over the term of the lease. The lease term is the
non-cancellable period of the lease together with any further term for which
the occupier has the option to continue the lease where, at the inception of
the lease, the Directors are reasonably certain that the occupier will
exercise that option.
Insurance income is recognised in the accounting period in which the services
are rendered.
Amounts received from occupiers to terminate leases or to compensate for
dilapidations are recognised in the Group statement of comprehensive income
when the right to receive them arises, typically at the cessation of the
lease.
Service charge income is recognised when the related recoverable expenses are
incurred. The Group acts as the principal in service charge transactions as it
directly controls the delivery of the services at the point at which they are
provided to the occupier.
4. Property operating and administration expenses
Year ended 31 March Year
2024 ended
£'000 31 March
2023
£'000
Service charge expenses 4,068 3,767
Premises expenses 2,625 3,532
Insurance 1,509 1,735
Loss allowance on trade receivables 196 187
Property operating expenses 4,330 5,454
Investment Advisor fees 5,725 6,970
Costs associated with the transfer to the Main Market - 1,069
Directors' remuneration (including social security costs) 179 179
Head lease asset depreciation 165 189
Other administration expenses 1,536 1,309
Administration expenses 7,605 9,716
Total 16,003 18,937
Details of how the Investment Advisor fees are calculated are disclosed in
note 29.
Accounting policy
All property operating expenses and administration expenses are charged to the
consolidated statement of comprehensive income and are accounted for on an
accruals basis.
Property expenses are costs incurred by the Group that are not directly
recoverable from an occupier, as well as professional fees relating to the
letting of our estates.
5. Directors' remuneration
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Neil Kirton 48 48
Lynette Lackey 38 38
Martin Meech 17 38
Aimée Pitman 38 38
Simon Hope - -
Stephen Barrow - -
Dominic O'Rourke 21 -
Employer's national insurance contributions 17 18
Total 179 180
A summary of the Directors' emoluments, including the disclosures required by
the Companies Act 2006, is set out in the Directors' remuneration report. The
Group had no employees in either period. All payments made are short-term
employee benefits.
6. Auditor's remuneration
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Audit fee 214 192
Total 214 192
The Group reviews the scope and nature of all proposed non-audit services
before engagement, to ensure that the independence and objectivity of the
Auditor are safeguarded. Audit fees are comprised of the following items:
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Group year-end Annual Report and Financial Statements 190 172
Subsidiary accounts 24 20
Total 214 192
Non-audit fees payable to the Group's Auditor comprised the following:
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Services as reporting accountant relating to Main Market move - 110
Total - 110
The Audit Committee receives assurance from the Auditor that its independence
is not compromised. The Group's Auditor for the year ended 31 March 2024 was
BDO LLP.
7. Finance income
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Interest from cash and short-term deposits 267 12
Interest from derivatives 8,193 2,027
Total 8,460 2,039
Accounting policy
Interest income is recognised on an effective interest rate basis and shown
within the Group statement of comprehensive income as finance income. See note
18 for details on the accounting policy for interest rate derivatives.
8. Finance expenses
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Loan interest 21,791 14,057
Head lease interest 1,054 961
Accelerated loan arrangement fees 1,688 -
Loan arrangement fees amortised 883 1,052
Recurrent loan fees 362 607
Bank charges 6 5
25,784 16,682
Less: amounts capitalised on the development of properties (1,218) (1,154)
Total 24,566 15,528
Finance expenses include accelerated amortisation of £1.6 million given the
refinancing of the facility that took place in July 2023. Refer to note 17 for
details.
The interest capitalisation rates for the year ended 31 March 2024 ranged from
4.3% to 4.7% (31 March 2023: 3.2% to 4.3%).
Accounting policy
Finance costs consist of interest and other costs that the Group incurs in
connection with bank and other borrowings. Any finance costs that are
separately identifiable and directly attributable to an asset that takes a
period of time to complete are capitalised as part of the cost of the asset.
Ongoing services fees relating to the maintenance of the facility are expensed
in the period in which they occur. Fair value movements on derivatives are
recorded in finance expenses or in finance income depending on the fair value
movement during the year. See note 19 for the accounting policy on head lease
interest expensed.
9. Taxation
Corporation tax has arisen as follows:
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Corporation tax on residual income - -
Total - -
Reconciliation of tax charge to profit before tax:
Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Profit/(loss) before tax 34,306 (182,863)
Corporation tax at 25.0% (2023: 19.0%) 8,577 (34,744)
Change in value of investment properties (3,771) 36,740
Realised (profit)/loss on disposal of investment properties (1,380) 2,490
Tax-exempt property rental business (3,426) (4,486)
Total - -
Accounting policy
As a REIT, the Group is exempt from corporation tax on the profits and gains
from its property rental business, provided it continues to meet certain
conditions as per the REIT regulations.
Non-qualifying profits and gains of the Group continue to be subject to
corporation tax. Therefore, current tax is the expected tax payable on the
non-qualifying taxable income for the period, if applicable, using tax rates
enacted or substantively enacted at the balance sheet date.
10. Operating leases
Operating lease commitments - as lessor
The Group has entered into commercial property leases on its investment
property portfolio. These non-cancellable leases have a remaining term of up
to 14 years.
Future minimum rentals receivable under non-cancellable operating leases as at
31 March 2024 are as follows:
31 March 2024 31 March 2023
£'000 £'000
Within one year 40,436 42,033
Between one and two years 33,894 33,340
Between two and three years 27,053 26,998
Between three and four years 22,170 22,360
Between four and five years 18,597 18,457
Between five and ten years 35,956 34,394
More than ten years 7,925 19,607
Total 186,031 197,189
11. Dividends
For the year ended 31 March 2024 Pence £'000
per share
Third interim dividend for year ended 31 March 2023 paid on 3 April 2023 1.60 6,798
Fourth interim dividend for year ended 31 March 2023 paid on 7 July 2023 1.60 6,798
First interim dividend for year ended 31 March 2024 paid on 6 October 2023 1.60 6,798
Second interim dividend for year ended 31 March 2024 paid on 29 December 2023 1.60 6,798
Total dividends paid during the year 6.4 27,192
Paid as:
Property income distributions 6.4 27,192
Non-property income distributions - -
Total 6.4 27,192
For the year ended 31 March 2023 Pence £'000
per share
Third interim dividend for year ended 31 March 2022 paid on 1 April 2022 1.55 6,585
Fourth interim dividend for year ended 31 March 2022 paid on 30 June 2022 1.75 7,435
First interim dividend for year ended 31 March 2023 paid on 1 October 2022 1.60 6,798
Second interim dividend for year ended 31 March 2023 paid on 30 December 2022 1.60 6,798
Total dividends paid during the year 6.50 27,616
Paid as:
Property income distributions 6.50 27,616
Non-property income distributions - -
Total 6.50 27,616
As a REIT, the Group is required to pay property income distributions ("PIDs")
equal to at least 90% of the property rental business profits of the Group.
A third interim property income dividend for the year ended 31 March 2024 of
1.60 pence per share was declared on 26 February 2024 and paid on 2 April
2024. In addition, a fourth interim non-property income dividend for the year
ended 31 March 2024 of 1.60 pence per share will be declared on 25 June 2024
and paid on 26 July 2024.
Accounting policy
Dividends due to the Group's shareholders are recognised when they become
payable.
12. Earnings per share
Basic EPS is calculated by dividing profit for the period attributable to
ordinary shareholders of the Group by the weighted average number of ordinary
shares during the period. As there are no dilutive instruments in issue, basic
and diluted EPS are identical.
The European Public Real Estate Association ("EPRA") publishes guidelines for
calculating adjusted earnings on a comparable basis. EPRA EPS is a measure of
EPS designed by EPRA to enable entities to present underlying earnings from
core operating activities, which excludes fair value movements on investment
properties.
The Group has also included an additional earnings measure called 'Adjusted
Earnings' and 'Adjusted EPS'. Adjusted Earnings and Adjusted EPS recognises
finance income earned from derivatives held at fair value through profit and
loss used to hedge the Group's floating interest rate exposure. The premiums
for the interest rate caps, which are being paid in quarterly instalments, are
included in the statement of financial position as a derivative asset measured
at fair value and have not been deducted in the calculation of adjusted
earnings. Also included in adjusted earnings is the add back of the costs
associated with the early close out of debt, as these costs will not be
recurring.
The Board deems this a more relevant indicator of core earnings as it reflects
our ability to generate earnings from our portfolio and matches the basis on
which interest cover is measured for loan covenant compliance.
Year ended 31 March 2024 Year ended 31 March 2023
£'000 £'000
IFRS earnings/(losses) 34,306 (182,863)
EPRA earnings adjustments:
(Gain)/loss on disposal of investment properties (5,521) 13,105
Fair value (gains)/losses on investment properties (15,082) 193,367
Interest from derivatives (8,193) (2,027)
Changes in fair value of interest rate derivatives 5,214 (4,850)
Losses associated with early close out of debt (see note 17) 1,688 -
EPRA earnings 12,412 16,732
Group-specific earnings adjustments:
Interest from derivatives 8,193 2,027
Costs associated with the transfer to the Premium Segment of the Main Market - 1,069
of the London Stock Exchange
Adjusted earnings 20,605 19,828
Year ended 31 March 2024 Year ended 31 March 2023
Pence Pence
Basic IFRS EPS 8.1 (43.0)
Diluted IFRS EPS 8.1 (43.0)
EPRA EPS 2.9 3.9
Adjusted EPS 4.8 4.7
Year ended 31 March 2024 Year ended 31 March 2023
Number Number
of shares of shares
Weighted average number of shares in issue (thousands) 424,862 424,862
13. UK investment property
Completed investment Development Total investment
property property property
£'000 and land £'000
£'000
Investment property valuation brought forward as at 1 April 2023 752,485 75,660 828,145
Acquisition of properties - - -
Capital expenditure 3,327 8,191 11,518
Movement in rent incentives 1,065 (3) 1,062
Disposal of properties (42,462) (3,125) (45,587)
Fair value gains/(losses) on revaluation of investment property 17,312 (2,230) 15,082
Total portfolio valuation per valuer's report 731,727 78,493 810,220
Assets transferred to held for sale (56,230) (72,830) (129,060)
Adjustment for head lease obligations 14,185 - 14,185
Carrying value at 31 March 2024 689,682 5,663 695,345
Completed investment Development Total investment
property property and land property
£'000 £'000 £'000
Investment property valuation brought forward as at 1 April 2022 913,035 98,950 1,011,985
Transferred in the period 5,449 (5,449) -
Acquisition of properties 64,512 2,216 66,728
Capital expenditure 5,035 8,295 13,330
Movement in rent incentives 1,272 28 1,300
Disposal of properties (71,206) - (71,206)
Assets transferred to held for sale (625) - (625)
Fair value losses on revaluation of investment property (164,987) (28,380) (193,367)
Total portfolio valuation per valuer's report 752,485 75,660 828,145
Adjustment for head lease obligations 14,124 - 14,124
Carrying value at 31 March 2023 766,609 75,660 842,269
All completed investment properties are charged as collateral on the Group's
borrowings. See note 17 for details.
Included within the carrying value of investment properties as at 31 March
2024 is £11.5 million (31 March 2023: £10.4 million) in respect of rent
incentives as a result of the IFRS treatment of leases with rent-free periods,
which require recognition on a straight-line basis over the lease term. The
difference between this and cash receipts change the carrying value of the
property on which revaluations are measured.
During the period the Group capitalised £1.2 million (31 March 2023: £1.2
million) of interest paid in development properties. Please see note 8 for
details on the capitalisation rate used.
Realised (gain)/loss on disposal of investment properties
31 March 31 March
2024 2023
£'000 £'000
Net proceeds from disposals of investment property during the year 51,733 58,101
Carrying value of disposals (46,212) (71,206)
Realised gain/(loss) on disposal of investment properties 5,521 (13,105)
Accounting policy
Development property and land is where the whole or a material part of an
estate is identified as having potential for development. Assets are
classified as such until development is completed and they have the potential
to be fully income-generating. Development property and land is measured at
fair value if the fair value is considered to be reliably determinable. Where
the fair value cannot be determined reliably but where it is expected that the
fair value of the property will be reliably determined when construction is
completed, the property is measured at cost less any impairment until the fair
value becomes reliably determinable or construction is completed, whichever is
earlier. In addition, it is the Group's policy to capitalise finance costs
relating to the development of the assets with planning permission, where
development work is underway see note 8 for details.
Subsequent to initial recognition, investment property is stated at fair value
(see note 25). Gains or losses arising from changes in the fair values are
included in the profit and loss in the period in which they arise under IAS 40
Investment Property.
Investment properties cease to be recognised when they have been disposed of
or withdrawn permanently from use and no future economic benefit is expected.
Gains or losses on the disposal of investment property are determined as the
difference between net disposal proceeds and the carrying value of the asset.
Movements in rent incentives are presented within the total portfolio
valuation.
Where an investment property is held under a leasehold interest, the headlease
is initially recognised as an asset at cost plus the present value of minimum
ground rent payments and is subsequently measured at fair value. The
corresponding rental liability to the head leaseholder is included in the
balance sheet as a finance lease obligation (see note 19).
14. Investment properties held for sale
Completed investment Development Total investment
property property property
£'000 and land £'000
£'000
Carrying value at 31 March 2022 - - -
Disposal of properties - - -
Assets transferred in 625 - 625
Carrying value at 31 March 2023 625 - 625
Disposal of properties (625) - (625)
Assets transferred in 56,230 72,830 129,060
Carrying value at 31 March 2024 56,230 72,830 129,060
As at 31 March 2024, Radway Green, Crewe along with the associated land are
designated as held for sale, as sales offers are in progress and will likely
be completed during the year ended 31 March 2025. St Modwen Road, Plymouth
completed on 29 April 2024 and Barlborough Links Chesterfield exchanged
contracts for completion which will occur during H1 of FY'25. Pikelaw Place,
Skelmersdale is expected to complete during H1 of FY'25.
Accounting policy
An asset 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 continuing
use. An asset will be classified in this way only 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 12 months after the date of the
consolidated statement of financial position.
15. Cash and cash equivalents
31 March 2024 31 March 2023
£'000 £'000
Cash and cash equivalents 9,905 18,990
Cash in transit 6,063 6,063
Total 15,968 25,053
Cash in transit comprises £6.1 million (31 March 2023: £6.1 million) of cash
held by the Group's Registrar to fund the shareholder dividend, less
withholding tax, which was paid on 2 April 2024 as disclosed in note 11.
Accounting policy
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.
16. Trade and other receivables
31 March 2024 31 March 2023
£'000 £'000
Rent and insurance receivables 4,425 3,952
Payments in advance of property completion 2,217 2,080
Interest receivable on derivatives 1,770 1,050
Occupier deposits 643 698
Prepayments 266 191
Other receivables 2,198 1,287
Total 11,519 9,258
The rent and insurance receivables balance represents gross receivables of
£4.7 million (31 March 2023: £4.2 million), net of a provision for doubtful
debts of £0.3 million (31 March 2023: £0.2 million).
Payments in advance of property completion represent the deposits paid to
vendors upon exchange of purchase contracts.
Accounting policy
Rent and other receivables are recognised at their original invoiced value and
become due based on the terms of the underlying lease or at the date of
invoice.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables.
To measure expected credit losses on a collective basis, trade receivables are
grouped based on similar credit risk and ageing.
The expected loss rates are based on the Group's historical credit losses
experienced over the two-year period prior to the year end. The historical
loss rates are then adjusted for current and forward-looking information on
macroeconomic factors affecting the Group's customers.
17. Interest-bearing loans and borrowings
31 March 2024 31 March 2023
£'000 £'000
At the beginning of the year 306,000 271,000
Drawn in the year 323,000 65,000
Repaid in the year (345,000) (30,000)
Interest-bearing loans and borrowings 284,000 306,000
Unamortised fees at the beginning of the year (1,907) (2,784)
Loan arrangement fees paid in the year (4,251) (175)
Unamortised fees written off in the year 1,688 -
Amortisation charge for the year 883 1,052
Unamortised loan arrangement fees (3,587) (1,907)
Loan balance less unamortised loan arrangement fees 280,413 304,093
On 2 June 2023, the Group entered into a new £320.0 million facility,
replacing the Group's previous £320.0 million debt facility and extending the
tenure from January 2025 to June 2028. It comprises a £220.0 million term
loan (2023: £182.0 million) and a £100.0 million RCF (2023: £138.0 million)
with a club of four lenders; HSBC, Bank of Ireland, NatWest and Santander. The
minimum interest cover is 1.5 times compared to 2.0 times under the previous
facility and the maximum LTV has been extended to 60% from 55%. Both the term
loan and the RCF attract a margin of 2.2% plus SONIA for an LTV below 40% or
2.5% if above. The Group has £250.0 million of interest rate caps in place,
£50.0 million has a termination date of 20 November 2026, £100.0 million has
a termination date of 20 July 2025 and £100.0 million has a termination date
of 20 July 2027 (see note 18). The facilities are secured on all completed
investment properties within the portfolio.
At 31 March 2024, £64.0 million was drawn against the RCF (31 March 2023:
124.0 million) and £220.0 million against the term loan (31 March 2023:
£182.0 million). This gave total debt of £284.0 million (31 March 2023:
£306.0 million); with the Group also holding cash balances of £16.0 million
(31 March 2023: £25.1 million), the Group's net debt as at 31 March 2024 was
£268.0 million (31 March 2023: £280.9 million). The LTV ratio at 31 March
2024 was therefore 33.1% (31 March 2023: 33.9%), with the decrease reflecting
the disposal of properties in the year and the higher portfolio valuation.
As at 31 March 2024, there was £36.0 million (31 March 2023: £14.0 million)
available to draw.
The debt facility includes interest cover and market value covenants that are
measured at a Group level. The Group has complied with all covenants
throughout the financial period.
Accounting policy
Loans and borrowings are initially recognised as the proceeds received net of
directly attributable transaction costs. Loans and borrowings are subsequently
measured at amortised cost with interest charged to the consolidated statement
of comprehensive income at the effective interest rate, and shown within
finance costs. Transaction costs are spread over the term of the loan.
18. Interest rate derivatives
31 March 2024 31 March 2023
£'000 £'000
At the start of the period 7,387 337
Additional premiums accrued 3,849 10,926
Changes in fair value of interest rate derivatives (5,214) 4,850
Movement in interest rate derivative premium payable 1,219 (8,726)
Balance at the end of the period 7,241 7,387
Current 1,756 (3,841)
Non-current 5,485 11,228
Balance at the end of the period 7,241 7,387
To mitigate the interest rate risk that arises as a result of entering into
variable rate linked loans, the Group entered into interest rate derivatives
("caps") against movements in SONIA. The caps have a combined notional value
of £250.0 million with £200.0 million at a strike rate of 1.50% and the
remaining £50 million at a strike rate of 2.00%. The £50.0 million cap has a
termination date of 20 November 2026, £100.0 million has a termination date
of 20 July 2025 and £100.0 million has a termination date of 20 July 2027.
Total consideration payable for the interest rate caps has been deferred over
eight consecutive quarters, subsequent to the issuance of the instrument. The
Group has paid £5.1 million in deferred premiums during the year to 31 March
2024 (2023: £2.2 million). The remaining premium of £7.5 million is due in
quarterly instalments with the final payment due in October 2025.
Accounting policy
Interest rate derivatives are initially recognised at fair value 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. Premiums payable under such arrangements
are initially capitalised into the statement of financial position.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data is available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs significant to the fair value measurement as a whole. Changes in fair
value of interest rate derivatives are recognised within finance expenses in
profit or loss in the period in which they occur.
All receipts of income from the instrument are recognised as finance income in
note 8 of the financial statements separate from the fair value measurement
recorded.
19. Head lease obligations
The following table analyses the present value of minimum lease payments under
non-cancellable head leases using an average discount rate of 6.91% for each
of the following periods:
31 March 2024 31 March 2023
£'000 £'000
Current liabilities
Within one year 987 705
Non-current liabilities
After one year but not more than two years 903 919
After two years but not more than five years 2,374 2,141
After five years but not more than ten years 3,035 2,776
Later than ten years 7,923 8,484
14,235 14,320
Total head lease obligations 15,222 15,025
The maturity analysis has been expanded in the current year to provide more
information. The comparatives have been amended for consistency.
31 March 2024 31 March 2023
£'000 £'000
Head lease liability - opening balance 15,025 14,896
Cash flows (1,074) (832)
Non-cash movements
Interest 1,054 961
Head lease accrual 217 -
Head lease obligations - closing balance 15,222 15,025
The following table analyses the minimum undiscounted lease payments under
non-cancellable head leases for each of the following periods:
31 March 2024 31 March 2023
£'000 £'000
Current liabilities
Within one year 1,056 1,052
Non-current liabilities
After one year but not more than five years 4,223 4,219
Later than five years 86,696 85,530
Total 91,975 90,801
The weighted average unexpired lease term of head leases is 88.2 years (31
March 2023: 93.9 years).
Accounting policy
At the commencement date, head lease obligations are recognised at the present
value of future lease payments using the discount rate implicit in the lease,
if determinable, or, if not, the property-specific incremental borrowing rate.
20. Other liabilities - other payables and accrued expenses, provisions and
deferred income
31 March 2024 31 March 2023
£'000 £'000
Administration expenses payable 1,763 2,170
Deferred consideration payable 10,300 4,500
Capital expenses payable 1,743 3,864
Loan interest payable 4,161 3,691
Property operating expenses payable 733 855
Other expenses payable 1,958 3,504
Total other payables and accrued expenses - current 20,658 18,584
Other payables and accrued expenses are initially recognised at fair value and
subsequently held at amortised cost. No discounting is applied to deferred
consideration on the grounds of materiality.
31 March 2024 31 March 2023
£'000 £'000
Capital expenses payable - 11,300
Total other payables and accrued expenses - non-current - 11,300
During the year ended 31 March 2021, the Group exchanged contracts to acquire
land for £15.0 million. The first three instalments were paid for a total of
£2.5 million to the year ended 31 March 2022 with an additional £1.5 million
paid during the year ended 31 March 2023 and £1.0 million paid during the
year ended 31 March 2024. The final instalment of £10.3 million is due to be
paid on 1 September 2024.
31 March 31 March
2024 2023
£'000 £'000
Total deferred income 7,251 7,115
Deferred income is rental income received in advance during the accounting
period. The income is deferred and is unwound to revenue on a straight-line
basis over the period in which it is earned.
21. Share capital
Share capital is the nominal amount of the Group's ordinary shares in issue.
Ordinary shares of £0.01 each Number 31 March Number 31 March
2024 2023
£'000 £'000
Authorised, issued and fully paid:
At the start of the period 424,861,650 4,249 424,861,650 4,249
Shares issued - - - -
Balance at the end of the period 424,861,650 4,249 424,861,650 4,249
The share capital comprises one class of ordinary shares. At general meetings
of the Group, ordinary shareholders are entitled to one vote on a show of
hands and on a poll, to one vote for every share held. There are no
restrictions on the size of a shareholding or the transfer of shares, except
for the UK REIT restrictions.
22. Share premium
Share premium comprises the following amounts:
31 March 2024 31 March 2023
£'000 £'000
At the start of the period 275,648 275,648
Shares issued - -
Share premium 275,648 275,648
Share premium represents the excess over nominal value of the fair value of
the consideration received for equity shares net of direct issue costs.
23. Retained earnings
Retained earnings comprise the following cumulative amounts:
31 March 31 March
2024 2023
£'000 £'000
Capital reduction reserve 161,149 161,149
Total unrealised gains on investment properties 111,093 96,011
Total unrealised gain on interest rate caps (168) 5,046
Total realised profits 106,646 82,208
Dividends paid from revenue profits (123,028) (95,836)
Retained earnings 255,692 248,578
Retained earnings represent the profits of the Group less dividends paid from
revenue profits to date. Unrealised gains on the revaluation of investment
properties and interest rate caps contained within this reserve are not
distributable until any gains crystallise on the sale of the investment
property and settlement of the interest rate caps. The capital reduction
reserve is a distributable reserve established upon cancellation of the share
premium of the Group on 17 November 2017.
24. Net asset value per share
Basic NAV per share amounts are calculated by dividing net assets attributable
to ordinary equity holders of the Group in the statement of financial position
by the number of ordinary shares outstanding at the end of the period. As
there are no dilutive instruments in issue, basic and diluted NAV per share
are identical.
31 March 2024 31 March 2023
£'000 £'000
IFRS net assets attributable to ordinary shareholders 535,589 528,475
IFRS net assets for calculation of NAV 535,589 528,475
Adjustment to net assets:
Fair value of interest rate derivatives (note 18) (7,241) (7,387)
EPRA NTA 528,348 521,088
31 March 2024 31 March 2023
Pence Pence
IFRS basic and diluted NAV per share (pence) 126.1 124.4
EPRA NTA per share (pence) 124.4 122.6
31 March 2024 31 March 2023
Number Number
of shares of shares
Number of shares in issue (thousands) 424,862 424,862
25. Fair value
IFRS 13 defines fair value 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. The following methods and assumptions
were used to estimate the fair values.
The fair value of cash and short-term deposits, trade receivables, trade
payables and other current liabilities approximate their carrying amounts due
to the short-term maturities of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised cost. The
carrying value of the loans and borrowings approximate their fair value due to
the contractual terms and conditions of the loan. The loans are at variable
interest rates of 2.2% to 2.5% above SONIA.
Interest rate derivatives
The fair value of the interest rate cap contracts is recorded in the statement
of financial position and is revalued quarterly by an independent valuations
specialist, Chatham Financial.
The fair value is determined by forming an expectation that interest rates
will exceed strike rates and discounting these future cash flows at the
prevailing market rates as at the year end.
Investment properties
Six-monthly valuations of investment property are performed by CBRE,
accredited independent external valuers with recognised and relevant
professional qualifications and recent experience of the location and category
of the investment property being valued. The valuations are the ultimate
responsibility of the Directors however, who appraise these every six months.
The valuation of the Group's investment property at fair value is determined
by the independent external valuer on the basis of market value in accordance
with the internationally accepted RICS Valuation - Professional Standards
January 2022 (incorporating the International Valuation Standards).
Completed investment properties are valued by adopting the 'income
capitalisation' method of valuation. This approach involves applying
capitalisation yields to current and future rental streams, net of income
voids arising from vacancies or rent-free periods and associated running
costs. These capitalisation yields and future rental values are based on
comparable property and leasing transactions in the market using the valuer's
professional judgement and market observations. Other factors taken into
account in the valuations include the tenure of the property, tenancy details
and ground and structural conditions.
Development property and land has been valued by adopting the 'comparable
method' of valuation and where appropriate supported by a 'residual
development appraisal'. The comparable method involves applying a sales rate
per acre to relevant sites supported by comparable land sales. Residual
development appraisals have been completed where there is sufficient clarity
regarding planning and an identified or indicative scheme. In a similar manner
to 'income capitalisation', development inputs include the capitalisation of
future rental streams with an appropriate yield to ascertain a gross
development value. The costs associated with bringing a scheme to the market
are then deducted, including construction costs, professional fees, finance
and developer's profit, to provide a residual site value.
The following tables show an analysis of the fair values of investment
properties and interest rate derivatives recognised in the statement of
financial position by level of the fair value hierarchy(1):
Assets and liabilities measured at fair value 31 March 2024
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investment properties and assets held for sale - - 810,220 810,220
Interest rate derivatives - 7,241 - 7,241
Total - 7,241 810,220 817,461
Assets and liabilities measured at fair value 31 March 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investment properties and assets held for sale - - 828,770 828,770
Interest rate derivatives - 7,387 - 7,387
Total - 7,387 828,770 836,157
1 Explanation of the fair value hierarchy:
• Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date;
• Level 2 - use of a model with inputs (other than quoted prices
included in Level 1) that are directly or indirectly observable market data;
and
• Level 3 - use of a model with inputs that are not based on observable
market data.
Sensitivity analysis to significant changes in unobservable inputs within the
valuation of investment properties
The following table analyses:
• the fair value measurements at the end of the reporting period;
• 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.
31 March 2024 Fair value £'000 Valuation Key unobservable Range
technique inputs
Multi-let more than 100k sq ft 373,510 Income capitalisation ERV £2.62 - £10.90
Equivalent yield 5.2% - 11.1%
Multi-let less than 100k sq ft 150,390 Income capitalisation ERV £5.22 - £12.53
Equivalent yield 5.7% - 13.1%
Single-let regional distribution 129,875 Income capitalisation ERV £5.25 - £7.38
Equivalent yield 5.7% - 9.7%
Single-let last mile 78,065 Income capitalisation ERV £4.25 - £12.71
Equivalent yield 5.5% - 9.5%
Development land 78,380 Comparable method Sales rate per acre £195,000 - £860,000
810,220
31 March 2023 Fair value £'000 Valuation Key unobservable Range
technique inputs
Multi-let more than 100k sq ft 383,975 Income capitalisation ERV £2.38 - £17.50
Equivalent yield 5.0% - 19.8%
Multi-let less than 100k sq ft 153,910 Income capitalisation ERV £3.24 - £12.02
Equivalent yield 5.8% - 17.8%
Single-let regional distribution 131,890 Income capitalisation ERV £3.50 - £7.38
Equivalent yield 5.1% - 7.8%
Single-let last mile 83,335 Income capitalisation ERV £3.50 - £12.71
Equivalent yield 5.3% - 13.4%
Development land 75,660 Comparable method Sales rate per acre £200,000 - £925,000
828,770
The weighted average equivalent yield and ERV for completed investment
property is 6.4% and £7.60 per sq ft, respectively (31 March 2023: 6.8% and
£7.26 per sq ft). The weighted average sales rate per acre for development
property and land is £681,000 (31 March 2023: £622,000).
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 discount rate
(and equivalent yield) in isolation would result in a significantly
lower/higher fair value measurement.
Generally, a change in the assumption made for the ERV is accompanied by:
• a similar change in the rent growth per annum and discount rate
(and exit yield)
The table below sets out a sensitivity analysis for each of the key sources of
estimation uncertainty with the resulting increase/(decrease) in the fair
value of completed investment property and derivatives:
As at 31 March 2024
Completed investment property Increase in sensitivity Decrease in sensitivity
£'000 £'000
Change in ERV of 5% 36,592 36,592
Change in net equivalent yields of 25 basis points 27,874 (30,214)
Development property and land Increase in Decrease in sensitivity
sensitivity £'000
£'000
Change in sales rate per acre of 5% 3,892 (3,892)
Interest rate derivatives Increase in Decrease
sensitivity in sensitivity
£'000 £'000
Change in SONIA by 50 basis points 2,423 (2,417)
As at 31 March 2023
Completed investment property Increase in sensitivity Decrease in sensitivity
£'000 £'000
Change in ERV of 5% 37,656 (37,656)
Change in net equivalent yields of 25 basis points 28,012 (30,341)
Development property and land Increase in sensitivity Decrease in sensitivity
£'000 £'000
Change in sales rate per acre of 5% 3,756 (3,756)
Interest rate derivatives Increase in Decrease
sensitivity in sensitivity
£'000 £'000
Change in SONIA by 50 basis points 2,630 (2,634)
Gains recorded in profit or loss for recurring fair value measurements
categorised within Level 3 of the fair value hierarchy amount to £15,082,000
(31 March 2023: loss of £193,367,000) and are presented in the consolidated
statement of comprehensive income in line item 'fair value gains/(losses) on
investment properties'.
All gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy are
attributable to changes in unrealised gains or losses relating to investment
property held at the end of the reporting period.
The carrying amount of the Group's assets and liabilities is considered to be
the same as their fair value.
26. Financial risk management objectives and policies
The Group's principal financial liabilities are loans and borrowings. The main
purpose of the Group's loans and borrowings is to finance the acquisition of
the Group's property portfolio. The Group has trade and other receivables,
trade and other payables and cash and short-term deposits that arise directly
from its operations.
The Group is exposed to market risk, interest rate risk, credit risk and
liquidity risk. The Board of Directors reviews and agrees policies for
managing each of these risks, which are summarised below.
Market risk
The Group's activities expose it primarily to the financial risks of changes
in interest rates. The Group enters into a variety of derivative financial
instruments to manage its exposure to interest rate risk. There has been no
change to the Group's exposure to market risks or the manner in which these
risks are managed and measured.
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Group's exposure to the risk of changes in market interest rates relates to
its variable rate bank loans. In order to address interest rate risk, the
Group has entered into interest rate cap instruments.
The instruments have a combined notional value of £250.0 million, £200.0
million at a strike rate of 1.50% and the remaining £50.0 million at a strike
rate of 2.00%. £100.0 million has a termination date of 20 July 2025, £100.0
million has a termination date of 20 July 2027 and the £50.0 million has a
termination date of 20 November 2026.
As at 31 March 2024, the unhedged exposure to changes in interest rates is
£34.0 million (31 March 2023: £76.0 million).
Changes in interest rates may have an impact on consolidated earnings over the
longer term. The table below provides indicative sensitivity data.
Effect on (loss)/profit before tax: 2024 2023
Increase in interest rates by 1% Decrease in interest rates by 1% Increase in interest rates by 1% Decrease in interest rates by 1%
£'000 £'000 £'000 £'000
Increase/(decrease) (340) 340 (760) 760
Credit risk
Credit risk is the risk that a counterparty or occupier will cause a financial
loss to the Group by failing to meet a commitment it has entered into with the
Group.
All cash deposits are placed with approved counterparties, currently HSBC Bank
plc. In respect of property investments, in the event of a default by an
occupier, the Group will suffer a shortfall and additional costs concerning
re-letting of the property. The Investment Advisor monitors the occupier
arrears in order to anticipate and minimise the impact of defaults by
occupational occupiers.
Credit risk is not considered material due to the diverse number of occupiers
in the investment property portfolio.
The following table analyses the Group's exposure to credit risk:
31 March 2024 31 March
£'000 2023
£'000
Cash and cash equivalents 9,905 18,990
Restricted cash 6,063 6,063
Trade and other receivables¹ 9,036 6,987
Total 25,004 32,040
1 Excludes prepayments and payments in advance of completion.
Liquidity risk
Liquidity risk is defined as the risk that the Group will encounter difficulty
in meeting obligations associated with financial liabilities that are settled
by delivering cash or another financial asset. Exposure to liquidity risk
arises because of the possibility that the Group could be required to pay its
liabilities earlier than expected. The Group's objective is to maintain a
balance between continuity of funding and flexibility through the use of bank
deposits and loans.
Set out below is a comparison by class of the carrying amounts and fair value
of the Group's financial instruments that are carried in the financial
statements:
2024 2023
Fair value Carrying Fair value Carrying Fair value
hierarchy value £'000 value £'000
£'000 £'000
Held at amortised cost
Cash and cash equivalents n/a 9,905 9,905 18,990 18,990
Restricted cash n/a 6,063 6,063 6,063 6,063
Trade and other receivables¹ n/a 9,036 9,036 6,987 6,987
Other payables and accrued expenses² n/a (18,985) (18,985) (26,629) (26,629)
Interest-bearing loans and borrowings n/a (280,413) (280,413) (304,093) (304,093)
Held at fair value
Interest rate derivatives (assets) 2 7,241 7,241 7,387 7,387
1 Excludes prepayments and payments in advance of completion.
2 Excludes VAT liability and deferred income.
The table below summarises the maturity profile of the Group's financial and
lease liabilities based on contractual undiscounted payments:
Year ended 31 March 2024 Less Three One to Two to More than Total
than three to 12 two years five years five years £'000
months months £'000 £'000 £'000
£'000 £'000
Interest-bearing loans and borrowings 5,233 15,755 20,988 330,805 - 372,781
Other payables and accrued expenses 8,685 10,300 - - - 18,985
Head lease obligations 264 792 1,056 3,167 86,696 91,975
Total 14,182 26,847 22,044 333,972 86,696 483,741
Less Three One to Two to More than Total
than three to 12 two years five years five years £'000
Year ended 31 March 2023 months months £'000 £'000 £'000
£'000 £'000
Interest-bearing loans and borrowings - 13,993 321,112 - - 335,105
Other payables and accrued expenses 10,829 4,500 11,300 - - 26,629
Head lease obligations 263 789 1,055 3,164 85,530 90,801
Total 11,092 19,282 333,467 3,164 85,530 452,535
27. Subsidiaries
Company Country of Number and class Group
incorporation of share held holding
and operation by the Group
Tilstone Holdings Limited UK 63,872 ordinary shares 100%
Tilstone Warehouse Holdco Limited UK 94,400 ordinary shares 100%
Tilstone Industrial Warehouse Limited(1) UK 23,600 ordinary shares 100%
Tilstone Retail Warehouse Limited(1) UK 20,000 ordinary shares 100%
Tilstone Industrial Limited(1) UK 20,000 ordinary shares 100%
Tilstone Retail Limited(1) UK 200 ordinary shares 100%
Tilstone Trade Limited(1) UK 20,004 ordinary shares 100%
Tilstone Basingstoke Limited(1) UK 1,000 ordinary shares 100%
Tilstone Glasgow Limited(1) UK 1 ordinary share 100%
Tilstone Radway Limited(1) UK 100 ordinary shares 100%
Tilstone Oxford Limited(1) UK 1,000 ordinary shares 100%
Tilstone Liverpool Limited(1) UK 100 ordinary shares 100%
Warehouse 1234 Limited(1) UK 100 ordinary shares 100%
Tilstone Chesterfield Limited(1) UK 15,000,001 ordinary shares 100%
1 Indirect subsidiaries.
The registered office of all subsidiaries is located at 65 Gresham Street,
London EC2V 7NQ.
Tilstone Property Holdings Limited was voluntarily struck off and dissolved on
5 December 2023.
28. Capital management
The Group's capital is represented by share capital, reserves and borrowings
totalling £816.0 million (2023: £832.0 million).
The primary objective of the Group's capital management is to ensure that it
remains within its quantitative banking covenants and maintains a strong
credit rating. The Group's capital policies are as follows:
• the Group will keep sufficient cash for working capital purposes with
excess cash, should there be any, deposited at the best interest rate
available while maintaining flexibility to fund the Group's investment
programme;
• borrowings will be managed in accordance with the loan agreements and
covenants will be tested quarterly and reported to the Directors.
Additionally, quarterly lender reporting will be undertaken in line with the
loan agreement; and
• new borrowings are subject to Director approval. Such borrowings will
support the Group's investment programme but be subject to a maximum 60% LTV.
The intention is to maintain borrowings at an LTV of between 30% and 40%.
The Group is subject to banking covenants in regards to its debt facility and
these include a prescribed methodology for interest cover and market value
covenants that are measured at a Group level.
The Group has complied with all covenants on its borrowings up to the date of
this report. All of the targets mentioned above sit comfortably within the
Group's covenant levels, which include loan to value ("LTV"), interest cover
ratio and loan to projected project cost ratio. The Group LTV at the year end
was 33.1% (2023: 33.9%) and there is substantial headroom within existing
covenants.
29. Related party transactions
Directors
The Directors (all Non-Executive Directors) of the Group and its subsidiaries
are considered to be the key management personnel of the Group. Directors'
remuneration (including social security costs) for the period totalled
£178,000 (31 March 2023: £179,000) and at 31 March 2024, a balance of £nil
(31 March 2023: £nil) was outstanding. The Directors who served during the
year received £1.5 million in dividend payments (31 March 2023: £1.6
million). Further information is given in note 5 and in the Directors'
remuneration report on pages 90 to 92.
Investment Advisor
The Group is party to an Investment Management Agreement with the Investment
Manager and the Investment Advisor, pursuant to which the Group has appointed
the Investment Advisor to provide investment advisory services relating to the
respective assets on a day-to-day basis in accordance with their respective
investment objectives and policies, subject to the overall supervision and
direction by the Investment Manager and the Board of Directors.
For its services to the Group, the Investment Advisor receives an annual fee
at the rate of 1.1% of the NAV of the Group up to £500 million and at a lower
rate of 0.9% thereafter. Refer to page 95 of the Directors' report for further
information.
During the year, the Group incurred £5,725,000 (31 March 2023: £6,970,000)
in respect of investment management fees. As at 31 March 2024, £1,429,000 (31
March 2023: £1,529,000) was outstanding.
During the year, the Group reimbursed £nil (31 March 2023: £86,900) in
respect of direct costs incurred by the Investment Advisor relating to the
movement to the Premium Segment of the Main Market, as well as £5,151 (31
March 2023: £16,665) of incidental travel related costs.
30. Ultimate controlling party
It is the view of the Directors that there is no ultimate controlling party.
31. Notes to the statement of cash flows
Reconciliation of changes in liabilities to cash flows generated from
financing activities
Interest payable Interest-bearing loans and borrowings Head lease liability Total
£'000 £'000 £'000 £'000
Balance as at 1 April 2023 3,691 304,093 15,025 322,809
Changes from financing cash flows:
Bank loans drawn down - 323,000 - 323,000
Bank loans repaid - (345,000) - (345,000)
Loan arrangement fees paid in the year - (4,251) - (4,251)
Loan interest paid (21,321) - - (21,321)
Head lease payments - - (1,074) (1,074)
Total changes from financing cash flows (21,321) (26,251) (1,074) (48,646)
Amortisation charge for the year - 883 - 883
Arrangement fees written off - 1,688 - 1,688
Head lease interest - - 1,054 1,054
Interest and commitment fee 21,791 - - 21,791
Accrued head lease expense - - 217 217
Balance as at 31 March 2024 4,161 280,413 15,222 299,796
Interest payable Interest-bearing loans and borrowings Head lease liability Total
£'000 £'000 £'000 £'000
Balance as at 1 April 2022 1,444 268,216 14,896 284,556
Changes from financing cash flows:
Bank loans drawn down - 65,000 - 65,000
Bank loans repaid - (30,000) - (30,000)
Loan arrangement fees paid in the year - (175) - (175)
Interest and commitment fees paid (11,810) - - (11,810)
Head lease payments - - (832) (832)
Total changes from financing cash flows (11,810) 34,825 (832) 22,183
Amortisation charge for the year - 1,052 - 1,052
Head lease interest - - 961 961
Interest and commitment fee 14,057 - - 14,057
Accrued head lease expense - - - -
Balance as at 31 March 2023 3,691 304,093 15,025 322,809
32. Capital commitments
Other than the amounts disclosed in note 20, the Group has no material capital
commitments in relation to its development activity, asset management
initiatives and commitments under development land, outstanding as at 31 March
2024 (31 December 2023: nil).
33. Post balance sheet events
The Group exchanged or completed on the sale of £57.5 million of non-core
single-let assets in three separate transactions. The transactions comprise
Parkway Industrial Estate in Plymouth sold for £6.3 million and Celtic
Business Park, Newport sold for £5.2 million. Barlborough Links in
Chesterfield, exchanged for £46.0 million and is expected to complete
shortly. In June 2024, the Group exchanged contracts to acquire Ventura Retail
Park in Tamworth, a retail warehousing asset for £38.6 million, with
completion to occur in Q2 2024.
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 March 2024
The Company reported a loss for the year ended 31 March 2024 of £323,000
(year ended 31 March 2023: loss of £2,495,000).
These financial statements were approved by the Board of Directors of
Warehouse REIT plc on 24 June 2024 and signed on its behalf by:
Neil Kirton
Company number: 10880317
Notes 31 March 31 March
2024 2023
£'000 £'000
Assets
Non-current assets
Investment in subsidiary companies 36 25,244 66,477
Amount due from subsidiaries 38 276,570 242,750
301,814 309,227
Current assets
Cash and cash equivalents 37 8,183 6,245
Amount due from subsidiaries 38 27,000 27,000
Trade and other receivables 38 625 697
35,808 33,942
Total assets 337,622 343,169
Liabilities
Current liabilities
Other payables and accrued expenses 39 (1,652) (1,793)
Amount due to subsidiaries 39 (27,151) (5,042)
Total liabilities (28,803) (6,835)
Net assets 308,819 336,334
Equity
Share capital 4,249 4,249
Share premium 275,648 275,648
Retained earnings 28,922 56,437
Total equity 308,819 336,334
Number of shares in issue (thousands) 424,862 424,862
Net asset value per share (basic and diluted) (pence) 72.7 79.2
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2024
Retained earnings represent distributable profits available to the members of
the Company.
Share Share Retained Total
capital premium earnings £'000
£'000 £'000 £'000
Balance at 31 March 2022 4,249 275,648 86,548 366,445
Total comprehensive expense - - (2,495) (2,495)
Dividends paid - - (27,616) (27,616)
Balance at 31 March 2023 4,249 275,648 56,437 336,334
Total comprehensive expense - - (323) (323)
Dividends paid - - (27,192) (27,192)
Balance at 31 March 2024 4,249 275,648 28,922 308,819
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 March 2024
34. General information
Warehouse REIT plc is a closed-ended REIT incorporated in England and Wales on
24 July 2017. The Company began trading on 20 September 2017. The registered
office of the Company is located at 6th Floor, 65 Gresham Street, London,
England, EC2V 7NQ. The Company's shares are admitted to trading on the Premium
Segment of the Main Market, a market operated by the London Stock Exchange.
35. Basis of preparation
The financial statements have been prepared in accordance with Financial
Reporting Standard 101 Reduced Disclosure Framework ("FRS 101"). This is a
transition from UK adopted international accounting standards which has been
made in order to take advantage of the disclosure exemptions available under
FRS101. The adoption of FRS101 has not resulted in any change in the Company's
accounting policies.
Disclosure exemptions adopted In preparing these financial statements the
Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
• certain comparative information as otherwise required by adopted
IFRS;
• certain disclosures regarding the Company's capital;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• the disclosure of the remuneration of key management personnel;
and
• disclosure of related party transactions with other wholly owned
members of Warehouse REIT plc.
In addition, and in accordance with FRS 101, further disclosure exemptions
have been adopted because equivalent disclosures are included in the Company's
consolidated financial statements. These financial statements do not include
certain disclosures in respect of:
• financial instruments;
• fair value measurement
The financial statements have been prepared under the historical cost
convention. The audited financial statements are presented in Pound Sterling
and all values are rounded to the nearest thousand pounds (£'000), except
when otherwise indicated.
The Company has taken advantage of the exemption in section 408 of the
Companies Act 2006 not to present its own statement of comprehensive income.
The financial statements of the Company follow the accounting policies laid
out on previously.
In the course of preparing the financial statements, no judgements or
estimates have been made in the process of applying the accounting policies
that have had a significant effect on the amounts recognised in the financial
statements.
36. Investment in subsidiary companies
31 March 2024 31 March
£'000 2023
£'000
Investment in subsidiary companies
Total carrying value 25,244 66,477
Total 25,244 66,477
31 March 31 March
2024 2023
£'000 £'000
Investments in subsidiary companies
Tilstone Holdings Limited 21,017 21,017
Tilstone Warehouse Holdco Limited 4,227 4,227
Tilstone Property Holdings Limited - 41,233
25,244 66,477
During the year, Tilstone Property Holdings Limited was dissolved on 19
December 2023.
Accounting policy
Investments in subsidiary companies are included in the statement of financial
position at cost less impairment.
Where the carrying value of the investment exceeds its recoverable amount (the
higher of value-in-use and fair value less costs to sell), the investment is
impaired accordingly.
Impairment charges are included in Company profit or loss.
37. Cash and cash equivalents
31 March 31 March
2024 2023
£'000 £'000
Cash and cash equivalents 2,120 182
Cash in transit 6,063 6,063
Total 8,183 6,245
Cash in transit comprises £6.1 million (31 March 2023: £6.1 million) of cash
held by the Company's Registrar to fund the shareholder dividend, less
withholding tax, which was paid on 2 April 2024 as disclosed in note 11.
38. Trade and other receivables
31 March 2024 31 March 2023
£'000 £'000
Prepayments 60 22
Other receivables 565 675
Amount due from subsidiaries 27,000 27,000
Current receivables 27,625 27,697
Amount due from subsidiaries 276,570 242,750
Non-current receivables 276,570 242,750
Loans due from subsidiary companies are unsecured, interest free and repayable
on demand. The Directors have reviewed the Company's cash flow forecast and
presented the amount expected to fall due within 12 months as current. The
Directors do not expect any further amounts to be paid within 12 months and as
such the remaining balance has been classified as non-current assets.
The amounts due from subsidiaries are not considered to carry any material
credit risk, being from related parties that remain trading in their normal
capacity.
39. Other payables and accrued expenses
31 March 2024 31 March 2023
£'000 £'000
Other expenses payable 1,652 1,793
Amounts due to subsidiaries 27,151 5,042
Total 28,803 6,835
40. Related party transactions
The Company has taken advantage of the exemption not to disclose transactions
with other members of the Group as the Company's own financial statements are
presented together with its consolidated financial statements.
For all other related party transactions make reference to note 29 of the
Group's financial statements.
UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE CONSOLIDATED FINANCIAL
INFORMATION
For the year ended 31 March 2024
The Group is a member of the European Public Real Estate Association ("EPRA").
EPRA has developed and defined performance measures to give transparency,
comparability and relevance of financial reporting across entities that may
use different accounting standards.
The Group presents adjusted earnings per share ("EPS"), dividends per share,
total accounting return, total cost ratio, LTV ratio and EPRA Best Practices
Recommendations, calculated in accordance with EPRA guidance, as Alternative
Performance Measures ("APMs") to assist stakeholders in assessing performance
alongside the Group's statutory results reported under IFRS. APMs are among
the key performance indicators used by the Board to assess the Group's
performance and are used by research analysts covering the Group.
EPRA Best Practices Recommendations have been disclosed to facilitate
comparison with the Group's peers through consistent reporting of key real
estate specific performance measures. Certain other APMs may not be directly
comparable with other companies' adjusted measures and are not intended to be
a substitute for, or superior to, any IFRS measures of performance.
Table 1: EPRA performance measures summary
Notes 2024 2023
EPRA EPS (pence) Table 2 2.9 3.9
EPRA cost ratio (including direct vacancy cost) Table 6 24.4% 30.8%
EPRA cost ratio (excluding direct vacancy cost) Table 6 23.4% 26.8%
EPRA NDV per share (pence) Table 3 126.1 124.4
EPRA NRV per share (pence) Table 3 137.3 135.9
EPRA NTA per share (pence) Table 3 124.4 122.6
EPRA NIY Table 4 5.4% 5.0%
EPRA 'topped-up' net initial yield Table 4 5.6% 5.5%
EPRA vacancy rate Table 5 3.6% 5.0%
EPRA LTV Table 10 34.2% 36.5%
Table 2: EPRA income statement
Notes Year ended 31 March 2024 Year ended 31 March 2023
£'000 (Restated)
£'000
Total property income 3 51,026 51,185
Less: service charge income 3 (3,853) (3,340)
Less: dilapidation income 3 (1,652) (503)
Less: insurance recharged 3 (1,496) (1,592)
Rental income (A) 44,025 45,750
Property operating expenses 4 (4,330) (5,454)
Service charge expenses 4 (4,068) (3,767)
Add back: service charge income 3 3,853 3,340
Add back: dilapidation income 3 1,652 503
Add back: insurance recharged 3 1,496 1,592
Adjusted gross profit (B) 42,628 41,964
Administration expenses 4 (7,605) (9,716)
Adjusted operating profit before interest and tax 35,023 32,248
Finance income 7 8,460 6,889
Finance expenses 8 (29,780) (15,528)
Add back: Costs associated with the transfer to the Premium Segment of the - 1,069
Main Market of the London Stock Exchange
Add back: Losses associated with early close out of debt (see note 17) 1,688 -
Less change in fair value of interest rate derivatives 5,214 (4,850)
Adjusted profit before tax 20,605 19,828
Tax on adjusted profit - -
Adjusted earnings 20,605 19,828
Less: interest from derivatives (8,193) (2,027)
Less: Costs associated with the transfer to the Premium Segment of the Main - (1,069)
Market of the London Stock Exchange
EPRA earnings 12,412 16,732
Weighted average number of shares in issue (thousands) 424,862 424,862
EPRA EPS (pence) 2.9 3.9
Adjusted EPS (pence) 4.8 4.7
Gross to net rental income ratio (B/A) 96.83% 91.72%
The Group has also included additional earnings measures called 'Adjusted
Earnings' and 'Adjusted EPS'. Adjusted Earnings and Adjusted EPS recognises
finance income earned from derivatives held at fair value through profit and
loss used to hedge the Group's floating interest rate exposure. The premiums
for the interest rate caps, which are being paid in quarterly instalments, are
included in the statement of financial position as a derivative asset measured
at fair value and have not been deducted in the calculation of adjusted
earnings. Also included in adjusted earnings is the add back of the costs
associated with the early close out of debt, as these costs will not be
recurring and has been adjusted for as a 'Group-specific adjustment'.
The Board deems this a more relevant indicator of core earnings as it reflects
our ability to generate earnings from our portfolio.
Table 3: EPRA balance sheet and net asset value performance measures
In line with the European Public Real Estate Association ("EPRA") published
Best Practice Recommendations ("BPR") for financial disclosures by public real
estate companies, the Group presents three measures of net asset value: EPRA
net disposal value ("NDV"), EPRA net reinstatement value ("NRV") and EPRA net
tangible assets ("NTA"). EPRA NTA is considered to be the most relevant
measure for Warehouse REIT's operating activities.
As at 31 March 2024 EPRA NDV EPRA NRV EPRA NTA
£'000 £'000 £'000
Total properties(1) 810,220 810,220 810,220
Net borrowings(2) (268,032) (268,032) (268,032)
Other net liabilities (6,599) (6,599) (6,599)
IFRS NAV 535,589 535,589 535,589
Exclude: fair value of interest rate derivatives - (7,241) (7,241)
Include: real estate transfer tax(3) - 55,095 -
NAV used in per share calculations 535,589 583,443 528,348
Number of shares in issue (thousands) 424,862 424,862 424,862
NAV per share (pence) 126.1 137.3 124.4
As at 31 March 2023 EPRA NDV EPRA NRV EPRA NTA
£'000 £'000 £'000
Total properties(1) 828,770 828,770 828,770
Net borrowings(2) (280,947) (280,947) (280,947)
Other net liabilities (19,348) (19,348) (19,348)
IFRS NAV 528,475 528,475 528,475
Exclude: fair value of interest rate derivatives - (7,387) (7,387)
Include: real estate transfer tax(3) - 56,356 -
NAV used in per share calculations 528,475 577,444 521,088
Number of shares in issue (thousands) 424,862 424,862 424,862
NAV per share (pence) 124.4 135.9 122.6
1 Professional valuation of investment property (including assets held
for sale).
2 Comprising interest-bearing loans and borrowings (excluding
unamortised loan arrangement fees) of £284,000,000 (31 March 2023:
£306,000,000) net of cash of £15,968,000 (31 March 2023: £25,053,000).
3 EPRA NTA and EPRA NDV reflect IFRS values which are net of real estate
transfer tax. Real estate transfer tax is added back when calculating EPRA
NRV.
EPRA NDV details the full extent of liabilities and resulting shareholder
value if Company assets are sold and/or if liabilities are not held until
maturity. Deferred tax and financial instruments are calculated as to the full
extent of their liability, including tax exposure not reflected in the
statement of financial position, net of any resulting tax.
EPRA NTA assumes entities buy and sell assets, thereby crystallising certain
levels of deferred tax liability.
EPRA NRV highlights the value of net assets on a long-term basis and reflects
what would be needed to recreate the Company through the investment markets
based on its current capital and financing structure. Assets and liabilities
that are not expected to crystallise in normal circumstances, such as the fair
value movements on financial derivatives and deferred taxes on property
valuation surpluses, are excluded. Costs such as real estate transfer taxes
are included.
Table 4: EPRA net initial yield
31 March 2024 31 March 2023
£'000 £'000
Total properties per external valuers' report 810,220 828,770
Less development property and land (78,493) (75,660)
Net valuation of completed investment property 731,727 753,110
Add estimated purchasers' costs(4) 49,757 51,211
Gross valuation of completed property including estimated purchasers' costs 781,484 804,321
(A)
Gross passing rents(5) (annualised) 42,920 41,241
Less irrecoverable property costs(5) (613) (1,279)
Net annualised rents (B) 42,307 39,962
Add notional rent on expiry of rent-free periods or other lease incentives(6) 1,654 4,068
'Topped-up' net annualised rents (C) 43,961 44,030
EPRA NIY (B/A) 5.4% 5.0%
EPRA 'topped-up' net initial yield (C/A) 5.6% 5.5%
4 Purchasers' costs estimated at 6.8%.
5 Gross passing rents and irrecoverable property costs assessed as at
the balance sheet date for completed investment properties excluding
development property and land.
6 Adjustment for unexpired lease incentives such as rent-free periods,
discounted rent period and step rents. The adjustment includes the annualised
cash rent that will apply at the expiry of the lease incentive. Rent-frees
expire over a weighted average period of three months' passing rents.
Irrecoverable property costs assessed as at the balance sheet date for
completed investment properties excluding development property and land.
EPRA NIY represents annualised rental income based on the cash rents passing
at the balance sheet date, less non-recoverable property operating expenses,
divided by the market value of the property, increased with (estimated)
purchasers' costs. It is a comparable measure for portfolio valuations
designed to make it easier for investors to judge for themselves how the
valuation of portfolio X compares with portfolio Y.
EPRA 'topped-up' NIY incorporates an adjustment to the EPRA NIY in respect of
the expiration of rent-free periods (or other unexpired lease incentives such
as discounted rent periods and step rents).
NIY as stated in the Investment Advisor's report calculates net initial yield
on topped-up annualised rents but does not deduct non-recoverable property
costs.
Table 5: EPRA vacancy rate
31 March 2024 31 March 2023
£'000 £'000
Annualised ERV of vacant premises (D) 1,907 2,537
Annualised ERV for the investment portfolio (E) 53,488 50,736
EPRA vacancy rate (D/E) 3.6% 5.0%
EPRA vacancy rate represents ERV of vacant space divided by ERV of the
completed investment portfolio, excluding development property and land. It is
a pure measure of investment property space that is vacant, based on ERV.
Table 6: Total cost ratio/EPRA cost ratio
Year ended 31 March 2024 Year ended 31 March 2023
£'000 £'000
Property operating expenses 4,330 5,454
Service charge expenses 4,068 3,767
Add back service charge income (3,853) (3,340)
Add back insurance recharged (1,496) (1,592)
Net property operating expenses 3,049 4,289
Administration expenses 7,605 9,716
Costs associated with the transfer to the Premium Segment of the Main Market - (1,069)
of the London Stock Exchange
Less ground rents(7) (165) (189)
Total cost including direct vacancy cost (F) 10,489 12,747
Direct vacancy cost (455) (1,774)
Total cost excluding direct vacancy cost (G) 10,034 10,973
Rental income 44,025 45,750
Less ground rents paid (1,074) (832)
Gross rental income less ground rents (H) 42,951 44,918
Less direct vacancy cost (455) (1,774)
Net rental income less ground rents 42,496 43,144
Total cost ratio including direct vacancy cost (F/H) 24.4% 28.4%
Total cost ratio excluding direct vacancy cost (G/H) 23.4% 24.4%
7 Ground rent expenses included within administration expenses such as
depreciation of head lease assets.
Year ended 31 March 2024 Year ended 31 March 2023
£'000 £'000
Total cost including direct vacancy cost (F) 10,489 12,745
Costs associated with the transfer to the Premium Segment of the Main Market - 1,069
of the London Stock Exchange
EPRA total cost (I) 10,489 13,814
Direct vacancy cost (455) (1,774)
EPRA total cost excluding direct vacancy cost (J) 10,034 12,040
EPRA cost ratio including direct vacancy cost (I/H) 24.4% 30.8%
EPRA cost ratio excluding direct vacancy cost (J/H) 23.4% 26.8%
EPRA cost ratios represent administrative and operating costs (including and
excluding costs of direct vacancy) divided by gross rental income less ground
rents. They are a key measure to enable meaningful measurement of the changes
in the Group's operating costs.
It is the Group's policy not to capitalise overheads or operating expenses and
no such costs were capitalised in either the year ended 31 March 2024 or the
year ended 31 March 2023.
Table 7: Lease data
As at 31 March 2024 Year 1 Year 2 Years Year 10+ £'000 Head rents payable Total
£'000 £'000 3- 10 £'000 £'000
£'000
Passing rent of leases expiring in: 7,583 5,642 28,759 2,282 (1,209) 43,057
ERV of leases expiring in: 11,525 6,712 34,103 2,571 (1,209) 53,702
Passing rent subject to review in: 16,208 8,313 19,744 1 (1,209) 43,057
ERV subject to review in: 22,714 9,583 22,613 1 (1,209) 53,702
WAULT to expiry is 5.0 years and to break is 4.1 years.
As at 31 March 2023 Year 1 Year 2 Years Year 10+ Head rents payable Total
£'000 £'000 3- 10 £'000 £'000 £'000
£'000
Passing rent of leases expiring in: 5,812 4,327 27,533 4,773 (1,204) 41,241
ERV of leases expiring in: 9,239 5,062 33,716 6,460 (1,204) 53,273
Passing rent subject to review in: 15,782 8,522 18,139 2 (1,204) 41,241
ERV subject to review in: 21,055 10,280 23,140 2 (1,204) 53,273
WAULT to expiry is 5.5 years and to break is 4.5 years.
Table 8: EPRA capital expenditure
Year ended 31 March 2024 Year ended 31 March 2023
£'000 £'000
Acquisitions(8) - 66,728
Development spend(9) 8,191 8,295
Completed investment properties:(10)
No incremental lettable space - like-for-like portfolio 3,327 5,035
No incremental lettable space - other - -
Occupier incentives - -
Total capital expenditure 11,518 80,058
Conversion from accruals to cash basis 653 (1,082)
Total capital expenditure on a cash basis 12,171 78,976
8 Acquisitions include £nil completed investment property and £nil
development property and land (2023: £64,512,000 and £2,216,000
respectively).
9 Expenditure on development property and land.
10 Expenditure on completed investment properties.
Table 9: EPRA like-for-like rental income
Notes Year ended 31 March 2024 Year ended 31 March 2023 % change
£'000 £'000
EPRA like-for-like rental income(11) 42,706 40,390 5.7%
Other(12) (377) -
Adjusted like-for-like rental income 42,329 40,390 4.8%
Development lettings 145 306
Properties sold 1,551 5,054
Rental income 44,025 45,750
Service charge income 3,853 3,340
Dilapidation income 1,652 503
Insurance recharged 1,496 1,592
Total property income 2 51,026 51,185
11 Like-for-like portfolio valuation as at 31 March 2024: £680.7 million
(31 March 2023: £657.9 million).
12 Includes rent surrender premiums, back rent and other items.
Table 10: Loan to value ("LTV") ratio and EPRA LTV
Gross debt less cash, short-term deposits and liquid investments, divided by
the aggregate value of properties and investments. The Group has also opted to
present the EPRA loan to value, which is defined as net debt divided by total
property market value.
Notes Year ended 31 March 2024 Year ended 31 March 2023
£'000 £'000
Interest-bearing loans and borrowings 17 284,000 306,000
Cash 15 (15,968) (25,053)
Net debt (A) 268,032 280,947
Total portfolio valuation per valuer's report (B) 13,14 810,220 828,770
LTV ratio (A/B) 33.1% 33.9%
EPRA LTV
Notes Year ended 31 March 2024 Year ended
£'000 31 March
2023
£'000
Interest-bearing loans and borrowings(1) 17 284,000 306,000
Net payables(2) 16,646 29,352
Cash 15 (15,968) (25,053)
Net borrowings (A) 284,678 310,299
Investment properties at fair value 13,14 810,220 828,770
Interest rate derivatives 18 7,241 7,387
Head lease obligation 13,19 14,185 14,124
Total property value (B) 831,646 850,281
EPRA LTV (A/B) 34.2% 36.5%
1 Excludes unamortised loan arrangement fees asset of £3.6 million
(2023: £1.9 million) (see note 17).
2 Net payables includes trade and other receivables and other payables
and accrued expenses.
Table 11: Total accounting return
The movement in EPRA NTA over a period plus dividends paid in the period,
expressed as a percentage of the EPRA NTA at the start of the period.
Year ended 31 March 2024 Year ended 31 March 2023
Notes Pence per share Pence per share
Opening EPRA NTA (A) 122.6 173.8
Movement (B) 1.8 (51.2)
Closing EPRA NTA 24 124.4 122.6
Dividends per share (C) 11 6.4 6.5
Total accounting return (B+C)/A 6.7% (25.7%)
Table 12: Ongoing charges ratio
Ongoing charges ratio represents the costs of running the REIT as a percentage
of NAV as prescribed by the Association of Investment Companies.
Notes Year ended 31 March Year ended 31 March
2024 2023
£'000 £'000
Administration expenses 4 7,605 9,716
Less: costs associated with moving to Main Market - (1,069)
Less: head lease asset depreciation (165) (189)
Annualised ongoing charges (A) 7,440 8,458
Opening NAV as at 1 April 528,475 738,954
NAV as at 30 September 536,848 678,578
Closing NAV as at 31 March 535,589 528,475
Average undiluted NAV during the period (B) 533,637 648,669
Ongoing charges ratio (A/B) 1.4% 1.3%
GLOSSARY
Adjusted earnings per share ("Adjusted EPS")
EPRA EPS adjusted to exclude one-off costs, divided by the weighted average
number of shares in issue during the year, which ultimately underpins our
dividend payments
Admission
The admission of Warehouse REIT plc onto the premium segment of the London
Stock Exchange on 12 July 2022
AGM
Annual General Meeting
AIC
The Association of Investment Companies
AIFM
Alternative Investment Fund Manager
AIFMD
The Alternative Investment Fund Managers Regulations 2013 (as amended by The
Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations
2019) and the Investment Funds
Sourcebook forming part of the FCA Handbook
AIM
A market operated by the London Stock Exchange
APM
An Alternative Performance Measure is a numerical measure of the Company's
current, historical or future financial performance, financial position or
cash flows, other than a financial measure defined or specified in the
applicable financial framework. In selecting these APMs, the Directors
considered the key objectives and expectations of typical investors
BREEAM
BREEAM (Building Research Establishment Environmental Assessment Method) is a
certification which assess the sustainability credentials of buildings against
a range of social and environmental criteria
Company
Warehouse REIT plc
Contracted rent
Gross annual rental income currently receivable on a property plus rent
contracted from expiry of rent-free periods and uplifts agreed at the balance
sheet date less any ground rents payable under head leases
Development property and land
Whole or a material part of an estate identified as having potential for
development. Such assets are classified as development property and land until
development is completed and they have the potential to be fully income
generating
Effective occupancy
Total open market rental value of the units leased divided by total open
market rental value excluding assets under development, units undergoing
refurbishment and units under offer to let
EPC
Energy Performance Certificates provides information about a property's energy
use including an energy efficiency rating from A (most efficient) to G (lease
efficient) and is valid for ten years.
EPRA
The European Public Real Estate Association, the industry body for European
REITs
EPRA cost ratio
The sum of property expenses and administration expenses as a percentage of
gross rental income less ground rents, calculated both including and excluding
direct vacancy cost
EPRA earnings
IFRS profit after tax excluding movements relating to changes in fair value of
investment properties, gains/losses on property disposals, changes in fair
value of financial instruments and the related tax effects
EPRA earnings per share ("EPRA EPS")
A measure of EPS on EPRA earnings designed to present underlying earnings from
core operating activities based on the weighted average number of shares in
issue during the year
EPRA guidelines
The EPRA Best Practices Recommendations Guidelines October 2019
EPRA like-for-like rental income growth
The growth in rental income on properties owned throughout the current and
previous year under review. This growth rate includes revenue recognition and
lease accounting adjustments but excludes development property and land in
either year and properties acquired or disposed of in either year
EPRA NDV / EPRA NRV / EPRA NTA per share
The EPRA net asset value measures figures divided by the number of shares
outstanding at the balance sheet date
EPRA net disposal value ("EPRA NDV")
The net asset value measure detailing the full extent of liabilities and
resulting shareholder value if Company assets are sold and/or if liabilities
are not held until maturity. Deferred tax and financial instruments are
calculated as to the full extent of their liability, including tax exposure
not reflected in the statement of financial position, net of any resulting tax
EPRA net initial yield ("EPRA NIY")
The annualised passing rent generated by the portfolio, less estimated
non-recoverable property operating expenses, expressed as a percentage of the
portfolio valuation (adding notional purchasers' costs), excluding development
property and land
EPRA net reinstatement value ("EPRA NRV")
The net asset value measure to highlight the value of net assets on a
long-term basis and reflect what would be needed to recreate the Company
through the investment markets based on its current capital and financing
structure. Assets and liabilities that are not expected to crystallise in
normal circumstances, such as the fair value movements on financial
derivatives and deferred taxes on property valuation surpluses, are excluded.
Costs such as real estate transfer taxes are included
EPRA net tangible assets ("EPRA NTA")
The net asset value measure assuming entities buy and sell assets, thereby
crystallising certain levels of deferred tax liability
EPRA 'topped-up' net initial yield
The annualised passing rent generated by the portfolio, topped up for
contracted uplifts, less estimated non-recoverable property operating
expenses, expressed as a percentage of the portfolio valuation (adding
notional purchasers' costs), excluding development property and land
EPRA vacancy rate
Total open market rental value of vacant units divided by total open market
rental value of the portfolio excluding development property and land
EPS
Earnings per share
Equivalent yield
The weighted average rental income return expressed as a percentage of the
investment property valuation, plus purchasers' costs, excluding development
property and land
ERV
The estimated annual open market rental value of lettable space as assessed by
the external valuer
FCA
Financial Conduct Authority
GAV
Gross asset value
Group
Warehouse REIT plc and its subsidiaries
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards
IFRS earnings per share ("EPS")
IFRS earnings after tax for the year divided by the weighted average number of
shares in issue during the year
IFRS NAV per share
IFRS net asset value divided by the number of shares outstanding at the
balance sheet date
Investment portfolio
Completed buildings and excluding development property and land
Interest cover
Adjusted operating profit before gains on investment properties, interest (net
of interest received) and tax, divided by the underlying net interest expense
IPO
Initial public offering
Like-for-like rental income growth
The increase in contracted rent of properties owned throughout the period
under review, expressed as a percentage of the contracted rent at the start of
the period, excluding development property and land and units undergoing
refurbishment
Like-for-like valuation increase
The increase in the valuation of properties owned throughout the period under
review, expressed as a percentage of the valuation at the start of the period,
net of capital expenditure
Loan to value ratio ("LTV")
Gross debt less cash, short-term deposits and liquid investments, divided by
the aggregate value of properties and investments
Main Market
The Premium Segment of the London Stock Exchange's Main Market
MEES
The Minimum Energy Efficiency Standards are regulations requiring a minimum
energy efficiency standard to be met (or have valid exemptions registered)
before properties in England and Wales can be let. Currently the minimum is an
EPC E rating.
NAV
Net asset value
Net initial yield ("NIY")
Contracted rent at the balance sheet date, expressed as a percentage of the
investment property valuation, plus purchasers' costs, excluding development
property and land
Net rental income
Gross annual rental income receivable after deduction of ground rents and
other net property outgoings including void costs and net service charge
expenses
Net reversionary yield ("NRY")
The anticipated yield to which the net initial yield will rise (or fall) once
the rent reaches the ERV
Occupancy
Total open market rental value of the units leased divided by total open
market rental value excluding development property and land, equivalent to one
minus the EPRA vacancy rate
Ongoing charges ratio
Ongoing charges ratio represents the costs of running the REIT as a percentage
of NAV as prescribed by the Association of Investment Companies
Passing rent
Gross annual rental income currently receivable on a property as at the
balance sheet date less any ground rents payable under head leases
Property income distribution ("PID")
Profits distributed to shareholders that are subject to tax in the hands of
the shareholders as property income. PIDs are usually paid net of withholding
tax (except for certain types of tax-exempt shareholders). REITs also pay out
normal dividends called non-PIDs
RCF
Revolving credit facility
Real Estate Investment Trust ("REIT")
A listed property company that qualifies for, and has elected into, a tax
regime that is exempt from corporation tax on profits from property rental
income and UK capital gains on the sale of investment properties
RPI
Retail price index
SONIA
Sterling Overnight Index Average
Total accounting return
The movement in EPRA NTA over a period plus dividends paid in the period,
expressed as a percentage of the EPRA NTA at the start of the period
Total cost ratio
EPRA cost ratio excluding one-off costs calculated both including and
excluding vacant property costs
Weighted average unexpired lease term ("WAULT")
Average unexpired lease term to first break or expiry weighted by gross
contracted rent (excluding ground rents payable under head leases) across the
portfolio, excluding development property and land
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